UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of March 2016

 

Commission File Number: 001-53087

 

IAO KUN GROUP HOLDING COMPANY LIMITED

 

 

 

(Translation of registrant’s name into English)

 

Alameda Dr. Carlos D’ Assumpcao No: 181-187
Centro Comercial Comercial
Brilhantismo, 12 Andar T Macau
(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x    Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ¨    No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______________.

 

 

 

 

Other Events.

 

On March 4, 2016, Iao Kun Group Holding Company Limited (the “Company”) issued a press release announcing fourth quarter and full year 2015 financial results. The press release is attached hereto as Exhibit 99.1.

 

Financial Statements and Exhibits.

 

Exhibit No. Description
   
99.1 Press Release dated March 4, 2016

 

 

 

 

SIGNATURE

 

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 hereunto duly authorized.

 

Dated: March 7, 2016 IAO KUN GROUP HOLDING COMPANY LIMITED  
     
     
  By:  /s/ Yip Cheuk Fai  
    Name: Yip Cheuk Fai
Title: Chief Financial Officer
 

 

 

 

 



 

Exhibit 99.1

 

Iao Kun Group Holding Company Limited Announces Fourth Quarter and Full Year 2015 Financial Results

 

Hong Kong, China – March 4, 2016 – Iao Kun Group Holding Company Limited (“IKGH”) (NASDAQ: IKGH), which operates through its subsidiaries and related promotion entities that act as VIP room gaming promoters and a collaborator, today announced unaudited financial results for the fourth quarter and year ended December 31, 2015. All currency amounts are stated in United States dollars. Please refer to the Annual Report on Form 20-F that will be filed with the Securities and Exchange Commission in March 2016 for the full audited financial statements and related disclosures for the year ended December 31, 2015.

 

Fourth Quarter 2015 Highlights

 

·Rolling Chip Turnover (a metric used by casinos to measure the aggregate amount of players’ bets and overall volume of VIP gaming room business transacted, which is further defined below) for the three months ended December 31, 2015 was $1.2 billion, a decrease of 57%, compared to $2.9 billion for the three months ended December 31, 2014.

 

·Net income, including gain from the change in fair value of contingent consideration of $15.4 million related to the King’s Gaming, Bao Li Gaming and Oriental VIP Room acquisitions, was $12.2 million, or $0.19 net income per share (basic and diluted), for the fourth quarter of 2015, compared to net income of $5.7 million, or $0.09 net income per share (basic and diluted), for the same period of 2014.

 

·Non-GAAP income, which is operating income before amortization of intangible assets, impairment of goodwill and the change in fair value of contingent consideration related to the acquisitions of King’s Gaming, Bao Li Gaming and Oriental VIP Room, was $0.9 million, or $0.01 earnings per share (basic and diluted), for the three months ended December 31, 2015, compared to non-GAAP income of $8.0 million, or $0.13 earnings per share (basic and diluted), for the three months ended December 31, 2014.

 

Fourth Quarter 2015 Results

 

For the three months ended December 31, 2015, IKGH recorded revenue of $19.0 million, a 64% decrease from the same period of 2014, primarily due to lower Rolling Chip Turnover during the quarter, as well as (i) a decrease of players for VIP baccarat, consistent with the overall decline of gaming revenue in Macau; (ii) the economic downturn and ongoing anti-corruption campaign in mainland China, where the majority of IKGH’s VIP gaming patrons reside; and (iii) the continued tightening of government policies in mainland China, including restrictions on credit card usage.

  

The improved net income for the three months ended December 31, 2015 compared to the prior-year period was primarily a result of the change in contingent consideration, which was a gain of $15.4 million for the fourth quarter of 2015 compared to a gain of $1.8 million for the same period of 2014, as well as lower commissions to junket agents for the three months ended December 31, 2015 as a result of lower Rolling Chip Turnover compared to the prior-year period. IKGH also incurred lower selling, general and administrative expenses for the three months ended December 31, 2015, primarily due to costs incurred in the prior-year period in connection with IKGH’s application to list on the Hong Kong Stock Exchange that did not recur in the fourth quarter of 2015, reduced management fees and lower overall VIP Gaming Room operating expenses.

 

“With a difficult 2015 behind us and with the expectation that 2016 will also be a challenging year for VIP gaming in Macau, we continue to prudently manage our capital to ensure we will be appropriately positioned when the market turns around,” said Mr. Lam Man Pou, Chairman of IKGH. “At the same time, we continue to source additional VIP opportunities in overseas markets to allow us to further diversify our revenue streams. We remain committed to finding suitable opportunities to expand our presence and ultimately generating long-term value for our shareholders.”

 

 

 

 

Full Year 2015 Highlights

 

·Rolling Chip Turnover for the year ended December 31, 2015 was $6.4 billion, a decrease of 61%, compared to $16.6 billion for the year ended December 31, 2014.

 

·Net income, including gain from the change in fair value of contingent consideration of $30.2 million related to the King’s Gaming, Bao Li Gaming and Oriental VIP Room acquisitions, was $5.1 million, or $0.08 net income per share (basic and diluted), for the year ended December 31, 2015, compared to a net loss of $60.1 million, or $0.99 net loss per share (basic and diluted), for the year ended December 31, 2014.  During the year ended December 31, 2015, IKGH incurred a one-time $17.8 million impairment of goodwill.

 

·Non-GAAP income was $9.0 million, or $0.14 earnings per share (basic and diluted), for the year ended December 31, 2015, compared to income of $17.2 million, or $0.28 earnings per share (basic and diluted), for the year ended December 31, 2014.

 

Outlook for 2016

 

For the first two months of 2016, IKGH’s Rolling Chip Turnover was US$0.81 billion (an average of $0.41 billion per month), down 44% year-over-year, compared to US$1.44 billion (an average of $0.72 billion per month) for the first two months of 2015.

 

The Company is providing 2016 Rolling Chip Turnover guidance for its five existing VIP rooms in Macau of between US$3.5 billion and US$4.5 billion.

 

Conference Call and Replay Information

 

IKGH will conduct a conference call to discuss the financial results today at 8:30AM EST/9:30PM Macau. To participate, please dial one of the following numbers at least 10 minutes prior to the scheduled start of the call:

 

1-888-556-4997 (United States/Canada)

10-800-714-0940 (North China)

10-800-140-0915 (South China)

800-968-149 (Hong Kong)

800-101-1739 (Singapore)

0800-404-7655 (United Kingdom)

1-719-325-2454 (Other International)

 

Interested parties may also access the live call on the Internet at www.ikghcl.com (select Events and Presentations). Following its completion, a replay of the call can be accessed on the Internet at the above link or through March 28, 2016 by calling either 1-877-870-5176 (U.S. callers) or 1-858-384-5517 (International callers) and providing conference ID 1450876.

 

Definition of Rolling Chip Turnover

 

Rolling Chip Turnover is used by casinos to measure the volume of VIP business transacted and represents the aggregate amount of non-negotiable chips players purchased. Bets are wagered with “non-negotiable chips” and winning bets are paid out by casinos in so-called “cash” chips. “Non-negotiable chips” are specifically designed for VIP players to allow casinos to calculate the commission payable to VIP room gaming promoters and collaborator. Commissions are paid based on the total amount of “non-negotiable chips” purchased by each player. VIP room gaming promoters therefore require the players to “roll,” from time to time, their “cash chips” into “non-negotiable” chips for further betting (hence the term “Rolling Chip Turnover”). Through the promoters, “non-negotiable chips” can be converted back into cash at any time. Betting using rolling chips, as opposed to using cash chips, is also used by the Gaming Inspection and Coordination Bureau (“DICJ”) to distinguish between VIP table revenue and mass market table revenue.

 

 

 

  

All of IKGH’s Macau VIP rooms are on a revenue sharing remuneration model. On a win/loss split basis, the VIP room gaming promoter and collaborator receive an agreed percentage of the “win” in the VIP gaming room (plus certain incentive allowances), and is required to also bear the same percentage of losses that might be incurred. Revenue from VIP operation in Australia is based upon a mutually-agreed percentage of the Rolling Chip Turnover.

 

About Iao Kun Group Holding Company Limited

 

IKGH is a holding company which operates through its subsidiaries and related promotion entities that act as VIP room gaming promoters and a collaborator, and is entitled to receive all of the profits of the VIP gaming promoters and a collaborator from VIP gaming rooms. IKGH’s VIP room gaming promoters and collaborator currently participate in the promotion of five major luxury VIP gaming facilities in Macau, China, the largest gaming market in the world. One VIP gaming room is located at the top-tier 5-star hotel, the StarWorld Hotel & Casino in downtown Macau, and another is located in the luxury 5-star hotel, the Galaxy Macau™ Resort in Cotai, each of which is operated by Galaxy Casino, S.A. Additional VIP gaming rooms are located at the Sands Cotai Central and City of Dreams Macau, both in Cotai, and Le Royal Arc Casino, located in NAPE, Downtown Macau. IKGH recently started trial operations to the Australian casinos (Crown Perth Casino in Perth, Australia and the Crown Melbourne Casino in Melbourne, Australia) to gain a greater understanding of the preferences of its junket agents and VIP players and the logistics of the market.

 

Forward-Looking Statements

 

This press release includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Forward-looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of IKGH’s management, are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The gaming industry is characterized by an element of chance. Theoretical win rates for IKGH’s promotion entities’ VIP gaming room operations depend on a variety of factors, some beyond their control. In addition to the element of chance, theoretical win rates are also affected by other factors, including gaming patrons’ skill and experience, the mix of games played, the financial resources of gaming patrons, the spread of table limits, the volume of bets placed by IKGH’s promotion entities’ gaming patrons and the amount of time gaming patrons spend on gambling — thus VIP gaming rooms’ actual win rates may differ greatly over short time periods, such as from quarter to quarter, and could cause their quarterly results to be volatile. These factors, alone or in combination, have the potential to negatively impact the VIP gaming rooms’ win rates. Investors and potential investors should consult all of the information set forth herein and should also refer to the risk factors set forth in IKGH’s Annual Report on Form 20-F to be filed in March 2016, and other reports filed or to be filed from time-to-time with the Securities and Exchange Commission.

 

 

 

 

IAO KUN GROUP HOLDING COMPANY LIMITED
F/K/A ASIA ENTERTAINMENT & RESOURCES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME

 

   For the
Three Months Ended
   For the
Three Months Ended
   For the
Year Ended
   For the
Year Ended
 
   December 31,
2015
   December 31,
2014
   December 31,
2015
   December 31,
2014
 
                 
Revenue from VIP Gaming Operations  $19,035,871   $52,273,694   $105,002,184   $233,822,859 
Total Revenues   19,035,871    52,273,694    105,002,184    233,822,859 
                     
Expenses                    
- Commission to Agents   14,124,464    36,813,086    76,979,677    188,448,178 
- Selling, General and Administrative Expenses   3,971,264    7,160,189    18,351.625    26,506,299 
- Special Rolling Tax   122,076    286,652    642,268    1,662,714 
- Impairment of Goodwill   -    -    17,757,113    - 
- Amortization of Intangible Assets   4,093,318    4,090,625    16,369,467    16,365,034 
 Total Expenses   22,311,122    48,350,552    130,100,150    232,982,225 
                     
Operating (loss) income attributable to ordinary shareholders before change in fair value of contingent consideration   (3,275,251)   3,923,142    (25,097,966)   840,634 
                     
Change in Fair Value of Contingent Consideration for the Acquisitions of King’s Gaming, Bao Li Gaming and Oriental   15,425,409    1,783,134    30,215,735    (60,918,569)
Net Income (Loss) Attributable to Ordinary Shareholders   12,150,158    5,706,276    5,117,769    (60,077,935)
                     
Other Comprehensive Income (Loss)                    
 Foreign Currency                    
- Translation Adjustment   (13,960)   391,040    89,182    65,092 
Total Comprehensive Income (Loss)  $12,136,198   $6,097,316   $5,206,951   $(60,012,843)
                     
Net Income (Loss) Per Share                    
Basic  $0.19   $0.09   $0.08   $(0.99)
Diluted  $0.19   $0.09   $0.08   $(0.99)
Weighted Average Shares Outstanding                    
Basic   62,416,761    61,396,667    62,116,749    60,781,915 
Diluted   62,959,381    61,478,528    62,292,834    60,781,915 

 

 

 

 

 IAO KUN GROUP HOLDING COMPANY LIMITED

F/K/A ASIA ENTERTAINMENT & RESOURCES LTD.

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

   December 31,
2015
   December 31,
2014
 
ASSETS          
CURRENT ASSETS          
Cash and Cash Equivalents  $3,052,694   $11,146,534 
Accounts Receivable, Net   1,460,251    1,529,052 
Markers Receivable   170,892,037    188,549,136 
Prepaid Expenses and Other Assets   1,448,155    348,777 
Total Current Assets   176,853,137    201,573,499 
           
Intangible Assets (net of accumulated amortization of $58,496,618 and $42,105,966 at December 31, 2015 and December 31, 2014, respectively)   105,645,737    121,968,648 
Goodwill   -    17,753,907 
Property and Equipment (net of accumulated depreciation of $169,798 and $108,913 at December 31, 2015 and  December 31, 2014, respectively)   241,927    322,149 
Other Assets   -    23,427 
TOTAL ASSETS  $282,740,801   $341,641,630 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Lines of Credit Payable  $41,908,984   $32,392,020 
Accrued Expenses   6,030,996    11,682,653 
Bao Li Gaming Acquisition-Contingent Purchase Price Obligation   14,228,500    22,662,750 
Oriental VIP Room Acquisition-Contingent Purchase Price Obligation   -    13,738,762 
Loan Payable, Shareholders, current   2,827,584    2,612,490 
Total Current Liabilities   64,996,064    83,088,675 
           
Bao Li Gaming Acquisition-Contingent Purchase Price Obligation, net of current portion   -    19,628,881 
Oriental VIP Room Acquisition-Contingent Purchase Price Obligation, net of current portion   -    27,665,264 
Total Liabilities   64,996,064    130,382,820 
           
COMMITMENTS AND CONTINGENCIES          
           
SHAREHOLDERS’ EQUITY          
Preferred Shares, $0.0001 par value Authorized 1,150,000 shares; none issued   -    - 
Ordinary Shares, $0.0001 par value,
Authorized 500,000,000 shares; 62,307,794 and 60,452,314 issued and outstanding at December 31, 2015 and December 31, 2014, respectively.
   6,230    6,044 
Additional Paid-in Capital   133,236,655    130,048,153 
Retained Earnings   83,861,247    80,653,190 
Accumulated Other Comprehensive Income   640,605    551,423 
Total Shareholders’ Equity   217,744,737    211,258,810 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $282,740,801   $341,641,630 
           

 

 

 

 

Cash flow information (in thousands) (unaudited)

 

   For the
year ended
December 31,
2015
   For the
year ended
December 31,
2014
 
         
Net cash provided by operating activities  $29,883   $60,602 
Net cash used in investing activities   (3)   (291)
Net cash used in financing activities   (37,966)   (56,929)
Net (decrease) increase in cash and cash equivalents  $(8,086)  $3,382 

 

Non-GAAP Financial Measures

 

IKGH’s calculation of Non-GAAP income (operating income before amortization of intangible assets, impairment of goodwill and change in fair value of contingent consideration) and Non-GAAP EPS differs from EPS based on net income because it does not include amortization of intangible assets, impairment of goodwill and change in fair value of contingent consideration.  IKGH uses this information internally in evaluating its operations and believes this information is important to investors because it provides users of IKGH’s financial information with additional useful information in evaluating operating performance for the periods and is more consistently comparable to the prior periods.  Notwithstanding the foregoing, Non-GAAP income and EPS should not be considered an alternative to, or more meaningful than, net income and EPS as determined in accordance with GAAP.   The following is a reconciliation of IKGH’s net income to Non-GAAP income and GAAP EPS to IKGH’s Non-GAAP EPS: 

 

   For the
Three Months
Ended December 31,
2015
   For the
Three Months
Ended December 31,
2014
   For the
Year Ended
December 31,
2015
   For the
Year Ended
December 31,
2014
 
                 
Net Income (Loss) attributable to ordinary shareholders  $12,150,158   $5,706,276   $5,117,769   $(60,077,935)
                     
Amortization of intangible assets   4,093,318    4,090,625    16,369,467    16,365,034 
                     
Impairment of goodwill   -    -    17,757,113    - 
                     
Change in fair value of contingent consideration   (15,425,409)   (1,783,134)   (30,215,735)   60,918,569 
                     
Non-GAAP Income (before amortization of intangible assets, impairment of goodwill and change in fair value of contingent consideration)  $818,067   $8,013,767   $9,028,614   $17,205,668 
                     
Weighted Average Shares Outstanding                    
                     
Basic   62,416,761    61,396,667    62,116,749    60,781,915 
Diluted   62,959,381    61,478,528    62,292,834    61,002,086 

 

 

 

 

   For the Three Months Ended December 31, 2015   For the Three Months Ended December 31, 2014 
   Basic   Fully
Diluted
   Basic   Fully
Diluted
 
                     
Net income per share attributable to ordinary shareholders  $0.19   $0.19   $0.09   $0.09 
                     
Amortization of intangible assets   0.07    0.07    0.07    0.07 
                     
Change in fair value of contingent consideration   (0.25)   (0.25)   (0.03)   (0.03)
                     
Non-GAAP income per share (before amortization of intangible assets and change in fair value of contingent consideration)  $0.01   $0.01   $0.13   $0.13 

 

 

   For the Year Ended
December 31, 2015
   For the Year Ended
December 31, 2014
 
   Basic   Fully
Diluted
   Basic   Fully
Diluted
 
                 
Net income (loss) per share attributable to ordinary shareholders  $0.08   $0.08   $(0.99)  $(0.99)
                     
Amortization of intangible assets   0.26    0.26    0.27    0.27 
                     
Impairment of goodwill   0.29    0.29    -    - 
                     
Change in fair value of contingent consideration   (0.49)   (0.49)   1.00    1.00 
                     
Non-GAAP income per share (before amortization of intangible assets, impairment of goodwill and change in fair value of contingent consideration)  $0.14   $0.14   $0.28   $0.28 

 

Contact:

 

Iao Kun Group Holding Company Limited
James Preissler, +1 646-450-8808
preissj@ikghcl.com

 

 

 

 

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