U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended June 30, 1996
Commission file number 0-25624
LOTTOWORLD, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0399794
(State of Incorporation) (IRS Employer ID No.)
2150 Goodlette Road
Suite 200
Naples, FL 34102
(Address of principal executive offices) (Zip Code)
(941) 643-1677
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the 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
----- ----
Common stock, par value $.001 per share; 5,428,353 shares outstanding as of July
31, 1996
<PAGE>
LOTTOWORLD, INC.
TABLE OF CONTENTS
PART I Financial Information Page No.
Item 1. Financial Statements
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statements of Common Shareholders'
Equity (Deficit) 5
Condensed Statements of Cash Flows 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
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<PAGE>
LOTTOWORLD, INC
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,529,517 $ 318,963
Accounts receivable, net 303,753 159,479
Stock subscriptions receivable -- 449,980
Accounts receivable, officers 58,375 58,375
Prepaid expenses 1,014,191 168,412
------------ ------------
2,905,836 1,155,209
Restricted Cash, redeemable convertible preferred stock 1,000,020 1,000,020
Furniture, Fixtures and Equipment, net 404,174 556,253
Other Assets 26,820 10,101
------------ ------------
$ 4,336,850 $ 2,721,583
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 16,667 $ 16,667
Accounts payable 689,409 851,673
Accrued expenses 47,658 56,302
Deferred revenue 349,927 149,549
Dividends payable 25,000 25,000
------------ ------------
1,128,661 1,099,191
------------ ------------
Long-Term Debt, less current maturities 16,716 25,050
------------ ------------
Redeemable convertible preferred stock 1,000,020 1,000,020
------------ ------------
Common Shareholders' Equity
Common stock 5,391 3,106
Common stock subscribed -- 1,316,230
Additional paid-in capital 11,707,334 7,933,759
Accumulated deficit (9,487,195) (7,789,523)
Less treasury stock (34,077) --
Less stock subscriptions -- (866,250)
------------ ------------
2,191,453 597,322
------------ ------------
$ 4,336,850 $ 2,721,583
============ ============
</TABLE>
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<PAGE>
LOTTOWORLD, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales revenue $ 522,741 $ 231,040 $ 276,475 $ 193,444
----------- ----------- ----------- -----------
Operating expenses:
Production, distribution and editorial 872,678 804,364 462,127 530,162
Circulation 387,392 606,705 121,658 464,558
Advertising, promotion and business development 260,926 383,349 127,418 267,395
Selling, general and administrative 685,372 676,779 367,503 337,530
----------- ----------- ----------- -----------
2,206,368 2,471,197 1,078,706 1,599,645
----------- ----------- ----------- -----------
Operating (loss) (1,683,627) (2,240,157) (802,231) (1,406,201)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 37,920 65,269 12,478 50,306
Interest expense (1,965) (62,429) (946) (49,832)
----------- ----------- ----------- -----------
35,955 2,840 11,532 474
----------- ----------- ----------- -----------
Net (loss) ($1,647,672) ($2,237,317) ($ 790,699) ($1,405,727)
=========== =========== =========== ===========
Net (loss) per common share ($ 0.42) ($ 0.92) ($ 0.24) ($ 0.52)
=========== =========== =========== ===========
Weighted average number of common shares outstanding 3,966,966 2,420,099 3,357,689 2,687,682
=========== =========== =========== ===========
</TABLE>
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<PAGE>
LOTTOWORLD, INC.
STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Additional Common Total
Common Stock Paid-in Accumulated Stock Treasury Shareholders'
Stock Subscribed Capital (Deficit) Subscriptions Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
Balance, December 31, 1994 $ 1,885 $ - $ 2,095,394 ($ 2,094,330) $ - $ - $ 2,949
Common stock issued (1,221,090 shares) 1,221 - 5,838,365 - - - 5,839,586
Stock subscriptions - 1,316,230 - - (866,250) - 449,980
Dividend distributions - - - (100,002) - - (100,002)
Net (loss) - - - (5,595,191) - - (5,595,191)
- - - - - - -
---------------------------------------------------------------------------------
Balance, December 31, 1995 3,106 1,316,230 7,933,759 (7,789,523) (866,250) - 597,322
Common stock (2,284,831 shares) (unaudited) 2,285 (1,316,230) 3,773,575 - 866,250 - 3,325,880
Purchase of stock for treasury (11,500 shares)
(Unaudited) - - - - - (34,077) (34,077)
Dividend distributions - - - (50,000) - - (50,000)
Net (loss) (Unaudited) - - - (1,647,672) - - (1,647,672)
---------------------------------------------------------------------------------
Balance, June 30, 1996 (Unaudited) $ 5,391 $ 0 $11,707,334 ($9,487,195) $ 0 ($34,077) $ 2,191,453
=================================================================================
</TABLE>
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<PAGE>
LOTTOWORLD, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net cash (used in) operating activites ($2,098,196) ($2,795,355) ($ 575,389) ($ 894,137)
----------- ----------- ----------- -----------
Cash Flows (Used In) Investing Activities
Purchase (disposal) of furniture and equipment 75,281 ($ 206,428) $ 96,380 ($ 109,103)
----------- ----------- ----------- -----------
Cash Flows From Financing Activities
Issuance on long-term notes payable (8,334) $ 1,033,353 ($ 4,167) $ 33,333
Issuance of common stock 3,325,880 4,502,235 1,718,382 (63,316)
Purchase of treasury stock (34,077) (23,217)
Dividends paid (50,000) (50,000)
----------- ----------- ----------- -----------
3,233,469 $ 5,535,588 1,640,998 ($ 29,983)
----------- ----------- ----------- -----------
Net increase in cash 1,210,554 2,533,805 1,161,989 (1,033,223)
Cash
Beginning 318,963 1,061,855 367,528 1,061,855
----------- ----------- ----------- -----------
Ending $ 1,529,517 $ 3,595,660 $ 1,529,517 $ 28,632
=========== =========== =========== ===========
</TABLE>
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<PAGE>
LOTTOWORLD, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) The unaudited financial statements and the related notes have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying
financial statements and related notes should be read in conjunction
with the audited financial statements of the Company, and notes
thereto, for the year ended December 31, 1995.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
(2) The net (loss) per common share amounts are computed using the weighted
average number of common shares outstanding during the periods.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The loss for the six months and three months three months ended June
30, 1996 and 1995 are $(1,647,672) and $(2,237,317); $(790,699) and $(1,405,727)
respectively before dividends paid to preferred shareholders.
The Company declared a dividend in the amount of $.15 per share for
record holders of its Series A Convertible Preferred Stock as of the close of
business on June 30, 1996 payable on July 31, 1996.
Revenues increased 127% and 43% for the six months and the three months
ended June 30, 1996 respectively, when compared to similar periods in 1995. The
major component of the increase was subscription income which increased because
of the addition of approximately 61,000 subscribers obtained through the efforts
of Publishers Clearing House .
Operating expenses decreased $256,000 and $521,000 for the same periods
respectively. In 1995, the Company launched its national distribution of
LottoWorld through the efforts of Time Distribution Services and ICD/The Hearst
Corporation. The operating costs for that launch are reflected in the 1995
operations. In September 1995, the Company realized that there were problems
with the distribution of LottoWorld and stopped most of the promotion and
marketing efforts. The six months ended June 30, 1996 show the decrease in those
efforts.
Liquidity and Capital Resources
On June 28, 1996 the Company sold 1,188,164 shares of its $.001 par
value common stock. Those proceeds, together with expected increases in revenues
attributed to the Company's wholly-owned subsidiary, Lottery Players Publishing
Company, which is expected to begin operations in October when it publishes it's
first issue on behalf of the New York State Lottery, should enable the Company
to have the working capital necessary to meet its needs for the next twelve
months.
-8-
<PAGE>
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11. Computation of net (loss) per share of
Common Stock - not required
(b) Exhibit 27. Financial Data Schedule (Electronic
filing only)
(c) The Registrant did not file a Form 8-K
during the quarter ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOTTOWORLD, INC.
DATED: July 31, 1996 s/Stuart Dubow
--------------------------
Stuart Dubow
Chief Financial Officer
DATED: July 31, 1996 s/Stuart Dubow
--------------------------
Stuart Dubow
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LOTTOWORLD, INC. FOR THE SIX MONTHS ENDED JUNE 30,1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,529
<SECURITIES> 0
<RECEIVABLES> 362
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,905
<PP&E> 587
<DEPRECIATION> 183
<TOTAL-ASSETS> 4,337
<CURRENT-LIABILITIES> 1,129
<BONDS> 0
<COMMON> 5
1,000
0
<OTHER-SE> 2,186
<TOTAL-LIABILITY-AND-EQUITY> 4,337
<SALES> 553
<TOTAL-REVENUES> 553
<CGS> 0
<TOTAL-COSTS> 2,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> (1,648)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,648)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,648)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> 0
</TABLE>
