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, 1997
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; 7,523,124 shares outstanding as of July
31, 1997
<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 Consolidated 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
2
<PAGE>
LOTTOWORLD, INC
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 34,157 $ 137,752
Accounts receivable, net 33,618 324,297
Prepaid expenses 15,684 549,664
Investment 500,000 --
------------ ------------
583,459 1,011,713
Restricted Cash, redeemable convertible preferred stock 755,174 1,000,020
Accounts receivable - officers 58,375 58,375
Furniture, Fixtures and Equipment, net 145,340 338,729
Other Assets 26,820 26,820
------------ ------------
$ 1,569,168 $ 2,435,657
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 16,667 $ 16,667
Accounts payable 938,348 757,789
Accrued expenses 145,445 45,724
Deferred revenue 341,450 366,372
Dividends payable 15,206 25,000
------------ ------------
1,457,116 1,211,552
------------ ------------
Long-Term Debt, less current maturities 442,817 8,383
------------ ------------
Redeemable convertible preferred stock 750,020 1,000,020
------------ ------------
Common Shareholders' Equity
Convertible preferred stock 45,000 --
Common stock 7,503 6,165
Additional paid-in capital 13,677,947 12,491,870
Accumulated deficit (14,777,161) (12,248,259)
Less treasury stock (34,074) (34,074)
------------ ------------
(1,080,785) 215,702
------------ ------------
$ 1,569,168 $ 2,435,657
============ ============
</TABLE>
-3-
<PAGE>
LOTTOWORLD, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales revenue $ 311,060 $ 522,741 $ 49,823 $ 276,475
----------- ----------- ----------- -----------
Operating expenses:
Production, distribution and editorial 1,260,187 872,678 675,724 462,127
Circulation 254,353 387,392 134,737 121,658
Advertising, promotion and business development 257,692 260,926 127,828 127,418
Selling, general and administrative 1,048,536 685,372 301,749 367,503
----------- ----------- ----------- -----------
2,820,768 2,206,368 1,240,038 1,078,706
----------- ----------- ----------- -----------
Operating (loss) (2,509,708) (1,683,627) (1,190,215) (802,231)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 23,154 37,920 11,983 12,478
Interest expense (2,142) (1,965) (1,538) (946)
----------- ----------- ----------- -----------
21,012 35,955 10,445 11,532
----------- ----------- ----------- -----------
Net (loss) ($2,488,696) ($1,647,672) ($1,179,770) ($ 790,699)
=========== =========== =========== ===========
Net (loss) per common share ($ 0.38) ($ 0.42) ($ 0.17) ($ 0.24)
=========== =========== =========== ===========
Weighted average number of common shares outstanding 6,533,000 3,966,966 6,900,000 3,357,689
=========== =========== =========== ===========
</TABLE>
-4-
<PAGE>
LOTTOWORLD, INC.
STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Additional Common Total
Preferred Common Stock Paid-in Accumulated Stock Treasury Shareholders'
Stock Stock Subscribed Capital (Deficit) Subscriptions Stock Equity
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ -- $3,106 $1,316,230 $ 7,933,759 ($ 7,789,523) ($866,250) $ -- $ 597,322
Common stock issued (3,058,831 shares) -- 3,059 (449,980) 4,558,111 -- -- -- 4,111,190
Stock subscriptions expired -- -- (866,250) -- -- 866,250 -- 0
Purchase of stock for treasury (11,500 shares) -- -- -- -- -- -- (34,074) (34,074)
Dividend distributions -- -- -- -- (100,002) -- -- (100,002)
Net (loss) -- -- -- -- (4,358,734) -- -- (4,358,734)
--------------------------------------------------------------------------------------
Balance, December 31, 1996 $ -- 6,165 0 12,491,870 (12,248,259) 0 (34,074) 215,702
Preferred Stock 45,000 -- -- -- -- -- -- 45,000
Common stock (1,338,293 shares) (unaudited) -- 1,338 -- 1,186,077 -- -- -- 1,187,415
Dividend distributions -- -- -- -- (40,206) -- -- (40,206)
Net (loss) (Unaudited) -- -- -- -- (2,488,696) -- -- (2,488,696)
--------------------------------------------------------------------------------------
Balance, June 30, 1997 (Unaudited) $45,000 $7,503 $ 0 $13,677,947 ($14,777,161) $ 0 (34,074)($1,080,785)
======================================================================================
</TABLE>
5
<PAGE>
LOTTOWORLD, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net cash (used in) operating activites ($1,409,827) ($2,098,196) ($1,048,077) ($ 575,389)
----------- ----------- ----------- -----------
Cash Flows (Used In) Investing Activities
(Purchase) disposal of furniture and equipment 179,589 $ 75,281 $ 182,788 $ 96,380
Investments (500,000) -- (500,000) --
----------- ----------- ----------- -----------
(320,411) 75,281 (317,212) 96,380
----------- ----------- ----------- -----------
Cash Flows From Financing Activities
Issuance on long-term notes payable $ 434,434 ($ 8,334) $ 438,604 ($ 4,167)
Issuance of common stock 1,187,415 3,325,880 912,415 1,718,382
Issuance of preferred stock 45,000 -- 45,000 (23,217)
Purchase of treasury stock -- (34,077) -- --
Dividends paid (40,206) (50,000) (15,206) (50,000)
----------- ----------- ----------- -----------
1,626,643 3,233,469 1,380,813 1,640,998
----------- ----------- ----------- -----------
Net increase in cash (103,595) 1,210,554 15,524 1,161,989
Cash
Beginning 137,752 318,963 18,633 367,528
----------- ----------- ----------- -----------
Ending $ 34,157 $ 1,529,517 $ 34,157 $ 1,529,517
=========== =========== =========== ===========
</TABLE>
-6-
<PAGE>
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 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, 1996.
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.
The unaudited financial statements have been prepared with the assumption
that the Company is a going concern. While management has ceased
publication of all magazines, management is still pursuing sources of
capital with the intention of resuming publication.
(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
On June 18, 1997 the Company's securities were delisted from the Nasdaq
SmallCap Market for failure to meet the listing requirements. The Company's
securities are now listed on the OTC Bulletin Board.
The Company has suspended all operations pertaining to the publication of
the Company's magazines, terminated or laid-off 30 employees and does not have
the capital to resume publication. The Company is negotiating with several
potential investors, but at this time there can be no assurance that even if
sufficient capital is raised, that the publication of the magazines can be
resumed immediately.
The Board of Directors of the Company authorized the redemption of its
Redeemable Convertible Preferred Stock after giving those shareholders an
opportunity to convert those shares into common stock. Holders of $250,000 of
the preferred stock converted those shares into common stock and in July 1997,
the remaining shares were redeemed. Funds needed for the redemption have been
kept in escrow since the issuance of those preferred stock. The funds related to
the converted $250,000 shares has been used by the Company for working capital.
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) The Company filed a Form 8-K on the following dates:
April 9, 1997 - regarding the acquisition of certain assets.
April 22, 1997 - to summarize various transactions subsequent
to the Company's filing of Form 10-KSB.
June 18, 1997 - to report on the Company's delisting from the
Nasdaq SmallCap Market.
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: August 25, 1997 s/ Judith A. Schroeder
----------------------
Judith A. Schroeder
Treasurer
DATED: August 25, 1997 Dennis B. Schroeder
----------------------
Dennis B. Schroeder
Chairman of the Board and
Chief Executive Officer
9
<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, 1997,
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 34
<SECURITIES> 500
<RECEIVABLES> 33
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 583
<PP&E> 280
<DEPRECIATION> 135
<TOTAL-ASSETS> 1,569
<CURRENT-LIABILITIES> 1,457
<BONDS> 0
750
45
<COMMON> 7
<OTHER-SE> (1,132)
<TOTAL-LIABILITY-AND-EQUITY> 1,569
<SALES> 311
<TOTAL-REVENUES> 311
<CGS> 2,821
<TOTAL-COSTS> 2,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2)
<INCOME-PRETAX> (2,489)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,489)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,489)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
</TABLE>
