<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 1 TO
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 2000
/ / 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
--------------------
TRANS WORLD CORPORATION (FORMERLY TRANS WORLD GAMING CORP.)
(Exact name of small business issuer as specified in its charter)
NEVADA 13-3738518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
545 FIFTH AVENUE, SUITE 940
NEW YORK, NY 10017
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (212) 983-3355
--------------------
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 of October 31, 2000: 5,365,449
Transitional Small Business Disclosure Format (check one; YES / / NO /X/)
<PAGE>
TRANS WORLD CORPORATION AND SUBSIDIARIES
(FORMERLY TRANS WORLD GAMING CORP.)
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE 2
LOSS FOR THE NINE ANDTHREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE 3
MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 6
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBSMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURE 15
</TABLE>
<PAGE>
TRANS WORLD CORPORATION (FORMERLY TRANS WORLD GAMING CORP.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
September 30, 2000
(In thousands)
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS:
<S> <C>
Cash $ 923
Accounts receivable 159
Prepaid expenses and other current assets 205
----------
TOTAL CURRENT ASSETS 1,287
----------
PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $1,523 4,523
----------
OTHER ASSETS:
Goodwill and other intangible assets, less accumulated amortization of $5,478 8,840
Deposits and other assets 791
----------
9,631
----------
$ 15,441
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term debt $ 396
Accounts payable 699
Interest Payable 2,400
Taxes payable to Spanish taxing authorities, current portion 3,580
Accrued expenses and other current liabilities 928
----------
TOTAL CURRENT LIABILITIES 8,003
----------
LONG-TERM LIABILITIES:
Long-term debt, net of unamortized debt discount of $3,666 21,134
Taxes payable to Spanish taxing authorities 4,328
----------
25,462
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 2,000 shares authorized,
none issued
Common stock $.001 par value, 50,000 shares authorized,
5,365 shares issued and outstanding 5
Additional paid-in capital 10,104
Stock warrants outstanding 4,912
Accumulated other comprehensive income 1,766
Accumulated deficit (34,811)
----------
TOTAL STOCKHOLDERS' DEFICIT (18,024)
----------
$ 15,441
----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
<PAGE>
TRANS WORLD CORPORATION (FORMERLY TRANS WORLD GAMING CORP.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (unaudited)
Nine and Three Months Ended September 30, 2000 and 1999
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
2000 1999 2000 1999
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
REVENUES $ 10,916 $ 9,572 $ 3,061 $ 2,930
----------- ----------- --------- -----------
COSTS AND EXPENSES
Cost of revenues 6,128 5,098 2,122 2,098
Depreciation and amortization 2,010 2,152 633 714
Selling, general and administrative 4,223 3,135 1,399 530
----------- ----------- --------- -----------
12,361 10,385 4,154 3,342
----------- ----------- --------- -----------
LOSS FROM OPERATIONS (1,445) (813) (1,093) (412)
----------- ----------- --------- -----------
OTHER EXPENSES:
Interest expense (3,033) (2,327) (1,005) (510)
Foreign exchange gain (loss) (34) 37 230 211
----------- ----------- --------- -----------
(3,067) (2,290) (775) (299)
----------- ----------- --------- -----------
LOSS FROM CONTINUING OPERATIONS (4,512) (3,103) (1,868) (711)
DISCONTINUED OPERATIONS, income (loss) from operations of discontinued 5 (469)
truckstop segment ----------- ----------- --------- -----------
NET LOSS $ (4,512) $ (3,098) $(1,868) $ (1,180)
=========== =========== ========= ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, basic and diluted 5,365 3,364 5,365 3,364
=========== =========== ========= ===========
EARNINGS (LOSS) PER COMMON SHARE, basic and diluted
From continuing operations $ (0.84) $ (0.92) $ (0.35) $ (0.21)
From discontinued operations 0.00 (0.14)
----------- ----------- --------- -----------
Net loss $ (0.84) $ (0.92) $ (0.35) $ (0.35)
=========== =========== ========= ===========
COMPREHENSIVE LOSS
NET LOSS $ (4,512) $ (3,098) $ (1,868) $ (1,180)
OTHER COMPREHENSIVE INCOME, foreign currency
translation adjustment 731 870 242 83
----------- ----------- --------- -----------
COMPREHENSIVE LOSS $ (3,781) $ (2,228) $ (1,626) $ (1,097)
=========== =========== ========= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
TRANS WORLD CORPORATION (FORMERLY TRANS WORLD GAMING CORP.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine and Three Months Ended September 30, 2000 and 1999
(in thousands)
<TABLE>
<CAPTION>
2000 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 116 $ 254
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES,
Purchases of property and equipment (291) (707)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 600
Payments of short-term debt (350) (56)
------------------ ------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 250 (56)
------------------ ------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (86) (127)
------------------ ------------------
NET DECREASE IN CASH (11) (636)
CASH
Beginning of period 934 1,955
------------------ ------------------
End of period $ 923 $ 1,319
================== ==================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
TRANS WORLD CORPORATION (FORMERLY TRANS WORLD GAMING CORP.) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Unaudited Statements.
The accompanying condensed consolidated financial statements of Trans World
Corporation (formerly "Trans World Gaming Corp.") and subsidiaries (the
"Company" or "TWC") for the nine and three month periods ended September
30, 2000 and 1999 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
condensed, consolidated financial statements have been prepared by the
Company pursuant to the instructions to Form 10-QSB. Pursuant to such
instructions, certain financial information and footnote disclosures
normally included in such financial statements have been condensed or
omitted.
Due to the fact that the Company's operations are located in Europe, the
financial results are subject to the influence of fluctuations in foreign
currency exchange rates. In 2000, the Euro and other European currencies
have lost significant value versus the United States ("US") Dollar, which
has negatively impacted the Company's performance.
These unaudited condensed, 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 operations, contained in the Company's Annual Report Form 10-KSB for the
year ended December 31, 1999. The results of operations for the nine and
three months ended September 30, 2000 are not necessarily indicative of the
results that may occur for the year ending December 31, 2000.
Certain prior period amounts, which collectively represent the results of
operations that were discontinued in 1999, have been reclassified to
conform to the 2000 presentation.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has
suffered significant losses from operations and has a working capital
deficit of approximately $6.7 million and a stockholders' deficit of
approximately $18.0 million as of September 30, 2000. Furthermore, the
Company is highly leveraged with debt and is unable to pay its obligations
as they become due. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty. The Company has taken steps to improve its
situation including the expansion of its Czech operations by means of the
December 1999 opening of its third Czech casino and certain measures to
reduce expenses. Further, management's plans include an expansion strategy
to counter the affects of seasonality on the Company's operations and cash
flows. The goals of the expansion strategy are to diversify the Company's
portfolio of operations in terms of geographical location and to add
hotels, a business segment that is complementary to casinos, to the mix of
operations. In implementing its expansion strategy, the Company is seeking
additional outside financing for acquisitions and, where possible, is
pursuing management or joint venture agreements and leased space
arrangements that will attempt to avoid further indebtedness.
2. Earnings (loss) per common share.
Basic earnings (loss) per common share are computed by dividing net income
(loss) by the weighted average number of common shares outstanding during
the period. Diluted earnings (loss) per common share incorporate 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 common share have not
been presented for the nine and three month periods ended September 30,
2000 and 1999 since the inclusion of common stock equivalents either did
not have a material effect on basic earnings (loss) per common share or
would have been antidilutive.
4
<PAGE>
3. Other items.
On or about October 23, 2000, Andrew Tottenham, the Company's former
President and Chief Operating Officer, filed a lawsuit against the Company
in the United States District Court Southern District of New York. The suit
is a civil action for monetary and equitable relief against the Company for
compensation allegedly due to Mr. Tottenham of approximately $1.8 million
plus interest, costs and disbursements, and attorney's fees for breach of
employment and oral contract actions as well as amounts to be determined by
a court or jury plus interest, costs and disbursements, and attorney's fees
for breach of contract, breach of oral contract, intentional
misrepresentation, tortuous interference with business relationships,
derivative stockholder/breach of fiduciary duty, and conversion of property
actions. The Company disputes the claims made in the action by Mr.
Tottenham and intends to vigorously defend itself against these claims.
Accordingly, no provision for liability to the Company that may result upon
adjudication has been made in the accompanying consolidated financial
statements.
At September 30, 2000, the Company was in default of certain debt
obligations for nonpayment of interest. The Company received waivers from a
majority interest of the debt holders, through December 31, 2000. The
Company believes that it will either be able to satisfy its remaining
September 2000 interest obligation or receive further waivers at that time.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
OVERVIEW
The Company is primarily engaged in the gaming business in the Czech Republic
and Spain. The Company previously operated two video poker parlors situated at
truckstops in the United States. Such truckstop operations were terminated on
June 30, 1999 as a result of local legislation. Accordingly, the Company has
restated 1999 operations to reflect the truckstop segment as discontinued
operations.
The Company's continuing operations consist of three casinos in the Czech
Republic ("Ceska", "Rozvadov" and "Snojmo") and one casino in Spain ("Zaragoza")
(collectively, the "Business Units"). Information relative to the Business Units
for the nine and three months ended September 30, 2000, exclusive of revenue and
expense eliminations that are part of the consolidation process, is as follows:
6
<PAGE>
<TABLE>
<CAPTION>
------------------------------ ------------------------------
Nine Months Ended Sept. 30 Three Months Ended Sept. 30
------------------------------ ------------------------------
2000 1999(1) Variance 2000 1999(1) Variance
---------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
CESKA, CZECH REPUBLIC
Total number of guests 43,810 40,908 2,902 18,563 13,046 5,517
------------------------------ ------------------------------
Average "Drop per Head" (2) $ 321 $ 502 $ (182) $ 232 $ 545 $ (313)
------------------------------ ------------------------------
Total drop ($000) (3) 14,057 20,552 (6,495) 4,311 7,107 (2,797)
------------------------------ ------------------------------
Win percentage (4) 18.6% 17.9% 0.7 16.9% 17.5% (0.6)
------------------------------ ------------------------------
Total revenue ($000) 3,500 5,380 (1,880) 886 1,745 (859)
------------------------------ ------------------------------
Operating expenses ($000) (2,292) (3,231) 939 (603) (1,090) 487
------------------------------ ------------------------------
Management fees ($000) (5) (689) (672) (18) (149) (231) 82
------------------------------ ------------------------------
Income from operations exclusive of interest and
depreciation and amortization ($000) 519 1,477 (959) 133 424 (291)
------------------------------ ------------------------------
ROZVADOV, CZECH REPUBLIC
Total number of guests 25,048 24,338 710 9,482 8,415 1,067
------------------------------ ------------------------------
Average "Drop per Head" (2) $ 259 $ 216 $ 43 $ 218 $ 220 $ (2)
------------------------------ ------------------------------
Total drop ($000) (3) 6,497 5,265 1,231 2,068 1,850 218
------------------------------ ------------------------------
Win percentage (4) 17.4% 18.0% (0.6) 15.6% 18.9% (3.3)
------------------------------ ------------------------------
Total revenue ($000) 1,525 1,431 94 392 516 (124)
------------------------------ ------------------------------
Operating expenses ($000) (1,102) (1,166) 64 (297) (382) 85
------------------------------ ------------------------------
Management fees ($000) (5) (239) (248) 9 (69) (91) 22
------------------------------ ------------------------------
Income from operations exclusive of interest and
depreciation and amortization ($000) 184 17 167 26 43 (18)
------------------------------ ------------------------------
SNOJMO, CZECH REPUBLIC (6)
Total number of guests 40,059 - 40,059 13,869 - 13,869
------------------------------ ------------------------------
Average "Drop per Head" (2) $ 259 $ - $ 259 $ 247 $ - $ 247
------------------------------ ------------------------------
Total drop ($000) (3) 10,358 - 10,358 3,427 - 3,427
------------------------------ ------------------------------
Win percentage (4) 16.4% 0.0% 16.4 17.2% 0.0% 17.2
------------------------------ ------------------------------
Total revenue ($000) 2,676 - 2,676 898 - 898
------------------------------ ------------------------------
Operating expenses ($000) (2,241) - (2,241) (570) - (570)
------------------------------ ------------------------------
Management fees ($000) (5) (448) - (448) (158) - (158)
------------------------------ ------------------------------
Income from operations exclusive of interest and
depreciation and amortization ($000) (13) - (13) 170 - 170
------------------------------ ------------------------------
ZARAGOZA, SPAIN
------------------------------ ------------------------------
Total number of guests 17,588 18,078 (490) 5,750 5,294 456
------------------------------ ------------------------------
Average "Drop per Head" (2) $545 $597 $(52) $ 466 $576 $ (110)
------------------------------ ------------------------------
Total drop ($000) (3) 9,577 10,790 (1,213) 2,678 3,050 (372)
------------------------------ ------------------------------
Win percentage (4) 24.9% 18.4% 6.5 21.5% 18.6% 2.9
------------------------------ ------------------------------
Total revenue ($000) 3,298 2,779 519 887 792 95
------------------------------ ------------------------------
Operating expenses ($000) (3,433) (3,129) (304) (1,111) (1,051) (61)
------------------------------ ------------------------------
Management fees ($000) (5) - (55) 55 - (18) 18
------------------------------ ------------------------------
Income from operations exclusive of interest and
depreciation and amortization $000) (134) (404) 270 (225) (277) 53
------------------------------ ------------------------------
GRAND TOTAL
------------------------------ ------------------------------
Total number of guests 126,505 83,324 43,181 47,664 26,755 20,909
------------------------------ ------------------------------
Average "Drop per Head" (2) $320 $439 $ (119) $ 262 $449 $(187)
------------------------------ ------------------------------
Total drop ($000) (3) 40,489 36,607 3,881 12,483 12,007 476
------------------------------ ------------------------------
Win percentage (4) 19.3% 18.1% 1.3 17.8% 18.0% (0.2)
------------------------------ ------------------------------
Total revenue ($000) 11,000 9,591 1,409 3,062 3,053 10
------------------------------ ------------------------------
Operating expenses ($000) (9,068) (7,526) (1,542) (2,582) (2,523) (59)
------------------------------ ------------------------------
Management fees ($000) (5) (1,377) (974) (402) (376) (340) (36)
------------------------------ ------------------------------
Income from operations exclusive of interest and
depreciation and amortization ($000) 555 1,090 (535) 105 189 (85)
------------------------------ ------------------------------
</TABLE>
(1) Includes continuing operations only.
(2) The per guest average dollar value of gaming chips purchased.
(3) The total value of all gaming chips purchased.
(4) The ratio of table game revenues to the value of all gaming chips
purchased.
(5) Eliminated in consolidation.
(6) Operations commenced December, 1999.
Note: The above table contains variances that can be attributed to the rounding
of numbers.
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
7
<PAGE>
Total revenue for the quarter ended September 30, 2000 was $3.1 million, which
represents an increase of $131,000 over the same period in 1999. The Company's
loss from continuing operations for the quarter ended September 30, 2000 was
$1.9 million as compared to a loss of $.7 million in 1999 and was, primarily,
the result of the disappointing performance of the Company's Ceska casino,
coupled with interest expenses related to the Company's high debt burden.
The Ceska casino continued to perform far below expectations and previous year
results in the third quarter of 2000. Total revenue in Ceska was $886,000 for
the period, which represents a 49% decrease from the $1.7 million in total
revenue for the same period in 1999. As has been the trend all year, Ceska's
revenue shortfall was largely the product of a loss of market share due to the
influx of competitor casinos in the region. In response, the Ceska casino has
implemented a comprehensive marketing and promotional campaign, which has
succeeded in increasing attendance levels. In fact, the third quarter 2000
attendance of 18,563 represents a 5,517 increase over the same period in 1999.
However, as evidenced by the decrease in the Drop per Head from $545 in the
third quarter of 1999 to $232 in the third quarter of 2000, a sizable portion of
the attendance in the period was comprised of low volume players.
The Ceska casino has also implemented a numbers of programs that have been
designed to attract former high volume players that have not frequented the
casino in recent months. One such program, a platinum card plan, which provided
VIP players with a number of exceptional benefits, including free admission and
complimentary food and beverage, resulted in the enrollment of 48 of 60
individuals that were targeted by the program. As a result of this and other
initiatives, VIP attendance in August, the first month that realized the
benefits of these initiatives, was 141 higher than in any preceding month in
2000.
Operating expenses in the third quarter of 2000 were $487,000 lower than the
same period in 1999. The savings related to reduced business volume, lower
gaming taxes, and the allocation of a portion of the overhead costs to a third
Czech casino in 2000.
Inclusive of management fees, which were eliminated in consolidation, Ceska's
third quarter income from operations, exclusive of interest and depreciation and
amortization, was $133,000, which represents a decline of $291,000 versus the
third quarter of 1999.
Despite an increase in Total Drop of $218,000 in the third quarter of 2000
versus the same period in 1999, at $392,000, revenues in Rozvadov in the third
quarter 2000 were $124,000 less than those of the same period in 1999. The
revenue shortfall was the result of a 3.3 percentage point decline in the Win
Percentage versus the third quarter of 1999, which can be attributed to a
combination of several losing nights in the period for Rozvadov, the smallest
and, as such, most vulnerable of TWC's casinos, and the casino's two for one
entrance promotion. While the entrance promotion was successful in boosting
attendance, as evidenced by a 1,067 increase in attendance in the third quarter
of 2000 versus the same period in 1999, the promotion lowered the casino's Win
Percentage. Under the program, casino attendees received non-negotiable gaming
chips equal to double the cost of entry to the casino. Since these chips were
not counted as part of the Total Drop, negotiable chips won in the course of
betting with the non-negotiable chips and ultimately cashed in drove down the
Win Percentage.
In mid-September, the casino added a ninth gaming table. The additional table,
the installation of which was originally planned for March 2000, is anticipated
to assist in alleviating the capacity constraint problems that the casino has
consistently experienced during peak periods.
Rovadov produced income from operations, inclusive of management fees, but
exclusive of interest and depreciation and amortization of $26,000 in the third
quarter of 2000 as compared to $43,000 in the same period in 1999.
Snojmo, which opened on December 22, 1999, outpaced attendance projections by
4,369 in the third quarter of 2000. However, lower than expected Drop per Head
and Win Percentages, which are both negatively impacted by the practice of
issuing non-negotiable gaming chips in an amount equal to the entrance fee,
resulted in a shortfall of $46,000 in revenue versus expectations for the
period. Despite the revenue shortfall, savings in marketing and management fee,
which is calculated based on total revenue, expenditures versus projections
resulted in income from operations, inclusive of management fees, but exclusive
of depreciation and amortization for the casino of $170,000 in the period versus
a projected loss of $52,000.
The casino in Zaragoza recovered from a modest revenue performance in July to
finish the third quarter of 2000 with total revenue of $887,000, which exceeded
prior year totals for the third quarter by $495,000. An exceptionally high Win
Percentage (34.2) in August fueled the positive revenue result. Although higher
than the prior year third quarter
8
<PAGE>
results, 2000 third quarter revenues, which are historically slower due to the
summer vacation season, were the lowest of any quarter of the year in 2000.
Despite 50% retention of the revenue improvement over 1999, the casino's high
overhead costs resulted in a loss from operations, including management fees,
but excluding depreciation and amortization of $225,000 versus a loss of
$277,000 in the same period in 1999.
At $633,000, depreciation and amortization in the third quarter 2000 was $81,000
less than in the same period in 1999 due to a decrease in the amount of monthly
amortization of the Casino De Zaragoza ("CDZ") and Czech Republic investments
and an adjustment related to prior year. Selling, general and administrative
expenses in the three months ended September 30, 2000 were $869,000 higher than
for the same period in 1999 due, primarily, to the addition of the casino in
Snojmo. The selling, general and administrative expenses related to Snojmo were
somewhat offset by a reduction in expenses of the Corporate office, which
realized a significant savings from the closure of the Company's satellite
office in London. Interest expense in the second quarter of 2000 was $505,000
higher than in the same period in 1999 due to interest and amortization of
warrants related to $3.0 million of additional debt incurred in October 1999 and
reclassification of the interest related to the $4.8 million Louisiana bonds to
Discontinued Operations.
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999:
Total revenues in the nine month period ended September 30, 2000 were $10.9
million versus $9.6 million over the same period in 1999 exclusive of $3.0
million in revenue from operations in the United States that have since been
discontinued. The Company's loss from continuing operations for the nine-month
period was $4.5 million as compared to a loss of $3.1 million in the same period
in 1999.
A number of the Business Unit variances discussed in the preceding three month
comparative narrative are continuations of trends that began in the first and
second quarters of 2000, the two most significant of which have been in Ceska
and Snojmo. The decline in Ceska's performance, which has a year to date revenue
shortfall of $1.9 million versus the first nine months of 1999, is reflective of
the fact that new casinos in the area have developed and expanded their client
bases. Year to date through September 2000, Snojmo's attendance has exceeded
projections by 11,359.
Corporate overhead expenses in the first nine months of 2000 decreased by
approximately $394,000 compared to the same period in 1999. The reduction in
Corporate expenses was the result of higher legal fees in 1999, reduced payroll
costs in 2000, and other savings related to closure of the London office (see
"Administrative Issues" below) in 2000. Overall, selling, general and
administrative expenses were higher by $1,088,000 in the first nine months of
2000 than in the same period in 1999 due, primarily, to the addition of Snojmo
and the 1999 allocation of certain Corporate overhead expenses to the Company's
discontinued U.S. operations. Interest expense for the first nine months of 2000
was higher by $706,000 than for the same period in 1999 due to interest and
amortization of warrants related to $3.0 million of additional debt incurred in
October 1999 and reclassification of the interest related to the $4.8 million
Louisiana bonds to Discontinued Operations.
EXCHANGE RATES:
The actual 2000 operating results in local currency for the Business Units have
been converted to US Dollars using the average exchange rates of each quarterly
period, which are depicted in the following table.
<TABLE>
<CAPTION>
--------------------------------------- ---------------------- ------------------------ ---------------------
PERIOD US DOLLAR CZECH KORUNA SPANISH PESETA
--------------------------------------- ---------------------- ------------------------ ---------------------
<S> <C> <C> <C>
January 2000 through March 2000 $1.00 36.5027 172.2870
--------------------------------------- ---------------------- ------------------------ ---------------------
April 2000 through June 2000 $1.00 38.8697 177.9359
--------------------------------------- ---------------------- ------------------------ ---------------------
July 2000 through September 2000 $1.00 39.1083 183.5985
--------------------------------------- ---------------------- ------------------------ ---------------------
</TABLE>
The Balance Sheet totals of the Company's foreign subsidiaries at September 30,
2000 were converted to US Dollars using the prevailing exchange rates at
September 30, 2000, which are depicted in the following table.
9
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------- ---------------------- ------------------------ ---------------------
AS OF US DOLLAR CZECH KORUNA SPANISH PESETA
--------------------------------------- ---------------------- ------------------------ ---------------------
<S> <C> <C>
September 30 , 2000 $1.00 40.1606 189.1610
--------------------------------------- ---------------------- ------------------------ ---------------------
</TABLE>
ADMINISTRATIVE ISSUES:
Reorganization of the management in the Czech Republic took place in March 2000.
The position of Regional Director of Operations was combined with that of
Development Project Director, and a former auditor with the firm of Arthur
Anderson was hired as Regional Controller for the Czech Republic operations of
the Company. It is anticipated that these changes will produce a net annual
savings of approximately $100,000 in administrative expenses.
As part of the cost-cutting initiatives, the London office was closed in April
2000. The Company's Vice President of Development, who is based in London, will
operate, primarily, from an in-home office.
As of June 16, 2000, Andrew Tottenham, the former President of Trans World
Corporation, is no longer employed by the Company (see "Part II - Other
Information - Item 1 - Legal Proceedings").
The Company held its 2000 Annual Meeting on July 6, 2000, after adjournment for
lack of a quorum on June 19, 2000. In that meeting, the shareholders voted in
person and by proxy to amend the Company's Articles of Incorporation by changing
its name to "Trans World Corporation". The company's name change is based on the
importance of the Company's name accurately conveying the Company's proposed
identity as an owner/operator of both small to midsize boutique hotels as well
as casinos. Trans World's planned expansion into the hotel industry is founded
on management's belief that hotels in the small to midsize boutique class are
complementary to the Company's brand of casinos, that opportunities in one of
these two industries often lead to or are tied to opportunities in the other
industry, and that a more diversified portfolio of assets will give the Company
greater stability and make it more attractive to potential investors.
Furthermore, the Company's top management is experienced in the hotel industry.
SALES & MARKETING:
A brochure with profiles of each of the Company's four business units has been
published and is being used in conjunction with marketing efforts related to
financing activities.
In additon, a comprehensive marketing campaign was implemented in the third
quarter in Ceska, Czech Republic with the goals of increasing awareness and
attracting former clients that have migrated to competitive casinos in the area.
The program's "Wheel of Fortune" game, which encouraged guests to visit the
casino five times in order to earn a prize winning spin, and three for one
entrance promotion, which rewarded entrance fee paying guests with three times
the entrance fee in non-negotiable gaming chips, have proven to be highly
successful in terms of driving attendance growth at the casino.
Also, a number of "theme" parties were held at the Czech Republic casinos in the
third quarter, including Olympic parties in all three casinos, a Country Western
party in Ceska, and a Beer Garden festival in Rozvadov.
In addition, a Vienna marketing campaign has been developed and will be
implemented in the first quarter of 2001. This campaign is an effort to expand
the market base and increase the "Drop per Head" of the Snojmo casino by
targeting the affluent population of Vienna. Currently, the majority of Snojmo's
clients live in the northern suburbs of Vienna.
In Zaragoza, management has continued to concentrate on radio advertising to
promote the facility, with the content of the radio spots being varied in order
to assist in the continued effectiveness of the advertisements.
LIQUIDITY AND CAPITAL RESOURCES
10
<PAGE>
The deficit in the Company's working capital, defined as current assets minus
current liabilities, grew by $2.74 million to $6.72 million at September 30,
2000 from $3.98 million at December 31, 1999.
The Company is uncertain as to whether existing cash and anticipated cash flows
from current operations will be sufficient to satisfy its on-going operations,
liquidity and capital requirements for the next twelve months, notwithstanding
its present inability to meet certain obligations. The Company will require
additional debt and/or equity financing in order to consummate certain planned
expansion and acquisitions as described under "Plan of Operations" below and to
ensure that its liquidity and capital requirements are met. While the Company is
continuing its efforts to raise financing, there can be no assurances that its
efforts will be successful.
For the nine months ended September 30, 2000, the Company had net cash provided
by operations of $116,000. This was primarily a result of a $4.5 million loss
offset by, $2.0 million of depreciation and amortization, $595,000 of non-cash
interest related to the amortization of debt discount (recorded in connection
with the warrants issued with certain private placements of $20.0 million in 12%
Secured Notes ("Senior Notes") in March 1998 and October 1999), and a $2.0
million net increase in cash attributable to changes in operating assets and
liabilities. For the nine months ended Sepember 30, 2000, net cash provided by
financing activities of $250,000 consisted of new a short-term working capital
obligation of $600,000, which is payable in equal monthly installments through
September 2001, and $350,000 of payments against such note and an old
obligation.
The Company has, from time to time, been in technical default of the Senior
Notes and has relied upon the forbearance and waivers from a majority interest
of the holders thereof. Value Partners, Ltd., a Texas limited partnership
("Value Partners") represents a majority interest of the holders of the Senior
Notes. The Company has borrowed other amounts from Value Partners from time to
time (some of which have been in technical default for which forbearance or
waivers have been granted) and may seek to borrow additional funds or obtain
equity investments from Value Partners (or others) in the future. At September
30, 2000, the Company is delinquent in the payment of interest related to the
Senior Notes and has received waivers from Value Partners through December 31,
2000. The Company believes that it will either be able to satisfy its remaining
September 2000 interest obligation before December 31, 2000 or receive further
waivers at that time. At September 30, 2000, Value Partners owned 65.8% of the
Company's long-term debt and owned warrants to acquire 60.6% of the Company's
shares of Common Stock.
At September 30, 2000, the Company has approximately $7.9 million in taxes
payable to the Diputacion de Aragon (DGA), the Spanish Social Security
Authorities and the City Council of Alfajarin (collectively, the Spanish Taxing
Authorities). The aggregate amount of taxes payable to the Spanish Taxing
Authorities is a result of the Company's assumption of such liabilities in
connection with its April 1998 acquisition of CDZ and deferral of certain taxes
thereafter. As part of the terms of the April 1998 acquisition of CDZ, the
Company negotiated a verbal agreement with the local representatives of the DGA
to allow the casino to relocate from its present position, approximately 15
miles outside of Zaragoza, to the center of downtown Zaragoza, subject to a
decree. However, instead of a decree, in February 2000, the DGA introduced a
law, which was passed by the local parliament in June 2000, that will allow the
casino to relocate upon issuance of formal approval by the DGA, in lieu of a
decree. The Company is in the process of applying for permission to relocate the
casino, and approval of this petition is expected to be granted by the DGA by
March 2001. The Company believes that if it obtains the DGA's approval and if it
raises the necessary capital (anticipated to approximate $6.0 million) to
facilitate the relocation of the casino, it will commence operations in its new
location in January 2002. In the meantime, the Company is moving forward with
the design stages of the downtown facility. Further, the Company believes, based
on the forgoing, that future cooperation and deferral from the Spanish Taxing
Authorities are anticipated. It is anticipated that if commencement of
operations at its new location occurs, the Company may be able to generate
sufficient revenues to meet its obligations to the Spanish Taxing Authorities.
However, there can be no assurances that any of the events described above will
be realized. See further discussion of Spain in "Plan of Operations".
PLAN OF OPERATIONS
11
<PAGE>
CZECH REPUBLIC
In April 1999, the Company purchased a parcel of land in Folmova, Czech Republic
in the same region as the existing Ceska casino but nearer to the German border.
The Company intended to construct a new casino on this land and to relocate the
Ceska operation to the new facility. Given the impact of the influx of
competition on the Ceska operation, however, the Company is reconsidering the
project to relocate the Ceska casino to Folmova and is, instead, exploring the
possibility of relocating its Rozvadov casino to a larger facility adjacent to
the region's main highway. This move may address the attendance versus capacity
challenges experienced at the Rozvadov casino during peak periods. A preliminary
study of the proposed Rozvadov relocation indicates that the project may have
the potential to produce a positive return. The proposed Rozvadov relocation is
anticipated to cost approximately $4.0 million. There can be no assurances that
any of the events described above will be realized.
The casino near Snojmo opened on December 22, 1999 and has, in terms of both
attendance, 40,059, and Total Drop, $10.4 million, thus far exceeded the
budgeted expectations of 28,700 in attendance and $9.5 million in Total Drop.
The projections called for the addition of five gaming tables in October 2000,
however installation of the additional tables has been delayed due to a lack of
funding. On November 1, 2000, the casino installed 14 new slot machines, which,
due to the diversity of games offered and state-of-the-art technology of the new
machines, the Company believes will attract higher levels of slot play in the
casino, particularly, by the casino's Viennese customers.
SPAIN
In anticipation of receiving permission to move the CDZ casino from its present
location to center city Zaragoza, TWG is in the process of completing
negotiations to lease available space in a cinema adjacent to a downtown hotel
location. The cinema was chosen due to its desirable location, together with the
advantages of providing common services with the hotel (food, maintenance,
parking and accommodations). The Company believes that if it obtains the DGA's
approval, expected in March, 2001, and if it raises the necessary capital
(anticipated to approximate $6.0 million) to facilitate the relocation of the
casino, it will commence operations in its new location in January 2002. Pending
local planning board approvals, CDZ will have approximately 17 gaming tables and
120 slot machines. The investment required by TWG upon receipt of the approvals
is anticipated to total approximately $6.0 million.
LONG RANGE OBJECTIVE
The Company's long-range objectives are to develop the Company's casino
operations brand name, American Chance Casinos, into a leading name in the small
casino niche market overseas and to diversify the Company's operations to
include ownership and/or management of small to midsize hotels, which are
complementary to the Company's casino operations. To achieve these goals, the
Company's strategy consists of: (i) identifying business opportunities in areas
where economic conditions, cultural habits, and political climates are favorable
to investment in existing, or construction of new, gaming and hotel facilities;
(ii) forming a team of TWG's casino and hotel experts to develop and market a
complete set of operational and administrative guidelines for the purpose of
securing casino and hotel management contracts; and (iii) demonstrating its
effectiveness as an owner/operator of small casinos through improved
efficiencies in its existing operations.
DEVELOPMENT:
In addition to the relocation projects discussed above, the Company has
identified several hotel and casino investment opportunities and continues its
efforts to secure financing for expansion projects. In the interest of
protecting the Company's negotiating position, details of the development
projects being pursued have been omitted from this report.
NOTE ON FORWARD-LOOKING INFORMATION:
This Form 10-QSB contains certain forward-looking statements. For this purpose,
any statements contained in this Form 10-QSB 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
12
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
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. Mr. Edwards
claimed compensation charges of approximately $2.2 million and punitive charges
of $11.1 million and alleged that the Company breached a management contract
dated September 21, 1994. The lawsuit was settled for a cash payment of $100,000
on May 15, 1999. The final order of dismissal with full prejudice, which
terminated the litigation and disposed of all claims in the lawsuit, was issued
by the United States District Court of Louisiana on May 24, 1999.
On January 25, 1997 (prior to the Company's acquisition of 90% of CDZ), the
directors of CDZ filed an application in Court of First Instance Number 11 of
Zaragoza to declare CDZ in temporary receivership. Temporary receivership was
granted on June 23, 1997 and the property continues to operate in receivership
status.
The Company currently is involved as a plaintiff in litigation challenging the
Louisiana Voter Mandate. (See Item 1 of the Form 10-KSB/A for December 31, 1999
- "Description of Business - Louisiana Operations").
On or about October 23, 2000, Andrew Tottenham, the Company's former President
and Chief Operating Officer, filed a lawsuit against the Company in the United
States District Court Southern District of New York. The suit is a civil action
for monetary and equitable relief against the Company for compensation allegedly
due to Mr. Tottenham of approximately $1.8 million plus interest, costs and
disbursements, and attorney's fees for breach of employment and oral contract
actions as well as amounts to be determined by a court or jury plus interest,
costs and disbursements, and attorney's fees for breach of contract, breach of
oral contract, intentional misrepresentation, tortuous interference with
business relationships, derivative stockholder/breach of fiduciary duty, and
conversion of property actions. The Company disputes the claims made in the
action by Mr. Tottenham and intends to vigorously defend itself against these
claims. Accordingly, no provision for liability to the Company that may result
upon adjudication has been made in the accompanying consolidated financial
statements.
The Company is not currently involved in any other material legal proceeding nor
was it involved in any other material litigation during the nine and three
months ended September 30, 2000.
ITEM 2. CHANGES IN SECURITIES
(a) - (d) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has, from time to time, been in technical default of certain amended
indentures issued in connection with acquisition of the Company's Business
Units. The Company has relied upon the forbearance and waivers from a majority
interest of the holders of the senior notes issued pursuant to such amended
indentures. Value Partners represents a majority in interest of the holders of
the Senior Notes. The Company has borrowed other amounts from Value Partners
from time to time (some of which have been in technical default for which
forbearance or waivers have been granted) and may seek to borrow additional
funds or obtain equity investments, from Value Partners in the future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
13
<PAGE>
The Company held its 2000 Annual Meeting on July 6, 2000 after adjournment for
lack of a quorum on June 19, 2000. A total of 72 proxies were received, and a
total of 3,826,889 shares were voted. In that meeting, the shareholders voted in
person and by proxy as follows:
<TABLE>
<CAPTION>
1. Election of Directors:
FOR WITHHELD
<S> <C> <C>
Rami S. Ramadan 2,841,889 985,000
Julio E. Heurtematte, Jr. 2,454,389 1,372,500
Malcolm M.B. Sterrett. 2,454,389 1,372,500
Geoffrey B. Baker 2,454,389 1,372,500
<CAPTION>
2. Ratification of the appointment of the Board of Directors of Rothstein, Kass & Company, P.C.:
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3,804,189 22,700 0
3. Amendment of the Articles of Incorporation by changing the name to Trans World Corporation:
FOR AGAINST ABSTAIN
2,927,789 20,600 878,500
7. If necessary, Adjournment of the Annual Meeting to solicit additional proxies:
FOR AGAINST ABSTAIN
2,507,893 1,318,996 0
</TABLE>
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27 Financial Data Schedule
Filed herewith
b. Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
In accordance with the requirements of Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRANS WORLD CORPORATION
(formerly Trans World Gaming Corp.)
Date: November 14, 2000 By: /s/ Rami S. Ramadan
-----------------------
President,
Chief Executive Officer
Chief Financial Officer
15
