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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Quarterly period ended March 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _____________ .
COMMISSION FILE NO.: 0-25244
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TRANS WORLD GAMING CORP.
(Exact name of registrant as specified in its charter)
NEVADA 13-3738518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PENN PLAZA, SUITE 1503 10119-0002
NEW YORK, NY
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 563-3355
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Check whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. YES /X/ NO / /
Shares of the Registrant's Common Stock, par value $.001, outstanding as
August 27, 1999: 3,364,286
Transitional Small Business Disclosure Format (check one: YES / / NO /X/)
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TRANS WORLD GAMING CORP. HEREBY AMENDS AND RESTATES IN ITS ENTIRETY THE
FORM 10-QSB FOR THE FISCAL QUARTER ENDED MARCH 31, 1998. THIS AMENDMENT AND
RESTATEMENT IS THE RESULT OF A REVIEW BY OUR INDEPENDENT AUDITORS, ROTHSTEIN
KASS & CO. THE PURPOSE OF THE AMENDMENT IS TO MAKE CORRECTIONS AS DESCRIBED IN
NOTE 4. (ENTITLED "RESTATEMENT OF CERTAIN TRANSACTIONS AS OF MARCH 31, 1998") TO
THE FINANCIAL STATEMENTS APPEARING IN THIS REPORT.
TRANS WORLD GAMING CORP.
FORM 10-QSB/A
FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET (AMENDED) AS OF MARCH 31, 1998 1
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (AMENDED) (UNAUDITED) 2
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (AMENDED)
(UNAUDITED 3 FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
1997 3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AMENDED) 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 5
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 2. CHANGES IN SECURITIES 9
ITEM 3. DEFAULT UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
</TABLE>
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FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED STATEMENTS (AMENDED)
TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED BALANCE SHEET (AMENDED)
MARCH 31, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and equivalents $ 3,358
Accounts/Notes receivable 421
Inventories 77
Other current assets 464
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Total current assets 4,320
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PROPERTY AND EQUIPMENT -net 2,674
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OTHER ASSETS
Investment at equity 75
Goodwill 11,189
Deferred costs and other assets 1,158
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Total other assets 12,422
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TOTAL ASSETS $ 19,416
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LIABILITIES AND STOCKHOLDERS EQUITY/(DEFICIT)
CURRENT LIABILITIES
Current portion of long term debt $ 2,125
Accounts payable and accrued expenses 696
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Total current liabilities 2,821
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LONG TERM DEBT, net of current portion 15,651
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STOCKHOLDERS EQUITY/(DEFICIT)
Capital stock 3
Additional paid-in-capital 8,896
Stock warrants outstanding 5,237
Accumulated deficit (13,192)
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Total stockholders equity/(deficit) 944
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY/(DEFICIT) $ 19,416
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (AMENDED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
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1998 1997
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<S> <C> <C>
REVENUES $ 1,569 $ 1,671
COSTS AND EXPENSES
Cost of revenue 988 993
Administrative 210 328
Depreciation and Amortization 118 83
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TOTAL COSTS AND EXPENSES 1,316 1,404
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EARNINGS/(LOSS) FROM OPERATIONS 253 267
Interest expense 283 172
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EARNINGS/(LOSS) BEFORE TAXES (30) 95
Provision for tax 0 18
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NET EARNINGS/(LOSS) ($ 30) $ 77
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------- -------
Earnings/(loss) per share - basic ($ 0.01) $ 0.03
Weighted Average of Common
shares used in computing basic
earnings/(loss) per share 3,044 3,044
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (AMENDED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended March 31,
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1998 1997
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<S> <C> <C>
Cash flows provided by operating activities $ 7 $ 217
Cash flows used by investing
activities (13,302) 0
Cash flows provided/(used) by financing
activities 16,455 (277)
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Net increase/(decrease) in cash 3,160 (60)
Cash - beginning of period 198 489
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Cash - end of period $ 3,358 $ 429
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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TRANS WORLD GAMING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AMENDED)
1. Unaudited Statements.
The accompanying condensed consolidated financial statements (amended)
of Trans World Gaming Corp. (the "Company" or "TWG") as of March 31,
1998 and for the three months ended March 31, 1998 and March 31, 1997
are unaudited and reflect all adjustments of a normal and recurring
nature to present fairly the financial position, results of operation
and cash flows for the interim periods. These unaudited amended
statements have been prepared by the Company in accordance with
generally accepted accounting principles, pursuant to the rules and
regulations of the Securities and Exchange Commission. Pursuant to such
rules and regulations, certain financial information and footnote
disclosures normally included in such financial statements have been
condensed or omitted.
These unaudited condensed amended consolidated financial statements
should be read in conjunction with the audited, consolidated financial
statements and notes thereto, together with management's discussion and
analysis or plan of financial condition contained in the Company's
Annual Report on Form 10-KSB/A for the year ended December 31, 1997.
The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results for the entire year ending
December 31, 1998.
2. Basic earnings (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during that period. Diluted earnings (loss) per share
incorporates the dilutive effect of common stock equivalents on an
average basis during the period. The Company's common stock equivalents
currently include stock options and warrants. Dilutive earnings (loss)
per share have not been presented for the three month period ended
March 31, 1998 and 1997 since the inclusion of common stock equivalents
would have been antidilutive.
3. In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," which encourages companies
to recognize compensation expense in the income statement based on the
fair value of the underlying common stock at the date the awards are
granted. However, SFAS No. 123 will permit continued accounting under
APB Option 25, "Accounting for Stock Issued to Employees," accompanied
by disclosure of the pro forma effects on net income and earnings per
share had the new accounting rules been applied. The statement is
effective for calendar year 1996. The Company has not yet determined
which method it will follow for measuring compensation cost attributed
to stock based compensation or the impact of the new standard on its
consolidated financial statement.
4. Restatement of Certain Transactions as of March 31, 1998
a. PREVIOUSLY OVERSTATED DEBT AND UNDERSTATED SHAREHOLDERS' DEFICIT
Of the $17 million principal amount of notes and warrants issued
in the private placement offering in March 1998 ("Private
Placement"), the Company allocated approximately $4.7 million as
the estimated value of the warrants issued with the notes. This
amount is being amortized as additional interest expense and an
increase to notes payable over the lives of the notes using the
effective interest method until such notes are repaid or the
warrants are converted to equity.
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b. RECORDING OF THE ACQUISITION OF 21ST CENTURY RESORTS A.S.
The acquisition of 21st Century Resorts a.s. ("Resorts") was
erroneously recorded in the interim consolidated financial
statements. Furthermore, the amortization period of goodwill
recorded in connection with this acquisition was changed from 15
to 7 years.
c. BALANCE SHEET RECLASSIFICATIONS
Various balance sheet reclassifications were made to conform to
the presentation of the 1998 audited consolidated financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATION
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
The Company's operations resulted in net loss of $30,000 for the three months
ended March 31, 1998, representing a $107,000 decrease from the net income of
$77,000 for the three months ended March 31, 1997. The Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") totaled $371,000 for
the three months ended March 31, 1998, an increase of $39,000 when compared to
$332,000 for the three months ended March 31, 1997.
Revenues totaled $1,569,000 for the three months ended March 31, 1998, compared
to $1,671,000 for the same period in 1997, a decrease of 6%. Video Poker
revenues at the Gold Coin video poker parlor (the "Gold Coin") increased 3%,
from $939,000 to $968,000, for the three months ended March 31, 1997 and 1998,
respectively. Revenues from the Toledo Palace increased 84% from $62,000 to
$114,000, for the respective quarters due to the increase in the number of video
poker devices from 15 to 33 which occurred in June, 1997.
Revenues from retail operations at the Woodlands truck stop decreased 27% from
$662,000 for the three months ending March 31, 1997 to $482,000 for the three
months ending March 31, 1998, primarily due to lower than expected fuel sales.
Total costs and expenses decreased 7% from $1,404,000 for the three months ended
March 31, 1997 to $1,316,000 for the three months ended March 31, 1998. Video
Poker operations recorded direct costs of $300,000 for the three months ended
March 31, 1998, which increased by 9% from the costs of $275,000 during the
comparable 1997 quarter due primarily to the costs associated with the increase
in the number of machines at the Toledo Palace.
Retail expenses at the Woodlands truck stop decreased approximately $135,000, or
21%, from $644,000 for the three months ended March 31, 1997 to $509,000 for the
comparable quarter of 1998, due primarily to direct costs associated with
decreased fuel sales.
Consulting and business development costs incurred by the Tottenham & Co.
subsidiary increased $54,000, or 73%, from $74,000 for the three months ended
March 31,1997 to $128,000 for the comparable quarter of 1998, due to increased
travel and related costs incurred in the Company's new business development
activity in Eastern Europe.
MATS expenses, consisting primarily of labor and travel-related costs, amounted
to $55,000 for the three months ended March 31, 1998. The Company did not incur
such costs during the same period in 1997.
Administrative costs decreased 36% or $118,000 to $210,000 for the three months
ended March 31, 1998 as compared to $328,000 in the comparable quarter in 1997.
In the three months in the last fiscal quarter ended March 31, 1997, the Company
recorded approximately $120,000 in expenses in support of its business
development efforts in Eastern Europe, expenses the Company did not incur during
the current three month period ending March 31, 1998.
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Depreciation and amortization for the three month periods ending March 31, 1997
and March 31, 1998, totaled $83,000 and $118,000, respectively. The increase of
$35,000 was due primarily to the three months of amortization of the goodwill
portion of the Tottenham & Co. acquisition in 1998 as compared to one month in
1997.
Interest expense increased by $111,000 from $172,000 for the three months ended
March 31, 1997 to $283,000 for the comparable quarter of 1998 due to $108,000 in
interest on the $17 million Notes (as defined below) dated March 17, 1998 in
connection with the acquisition of Resorts. (See "Liquidity and Capital
Resources" below).
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital, defined as current assets minus current
liabilities, increased $2.4 million to $1.5 million for the three months ended
March 31, 1998 from a working capital deficit of $.9 million at December 31,
1997. As described below, the Company used the proceeds of certain short term
and long term financings to acquire Resorts (See: Form 10KSB/A for the year
ended December 31, 1997, Item 1. "Description of Business") and to repay
interest-bearing debt. The net proceeds of the financings, offset by the
investments and debt repayments, resulted in an increase in cash and equivalents
of $3.1 million to a balance of $3.3 million at March 31, 1998.
On October 29, 1997 the Company and Value Partners, Ltd., a Texas limited
partnership, ("Value Partners") executed a loan which was amended on
December 19, 1997, (the "First Amended Loan Agreement") under which TWG has the
ability to borrow up to $4,125,000. As of March 30, 1998, the Company borrowed
$1,288,000 under this loan which was repaid in full on March 31, 1998 from the
proceeds of the Private Placement (as described below) (See: Form 10KSB/A for
the year ended December 31, 1997, Item 6. "Management's Discussion and Analysis
or Plan of Operation - Liquidity and Capital Resources").
On March 19, 1998, the Company and Value Partners executed a Lenders Waiver and
Option Agreement (the "Waiver") under which the Company borrowed $250,000 to
fund the acquisition of the Bishkek Casino, in Krygyz, a former member of the
Soviet Union (the "Bishkek Note"). The Company will repay the principal and
accrued interest payable in twelve monthly installments starting May 1, 1998
from the Company's 60% share of the operating profits from the Bishkek Casino.
On March 31, 1998, the Company, with the assistance of Libra Investments, Inc.,
Los Angeles, California ("Libra") acting as placement agent, borrowed $17.0
million from fourteen sophisticated, accredited investors (the "Investors") in
the Private Placement. The loan is represented by 12% Senior Secured Notes (the
"Notes") issued pursuant to an indenture by and among TWG, TWG International
U.S. Corporation ("TWGI"), TWG Finance Corp. ("TFC") (both wholly-owned
subsidiaries of TWG) and U.S. Trust Company of Texas, N.A. acting as indenture
trustee. The Notes require mandatory prepayments based upon excess cash flow
generated by TWGI from the operation of the Czech casinos acquired in the
Resorts acquisition and bear interest at the rate of 12% per annum. (See: Form
8-K filed with the Securities and Exchange Commission on April 14, 1998). The
proceeds of the Notes were used for improvements to and the net acquisition
costs of Resorts of $12.6 million, to repay the First Amended Loan Agreement of
$1.3 million, for costs and expenses of the Private Placement of $1.4 million
and working capital of $1.7 million.
The Company believes, although there can be no assurance, that existing cash and
anticipated cash flows from current operations will be sufficient to satisfy its
on-going operational, liquidity and capital requirements for the next twelve
months. However, the Company will require additional debt and/or equity
financing in order to consummate certain planned acquisitions as described under
"Plan of Operations" below.
PLAN OF OPERATIONS
The Company intends to continue operating the Gold Coin and the Toledo Palace as
they are presently being operated; however, the Company has made available for
sale its Woodlands property, where the Toledo Palace is located.
On December 22, 1994, the Company acquired from Chrysolith LLC, a joint venture
in which the Company owns 49% ("Chrysolith"), and Prime Properties, Inc.
("Prime"), which leases a truckstop in which the Gold Coin is located from
National Auto Truckstops, Inc. ("National"), certain rights including an 18 year
sub-leasehold interest ("Sub-lease"), subject to the terms of an Over-lease
between Prime, as lessee and National, as lessor. Should this Over-Lease be
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terminated, the Company could lose all of its rights under the Sub-lease and
Prime would lose its establishment license for video poker in the State of
Louisiana. The Company acquired from Prime the right to a 50% interest in the
profits of the Gold Coin under the terms of an agreement under which the Company
agreed to pay a total of $6.0 million for such profit interest (the "Prime
Agreement"). The Company's obligation under the Prime Agreement was evidenced by
a note, the final installment of which was paid in full on December 23, 1997. On
November 10, 1997, the Company was advised that on October 16, 1997, National
placed Prime on notice that its rights to occupy the 76 Plaza (where the Gold
Coin is located) would terminate on January 23, 1998, due to an alleged breach
by Prime of the Over-Lease. The Company believes that the alleged default by
Prime may be due, in part, to the failure of Prime to pay certain sums due to
National under the Over-Lease. Consequently, on December 23, 1997, the Company
filed a Petition for Concursus in the 15th Judicial District Court, Lafayette
Parish, Louisiana, Case No. 976174-D and paid the final payment of $292,000 into
the registry of the court, protesting that such sum is actually due and owing
based on the alleged breach of the Over-Lease by Prime. On or about December 30,
1997, the Company received notice from Prime that Prime (which was not aware of
the Petition for Concursus) considered the Company in default of the Sub-lease
for the Gold Coin premises and demanded that the Company pay to Prime an amount
equal to approximately $299,513 on or before January 7, 1998 to cure this
alleged default. Upon receipt of this correspondence, the Company contacted
counsel for Prime and made him aware of the Company's prior filing. On or about
January 19, 1998, Prime filed in United States District Court, Western District
of Louisiana, Case No. CV98-0076L-0, a Complaint for Damages and Violation of
the Petroleum Marketing Practices Act against National alleging breaches by
National in the franchise agreement between Prime and National and seeking to
enjoin National from terminating the Over-Lease. On or about January 21, 1998,
Prime filed a Voluntary Petition in bankruptcy under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of
Louisiana, Case No. 98BK-50087, listing National as the holder of an unsecured
claim of between $925,000 and $1,000,000 (the "National Claim"). The Company has
engaged counsel and intends to intervene in this action in order to protect its
rights under the Prime Agreement and Sub-lease. (See: Form 10KSB-A for the year
ended December 31, 1997, Item 6, "Management's Discussion and Analysis or Plan
of Operations - Important Factors to Consider".)
As noted above, the Sub-lease for the Gold Coin is subject to the terms and
conditions of the Over-Lease between Prime and National. Although National is
aware of the Company's use of the Gold Coin facilities, National has not yet
granted its written consent to the Sub-lease, as required by the Over-Lease. The
Over-Lease expires September 30, 1999, subject to the right of Prime to extend
the term for up to five successive three-year periods. Prime is not
contractually obligated to the Company to exercise its right to extend the
Over-Lease at the end of its term or any renewal term. In addition, National has
the right to terminate the Over-Lease under certain circumstances, including if
Prime defaults under the terms of the Over-Lease, or if Prime does not renew a
franchise relationship between National and Prime. The termination of the
Over-Lease upon the expiration of its terms (or any renewal term), or as a
result of a breach by Prime or otherwise, will result in the termination of the
Company's sub-lease for the Gold Coin gaming facility premises, and any such
termination would have a materially adverse effect on the U.S. operations of the
Company.
On March 20, 1998, National filed various motions, as permitted under section
362 (a) of the Bankruptcy Code, to lift the automatic stay of certain actions by
Prime. On April 13, 1998 the United States Bankruptcy Court granted National's
motions and dismissed Prime's bankruptcy case. Following that decision, on April
17, 1998 National filed a "Motion for Expedited Hearing on Motion to Return
Possession of Premises to National Auto" in the United States District Court,
Western District of Louisiana Case No. 98-0076. As of May 11, 1998 the courts
have not yet ruled on Case No. 98-0076.
Counsel for the Company has been negotiating a settlement between and among
Trans World Gaming of Louisiana, Inc., ("TWGLa"), Chrysolith, Prime and National
(the "Settlement"). The proposed terms of the Settlement are as follows: (i)
TWGLa and Prime will agree to a settlement of $450,000 (the "Prime Payment"),
(ii) the National Claim against Prime will be satisfied by liquidating the
assets of Prime, the payment to National of the funds previously placed in the
registry of the court (Petition for Concursus file number 976174-D), the payment
to National of the available cash in Prime relating to the sale of Prime's
truckstop inventory (the "Prime Assets"); (iii) to the extent that the Prime
Assets are insufficient to satisfy the National Claim, TWGLa will reduce the
Prime Payment equal to such deficiency and remit such payment to National; (iv)
the remaining funds of the Prime Payment will be used first to pay trade
creditors and then Prime; (v) the capital stock of Prime will be transferred to
a third party; and (vi) all parties will then agree to mutually acceptable
releases of all claims and liabilities. If all parties agree to the Settlement,
and subject to a due diligence review including a limited audit by the Company's
independent certified accountants and the execution of all of the necessary
documents, the transaction is expected to close by the end of May 1998. There
can be no assurance that the transaction will be closed on that date, if at all.
If the parties cannot conclude an agreement, or if the Louisiana gaming
authorities do not approve the transaction, the establishment license for the
Gold Coin will be revoked. Such
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revocation will mandate the closing of the Gold Coin which will have a material
adverse effect on the Company's profitability.
On April 1, 1998, the Company issued a press release announcing the acquisition
of Resorts. In connection with the announcement, TWG stated that a third casino
in Znojmo, Czech Republic is scheduled to be opened by the 3rd quarter, 1999.
The Company will require financing of approximately $8.0 million to build and
equip the facility. The Company believes, although there can be no assurance,
that financing should be available at terms favorable to TWGI.
On April 17, 1998, the Company issued a press release announcing the acquisition
of 90% of the Casino de Zaragoza, SA, a company incorporated in Zaragoza, Spain
that holds an exclusive casino license in the region of Aragon (the "CDZ"). TWG
acquired 90% of the outstanding stock of CDZ for approximately $780,000, $50,000
of which was paid on deposit, and assumed outstanding debt obligations of
approximately $4.8 million. TWG is currently negotiating to raise approximately
$4.0 million to fund the remaining purchase price, recapitalize CDZ and provide
working capital to cover the projected operating losses. The Company anticipates
that permission will be granted by the Diputacion General de Aragon, the Aragon
Provincial Council, to enable TWG to move CDZ to a more favorable location which
will require an investment of approximately $7.0 million to build and equip a
new facility. The Company expects, although there can be no assurance, that the
financing of the $7.0 million will be available at terms favorable to TWG.
In the event that financing is not available for the casino in Znojmo, the
acquisition and recapitalization of CDZ and the new casino in Zaragoza, it would
have a material adverse effect on the future profitability of TWG.
Management of the Company continues to seek other opportunities both within and
outside of the United States. There can be no assurance that management will be
successful in identifying such opportunities, financing such acquisitions or
investments or implementing such transactions. The failure to so do may have a
material adverse effect upon the Company's financial condition and results of
operation.
NOTE ON FORWARD-LOOKING INFORMATION
This Form 10-QSB/A contains certain forward-looking statements. For this
purpose, any statements contained in this Form 10-QSB/A that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipates," "estimates," or "continue" or comparable terminology or the
negative thereof are intended to identify certain forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
both known and unknown, and actual results may differ materially from any future
results expressed or implied by such forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements whether as a result of new information, future events or otherwise.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
BREACH OF MANAGEMENT CONTRACT. On or about November 6, 1997, the Company was
sued for breach of contract by Monarch Casinos, Inc. of Louisiana and Michael A.
Edwards in the 15th Judicial District Court, Lafayette Parish, Louisiana, Case
No. 97-5037B. This litigation was filed pro se, but Mr. Edwards has since
engaged counsel. Mr. Edwards claims compensation charges of approximately $2.2
million and punitive charges of $11.1 million and has alleged that the Company
breached a management contract dated September 21, 1994. On May 6, 1998 Mr.
Edwards filed a First Supplemental and Amending Petition for Breach of Contract
and for Declaratory Relief against the Company. The Company has hired local
litigation counsel and believes that these claims are wholly without merit and
intends to defend this action vigorously.
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PRIME/NATIONAL OVER-LEASE. See Item 2, "Management's Discussion and Analysis or
Plan of Operations - Plan of Operations".
VOTER MANDATE. On April 19, 1996, a local option bill was passed which required
the residents of each parish in the State of Louisiana to vote on the future of
gambling in their parish. On November 5, 1996, the residents in Lafayette and
Beauregard parishes, where the Company had video poker operations, were among 35
parishes that voted to eliminate video poker (the "Voter Mandate"). The Company,
through its Chrysolith affiliate, has joined with two other video poker
operators in the State in challenging the Voter Mandate in the courts. On
January 30, 1998 the Louisiana Supreme Court unanimously denied without comment
a writ application filed by Chrysolith, among others, alleging Election Code
violations, effectively ending the Election Code challenge to the video poker
referenda. The suit will proceed to federal court on a federal civil rights
violation under Title 42 of the United States Code Section 1983. The Company
cannot as of the date hereof predict the outcome of this litigation or when a
decision relating hereto will be rendered.
The Company is not currently involved in any other material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
(a) None
(b) None
(c) In connection with the recently completed financing including the
restructure of the Company's long term debt (See: Form 10-KSB/A for the
year ended December 31, 1997 Item 6. "Management's Discussion and
Analysis or Plan of Operations - Liquidity and Capital Resources"), the
Company issued the following series of warrants to purchase the
Company's common stock:
Series A Warrants: 960,000 warrants to purchase shares of TWG common
stock with an exercise price of $1.00 per share which expire on
December 31, 2005 issued to replace existing warrants in connection
with the issuance of TWG's Senior Bonds dated July 1, 1996. (See: Form
10-QSB for the quarter ended June 30, 1996 Item 6. " Management's
Discussion and Analysis or Plan of Operation - Liquidity and Capital
Resources").
Series B Warrants: 3,200,000 warrants to purchase shares of TWG common
stock with an exercise price of $1.50 per share which expire on
December 31, 2005 issued to replace the conversion rights in connection
with the Senior Bonds described above.
Series C Warrants: 7,087,452 warrants to purchase shares of TWG common
stock with an exercise price of $.01 per share which expire on March
31, 2008 issued pursuant to the Private Placement dated March 16, 1998
(See: Form 10-KSB/A for the year ended December 31, 1997, Item 6.
"Management's Discussion and Analysis or Plan of Operations - Liquidity
and Capital Resources").
Series D Warrants: 2,051,912 warrants to purchase shares of TWG common
stock with an exercise price of $.01 per share which expire on March
31, 2008 which replace the warrants issued in connection with the June,
1996 Baker Bridge (See: Form 10-QSB for the quarter ended June 30, 1996
Item 6. "Management's Discussion and Analysis or Plan of Operation -
Liquidity and Capital Resources").
Series E Warrants: 354,374 warrants to purchase shares of TWG common
stock with an exercise price of $.01 per share which expire on March
31, 2008 issued pursuant to the Private Placement dated March 16, 1998
(See: Form 10-KSB/A for the year ended December 31, 1997, Item 6.
"Management's Discussion and Analysis or Plan of Operation - Liquidity
and Capital Resources").
ITEM 3. DEFAULT UPON SENIOR SECURITIES
(a) None
(b) None
9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO VOTING SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-QSB/A
a. Exhibits
<TABLE>
<CAPTION>
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Item No. Item Method of Filing
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<S> <C> <C>
3.1 Articles of Incorporation Incorporated by reference to Exhibit 3.1 contained
in the registration statement on Form SB-2 (File
No. 33-85446-A).
3.2 By-laws Incorporated by reference to Exhibit 3.1 contained
in the registration statement on Form SB-2 (File
No. 33-85446-A).
4.1 Specimen Common Stock Certificate Incorporated by reference to Exhibit 4.1 contained
in the registration statement on Form SB-2 (File
No. 33-85446-A).
4.2 Specimen Redeemable Common Stock Purchase Incorporated by reference to Exhibit 4.2 contained
Warrant in the registration statement on Form SB-2 (File
No. 33-85446-A).
4.3 Form of Warrant Agreement Incorporated by reference to Exhibit 4.3 contained
in the registration statement on Form SB-2 (File
No. 33-85446-A).
4.4 Confidential Private Placement Memorandum dated Incorporated by reference to Exhibit 4.4
June 17, 1996 contained in Form 10-KSB for the fiscal year ended
December 31, 1996. (File No. 0-25244)
4.5 Supplement No. 1 dated January 14, 1997 to Incorporated by reference to Exhibit 4.5 contained
Confidential Private Placement Memorandum dated in Form 10-KSB for the fiscal year ended December
June 17, 1996 31, 1996. (File No. 0-25244)
4.6 Indenture dated as of November 1, 1996 between Incorporated by reference to Exhibit 4.6
the Company and Trans World Gaming of contained in Form 10-KSB for the fiscal year ended
Louisiana, Inc., as Issuer, and U.S. Trust December 31, 1996. (File No. 0-25244)
Company of Texas, N.A., as Trustee
4.7 Form of 12% Secured Convertible Senior Bond due Incorporated by reference to Exhibit 4.7 contained
June 30, 1999 in Form 10-KSB for the fiscal year ended
December 31, 1996. (File No. 0-25244)
4.8 Form of Warrant to Purchase Common Stock Dated Incorporated by reference to Exhibit 4.8 contained
July 1, 1996 in Form 10-KSB for the fiscal year ended
December 31, 1996. (File No. 0-25244)
4.9 Form of Warrant for Purchase of Shares of Incorporated by reference to Exhibit 4.9 contained
Common Stock dated January 1, 1997 in Form 10-KSB for the fiscal year ended
December 31, 1996. (File No. 0-25244)
4.10 Form of Non-Negotiable Promissory Note dated Incorporated by reference to Exhibit 4.10
January 1, 1997 contained in Form 10-KSB for the fiscal year ended
December 31, 1996. (File No. 0-25244)
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</TABLE>
10
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<CAPTION>
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Item No. Item Method of Filing
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<S> <C> <C>
4.11 First Amended Senior Secured Promissory Note Incorporated by reference to Exhibit 4.11
dated December 19, 1997 contained in Form 10-KSB for the fiscal year ended
December 31, 1997 filed on March 30, 1998. (File
No. 0-25244)
4.12 Form of Warrant for Purchase of Shares of Incorporated by reference to Exhibit 4.12
Common Stock dated January 15, 1998 contained in Form 10-KSB for the fiscal year ended
December 31, 1997 filed on March 30, 1998. (File
No. 0-25244)
4.13 Lenders Waiver and Option Agreement dated March Incorporated by reference to Exhibit 4.13
9, 1998 contained in Form 10-KSB for the fiscal year ended
December 31, 1997 filed on March 30, 1998. (File
No. 0-25244)
10.1 Agreement for Exchange of Shares dated July 12, Incorporated by reference to Exhibit 10.1
1994,between the Company and the shareholders contained in the registration statement on Form
of Lee Young Enterprises, Inc. SB-2 (File No. 33-85446-A).
10.2 Asset Purchase Agreement dated as of September Incorporated by reference to Exhibit 10.2
21,1994, between the Company and Prime contained in the registration statement on Form
Properties, Inc. SB-2 (File No. 33-85446-A).
10.3 Agreement of Sale dated as of September 21, Incorporated by reference to Exhibit 10.3
1994,between the Company and Prime Properties, contained in the registration statement on Form
Inc. SB-2 (File No. 33-85446-A).
10.4 Form of Lease between Prime Properties, Inc. Incorporated by reference to Exhibit 10.4
and the Company. contained in the registration statement on Form
SB-2 (File No. 33-85446-A).
10.5 Agreement dated September 21, 1994, among Incorporated by reference to Exhibit 10.5
Chrysolith, LLC, Prime Properties, Inc., contained in the registration statement on Form
Monarch Casinos, Inc. of Louisiana, SB-2 (File No. 33-85446-A).
("Monarch") and the Company.
10.6 Asset Purchase Agreement dated September 21, Incorporated by reference to Exhibit 10.6
1994, between Chrysolith L.L.C. and Monarch contained in the registration statement on Form
SB-2 (File No. 33-85446-A).
10.7 Lease (with option) dated May 10, 1994 among Incorporated by reference to Exhibit 10.7
Lula Miller, Inc., Charles A. Jones III and contained in the registration statement on Form
Kelly McCoy Jones, as Lessor, and Monarch, as SB-2 (File No. 33-85446-A).
Lessee.
10.8 Offer to Purchase dated October 4, 1994, among Incorporated by reference to Exhibit 10.8
Trans World Gaming of Louisiana, Inc., Monarch, contained in the registration statement on Form
Lula Miller, Inc., Charles A. Jones III and SB-2 (File No. 33-85446-A).
Kelly McCoy Jones.
10.9 Memorandum of Agreement dated March 18, 1994, Incorporated by reference to Exhibit 10.9
between the Company and Yves Gouhier and contained in the registration statement on Form
Camille Costard to acquire shares of Casino SB-2 (File No. 33-85446-A).
Cherbourg S.A., as amended (English
translation, except amendment is in French.)
10.10 Shareholder Agreement dated April 7, 1994, Incorporated by reference to Exhibit 10.10
between the Company and Michael A. Edwards, as contained in the registration statement on Form
the shareholders of Monarch SB-2 (File No. 33-85446-A).
10.11 Employment Agreement dated March 6, 1996 Incorporated by reference to Exhibit 10.11
between the Company and Stanley Kohlenberg contained in the Form 10-KSB for the fiscal year
ended December 31, 1995 (File No. 0-25244).
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</TABLE>
11
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<CAPTION>
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Item No. Item Method of Filing
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<S> <C> <C>
10.12 Employment Agreement between the Company and Incorporated by reference to Exhibit 10.12
Dominick J. Valenzano contained in the registration statement on Form
SB-2 (File No. 33-85446-A).
10.13 1993 Incentive Stock Option Plan Incorporated by reference to Exhibit 10.13
contained in the registration statement on Form
SB-2 (File No. 33-85446-A).
10.14 Form of 41/2% Bridge Note Incorporated by reference to Exhibit 10.14
contained in the registration statement on Form
SB-2 (File No. 33-85446-A).
10.15 Form of 10% Secured Bridge Incorporated by reference to Exhibit 10.15
contained in the registration statement on Form
SB-2 (File No. 33-85446-A).
10.16 Collateral Mortgage relating to the Woodlands Incorporated by reference to Exhibit 10.16
Travel Plaza. contained in the registration statement on Form
SB-2 (File No. 33-85446-A).
10.17 Operating Agreement dated as of December 22, Incorporated by reference to Exhibit 10.17
1994 Gold Coin. contained between the Company and Chrysolith
relating to the in the Form 10-KSB for the fiscal
year ended December 31, 1994 (File No. 0-25244).
10.18 Note in principal amount $75,000 payable by Incorporated by reference to Exhibit 10.18
Monarch (and assumed by the Company). contained in the Form 10-KSB for the fiscal year
ended December 31, 1994 (File No. 0-25244).
10.19 Lease Agreement dated May 1, 1993 between Incorporated by reference to Exhibit 10.19
National Auto/Truck Stops, Inc. and Prime contained in the Form 10-KSB for the fiscal year
Properties with respect to the 76 Plaza ended December 31, 1995 (File No. 0-25244).
10.20 Agreement and General Release dated as of March Incorporated by reference to Exhibit 10.20
6, 1996 between the Company and R. K. Merkey. contained in the Form 10-KSB for the fiscal year
ended December 31, 1995 (File No. 0-25244).
10.21 Forbearance Agreement dated January 19, 1996 Incorporated by reference to Exhibit 10.21
between the Company and Chrysolith contained in the Form 10-KSB for the fiscal year
ended December 31, 1995 (File No. 0-25244).
10.22 Letter Agreement dated January 30, 1996 between Incorporated by reference to Exhibit 10.22
the Company and Chrysolith regarding contained in the Form 10-KSB for the fiscal year
forbearance payments ended December 31, 1995 (File No. 0-25244).
10.23 Consulting Agreement dated January 1, 1997 Incorporated by reference to Exhibit 10.23
between the Company and Stanley Kohlenberg contains in Form 10-KSB for the fiscal year ended
December 31, 1996 (File No. 0-25244).
10.24 Employment Agreement dated December 26, 1996 Incorporated by reference to Exhibit 10.24
between the Company and Andrew Tottenham contains in Form 10-KSB for the fiscal year ended
December 31, 1996 (File No. 0-25244).
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</TABLE>
12
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<TABLE>
<CAPTION>
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Item No. Item Method of Filing
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10.25 Employment Agreement date February 1, 1997 Incorporated by reference to Exhibit 10.25
between the Company and Christopher Moore contains in Form 10-KSB for the fiscal year ended
December 31, 1996 (File No. 0-25244).
10.26 Cancellation Agreement dated as of October 3, Incorporated by reference to Exhibit 10.26
1996 between the Company and Mid-City Associates contained in the Form 10-KSB for the fiscal year
ended December 31, 1996 (File No. 0-25244).
10.27 Agreement of Lease dated as of October 2, 1996 Incorporated by reference to Exhibit 10.27
between the Company and Mid-City Associates contained in the Form 10-KSB for the fiscal year
ended December 31, 1996 (File No. 0-25244).
10.28 Stock Purchase Agreement dated as of January Incorporated by reference to Exhibit 10.28
1, 1997 among the Company, Andrew Tottenham contained in the Form 10-KSB for the fiscal year
and Robin Tottenham ended December 31, 1996 (File No. 0-25244).
10.29 Employment Agreement dated April 15, 1997 Incorporated by reference to Exhibit 10.29
between Company and James Hardman contained in Form 10-KSB for the fiscal year ended
December 31, 1997 filed on March 30, 1998. (File
No. 0-25244)
10.30 Stock Purchase Agreement dated as of January Incorporated by reference to Exhibit 10.30
20, 1998 between the Company and 21st Century contained in Form 10-KSB for the fiscal year ended
Resorts December 31, 1997 filed on March 31, 1998. (File
No. 0-25244)
10.31 Form of the Subscription Agreement for the Incorporated by reference to Exhibit 10.31
Private Placement contained in Form 10-KSB for the fiscal year ended
December 31, 1997 filed on March 31, 1998. (File
No. 0-5244)
10.32 Escrow Agreement dated March 17, 1998 among the Incorporated by reference to Exhibit 10.32
Company, TWG Finance Corp., TWG International contained in Form 10-KSB for the fiscal year ended
U.S. Corporation as Issuer and U.S. Trust December 31, 1997 filed on March 30, 1998. (File
Company of Texas, N.A., as Trustee No. 0-25244)
10.33 Consulting Agreement between Chrysolith, L.L.C. Incorporated by reference to Exhibit 10 contained
and Lee Young dated January 1, 1997 in the Form 10-QSB for the quarter ended June 30,
1996 filed on August 14, 1996 (File No. 0-25244)
10.34 Purchase Agreement dated as of April 15, 1997 Incorporated by reference to Exhibit 10.34
among the Company, James R. Hardman, Jr. and contained in the Form 10-Q for the quarter ended
Multiple Application Tracking System March 31, 1997, filed on May 9, 1997
(File No. 0-25244)
10.35 License Agreement dated as of April 15, 1997 Incorporated by reference to Exhibit 10.35
between the Company and James R. Hardman, Jr. contained in the Form 10-Q for the quarter ended
March 31, 1997, filed on May 9, 1997
(File No. 0-25244)
10.36 Loan Agreement dated June 11, 1997 between the Incorporated by reference to Exhibit 10.36
Company and Value Partners contained in the Form 8-K filed on June 17, 1997
(File No. 0-25244)
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</TABLE>
13
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<TABLE>
<CAPTION>
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Item No. Item Method of Filing
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<S> <C> <C>
10.37 $350,000 Senior Promissory Note dated June 11, Incorporated by reference to Exhibit 10.37
1997 contained in the Form 8-K filed on June 17, 1997
(File No. 0-25244)
10.38 Joint Activity Agreement dated March 31, 1997 Incorporated by reference to Exhibit 10.38
between Mr. Mahmud Avdiyev and Tottenham & contained in the Form 8-K filed on June 17, 1997
Co., d/b/a ART marketing Ltd. (File No. 0-25244)
10.39 Loan Agreement dated October 27, 1997, between Incorporated by reference to Exhibit 10.39
Value Partners, and the Company contained in the Form 10-QSB for the quarter ended
September 30, 1997, filed on November 12, 1997
(File No. 0-25244)
10.40 $262,500 Senior Promissory Note dated October Incorporated by reference to Exhibit 10.40
27, 1997 contained in the Form 10-QSB for the quarter ended
September 30, 1997, filed on November 12, 1997
(File No. 0-25244)
10.41 Warrant to Purchase Common Stock dated November Incorporated by reference to Exhibit 10.41
27, 1997 contained in the Form 10-QSB for the quarter ended
September 30, 1997, filed on November 12, 1997
(File No. 0-25244)
27.1 Financial Data Schedule Filed herewith
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</TABLE>
b. Reports on Form 8-K
The Company filed no reports on Form 8-K during the
last quarter ended March 31, 1998
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS WORLD GAMING CORP.
Date: September 3, 1999 By: /s/ Rami S. Ramadan
---------------------------------
Rami S. Ramadan
Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOUND ON PAGE F-3 AND F-4
OF THE COMPANY'S 10KSB/A FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,358
<SECURITIES> 0
<RECEIVABLES> 421
<ALLOWANCES> 0
<INVENTORY> 77
<CURRENT-ASSETS> 4,320
<PP&E> 2,674
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,416
<CURRENT-LIABILITIES> 2,821
<BONDS> 15,651
0
0
<COMMON> 3
<OTHER-SE> 941
<TOTAL-LIABILITY-AND-EQUITY> 19,416
<SALES> 0
<TOTAL-REVENUES> 1,569
<CGS> 0
<TOTAL-COSTS> 988
<OTHER-EXPENSES> 328
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 283
<INCOME-PRETAX> (30)
<INCOME-TAX> 0
<INCOME-CONTINUING> (30)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
