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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 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
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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, N.Y. 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
May 10, 2000: 5,365,449
Transitional Small Business Disclosure Format (check one; YES / / NO /X/)
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TRANS WORLD GAMING CORP. AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
PART 1 - FINANCIAL INFORMATION
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Page
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheet as of March 31, 2000 1
Condensed Consolidated Statements of Operations and Comprehensive 2
Income (Loss) for the Three Months Ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows for the Three 3
Months Ended March 31, 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 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 3. DEFAULTS UPON SENINOR SECURITIES 11
ITEM 4. SUBSMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
</TABLE>
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TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
March 31, 2000
(in thousands, except for per share data)
ASSETS
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<S> <C>
CURRENT ASSETS:
Cash $ 1,227
Accounts receivable 130
Prepaid expenses and other current assets 332
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Total current assets 1,689
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PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $1,220 5,166
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OTHER ASSETS:
Goodwill and other intangible assets, less accumulated amortization of $4,486 9,915
Deposits and other assets 738
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10,653
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$ 17,508
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term debt $ 577
Accounts payable 2,092
Taxes payable to Spanish taxing authorities, current portion 1,139
Accrued expenses and other current liabilities 1,991
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Total current liabilities 5,799
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LONG-TERM LIABILITIES:
Long-term debt, net of unamortized debt discount of $4,056 20,744
Taxes payable to Spanish taxing authorities 5,800
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26,544
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 2,000 shares authorized,
none issued
Common stock $.001 par value, 50,000 shares authorized,
5,365 shares issued and outstanding 5
Additional paid-in capital 10,104
Stock warrants outstanding 4,912
Accumulated other comprehensive income 1,605
Accumulated deficit (31,461)
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Total stockholders' deficit (14,835)
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$ 17,508
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</TABLE>
See accompanying notes to condensed consolidated financial statements
1
<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months Ended March 31, 2000 and 1999
(in thousands, except for per share data)
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2000 1999
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<S> <C> <C>
REVENUES $ 3,848 $ 3,238
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COSTS AND EXPENSES
Cost of revenues 2,107 1,731
Depreciation and amortization 702 720
Selling, general and administrative 1,141 1,432
------- -------
3,950 3,883
------- -------
LOSS FROM OPERATIONS (102) (645)
------- -------
OTHER EXPENSES:
Interest expense (1,005) (736)
Foreign exchange loss (54) (187)
Other (3)
------- -------
(1,059) (926)
------- -------
LOSS FROM CONTINUING OPERATIONS (1,161) (1,571)
DISCONTINUED OPERATIONS, income from operations of discontinued 186
truckstop segment ------- -------
NET LOSS $(1,161) $(1,385)
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, basic and diluted 5,365 3,364
======= =======
EARNINGS (LOSS) PER COMMON SHARE, basic and diluted
From continuing operations $ (0.22) $ (0.47)
From discontinued operations 0.06
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Net loss $ (0.22) $ (0.41)
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COMPREHENSIVE INCOME (LOSS)
Net loss $(1,161) $(1,385)
Other comprehensive income, foreign currency
translation adjustment 570 522
------- -------
Comprehensive loss $ (591) $ (863)
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
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TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 2000 and 1999
(in thousands)
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2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 141 $ 53
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NET CASH USED IN INVESTING ACTIVITIES, purchases of property and (256) (385)
equipment ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 577
Payments of short-term debt (146) (56)
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 431 (56)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (23) (181)
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NET INCREASE (DECREASE) IN CASH 293 (569)
CASH
Beginning of period 934 1,955
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End of period $ 1,227 $ 1,386
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
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
Gaming Corp. (the "Company" or "TWG") as of March 31, 2000 and for the
three months ended March 31, 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.
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 three
months ended March 31, 2000 are not necessarily indicative of the results
for the entire year ending December 31, 2000.
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 $4,110,000 and a stockholders' deficit of $14,835,000 as of
March 31, 2000. Furthermore, the Company is highly leveraged with debt and
has been unable to pay their 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 cost cutting measures. Further, management's
plans include an expansion strategy to counter the affects of seasonality
on the Company's 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 to the mix of operations. In implementing its
expansion strategy, the Company is seeking management or joint venture
agreements and leased space arrangements that will avoid further
indebtedness.
2. Basic earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during
the period. Diluted earnings (loss) per common 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 common share has not
been presented for the three month periods ended March 31, 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
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TRANS WORLD GAMING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. Business unit information listed below reflects the four business units in
operation during the three months ended March 31, 2000.
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Czech Republic
--------------------------------------------------- Zaragoza, Grand
Ceska Rozvadov Snojmo (1) Subtotal Spain Total
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<S> <C> <C> <C> <C> <C> <C>
ACTUAL 2000:
Total number of guests 13,320 8,475 11,839 33,634 6,255 39,889
Average drop per guest $ 409 $ 298 $ 273 $ 333 $ 550 $ 367
Total drop ($000) 5,451 2,522 3,234 11,207 3,440 14,647
Win percentage 18.6% 17.2% 14.4% 17.1% 24.0% 18.7%
Total Revenue ($000) 1,305 610 767 2,682 1,166 3,848
Income from operations
exclusive of amortization
and depreciation ($000) 595 232 37 864 27 891
</TABLE>
<TABLE>
<CAPTION>
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Czech Republic
-------------------------- Zaragoza,
Ceska Rozvadov Spain
-------------------------- --------------
<S> <C> <C> <C>
ACTUAL 1999 (2):
Total number of guests 13,250 6,753 6,845
Average drop per guest $ 458 $ 228 $ 559
Total drop ($000) 6,066 1,538 3,829
Win percentage 18.7% 21.0% 14.5%
Total Revenue ($000) 1,706 462 1,070
Income from operations
exclusive of amortization
and depreciation ($000) 645 51 (143)
</TABLE>
<TABLE>
<CAPTION>
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Czech Republic
-------------------------- Zaragoza,
Ceska Rozvadov Spain
-------------------------- --------------
<S> <C> <C> <C>
VARIANCE TO 1999 (2):
Total number of guests 70 1,722 (590)
Average drop per guest $ (49) $ 70 $ (9)
Total drop ($000) (615) 984 (389)
Win percentage (0.10) (3.80) 9.50
Total Revenue ($000) (401) 148 96
Income from operations
exclusive of amortization
and depreciation ($000) (50) 181 170
</TABLE>
(1) Operations commenced December, 1999
(2) Includes continuing operations only
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
In the first quarter of 1999, the Company's largest source of revenue was its
US-based truckstop operations in Louisiana. In addition, the Company operated
two casinos in Ceska and Rozvadov in the Czech Republic and a casino/hotel in
Zaragoza, Spain (CDZ). As a result of the closure of the Louisiana-based
operations due to changes in the local gaming laws and the opening of a
casino near Snojmo, Czech Republic, the Company operated three casinos in the
Czech Republic and a casino/hotel in Zaragoza, Spain in the first quarter of
2000. Comments with regard to variances to prior year are, except as noted,
based on continuing operations only.
First quarter revenues increased by $610,000 from 1999 to 2000. The revenue
improvement was the result of the initiation of operations of the third Czech
Republic casino in Snojmo, which commenced operations in December 1999 and was
launched by means of a Grand Opening party on January 22, 2000. The first
quarter revenue of $767,000 from those operations in Snojmo more than offset the
net decrease in revenues of the casinos in Ceska, Rozvadov, and Zaragoza.
$408,000 of the $610,000 revenue increase in the first quarter of 2000 flowed
through to the Loss From Continuing Operations (-$1,163,000 in 2000 from
- -$1,571,000 in 1999), a retention rate of 67%. The excellent flow through was
the net result of improved efficiencies in the operations; the minimal increase
in overhead administration costs related to the Snojmo casino due to benefits of
economies of scale; and a decrease in Corporate overhead expenses in both London
and New York, which imposed strict expenditure controls and benefited from lower
legal fees. Further, as a result of the April closure of the London office,
these costs will continue to decline.
In a very positive statistical indicator, both attendance (+1,172) and Total
Drop (+$82,000), the total value of playing chips sold to guests, for all
business units combined exceeded expectations in the first quarter of 2000. The
first quarter 2000 attendance in Ceska, Czech Republic increased by 70, the
attendance in Rozvadov, Czech Republic grew by 1,722, and the attendance in
Zaragoza, Spain declined by 590 versus the same period in 1999.
Despite positive variances versus expectations in both overall attendance and
Total Drop, a poor overall Win Percentage (18.7), the portion of the Total Drop
that was won by the House, particularly in the newly-opened Snojmo casino
(14.4), resulted in the first quarter 2000 revenues being short of expectations.
The disappointing Win Percentages were artificially influenced by a program
whereby special gaming chips, which were awarded to guests as part of the
admission fee entitlements, were excluded from the basis of calculation of the
Win Percentages. In Snojmo, where the admission fee and the associated gaming
chip value were highest, the impact on the Win Percentage was more pronounced.
Also affecting the Win Percentages was the inexperience of the dealers in Snojmo
and the crowded gaming table conditions in both Snojmo and Rozvadov,
particularly on the weekends. Efforts are being made to remedy these situations
through a combination of training and expansion. In Snojmo, the quieter
afternoon period is being used to conduct dealer training, and quotes have been
obtained for the equipment related to the addition of five gaming tables. While
this expansion was planned to occur in October 2000, funding permitting, the
timetable may be accelerated.
Rozvadov has expanded to eight tables from seven. The operating plan calls for
expansion to nine tables in March 2000. However, without performing major
renovation work, the casino space is too limited to accommodate another table.
Until a final decision is made with regard to the potential relocation of the
facility (see Plan of Operations-Czech Republic below), no investment in
structural alterations is planned.
Despite the disappointing Win Percentage in Rozvadov (17.2), the attendance
growth combined with a $70 increase in the Average Drop Per Head, produced a
$148,000 revenue increase in the first quarter 2000 versus the previous year.
The increase in the Average Drop Per Head stat, the average dollar amount of
chips sold to each guest, is indicative of the improvement in the marketing
efforts in Rozvadov to draw in higher spending clients.
6
<PAGE>
The first quarter revenue decline of -$401,000 in Ceska, $1,706,000 in 1999
versus $1,305,000 in 2000, is of concern. In the face of stronger competition,
Ceska has experienced some erosion of its client base. Further, as evidenced by
the decline in the Average Drop Per Head, -$49 in the first quarter of 2000
versus the first quarter of 1999, the migration of clients has included some of
the casino's "bigger" players. In response, the newly-appointed Managing
Director of Operations for the Company's casinos in the Czech Republic has
initiated several programs to lure customers back to Ceska. German speaking
hosts have been hired, and German language courses have begun. The complimentary
beverage policy has been revised to match the benefits offered by competing
casinos in the area. Marketing and promotional activities have been increased,
and customer service training has been given a high priority. Moreover, a
project to relocate the casino to a new facility closer to the German border is
being pursued (see Plan of Operations below).
In Zaragoza, where the casino experienced an exceptionally strong first quarter
2000, particularly in February, the first quarter 2000 Win Percentage of 24.0
was 9.5 percentage points higher than in 1999 and total revenue improved by
$96,000.
Operating expenses were well controlled in the business units in the first
quarter 2000 with the principal cost reductions coming from the Gaming
department in Ceska, in which the operating costs were $69,000 lower than in the
same period in 1999 and the Gaming department in Zaragoza, in which the
operating costs were $47,000 lower than the same period in 1999; General and
Administrative costs in Ceska, which decreased by $46,000 from the first quarter
of 1999 and which benefited from Snojmo cost allocations; and promotional costs
in Sales & Marketing in Rozvadov which decreased by $19,000 versus the first
quarter of 1999.
Interest expense increased by $269,000 in the first quarter of 2000 versus the
same period in 1999. The increase was comprised of $90,000 of interest expense
and $30,000 of amortization of discounts on warrants relative to a $3,000,000
loan that was secured in October 1999 as well as $143,853 of interest expense
related to a $4,800,000 loan, the interest of which was previously recorded on
the books of the discontinued Louisiana operations.
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. These changes will produce a net annual savings of approximately
$100,000 in administrative expenses.
In another major cost-cutting move, the London office was closed in April 2000.
The Company's Vice President of Development, who is based in London, will work
from an in-home office when he is not on the road.
SALES & MARKETING:
With the exception of the grand opening party in Snojmo, marketing initiatives
in the first quarter of 2000 were limited but are being increases in the second
quarter. The Czech casinos continued their strategy of having mid-week tombolas,
hosting "theme" parties such as the one that celebrated Leap Year, and sending
direct mail advertising pieces. In Spain, "theme" parties were held in
conjunction with the region's three holidays; a radio campaign was begun, which
was designed to promote catering and restaurant operations; and a new hotel
brochure was printed and distributed.
OTHER:
It is anticipated that the Proxy Statement for the 2000 Annual Meeting of
Shareholders (the "2000 Annual Meeting") will be sent to all shareholders the
week of May 22, and the 2000 Annual Meeting will take place in Prague, Czech
Republic on or about June 19, 2000. Included in the Proxy Statement will be a
proposal to change the Company's name from "Trans World Gaming Corp." to "Trans
World Corporation". This name change recommendation is based on the Company's
plans to diversify its operations to include hotels.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The deficit in the Company's working capital, defined as current assets minus
current liabilities, grew by $.134 million to $4.110 million at March 31, 2000
from $3.976 million at December 31, 1999 and by $.501 million in comparison to
the 1999 counterpart.
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 operations, liquidity and capital requirements for the next twelve
months, notwithstanding its present inability to meet certain obligations.
However, 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.
For the three months ended March 31, 2000, the Company had net cash provided by
operations of $141,000. This was primarily a result of a $1,161,000 loss from
operations, $702,000 of depreciation and amortization, $195,000 of non-cash
interest related to the amortization of debt discount (recorded in connection
with the warrants issued with certain private placements of $20 million in 12%
Secured Notes ("Senior Notes") in March 1998 and October 1999), and a $405,000
net increase in cash attributable to changes in operating assets and
liabilities. For the three months ended March 31, 2000, $256,000 was used in
investment activities, primarily for the purchase of property and equipment in
the Czech Republic and $431,000 was provided by financing activities, which
included the repayment of $146,000 for short-term working capital obligations
and the proceeds of a new short-term working capital obligation of $577,000
payable in equal monthly installments through September 2001. Also during the
three months ended March 31, 2000, the Company met its long-term debt interest
payment obligations associated with the March 1998 and October 1999 Senior
Notes.
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 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.
At March 31, 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 March 31, 2000, the Company has approximately $6.9 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 are 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 that would allow
the casino to relocate. It is expected that the law will be presented to local
Spanish parliament in the Summer of 2000. The Company believes, based on its
discussions with Spanish authorities, the law has little opposition and is
expected to pass. Further, the Company believes, based on the forgoing, that
future cooperation and deferral from the Spanish Taxing Authorities are
anticipated. Upon commencement of operations at its new location, the Company
believes that it will be able to generate sufficient revenues to meet its
obligations to the Spanish Taxing Authorities. There can be no assurances that
any of the events described above will be realized. See further discussion of
Spain in "Plan of Operations".
8
<PAGE>
PLAN OF OPERATIONS
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 intends to construct a new casino on this land and to relocate the
Ceska operation to the new facility. The strategy of this move would increase
the exposure of the casino due to its location directly on the border road the
proximity of which permits immediate access to the casino as opposed to the
casino of Ceska's main competitor; would allow for a larger parking facility
than that which exists in Ceska; would address the issue of capacity constraints
on the weekend in that it would allow for an increase in the number of gaming
tables over the existing space; and would allow for a floor plan to be designed
which, unlike the Ceska building, would optimize the casino's equipment layout.
Subsequent to relocation of the casino operation from Ceska to Folmova, the
Ceska facility will be used as office space and as a training center supporting
all of the Czech casinos.
Based on the attendance versus capacity challenges experienced at the existing
casino in Rozvadov, the Company has moved forward with its plan to expand the
number of tables in the facility and is considering the possibility of
relocating the casino to a larger facility adjacent to a highway.
The casino near Snojmo opened on December 22, 1999 and has, in terms of both
attendance (11,839) and Total Drop ($3,234,000), thus far exceeded the budgeted
expectations of 9,100 in attendance and $3,022,000 in Total Drop. The budget
calls for the addition of five gaming tables in October 2000, and based on the
results in the first quarter of 2000, that timetable may, funding permitting, be
accelerated.
SPAIN
In anticipation of receiving permission to move the CDZ casino 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). CDZ is
expected to reopen at this new location within ten months after it receives
permission to move, subject to the approval by the Spanish parliament in the
Summer of 2000. Pending local planning board approvals, the casino 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.
9
<PAGE>
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) to demonstrate its
effectiveness as an owner/operator of small casinos through improved
efficiencies in its existing operations.
DEVELOPMENT:
Expansion projects currently being studied by TWG as part of the Company's
business development strategy include the following:
Cairo - A proposal submitted by TWG to lease casino space in a hotel in Cairo
Egypt is under review by the hotel's owning company.
Croatia - The Company is exploring a potential deal that would result in the
acquisition of a combination of hotels and casinos.
Internet - Talks are underway with an internet gaming company regarding a
foreign-based internet gaming license. A study, which excludes the United States
from the potential customer base, is being prepared.
YEAR 2000 CONVERSION
The Company did not experience any computer system glitches related to the date
change to the year 2000.
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.
10
<PAGE>
PART II - OTHER INFORMATION
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, through its Chrysolith
affiliate, 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").
The Company is not currently involved in any other material legal proceeding nor
was it involved in any other material litigation during the quarter ended March
31, 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 the Resorts acquisition. 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,
Ltd., a Texas limited partnership ("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
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-QSB
a. Exhibits
b. Reports on Form 10-KSB
The Company filed a Periodic Report on Form 10-KSB on April 17,
2000 for the year ending December 31, 1999, which is anticipated
being amended on or before May 31, 2000.
11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Item No Item Method of Filing
<S> <C> <C>
3.2 Bylaws Incorporated by reference to Exhibit 3.2 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 Incorporated by reference to Exhibit 4.2
Purchase Warrant contained 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 Incorporated by reference to Exhibit 4.4 contained in
dated June 17, 1996 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 in
Confidential Private Placement Memorandum Form 10-KSB for the fiscal year ended December 31,
dated June 17, 1996 1996. (File No. 0-25244)
4.6 Indenture dated as of November 1, 1996 Incorporated by reference to Exhibit 4.6 contained in
between the Company and Trans World Gaming of Form 10-KSB for the fiscal year ended December 31,
Louisiana, Inc., as Issuer, and U.S. Trust 1996. (File No. 0-25244)
Company of Texas, N.A., as Trustee
4.7 Form of 12% Secured Convertible Senior Bond Incorporated by reference to Exhibit 4.7 contained in
due June 30, 1999 Form 10-KSB for the fiscal year ended December 31,
1996. (File No. 0-25244)
Form of Warrant to Purchase Common Stock dated Incorporated by reference to Exhibit 4.8 contained in
4.8 July 1, 1996 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 in
Common Stock dated January 1, 1997 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 contained
January 1, 1997 in Form 10-KSB for the fiscal year ended December 31,
1996. (File No. 0-25244)
4.11 First Amended Senior Secured Promissory Note Incorporated by reference to Exhibit 4.11 contained
dated December 19, 1997 in Form 10-KSB for the fiscal year ended December 31,
1997 filed on March 30, 1998. (File No. 0-25244)
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C>
4.12 Form of Warrant for Purchase of Shares of Incorporated by reference to Exhibit 4.12 contained in
Common Stock dated January 15, 1998 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 Incorporated by reference to Exhibit 4.13 contained
March 9, 1998 in Form 10-KSB for the fiscal year ended December 31,
1997 filed on March 30, 1998. (File No. 0-25244)
4.14 Indenture dated March 31, 1998 among the Incorporated by reference to Exhibit 4(I) contained
Company, TWG International U.S. Corporation, in the Form 8-K filed on April 14, 1998 (File No.
TWG Finance Corp. and U.S. Trust Company of 0-25244)
Texas, N.A.
4.15 Series C Warrant to Purchase Common Stock Incorporated by reference to Exhibit 4(II) contained
dated March 31, 1998 in the Form 8-K filed on April 14, 1998 (File No.
0-25244)
4.16 Indenture dated March 31, 1998 between TWG Incorporated by reference to Exhibit 4(III) contained
International U.S. Corporation and U.S. Trust in the Form 8-K filed on April 14, 1998 (File No.
Company of Texas, N.A. 0-25244)
4.17 Consent to Amend Indenture, Bonds and Warrants Incorporated by reference to Exhibit 4(IV) contained
dated March 25, 1998 by and between the in the Form 8-K filed on April 14, 1998 (File No.
Company, Trans World Gaming of Louisiana, 0-25244)
Inc., U.S. Trust Company of Texas, N.A., and
certain individuals
4.18 First Amended Indenture dated March 31, 1998 Incorporated by reference to Exhibit 4(V) contained
among the Company, TWGLa and U.S. Trust in the Form 8-K filed on April 14, 1998 (File No.
Company of Texas, N.A. 0-25244)
4.19 First Amended Indenture dated March 31,1998 Incorporated by reference to Exhibit 4(V) contained
among the Company, TWGLa and U.S. Trust in the Form 8-K filed on April 14, 1998 (File No.
Company of Texas, N.A. 0-25244)
4.20 Series A Warrant to Purchase Common Stock Incorporated by reference to Exhibit 4(VI) contained
dated March 31, 1998 in the Form 8-K filed on April 14, 1998 (File No.
0-25244)
4.21 Series B Warrant to Purchase Common Stock Incorporated by reference to Exhibit 4(VII) contained
dated March 31, 1998 in the Form 8-K filed on April 14, 1998 (File No.
0-25244)
4.22 Agreement to Amend Warrants dated March 31, Incorporated by reference to Exhibit 4(VIII)
1998 among the Company and the named Holders contained in the Form 8-K filed on April 14, 1998
(File No.0-25244)
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
10.1 Agreement for Exchange of Shares dated July Incorporated by reference to Exhibit 10.1 contained
12, 1994,between the Company and the in the registration statement on Form SB-2 (File No.
shareholders of Lee Young Enterprises, Inc. 33-85446-A).
10.2 Asset Purchase Agreement dated as of September Incorporated by reference to Exhibit 10.2 contained
21,1994, between the Company and Prime in the registration statement on Form SB-2 (File No.
Properties, Inc. 33-85446-A).
10.3 Agreement of Sale dated as of September 21, Incorporated by reference to Exhibit 10.3 contained
1994, between the Company and Prime in the registration statement on Form SB-2 (File No.
Properties, Inc. 33-85446-A).
10.4 Form of Lease between Prime Properties, Inc. Incorporated by reference to Exhibit 10.4 contained
and the Company. 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 contained
Chrysolith, LLC, Prime Properties, Inc., in the registration statement on Form SB-2 (File No.
Monarch Casinos, Inc. of Louisiana, and the 33-85446-A).
Company.
10.6 Asset Purchase Agreement dated September 21, Incorporated by reference to Exhibit 10.6 contained
1994, between Chrysolith L.L.C. and Monarch 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 contained
Lula Miller, Inc., Charles A. Jones III and in the registration statement on Form SB-2 (File No.
Kelly McCoy Jones, as Lessor, and Monarch, as 33-85446-A).
Lessee.
10.8 Offer to Purchase dated October 4, 1994, among Incorporated by reference to Exhibit 10.8 contained
Trans World Gaming of Louisiana, Inc., in the registration statement on Form SB-2 (File No.
Monarch, Lula Miller, Inc., Charles A. Jones 33-85446-A).
III and Kelly McCoy Jones.
10.9 Memorandum of Agreement dated March 18, 1994, Incorporated by reference to Exhibit 10.9 contained 10.9
between the Company and Yves Gouhier and in the registration statement on Form SB-2 (File No.
Camille Costard to acquire shares of Casino 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 contained
between the Company and Michael A. Edwards, as in the registration statement on Form SB-2 (File No.
the shareholders of Monarch 33-85446-A).
10.11 Employment Agreement dated March 6, 1996 Incorporated by reference to Exhibit 10.11 contained
between the Company and Stanley Kohlenberg in the Form 10-KSB for the fiscal year ended December
31, 1995 (File No. 0-25244).
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
10.12 Employment Agreement between the Company and Incorporated by reference to Exhibit 10.12 contained
Dominick J. Valenzano 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 4 1/2% 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 contained
Travel Plaza. 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 contained
1994 between the Company and Chrysolith in the Form 10-KSB for the fiscal year ended December
relating to the Gold Coin. 31, 1994 (File No. 0-25244).
10.18 Note in principal amount $75,000 payable by Incorporated by reference to Exhibit 10.18 contained
Monarch (and assumed by the Company). 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 contained
National Auto/Truck Stops, Inc. and Prime in the Form 10-KSB for the fiscal year ended December
Properties with respect to the 76 Plaza 31, 1995 (File No. 0-25244).
10.20 Agreement and General Release dated as of Incorporated by reference to Exhibit 10.20 contained
March 6, 1996 between the Company and R. K. in the Form 10-KSB for the fiscal year ended December
Merkey. 31, 1995 (File No. 0-25244).
10.21 Forbearance Agreement dated January 19, 1996 Incorporated by reference to Exhibit 10.21 contained
between the Company and Chrysolith 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 Incorporated by reference to Exhibit 10.22 contained
between the Company and Chrysolith regarding in the Form 10-KSB for the fiscal year ended December
forbearance payments 31, 1995 (File No. 0-25244).
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C>
10.23 Consulting Agreement dated January 1, 1997 Incorporated by reference to Exhibit 10.23 contained
between the Company and Stanley Kohlenberg in the Form 10-KSB for the fiscal year ended
December 31, 1996 (File No. 0-25244).
10.24 Employment Agreement dated December 26, Incorporated by reference to Exhibit 10.24 contains
1996 between the Company and Andrew in Form 10-KSB for the fiscal year ended December 31,
Tottenham 1996 (File No. 0-25244).
10.25 Employment Agreement date February 1, 1997 Incorporated by reference to Exhibit 10.25 contained
between the Company and Christopher Moore 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 contained
1996 between the Company and Mid-City in the Form 10-KSB for the fiscal year ended December
Associates 31, 1996 (File No. 0-25244).
10.27 Agreement of Lease dated as of October 2, Incorporated by reference to Exhibit 10.27 contained
1996 between the Company and Mid-City in the Form 10-KSB for the fiscal year ended December
Associates 31, 1996 (File No. 0-25244).
10.28 Stock Purchase Agreement dated as of January Incorporated by reference to Exhibit 10.28 contained
1, 1997 among the Company, Andrew Tottenham in the Form 10-KSB for the fiscal year ended December
and Robin Tottenham 31, 1996 (File No. 0-25244).
10.29 Employment Agreement dated April 15, 1997 Incorporated by reference to Exhibit 10.29 contained
between the Company and James Hardman 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 contained
20, 1998 between the Company and 21st Century in Form 10-KSB for the fiscal year ended December 31,
Resorts 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 contained
Private Placement 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 Incorporated by reference to Exhibit 10.32 contained
the Company, TWG Finance Corp., TWG in Form 10-KSB for the fiscal year ended December 31,
International U.S. Corporation as Issuer and 1997 filed on March 30, 1998. (File No. 0-25244)
U.S. Trust Company of Texas, N.A., as Trustee
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C>
10.33 Consulting Agreement between Chrysolith, Incorporated by reference to Exhibit 10 contained in
L.L.C. and Lee Young dated January 1, 1997 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 contained
among the Company, James R. Hardman, Jr. and in the Form 10-Q for the quarter ended March 31,
Multiple Application Tracking System 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 contained
between the Company and James R. Hardman, Jr. 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 Incorporated by reference to Exhibit 10.36 contained
the Company and Value Partners in the Form 8-K filed on June 17, 1997 (File No.
0-25244)
10.37 $350,000 Senior Promissory Note dated June Incorporated by reference to Exhibit 10.37 contained
11, 1997 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 contained
between Mr. Mahmud Avdiyev and Tottenham & in the Form 8-K filed on June 17, 1997 (File No.
Co., d/b/a ART marketing Ltd. 0-25244)
10.39 Loan Agreement dated October 27, 1997, Incorporated by reference to Exhibit 10.39 contained
between Value Partners, and the Company 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 Incorporated by reference to Exhibit 10.40 contained
October 27, 1997 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 Incorporated by reference to Exhibit 10.41 contained
November 27, 1997 in the Form 10-QSB for the quarter ended September 30,
1997, filed on November 12, 1997 (File No. 0-25244)
10.42 Employment Agreement between the Company and Incorporated by reference to Exhibit 10.42 contained
Rami S. Ramadan dated July 12, 1999 in the Form 8-K filed on July 13, 1999 (File No.
0-25244)
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
10.43 Severance Agreement between the Company and Incorporated by reference to Exhibit 10.43 contained
Stanley Kohlenberg dated May 23, 1999 in the Form 8-K filed on July 13, 1999 (File No.
0-25244)
10.44 Severance Agreement among the Company, Trans Incorporated by reference to Exhibit 10.44
World Gaming of Louisiana, TWG International contained in the Form 8-K filed on July 13, 1999
U.S. Corporation and TWG Finance Corp. and (File No. 0-25244)
Dominick J. Valenzano dated July 12, 1999
10.45 Form of Lease Agreement between London Incorporated by reference to Exhibit 10.45
Investments s.r.o. and the Company contained in the Form 8-K filed on July 13, 1999
(File No. 0-25244)
10.46 1998 Incentive Stock Option Plan Incorporated by reference to Exhibit 10.46
contained in the Form 8-K filed on April 14,
2000 (File No. 0-25244)
10.47 1999 Non-Employee Director Stock Option Plan Incorporated by reference to Exhibit 10.47
contained in the Form 8-K filed on April 14,
2000 (File No. 0-25244)
10.48 Form 12% Secured Senior Note due March 2005 Incorporated by reference to Exhibit 10.48
contained in the Form 8-K filed on April 14,
2000 (File No. 0-25244)
10.49 Form of Warrant to Purchase Common Stock Incorporated by reference to Exhibit 10.49
dated October 15, 1999 contained in the Form 8-K filed on April 14,
2000 (File No. 0-25244)
16.1 Letter from Bederson & Co. (the Company's Incorporated by reference to Exhibit 16.1
former independent public accountants) contained in the Form 10-QSB for the fiscal year
relating to a change of accountants ended December 31, 1995, filed on November 12,
1997 (File No. 0-25244)
16.2 Letter from Pannell, Kerr, Forster PC (the Incorporated by reference to Exhibit 16.2
Company's former independent public contained in the Form 8-K filed on February 25,
accountants) relating to a change of 1999 (File No. 0-25244)
accountants
27.1 Financial Data Schedule Filed herewith
</TABLE>
18
<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 GAMING CORP.
Date: May 23, 2000 By: /s/ Rami S. Ramadan
----------------------------
Chief Executive Officer
Chief Financial Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOUND ON PAGES 1 AND 2 OF THE COMPANY'S FORM 10-QSB FOR THE THREE
MONTHS ENDED MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 1,227 0
<SECURITIES> 0 0
<RECEIVABLES> 130 0
<ALLOWANCES> 0 0
<INVENTORY> 332 0
<CURRENT-ASSETS> 1,689 0
<PP&E> 21,525 0
<DEPRECIATION> (5,706) 0
<TOTAL-ASSETS> 17,508 0
<CURRENT-LIABILITIES> 5,799 0
<BONDS> 26,544 0
0 0
0 0
<COMMON> 5 0
<OTHER-SE> (14,840) 0
<TOTAL-LIABILITY-AND-EQUITY> 17,508 0
<SALES> 0 0
<TOTAL-REVENUES> 3,848 3,238
<CGS> 0 0
<TOTAL-COSTS> (2,107) (1,731)
<OTHER-EXPENSES> (1,897) (2,342)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,005) (736)
<INCOME-PRETAX> (1,161) (1,571)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,161) (1,571)
<DISCONTINUED> 0 186
<EXTRAORDINARY> 0 0
<CHANGES> 570 522
<NET-INCOME> (591) (863)
<EPS-BASIC> (.22) (.41)
<EPS-DILUTED> (.22) (.41)
</TABLE>
