<PAGE>
================================================================================
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 June 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 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 10017
NEW YORK, NY (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code: (219) 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 July 31, 2000: 5,365,449
Transitional Small Business Disclosure Format (check one; YES X NO )
--- ---
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<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE 2
LOSS FOR THE SIX ANDTHREE MONTHS ENDED JUNE 30, 2000 AND 1999
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX 3
MONTHS ENDED JUNE 30, 2000 AND 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 5
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBSMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE 13
</TABLE>
<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
June 30, 2000
(in thousands, except for per share data)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 891
Accounts receivable 212
Prepaid expenses and other current assets 183
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TOTAL CURRENT ASSETS 1,286
-------------------
PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $1,439 5,037
-------------------
OTHER ASSETS:
Goodwill and other intangible assets, less accumulated amortization of $4,982 9,419
Deposits and other assets 695
-------------------
10,114
-------------------
$ 16,437
===================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term debt $ 500
Accounts payable 924
Interest Payable 1,728
Taxes payable to Spanish taxing authorities, current portion 2,617
Accrued expenses and other current liabilities 1,454
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TOTAL CURRENT LIABILITIES 7,223
-------------------
LONG-TERM LIABILITIES:
Long-term debt, net of unamortized debt discount of $3,861 20,939
Taxes payable to Spanish taxing authorities 4,674
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25,613
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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 1,524
Accumulated deficit (32,944)
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TOTAL STOCKHOLDERS' DEFICIT (16,399)
-------------------
$ 16,437
===================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (Unaudited)
Six and Three Months Ended June 30, 2000 and 1999 (in
thousands, except for per share data)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES $ 7,855 $ 6,642 $ 4,007 $ 3,404
------- ------- ------- -------
COSTS AND EXPENSES
Cost of revenues 4,006 3,001 1,899 1,270
Depreciation and amortization 1,377 1,437 675 717
Selling, general and administrative 2,824 2,606 1,683 1,426
------- ------- ------- -------
8,207 7,044 4,257 3,413
------- ------- ------- -------
LOSS FROM OPERATIONS (352) (402) (250) (9)
------- ------- ------- -------
OTHER EXPENSES:
Interest expense (2,028) (1,817) (1,023) (937)
Foreign exchange loss (264) (174) (210) 13
Other 3
------- ------- ------- -------
(2,292) (1,991) (1,233) (921)
------- ------- ------- -------
LOSS FROM CONTINUING OPERATIONS (2,644) (2,392) (1,483) (930)
DISCONTINUED OPERATIONS, income from operations of discontinued 474 - 396
truckstop segment ------- ------- ------- -------
NET LOSS $(2,644) $(1,918) $(1,483) $ (533)
======= ======= ======= =======
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 $ (0.49) $ (0.71) $ (0.28) $ (0.28)
From discontinued operations 0.14 0.12
------- ------- ------- -------
Net loss $ (0.49) $ (0.57) $ (0.28) $ (0.16)
======= ======= ======= =======
COMPREHENSIVE LOSS
NET LOSS $(2,644) $(1,918) $(1,483) $ (533)
OTHER COMPREHENSIVE INCOME (LOSS), foreign currency
translation adjustment 489 787 (81) 265
------- ------- ------- -------
COMPREHENSIVE LOSS $(2,155) $(1,131) $(1,564) $ (268)
======= ======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
TRANS WORLD GAMING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 2000 and 1999
(in thousands)
<TABLE>
<CAPTION>
2000 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ (61) $ 895
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES,
Purchases of property and equipment (353) (699)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 577
Payments of short-term debt (223) (56)
------------------ ------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 354 (56)
------------------ ------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 17 (187)
------------------ ------------------
NET DECREASE IN CASH (43) (47)
CASH
Beginning of period 934 1,955
------------------ ------------------
End of period $ 891 $ 1,908
================== ==================
</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") for the six and three month periods
ended June 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.
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 six and
three months ended June 30, 2000 are not necessarily indicative of the
results which may occur at year ending December 31, 2000.
Certain prior period amounts 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 $5.94 million and a stockholders' deficit of $16.4 million as of
June 30, 2000. Furthermore, the Company is highly leveraged with debt and
is 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 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. 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 June 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>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
OVERVIEW
Trans World Gaming Corp. and Subsidiaries ( 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 (business units) in
the Czech Republic ("Ceska", "Rozvadov" and "Snojmo") and one casino (business
unit) in Spain ("Zaragoza"). Business unit information for the six and three
months ended June 30, 2000 is as follows:
5
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Six Months Ended June 30 Three Months Ended June 30
-------------------------------------------------------------------
2000 1999 (1) Variance 2000 1999 (1) Variance
-------------------------------------------------------------------
CESKA, CZECH REPUBLIC
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
Total number of guests 26,140 27,862 (1,722) 12,820 14,612 (1,792)
----------------------------------------------------------------------------------------------------------------
Average "Drop per Head" (2) $ 382 $ 483 $ (101) $ 353 $ 505 $ (152)
----------------------------------------------------------------------------------------------------------------
Total drop ($000) (3) 9,980 13,445 (3,465) 4,529 7,379 (2,850)
----------------------------------------------------------------------------------------------------------------
Win percentage (4) 18.9% 18.1% 0.8 19.3% 17.6% 1.7
----------------------------------------------------------------------------------------------------------------
Total revenue ($000) 2,533 3,692 (1,160) 1,226 1,986 (760)
----------------------------------------------------------------------------------------------------------------
Operating expenses ($000) (1,639) (2,065) 426 (794) (1,090) 296
----------------------------------------------------------------------------------------------------------------
Management fees ($000) (5) (540) (574) 33 (272) (299) 26
----------------------------------------------------------------------------------------------------------------
Income from operations exclusive of
depreciation and amortization ($000) 353 1,054 (700) 160 598 (438)
----------------------------------------------------------------------------------------------------------------
ROZVADOV, CZECH REPUBLIC
----------------------------------------------------------------------------------------------------------------
Total number of guests 16,408 15,923 485 7,933 9,170 (1,237)
----------------------------------------------------------------------------------------------------------------
Average "Drop per Head" (2) $ 272 $ 214 $ 57 $ 244 $ 205 $ 40
----------------------------------------------------------------------------------------------------------------
Total drop ($000) (3) 4,461 3,415 1,046 1,939 1,877 62
----------------------------------------------------------------------------------------------------------------
Win percentage (4) 18.2% 17.5% 0.6 19.4% 14.7% 4.7
----------------------------------------------------------------------------------------------------------------
Total revenue ($000) 1,133 915 218 522 453 69
----------------------------------------------------------------------------------------------------------------
Operating expenses ($000) (803) (760) (43) (423) (361) (62)
----------------------------------------------------------------------------------------------------------------
Management fees ($000) (5) (170) (181) 10 (85) (94) 8
----------------------------------------------------------------------------------------------------------------
Income from operations exclusive of
depreciation and amortization ($000) 160 (26) 186 14 (2) 16
----------------------------------------------------------------------------------------------------------------
SNOJMO, CZECH REPUBLIC (6)
----------------------------------------------------------------------------------------------------------------
Total number of guests 26,190 26,190 14,351 14,351
----------------------------------------------------------------------------------------------------------------
Average "Drop per Head" (2) $ 281 $ 281 $ 240 $ 240
----------------------------------------------------------------------------------------------------------------
Total drop ($000) (3) 7,372 7,372 3,447 3,447
----------------------------------------------------------------------------------------------------------------
Win percentage (4) 15.0% 15.0 18.6% 18.6
----------------------------------------------------------------------------------------------------------------
Total revenue ($000) 1,778 1,778 1,011 1,011
----------------------------------------------------------------------------------------------------------------
Operating expenses ($000) (1,675) (1,675) (878) (878)
----------------------------------------------------------------------------------------------------------------
Management fees ($000) (5) (290) (290) (157) (157)
----------------------------------------------------------------------------------------------------------------
Income from operations exclusive of
depreciation and amortization ($000) (188) (188) (24) (24)
----------------------------------------------------------------------------------------------------------------
ZARAGOZA, SPAIN
----------------------------------------------------------------------------------------------------------------
Total number of guests 11,838 12,784 (946) 5,583 5,939 (356)
----------------------------------------------------------------------------------------------------------------
Average "Drop per Head" (2) $ 583 $ 605 $ (23) $ 620 $ 659 $ (39)
----------------------------------------------------------------------------------------------------------------
Total drop ($000) (3) 6,900 7,740 (841) 3,460 3,911 (452)
----------------------------------------------------------------------------------------------------------------
Win percentage (4) 26.2% 18.3% 7.8 28.3% 22.1% 6.2
----------------------------------------------------------------------------------------------------------------
Total revenue ($000) 2,412 1,988 424 1,246 918 328
----------------------------------------------------------------------------------------------------------------
Operating expenses ($000) (2,321) (2,078) (243) (1,183) (865) (317)
----------------------------------------------------------------------------------------------------------------
Management fees ($000) (5) - (36) 36 - (36) 36
----------------------------------------------------------------------------------------------------------------
Income from operations exclusive of
depreciation and amortization ($000) 90 (127) 217 63 16 47
----------------------------------------------------------------------------------------------------------------
GRAND TOTAL
----------------------------------------------------------------------------------------------------------------
Total number of guests 80,576 56,569 24,007 40,687 29,721 10,966
----------------------------------------------------------------------------------------------------------------
Average "Drop per Head" (2) $ 356 $ 435 $ (79) $ 329 $ 443 $ (114)
----------------------------------------------------------------------------------------------------------------
Total drop ($000) (3) 28,712 24,600 4,111 13,374 13,167 207
----------------------------------------------------------------------------------------------------------------
Win percentage (4) 19.5% 18.1% 1.4 21.5% 18.5% 2.9
----------------------------------------------------------------------------------------------------------------
Total revenue ($000) 7,855 6,595 1,260 4,005 3,357 648
----------------------------------------------------------------------------------------------------------------
Operating expenses ($000) (6,438) (4,903) (1,535) (3,277) (2,316) (961)
----------------------------------------------------------------------------------------------------------------
Management fees ($000) (5) (1,001) (791) (210) (515) (429) (86)
----------------------------------------------------------------------------------------------------------------
Income from operations exclusive of
depreciation and amortization ($000) 416 901 (485) 213 612 (398)
----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes continuing operations only.
(2) The per guest average dollar value of gaming chips purchased.
(3) The total dollar 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.
6
<PAGE>
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Total revenue in the quarter ended June 30, 2000 was $4.0 million, which
represents an increase of $603,000 over the same period in 1999 exclusive of
$1.49 million in revenue from operations in the United States that have since
been discontinued. The Company's loss from continuing operations for the quarter
ended June 30, 2000 was $1.48 million as compared to a loss of $433,000 in 1999
and was the result of the operating results of the Company's four business
units, the income from which was not sufficient to cover the expenses of the
Company's Corporate Headquarters in New York and payment of interest on the
Company's outstanding debt in the period.
The Ceska casino continued to perform well below expectations in the second
quarter of 2000. Total revenue in Ceska was $1.2 million for the period, which
represents a 40% decrease from the $2.0 million in total revenue for the same
period in 1999. This revenue decline was the direct result Ceska's loss of
market share due to competition from three casinos that have opened in the
region. These casinos have succeeded in luring a number of regular, high volume
clients from Ceska. The erosion of Ceska's client base is evidenced by the
reduced attendance between 1999 and 2000 (-1,792 in quarter two) and the decline
in the average "Drop per Head", which demonstrates that the casino has lost some
of its players, who tend to play at a higher dollar level.
Growth of the overall market from which Ceska draws its clients has proven to be
a difficult challenge. The size of the German market, from which the bulk of the
casino's clients are drawn, is somewhat constrained by the driving distance to
the Czech Republic.
In response, the casino has implemented a comprehensive marketing and
promotional campaign, which has been designed to attract back former players and
to generate quality new players. Included in this campaign, which was
implemented in July 2000, are a high volume player reward program, a plan to
further develop internal promotional events, and a "Wheel of Fortune" game that
encourages repeat visitation by clients.
Inclusive of Management Fees, which were eliminated in the consolidation,
Ceska's second quarter income from operations, exclusive of depreciation and
amortization, was $160,000, which represents a decline of $438,000 versus the
second quarter of 1999.
In Rozvadov, second quarter 2000 revenues improved by $69,000 over the second
quarter in 1999. While attendance was down 13% in 2000, a $40 increase in the
"Drop per Head" and a higher Win percentage, attributed to several losing nights
by VIP clients, resulted in the revenue improvement versus 1999. In addition, an
eighth gaming table, which was added in March, created a benefit to operations
in the second quarter of 2000. The additional table has helped to alleviate the
overcrowding problems that the casino regularly faces during peak periods.
Expansion to nine tables, as reflected in the 2000 budget, will be pursued but
will require some minor renovations to the casino facility. Rovadov produced
income from operations, inclusive of management fees, but exclusive of
depreciation and amortization of $14,000 in the second quarter of 2000 as
compared to a loss of $2,000 in the same period in 1999.
Snojmo, which opened on December 22, 1999, outpaced attendance projections by
4,251 and total revenue projections by $78,000 in the second quarter of 2000.
The Snojmo casino has continued to experience strong attendance with targets
being exceeded in every month in the second quarter of 2000. Despite these
encouraging trends, the casino, which has absorbed exceptional administrative
expenses related to architectural plans and construction of a temporary parking
facility, produced a loss from operations, inclusive of management fees, but
exclusive of depreciation and amortization of $24,000.
The casino in Zaragoza performed well in the first quarter of 2000, and that
trend continued through the second quarter of 2000. Total revenue for the
quarter was $1.2 million, which represents an improvement of $328,000 over the
second quarter of 1999. Zaragoza's second quarter success was fueled by a 6.2
percentage point increase in the table game win percentage over 1999, which was
largely the result of increased play of French Roulette, the odds of which
heavily favor the casino. In the second quarter 2000, Zaragoza produced income
from operations, including management fees, but excluding depreciation and
amortization of $63,000 versus $16,000 in the same period in 1999.
Selling, general and administrative expenses in the three months ended June 30,
2000 were $257,000 higher than in 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 other expenses
in the Corporate office. Interest expense in the second quarter of 2000 was
$86,000 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.
7
<PAGE>
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Total revenues in the six month period ended June 30, 2000 were $7.86 million
versus $6.64 million over the same period in 1999 exclusive of $2.97 in revenue
from operations in the United States that have since been discontinued. The
Company's loss from continuing operations for the six month period was $2.64
million as compared to a loss of $1.91 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
quarter 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 $1.16 million versus the first six 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 June 2000, Snojmo's attendance has exceeded
projections by 6,990, and when compared to the casino's second quarter
attendance variance of 4,251, this positive trend demonstrates an increase in
demand.
Corporate overhead expenses in the first six months of 2000 decreased by
$638,000 as compared to the same period in 1999. The reduction in Corporate
expenses was the result of higher legal fees in 1999 and the benefit of cost
cutting initiatives (see "Administrative Issues" below) in 2000, although the
benefits of the most significant cost cutting move, closure of the London
office, will be realized beginning in the second half of the year. Overall,
selling, general and administrative expenses were higher by $218,000 in the
first six months of 2000 than in the same period in 1999 due, primarily, to the
addition of Snojmo. Interest expense for the first six months of 2000 was higher
than the same period in 1999 due to interest and amortization of warrants
related to $3.0 million of additional debt incurred in October 1999.
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, former President of Trans World Gaming
Corp, is no longer employed by the Company.
The Company held its 2000 Annual Meeting on July 6, 2000, after adjournment for
lack of 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 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 Company brochure with profiles of each of the Company's four business units
has been designed and will be used in conjunction with marketing efforts related
to financing activities.
A comprehensive marketing campaign is underway in Ceska with the goal of
attracting former clients that have migrated to competitive casinos in the area.
Given these new competitive forces in the market and limitations of the overall
market size, it is unlikely that the business volume in Ceska will return to
1999 levels. A Vienna marketing campaign has been developed and will be
implemented after the summer holiday season. 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
concentrated on radio advertising to promote the facility, and the radio spots
have recently been shortened and their frequency increased.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The deficit in the Company's working capital, defined as current assets minus
current liabilities, grew by $1.96 million to $5.94 million at June 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 six months ended June 30, 2000, the Company had net cash used in
operations of $61,000. This was primarily a result of a $2.64 million loss
offset by, $1.38 million of depreciation and amortization, $390,000 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 $816,000
net increase in cash attributable to changes in operating assets and
liabilities. For the six months ended June 30, 2000, net cash provided by
financing activities of $354,000 consisted of new a short-term working capital
obligation of $577,000, which is payable in equal monthly installments through
September 2000, and $223,000 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 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 (or others) in
the future. At June 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 June 30, 2000, the Company has approximately $7.2 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 Casino de Zaragoza (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 in June 2000, that will allow the casino to relocate upon
issuance of approval of the DGA, which is expected to be granted in September
2000. 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. There can be no assurances
that any of the events described above will be realized. See further discussion
of Spain in "Plan of Operations".
9
<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 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 existing casino during peak periods. A preliminary
study of the proposed Rozvadov relocation demonstrates that the project may have
the potential to produce a positive return.
The casino near Snojmo opened on December 22, 1999 and has, in terms of both
attendance, 26,190, and Total Drop, $7.37 million, thus far well exceeded the
budgeted expectations of 19,200 in attendance and $6.45 million in Total Drop.
The projections call for the addition of five gaming tables in October 2000, and
based on the results in the first six months 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 anticipated issuance of a decree by the local
DGA in September 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.
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.
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 six and three months
ended June 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 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.
11
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Company held its 2000 Annual Meeting on July 6, 2000 after adjournment for
lack of 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:
1. Election of Directors:
<TABLE>
<CAPTION>
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
</TABLE>
2. Ratification of the appointment of the Board of Directors of
Rothstein, Kass & Company, P.C.:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
3,804,189 22,700 0
</TABLE>
3. Amendment of the Articles of Incorporation by changing the
name to Trans World Corporation:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
2,927,789 20,600 878,500
</TABLE>
7. If necessary, Adjournment of the Annual Meeting to solicit
additional proxies:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
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
12
<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: August 14, 2000 By: /s/ Rami S. Ramadan
-------------------
President,
Chief Executive Officer
Chief Financial Officer
13
