-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NqMHxs9VANlFaMDLyBLlSln3AJTlQERqAydEAQuwtImQ0JWZ3jBNKHUYLY8yl4z7 i5+cP4c5IacBFUkjTLD/FQ== 0000912057-00-026052.txt : 20000524 0000912057-00-026052.hdr.sgml : 20000524 ACCESSION NUMBER: 0000912057-00-026052 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD GAMING CORP CENTRAL INDEX KEY: 0000914577 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 133738518 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25244 FILM NUMBER: 642214 BUSINESS ADDRESS: STREET 1: 545 FIFTH AVE STREET 2: STE 940 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125633355 MAIL ADDRESS: STREET 1: 545 FIFTH AVE STREET 2: STE 940 CITY: NEW YORK STATE: NY ZIP: 10017 10QSB 1 10QSB ================================================================================ 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 --------------------- 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/) ================================================================================ TRANS WORLD GAMING CORP. AND SUBSIDIARIES FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 2000 INDEX PART 1 - FINANCIAL INFORMATION
Page ---- 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
TRANS WORLD GAMING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) March 31, 2000 (in thousands, except for per share data) ASSETS CURRENT ASSETS: Cash $ 1,227 Accounts receivable 130 Prepaid expenses and other current assets 332 -------- Total current assets 1,689 -------- PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $1,220 5,166 -------- OTHER ASSETS: Goodwill and other intangible assets, less accumulated amortization of $4,486 9,915 Deposits and other assets 738 -------- 10,653 -------- $ 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 -------- Total current liabilities 5,799 -------- LONG-TERM LIABILITIES: Long-term debt, net of unamortized debt discount of $4,056 20,744 Taxes payable to Spanish taxing authorities 5,800 -------- 26,544 -------- 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) -------- Total stockholders' deficit (14,835) -------- $ 17,508 ========
See accompanying notes to condensed consolidated financial statements 1 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)
2000 1999 ------- ------- REVENUES $ 3,848 $ 3,238 ------- ------- 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 ------- ------- Net loss $ (0.22) $ (0.41) ======= ======= COMPREHENSIVE INCOME (LOSS) Net loss $(1,161) $(1,385) Other comprehensive income, foreign currency translation adjustment 570 522 ------- ------- Comprehensive loss $ (591) $ (863) ======= =======
See accompanying notes to condensed consolidated financial statements 2 TRANS WORLD GAMING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2000 and 1999 (in thousands)
2000 1999 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES $ 141 $ 53 ------- ------- 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) ------- ------- NET INCREASE (DECREASE) IN CASH 293 (569) CASH Beginning of period 934 1,955 ------- ------- End of period $ 1,227 $ 1,386 ======= =======
See accompanying notes to condensed consolidated financial statements 3 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 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.
---------------------------------------------------------------------------- Czech Republic --------------------------------------------------- Zaragoza, Grand Ceska Rozvadov Snojmo (1) Subtotal Spain Total ---------------------------------------------------------------------------- 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
-------------------------- -------------- Czech Republic -------------------------- Zaragoza, Ceska Rozvadov Spain -------------------------- -------------- 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)
-------------------------- -------------- Czech Republic -------------------------- Zaragoza, Ceska Rozvadov Spain -------------------------- -------------- 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
(1) Operations commenced December, 1999 (2) Includes continuing operations only 5 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 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 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 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 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 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
- ---------------------------------------------------------------------------------------------------------------------------- Item No Item Method of Filing 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)
12 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)
13 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).
14 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).
15 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
16 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)
17 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
18 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 EX-27 2 EXHIBIT 27
5 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. 1,000 3-MOS 3-MOS DEC-31-2000 DEC-31-1999 JAN-01-2000 JAN-01-1999 MAR-31-2000 MAR-31-1999 1,227 0 0 0 130 0 0 0 332 0 1,689 0 21,525 0 (5,706) 0 17,508 0 5,799 0 26,544 0 0 0 0 0 5 0 (14,840) 0 17,508 0 0 0 3,848 3,238 0 0 (2,107) (1,731) (1,897) (2,342) 0 0 (1,005) (736) (1,161) (1,571) 0 0 (1,161) (1,571) 0 186 0 0 570 522 (591) (863) (.22) (.41) (.22) (.41)
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