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, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURTIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO _______________
COMMISSION FILE NUMBER 0-25244
TRANS WORLD GAMING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 13-3738518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PENN PLAZA, SUITE 1503 10119-0002
NEW YORK, NY (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 563-3355
(Issuer's telephone number including area code)
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the past
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 .
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Shares of the Registrant's Common Stock, par value $.001, outstanding as of
May 10, 1997: 3,044,286
TRANS WORLD GAMING CORP.
FORM 10-QSB
FOR THE
QUARTER ENDED MARCH 31, 1997
INDEX
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED AND CONSOLIDATED BALANCE SHEET (UNAUDITED) AS OF 1
MARCH 31, 1997 AND DECEMBER 31, 1996.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) 2
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) 3
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 5
FINANCIAL CONDITION OR PLAN OF OPERATION
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED STATEMENTS
TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS March 31, Dec 31,
1997 1996
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CURRENT ASSETS (unaudited)
Cash & equivalents $429 $489
Accounts/Notes receivable 462 397
Inventories 61 57
Other current assets 64 109
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Total current assets 1,016 1052
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PROPERTY AND EQUIPMENT -net 433 435
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OTHER ASSETS
Investment at equity 75 75
Deferred facility costs - net 0 0
Goodwill - net 0 0
Deferred income tax 0 0
Tottenham services - net 642 0
Deferred placement costs - net 613 664
Discount on convertible debt - net 90 100
Other deferred costs - net 86 25
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Total other assets 1,506 864
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TOTAL ASSETS $2,955 $2,351
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LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Current portion of long term debt $880 $1,152
Accounts payable and accrued expenses 635 477
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Total current liabilities 1,515 1,629
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LONG TERM DEBT, net of current portion 5,022 4,824
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STOCKHOLDERS EQUITY
Capital stock 3 3
Additional paid-in-capital 8,896 8,600
Stock warrants outstanding 685 537
Accumulated deficit (13,166) (13,242)
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Total stockholders equity (3,582) (4,102)
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $2,955 $2,351
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
Three months ended
March 31,
1997 1996
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Revenues $1,671 $1,667
Costs and expenses
Cost of revenue 993 957
Administrative 328 506
Depreciation and Amortization 83 194
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Total costs and expenses 1,404 1,657
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Earnings/(loss) from operations 267 10
Interest expense 172 157
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Earnings/(loss) before taxes 95 (147)
Provision for tax 18 22
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Net earnings/(loss) $77 ($169)
--------------------------
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Earnings/(loss) per share $0.03 ($0.07)
Common shares used in computing
earnings per share 3,044 2,544
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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TRANS WORLD GAMING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
Three Months Ended March 31,
1997 1996
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Cash flows from operating activities $217 $218
Cash flows from investing activities 0 (4)
Cash flows from financing activities
Proceeds from short term notes 0 225
Repayment of outstanding debt (277) (383)
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Net cash from financing activities (277) (158)
Net increase/(decrease) in cash (60) 56
Cash - beginning of period 489 216
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Cash - end of period $429 $272
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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TRANS WORLD GAMING CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Unaudited Statements.
The accompanying consolidated financial statements for the three months
ended March 31, 1997 and March 31, 1996 are unaudited and reflect all
adjustments of a normal and recurring nature to present fairly, and not
misleading, the financial position and results of operation and cash flows
for the interim periods. These unaudited statements have been prepared by
the Company in accordance with generally accepted accounting principles,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Pursuant to such rules and regulations, certain financial
information and footnote disclosures normally included in such financial
statements have been condensed or omitted.
These financial statements should be read in conjunction with the financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Company's Annual Report on Form 10K-SB for the year ended December 31,
1996. The results of operations for the three months ended March 31, 1997
are not necessarily indicative of the results for the entire year ending
December 31, 1997.
2. Earnings/(loss) per share were calculated based on 3,044,286 and 2,544,286
shares of common stock outstanding for the three months ended March 31,
1997 and 1996 respectively.
3. In October, 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation", which encourages companies
to recognize compensation expense in the income statement based on the
fair value of the underlying common stock at the date the awards are
granted. However, it will permit continued accounting under APB Option 25,
"Accounting for Stock Issued to Employees" accompanied by disclosure of the
pro forma effects on net income and earnings per share had the new
accounting rules been applied. The statement is effective for calendar
year 1996. The Company has not yet determined which method it will follow
for measuring compensation cost attributed to stock operations or the
impact of the new standard on its consolidated financial statement.
4. In early 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 128, "Earning's per Share." The
statement is effective for financial statements for periods ending after
December 15, 1997, and changes the method in which earnings per share will
be determined. Adoption of this statement by the Company is not expected
to have a material impact on earnings per share.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
REVENUES
The Company's net revenues from its operations remained virtually unchanged
at $1.7 million for the three months ended March 31, 1997 as compared to the
three months ended March 31, 1996. Revenues from the Company's video poker
operations at the Gold Coin and Toledo Palace were $1.0 million for the three
months ended March 31, 1997 and 1996 respectively and revenues from the
Woodlands truck stop operation amounted to $.7 million for the three months
ended March 31, 1997 and 1996 respectively.
COST OF REVENUE
Cost of Revenue, which consists of the direct cost of operating both the Gold
Coin and Toledo Palace remained virtually unchanged at $275,000 for the three
months ended March 31, 1997 and 1996 respectively. Reductions in the cost of
fuel at the Woodlands truck stop resulted primarily in a 5% decrease in the
cost of revenue to $643,000 for the three months ended March 31, 1997 as
compared to the three months ended March 31, 1996. Costs incurred in the
operation of the Tottenham consulting service were $75,000 for the three
months ended March 31, 1997, a cost the Company did not incur in 1996.
Approximately $120,000 of costs for the Woodlands operation for each period
which were classified as general and administrative expenses in 1996 were
reclassified in 1997 to cost of revenue for comparative purposes.
EXPENSES
General and administrative expenses were $328,000 for the first quarter 1997
representing a 35% decrease over the first quarter 1996. In the first
quarter 1996 the Company incurred one-time charges of approximately $100,000
in financing costs for a canceled bridge loan and secondary offering of
securities, $23,000 in new business development and $38,000 in expenses in
connection with bridge financings which did not recur in 1997. In addition,
the Company realized savings of approximately $15,000 in the first quarter
1997 over 1996 as result of the relocation of the corporate offices in
November 1996.
In November 1996, the Company recognized an impairment loss under FASB 123 of
$11.3 million due to a voter mandate in Louisiana which ordered the closing
of video poker operations by June 30, 1999 in both parishes where the Company
has operations. As a result, the depreciation and amortization expense
decreased by $153,000 in the first quarter 1997 partially offset by
approximately $70,000 in amortization of the deferred placement costs in the
first quarter 1997 which were not expensed in the first quarter 1996.
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LIQUIDITY AND CAPITAL RESOURCES
The level of cash decreased by $60,000 for the quarter ended March 31, 1997
due primarily to the Company's scheduled quarterly repayment of its
obligation to Prime Properties in the amount of $277,000 offset by cash flows
from operating activities of $217,000.
The Company's obligation due to Prime Properties in connection with the
December 1994 acquisition of the Gold Coin is evidenced by a three-year
promissory note in the original principal amount of $3.0 million, which note
is secured by the Company's sublease with Prime Properties for the Gold Coin
premises (the "Prime Note"). As of March 26, 1997, the principal amount
outstanding on the Prime Note was $835,000. Such amount matures in its
entirety on December 22, 1997. If the Company defaults in its obligation
under the Prime Note, it would lose all its interests in the Gold Coin, which
loss would materially and adversely affect the financial condition and
business of the Company. The Company believes, although there can be no
assurance, that existing cash and anticipated cash flow from current
operations will be sufficient to satisfy its liquidity and capital
requirements for the next twelve months.
PLAN OF OPERATIONS
The Company intends to continue operating the Gold Coin and the Toledo Palace
as they are presently being operated; however, the Company has made available
for sale its Woodlands property where the Toledo Palace is located.
Currently, the Company is seeking to develop or acquire interests in gaming
operations at other locations so that it will generate positive cash flow by
1999; however, there can be no assurance that the Company will be able to
develop or acquire any such new operations by June 1999.
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 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.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS WORLD GAMING CORP.
Date: May 9, 1997 /s/ Dominick J. Valenzano
--------------------------------------------
Dominick J. Valenzano
Chief Financial Officer (Principal Financial
and Accounting Officer)
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On April 15, 1997, the Company completed the acquisition of Multiple
Application Tracking Systems, Inc. of Colorado ("MATS"). The purchase price
was $250,000 consisting of $15,000 in cash and a $235,000 promissory note
which matures in November, 2000 (the "Note"). The principal amount of the
Note is payable in three equal installments on November 1, 1998, 1999 and
2000. In addition, the Company entered into a five-year employment agreement
with Mr. James Hardman, Jr., the previous owner of MATS, at an annual
compensation of $100,000. Mr. Hardman will also receive ten percent (10%) of
all MATS gross revenues as a license royalty. The Company is currently
updating the operating system for the MATS product line and expects to
release the products during the second half of 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a). EXHIBITS.
10.1 Purchase Agreement dated as of April 15,1997 among
Trans World Gaming Corp., James R. Hardman, Jr., and
Multiple Application Tracking Systems, Inc.
10.2 Employment Agreement dated as of April 15, 1997 between
Multiple Application Tracking System, Inc. and James R.
Hardman, Jr.
10.3 License Agreement dated as of April 15, 1997 between
James R. Hardman, Jr. and Trans World Gaming Corp.
27 Financial Data Schedule
(b). REPORTS ON FORM 8-K
None.
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TRANS WORLD GAMING CORP.
EXHIBIT INDEX - FORM 10-Q
EXHIBIT NO. ITEM METHOD OF FILING
- ----------- ---- ----------------
10.1 Purchase Agreement dated as of April 15,1997 Filed electronically
among Trans World Gaming Corp., James R. herewith
Hardman, Jr., and Multiple Application
Tracking System, Inc.
10.2 Employment Agreement dated as of April 15,1997 Filed electronically
between Multiple Application Tracking System, Inc. herewith
and James R. Hardman, Jr.
10.3 License Agreement dated as of April 15, 1997 Filed electronically
between James R. Hardman, Jr. and Trans herewith.
World Gaming Corp.
27 Financial Data Schedule Filed electronically
herewith.
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