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, 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; 8,276,530 shares outstanding as of
October 31, 1997
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
LOTTOWORLD, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
(Unaudited)
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 7,423 $ 137,752
Accounts receivable, net 29,194 324,297
Prepaid expenses 15,684 549,664
Investment 500,000 0
------------ ------------
Total Current Assets 552,301 1,011,713
Restricted cash, redeemable convertible preferred stock 0 1,000,020
Accounts receivable - officers 64,111 58,375
Furniture, Fixtures, and Equipment, net 111,445 338,729
Other Assets 26,820 26,820
------------ ------------
TOTAL ASSETS $ 754,677 $ 2,435,657
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 12,500 $ 16,667
Accounts payable 933,427 757,789
Accrued expenses 93,139 45,724
Deferred revenue 349,143 366,372
Dividend payable 0 25,000
------------ ------------
Total Current Liabilities 1,388,209 1,211,552
Long-Term Debt, less current maturities 442,818 8,383
Redeemable convertible preferred stock 0 1,000,020
Common Shareholders' Equity
Convertible preferred stock 45,000 0
Common stock 7,503 6,165
Additional paid-in capital 13,677,947 12,491,870
Accumulated deficit (14,772,726) (12,248,259)
Less treasury stock (34,074) (34,074)
------------ ------------
Total Common Shareholders' Equity (1,076,350) 215,702
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 754,677 $ 2,435,657
============ ============
3
LOTTOWORLD, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
--------------------------- ---------------------------
NINE MONTHS ENDED SEPT 30, THREE MONTHS ENDED SEPT 30,
1997 1996 1997 1996
-------------------------- ---------------------------
Sales revenue $ 310,334 $ 668,455 $ (726) $ 145,714
Operating expenses:
Production, distribution, and editorial 1,240,119 1,415,252 (20,069) 542,574
Circulation 254,418 518,845 65 131,453
Advertising, promotion, and business development 256,958 450,845 (735) 189,919
Selling, general and administrative 1,065,366 1,155,532 16,832 470,160
----------- ----------- ----------- -----------
Total Operating expenses 2,816,861 3,540,474 (3,907) 1,334,106
Operating (loss) (2,506,527) (2,872,019) 3,181 (1,188,392)
Other income (expense):
Interest income 24,554 49,496 1,401 11,576
Interest expense (2,288) (2,802) (146) (837)
----------- ----------- ----------- -----------
Total Other income 22,266 46,694 1,255 10,739
Net (loss) $(2,484,261) $(2,825,325) $ 4,436 $(1,177,653)
=========== =========== =========== ===========
Net (loss) per common share (0.34) (0.62) 0.00 (0.21)
=========== =========== =========== ===========
Weighted average number of common shares outstanding 7,324,546 4,543,150 7,797,759 5,695,518
=========== =========== =========== ===========
4
LOTOWORLD, INC.
STATEMENT OF COMMON SHAREHOLDERS' EQUITY
---------------------------------------------------------------------------------------------
Common Additional Common Total
Preferred Common Stock Paid-in Accumulated Stock Treasury Shareholder
Stock Stock Subscribed Capital (Deficit) Subscriptions Stock Equity
---------------------------------------------------------------------------------------------
Balance, December 31, 1995 $0 $3,106 $1,316,230 $7,933,759 ($7,789,523) ($866,250) $0 $597,322
Common stock issued
(3,058,832 shares) 0 3,059 (449,980) 4,558,111 0 0 0 4,111,190
Stock subscriptions expired 0 0 (866,250) 0 0 866,250 0 0
Purchase of stock for treasury
(11,500 shares) 0 0 0 0 0 0 (34,074) (34,074)
Dividend distributions 0 0 0 0 (100,002) 0 0 (100,002)
Net (loss) 0 0 0 0 (4,358,734) 0 0 (4,358,734)
---------------------------------------------------------------------------------------------
Balance, December 31, 1996 0 6,165 0 12,491,870 (12,248,259) 0 (34,074) 215,702
Preferred Stock 45,000 0 0 0 0 0 0 45,000
Common Stock (1,338,293 shares)
(unaudited) 0 1,338 0 1,186,077 0 0 0 1,187,415
Dividend distributions 0 0 0 0 (40,206) 0 0 (40,206)
Net (loss) (unaudited) 0 0 0 0 (2,484,261) 0 0 (2,484,261)
---------------------------------------------------------------------------------------------
Balance, September 30, 1997 $45,000 $7,503 $0 $13,677,947 ($14,772,726) $0 ($34,074)($1,076,350)
=============================================================================================
5
LOTTOWORLD, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS AND TRHEE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
-------------------------- --------------------------
NINE MONTHS ENDED SEPT 30, THREE MONTHS ENDED SEPT 30,
1997 1996 1997 1996
-------------------------- --------------------------
Net cash flow from operating activities $(1,445,039) $(3,271,281) $ (35,212) $(1,173,085)
Cash Flows (Used in) Investing Activities
(Purchase) disposal of furniture and equipment 188,067 63,706 8,478 (11,575)
Investments (500,000) 0 0 0
----------- ----------- ----------- -----------
(311,933) 63,706 8,478 (11,575)
Cash Flows From Financing Activities
Issuance on long-term notes payable 434,434 (12,500) 0 (4,166)
Issuance of common stock 1,187,415 3,886,140 0 560,260
Issuance of preferred stock 45,000 0
Purchase of treasury stock 0 (34,077) 0 0
Dividends paid (40,206) (75,000) 0 (25,000)
----------- ----------- ----------- -----------
1,626,643 3,764,563 0 531,094
Net increase (decrease) in cash (130,329) 556,988 (26,734) (653,566)
Cash
Beginning 137,752 318,963 34,157 1,529,517
Ending $ 7,423 $ 875,951 $ 7,423 $ 875,951
=========== =========== =========== ===========
6
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 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 has announced that it is has reached an agreement in
principal and is in the process of finalizing a transaction with Group V
Corporation, a diversified telecommunications and software services company, to
jointly reorganize, develop and market the publishing assets of the Company.
The joint venture agreement contemplates the incorporation of a new subsidiary
of Group V, into which LottoWorld will assign its publishing assets and Group V
will provide funding.
The proposed agreement would provide increased marketing channels for Group V's
wholly-owned subsidiary, National Pools Corporation (NPC). This venture will
also facilitate the immediate introduction of NPC's Hit-LoTTo(TM) group play
program in multiple state, accelerating NPC's original forecasted rollout. Once
the definitive agreement has been signed and the transfer of LottoWorld's
publishing assets is finalized, NPC expects Hit-LoTTo(TM) to be operational in
several states within 12 months.
(2) The net (loss) per common share amounts are computed using the weighted
average number of common outstanding during the periods.
7
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 not listed on the OTC Bulletin Board.
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 has announced that it is has reached an agreement in
principal and is in the process of finalizing a transaction with Group V
Corporation, a diversified telecommunications and software services company, to
jointly reorganize, develop and market the publishing assets of the Company.
The joint venture agreement contemplates the incorporation of a new subsidiary
of Group V, into which LottoWorld will assign its publishing assets and Group V
will provide funding.
The proposed agreement would provide increased marketing channels for Group V's
wholly-owned subsidiary, National Pools Corporation (NPC). This venture will
also facilitate the immediate introduction of NPC's Hit-LoTTo(TM) group play
program in multiple state, accelerating NPC's original forecasted rollout. Once
the definitive agreement has been signed and the transfer of LottoWorld's
publishing assets is finalized, NPC expects Hit-LoTTo(TM) to be operational in
several states within 12 months.
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
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: November 17, 1997 /s/ Judith A. Schroeder
----------------------
Judith A. Schroeder
Treasurer
DATED: November 17, 1997 /s/ Dennis B. Schroeder
----------------------
Dennis B. Schroeder
Chairman of the Board and
Chief Executive Officer
9