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 September 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; 5,964,849 shares outstanding as of
October 31, 1996
<PAGE>
LOTTOWORLD, INC.
TABLE OF CONTENTS
PART I Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Common Shareholders'
Equity (Deficit) 5
Condensed Consolidated 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 CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPT 30, DECEMBER 31,
1996 1995
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 875,951 $ 318,963
Accounts receivable, net 424,107 159,479
Stock subscriptions receivable -- 449,980
Accounts receivable, officers 58,375 58,375
Prepaid expenses 922,741 168,412
------------ ------------
2,281,174 1,155,209
Restricted Cash, redeemable convertible preferred stock 1,000,020 1,000,020
Furniture, Fixtures and Equipment, net 377,346 556,253
Other Assets 26,820 10,101
------------ ------------
$ 3,685,360 $ 2,721,583
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 16,667 $ 16,667
Accounts payable 570,081 851,673
Accrued expenses 46,324 56,302
Deferred revenue 465,658 149,549
Dividends payable 25,000 25,000
------------ ------------
1,123,730 1,099,191
------------ ------------
Long-Term Debt, less current maturities 12,550 25,050
------------ ------------
Redeemable convertible preferred stock 1,000,020 1,000,020
------------ ------------
Common Shareholders' Equity
Common stock 5,965 3,106
Common stock subscribed -- 1,316,230
Additional paid-in capital 12,267,020 7,933,759
Accumulated deficit (10,689,848) (7,789,523)
Less treasury stock (34,077) --
Less stock subscriptions -- (866,250)
------------ ------------
1,549,060 597,322
------------ ------------
$ 3,685,360 $ 2,721,583
============ ============
</TABLE>
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<PAGE>
LOTTOWORLD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT 30, THREE MONTHS ENDED SEPT 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales revenue $ 668,455 $ 481,627 $ 145,714 $ 250,587
----------- ----------- ----------- -----------
Operating expenses:
Production, distribution and editorial 1,415,252 1,957,011 542,574 1,152,647
Circulation 518,845 940,264 131,453 333,559
Advertising, promotion and business development 450,845 858,170 189,919 474,821
Selling, general and administrative 1,155,532 984,410 470,160 307,631
----------- ----------- ----------- -----------
3,540,474 4,739,855 1,334,106 2,268,658
----------- ----------- ----------- -----------
Operating (loss) (2,872,019) (4,258,228) (1,188,392) (2,018,071)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 49,496 102,981 11,576 37,712
Interest expense (2,802) (137,849) (837) (75,420)
----------- ----------- ----------- -----------
46,694 (34,868) 10,739 (37,708)
----------- ----------- ----------- -----------
Net (loss) ($2,825,325) ($4,293,096) ($1,177,653) ($2,055,779)
=========== =========== =========== ===========
Net (loss) per common share ($ 0.62) ($ 1.77) ($ 0.21) ($ 0.76)
=========== =========== =========== ===========
Weighted average number of common shares outstanding 4,543,150 2,420,099 5,695,518 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 (2,858,827 shares) (unaudited) 2,859 (1,316,230) 4,333,261 - 866,250 - 3,868,140
Purchase of stock for treasury (11,500 shares)
(Unaudited) - - - - - (34,077) (34,077)
Dividend distributions - - - (75,000) - - (75,000)
Net (loss) (Unaudited) - - - (2,825,325) - - (2,825,325)
---------------------------------------------------------------------------------
Balance, September 30, 1996 (Unaudited) $ 5,965 $ 0 $12,267,020 ($10,689,848) $ 0 ($34,077) $ 1,549,060
=================================================================================
</TABLE>
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<PAGE>
LOTTOWORLD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT 30, THREE MONTHS ENDED SEPT 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net cash (used in) operating activites ($3,271,281) ($4,346,384) ($1,173,085) ($1,551,029)
----------- ----------- ----------- -----------
Cash Flows (Used In) Investing Activities
(Purchase) disposal of furniture and equipment 63,706 ($ 431,401) ($ 11,575) ($ 224,973)
----------- ----------- ----------- -----------
Cash Flows From Financing Activities
Issuance on long-term notes payable (12,500) $ 1,029,186 ($ 4,166) ($ 4,167)
Issuance of common stock 3,886,140 4,577,235 560,260
Purchase of treasury stock (34,077)
Dividends paid (75,000) (75,000) (25,000)
----------- ----------- ----------- -----------
3,764,563 5,531,421 531,094 ($ 4,167)
----------- ----------- ----------- -----------
Net increase in cash 556,988 753,636 (653,566) (1,780,169)
Cash
Beginning 318,963 1,061,855 1,529,517 3,595,660
----------- ----------- ----------- -----------
Ending $ 875,951 $ 1,815,491 $ 875,951 $ 1,815,491
=========== =========== =========== ===========
</TABLE>
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<PAGE>
LOTTOWORLD, INC.
NOTES TO CONDENSED CONSOLIDATED 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 consolidated financial statements include the accounts of
LottoWorld, Inc. and its wholly owned subsidiary, Lottery Players
Publishing Company, Inc. (The "Company"). These unaudited financial
statements should be read in conjunction with the audited financial
statements and the notes thereto as of 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. All
intercompany transactions and balances have been eliminated in
consolidation.
(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 losses for the nine months and three months ended September 30,
1996 are 33.7% and 42.7% less than the comparable periods last year; namely,
$(2,825,325) and $(4,258,228); $(1,177,653) and $(2,055,779) 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 September 30, 1996 payable on October 31, 1996.
The reduction of the loss is attributable to the cut-back of its
LottoWorld magazine from every two weeks to a monthly frequency as well as a
more than 50% reduction in circulation and marketing and promotion expenses
attributable to the national newsstand launch of its LottoWorld magazine in
1995. There were seven issues of LottoWorld magazine in the third quarter of
1995 as compared to three issues in the comparable quarter of 1996.
Expenses were reduced more than 25% for the nine months and more than
41% for the three months ended September 30, 1996 when compared to the same
periods in 1995. The Company anticipates further significant reductions in
expenses applicable to its LottoWorld magazine as the circulation growth rate of
this magazine from subscription sales outpaces the rate of growth of newsstand
circulation.
The Company, through its wholly-owned subsidiary, launched its second
magazine, the New York Lottery Players Monthly. This new magazine is published
under a three-year exclusive agreement with the New York State Division of
Lottery. With a circulation of 1,100,000 copies per month, the October issue was
the largest magazine launch in the United States since 1990 and immediately
ranks as the third largest magazine in New York, ranked by circulation. As it is
the policy of the Company to recognize an issue as published when it is shipped
from the printer, the Company has included this issue in the quarter ended
September 30, 1996. As a controlled circulation magazine (free to the reader),
the Company will depend on the sale of advertising to make this publication
profitable. As with most new publications, the sale of advertising lags behind
the introduction of a magazine . The Company recognized a loss in excess of
$200,000 attributable to this first issue.
Liquidity and Capital Resources
Although the Company sold 371,496 shares of its $.001 common stock and
derived $543,300 in additional capital, the Company feels it will need to raise
$2,000,000 of additional capital in the next six months to fulfill its
objectives in regard to the State Lottery Digest Program, of which the New York
Lottery Players Monthly, is the first edition.
-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
Exhibit 27. Financial Data Schedule (Electronic
filing only)
(b) The Registrant did not file a Form 8-K
during the quarter ended September 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: October 31, 1996 s/Stuart Dubow
------------------------------
Stuart Dubow
Chief Financial Officer
DATED: October 31, 1996 s/Stuart Dubow
------------------------------
Stuart Dubow
Chief Financial Officer
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LOTTOWORLD, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 876
<SECURITIES> 0
<RECEIVABLES> 482
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,281
<PP&E> 599
<DEPRECIATION> 222
<TOTAL-ASSETS> 3,685
<CURRENT-LIABILITIES> 1,124
<BONDS> 13
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<COMMON> 6
<OTHER-SE> 1,543
<TOTAL-LIABILITY-AND-EQUITY> 3,685
<SALES> 668
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<CGS> 1,415
<TOTAL-COSTS> 3,540
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</TABLE>
