UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
BINGO.COM, INC.
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(Exact name of registrant as specified in its charter)
Florida Not Applicable
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
702-543 Granville Street
Vancouver, B.C. V6C 1X8
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (604) 687-2000
Securities to be registered under Section 12(b) of the Act:
NONE None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares, Par Value $.001 Per Share
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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Item 1. Business.............................................................................................1
Item 2. Financial Information...............................................................................36
Item 3. Properties..........................................................................................43
Item 4. Security Ownership of Certain Beneficial Owners and Management......................................43
Item 5. Directors and Executive Officers....................................................................45
Item 6. Executive Compensation..............................................................................47
Item 7. Certain Relationships and Related Transactions......................................................49
Item 9. Market Price of and Dividends on Registrant's Common Equity and Related Stockholder Matters.........50
Item 10. Recent Sales of Unregistered Securities.............................................................50
Item 11. Descriptions of Registrant's Securities to be Registered............................................52
Item 12. Indemnification of Directors and Officers...........................................................58
Item 13. Financial Statements and Supplementary Data.........................................................59
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................59
Item 15. Financial Statements and Exhibits...................................................................60
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PART I
Item 1. Business.
Introduction
We, Bingo.com, Inc., are a holding company with three subsidiaries:
o Bingo.com (Canada) Enterprises Inc., a British Columbia corporation;
o Bingo.com (Antigua), Inc., an Antigua International Business Corporation;
and
o Bingo.com (Wyoming), Inc., a Wyoming corporation.
Our corporate structure is as follows:
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Bingo.com, Inc.
(a Florida corporation)
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<S> <C> <C>
Bingo.com (Canada) Enterprises Inc.(1) Bingo.com (Antigua), Inc. (2) Bingo.com (Wyoming), Inc. (3)
(a British Columbia corporation) (an Antigua International Business (a Wyoming corporation)
Corporation)
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</TABLE>
(1) Bingo.com (Canada) was incorporated on February 10, 1998 as 559262 B.C.
Ltd. and changed its name to Bingo.com (Canada) Enterprises Inc. on
February 11, 1999
(2) Bingo.com (Antigua) was incorporated on April 7, 1999 as Star
Communications Ltd. and changed its name to Bingo.com. (Antigua), Inc. on
April 21, 1999
(3) Bingo.com (Wyoming) was incorporated in the State of Wyoming on July 14,
1999.
Bingo.com (Canada) is in the business of developing and operating an Internet
portal, which focuses exclusively on the entertainment and lifestyle interests,
including health care, arts, recreation, movies, and games; and
Bingo.com (Antigua) is in the business of developing and operating a bingo
gaming web-site that is accessible worldwide over the Internet (except Bingo.com
(Antigua) does not accept wagers in jurisdictions that prohibit Internet
gaming).
Bingo.com (Wyoming) was formed for the purpose of restructuring our corporate
organization. See, "The Reorganization."
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Our Company - Bingo.com, Inc.
We were incorporated in the State of Florida on January 12, 1987, under the name
"Progressive General Lumber Corp." with an authorized share capital of 7,500
shares of common stock with a $1.00 par value per share. We were for the most
part inactive until July 1998.
On July 17, 1998, we filed Articles of Amendment and increased our authorized
share capital to 50,000,000 common shares with a $0.001 par value per share. We
also authorized a forward stock split by way of a stock dividend to increase the
number of then issued and outstanding shares on a 200 shares for 1 share basis.
In January 1999, our management changed, and we began to implement our current
business strategy. On January 13, 1999, we filed Articles of Amendment to amend
our Articles of Incorporation and change our name to "Bingo.com, Inc.,"
effective January 22, 1999.
On January 18, 1999, we finalized an agreement to purchase the right to use the
domain name "Bingo.com".
We organized Bingo.com (Canada) in February 1999 and Bingo.com (Antigua) in
April 1999 to facilitate the implementation of our business plan.
We organized Bingo.com (Wyoming) on July 14, 1999, to restructure our corporate
organization because Florida law would not allow us to continue to a
jurisdiction outside the United States. Wyoming law permits us to merge into
Bingo.com (Wyoming) and to continue into Antigua.
The Reorganization
In June 1999, our Board of Directors unanimously approved, subject to the
approval of the holders of more than 50% of the outstanding shares of our common
stock, a corporate reorganization pursuant to which we will merge with and into
Bingo.com (Wyoming), and immediately thereafter, we plan to obtain Articles of
Continuance from the Director of International Business Corporations, Antigua,
to become an Antigua International Business Corporation called "Bingo.com, Inc."
After the reorganization, our subsidiaries will continue to conduct the
businesses in which they are now engaged.
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We contemplate that the reorganization will be completed in two steps:
1. We will merge into Bingo.com (Wyoming), resulting in the following corporate
structure:
-----------------------------------
Bingo.com (Wyoming), Inc. (1)
(a Wyoming corporation)
-----------------------------------
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Bingo.com (Canada) Enterprises Inc. Bingo.com. (Antigua), Inc.
(a British Columbia corporation) (an Antigua International
Business Corporation)
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(1) Bingo.com (Wyoming) will take our place as a holding company for Bingo.com
(Canada) and Bingo.com (Antigua). Your shares will become shares of
Bingo.com (Wyoming).
2. Bingo.com (Wyoming) will continue out of Wyoming into Antigua and become an
Antigua International Business Corporation resulting in the following
corporate structure:
----------------------------------------------------
Bingo.com, Inc. (1)
(an Antigua International Business Corporation)
----------------------------------------------------
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Bingo.com (Canada) Enterprises Inc. Bingo.com. (Antigua), Inc.
(a British Columbia corporation) (an Antigua International
Business Corporation)
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(1) We, as Bingo.com (Wyoming), will file an Application for Certificate of
Transfer with the Secretary of State of the State of Wyoming, and we will
become an Antigua International Business Corporation using our current
name, Bingo.com, Inc. Your shares will then become shares of our newly
continued Antigua corporation.
Your basic voting rights will not change as a result of the reorganization. See
"Description of Registrant's Securities To Be Registered -- Post Reorganization
Rights and Analysis."
We believe that the continuation into Antigua will allow us to organize our
international business activities to take maximum advantage of business, tax and
financing environments, which we believe are more favorable than those available
in the United States. In particular, our board of directors approved the
reorganization for the following reasons and based on the following assumptions:
o the creation of an Antigua parent corporation may reduce corporate income
taxes because, unlike the United States tax system which imposes corporate
income tax on the worldwide income of United States corporations, Antigua
imposes no corporate income taxes on the income of an Antigua International
Business Corporation;
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o the reorganization may, in certain circumstances, have a favorable effect
on our ability to sell assets or raise additional capital in the future;
and
o the corporate structure in the form proposed by the reorganization is
anticipated to provide greater management flexibility and control, as well
as a more suitable corporate structure for expansion of our current
businesses.
We intend to file a registration statement on Form S-4 with the SEC relating to
the registration of our Antigua shares to be issued in connection with the
reorganization. The reorganization will require the approval of a majority of
our shareholders.
Our common shares are currently quoted on the National Association of Securities
Dealers' Over-The-Counter Bulletin Board (also known as the "OTCBB") under the
symbol "BIGR." We anticipate that the Antigua shares you receive in connection
with the reorganization will be quoted on the OTCBB under the "BIGR" trading
symbol. We cannot, however, assure you that we will continue to qualify for
quotation on the OTCBB or that the National Association of Securities Dealers
will approve our Antigua shares for OTCBB quotation or assign the BIGR symbol to
our Antigua shares after the reorganization.
We have not been subject to any bankruptcy, receivership or other similar
proceeding.
Bingo.com Domain Name
We entered into an agreement to purchase the right to use the domain name
"Bingo.com" from Bingo, Inc. for (i) $200,000, (ii) 500,000 shares of our common
stock (at a deemed value of $2.00 per share) and (iii) an agreement to pay, on
an ongoing basis, royalties in the amount of 4% of our gross revenues with a
total minimum guarantee of $1,100,000. We based the value of the "Bingo.com"
domain name on factors such as the relationship of the name to our business, the
ability for us to create a brand for our web-site and portal based on the name,
the ease of internet browser searchability of the domain name and the ability of
visitors to our web-site to remember and associate the name with our web-site
and portal. We negotiated the terms of the domain name acquisition at arms'
length, and we believe the consideration we paid for the name was reasonable.
The Business of Bingo.com
Overview
We intend to develop a leading on-line bingo game and an Internet portal focused
on worldwide entertainment and lifestyle interests, including health care, arts,
recreation, cooking, travel, music, videos, movies and games.
Bingo.com (Canada) is developing our entertainment and lifestyle portal and
Bingo.com (Antigua) is developing the bingo gaming web-site.
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The Business of Bingo.com (Canada) - Portal Site
Overview
Our primary objective through Bingo.com (Canada) will be to provide Internet
users with an Internet portal site that will be a unique gateway to the
Internet's entertainment and lifestyle web-sites and that can be easily
designated by the Internet user as its default home page. We anticipate that the
portal will incorporate appealing graphic design and information content, be
user friendly in the sense that it will be less technical and easy to use, and
offer free services, gifts and links to other web-sites. Bingo.com (Canada)'s
strategy is to create user loyalty to our portal and to influence the user to
designate our portal as their default home page. We anticipate that Bingo.com
(Canada) will develop a measurable audience that will justify and permit it to
generate revenues from the sale of banner advertising and provide opportunities
to generate revenues from e-commerce. Bingo.com (Canada) will be managed by its
own management team and structured as an independent operating subsidiary
principally located in Vancouver, Canada.
The entertainment aspect of Bingo.com (Canada)'s portal will not include adult
content.
The Global Portal Market
The portal industry was started by Yahoo!, a search engine company that brought
organization to the chaos of the Web. It began as a simple classification or
index of web-sites and kept growing. As a result of the explosive popularity of
the Web and the Web surfer's demand for quick access to well-organized
information, many companies such as Excite, Infoseek and Lycos soon followed
Yahoo!'s lead. The search engine companies responded to the market demand for
better organization and increased service and have evolved into what are today
referred to as portals or content channels.
Today, a constant stream of traffic is directed to the portals and from there,
out into the Web. Web portals are targeted at both businesses and consumers and
typically contain a search engine. Portals offer a multitude of free services in
an attempt to capture the attention of passing traffic and encourage the
passersby to stay and use their services. All of this activity (such as, how
many users enter the site, how long they stay and where they go to within the
portal) is tracked by sophisticated software. When a site can state that it has
numerous hits or page views, it can generally attract advertisers and generate
revenues by selling advertising or virtual real estate space on its site, not
unlike billboards on a highway. Portal operators like America Online Inc.,
Excite Inc., and Yahoo! Inc., generate revenues by selling advertising space to
advertisers seeking to target the millions of people each day who visit these
portals as the starting point for daily surfing.
Niche Market Focus
We believe the market for major portal companies that have launched sites with a
broad appeal is becoming crowded. These `macro portals' are often viewed as
being cluttered and, although they seek to position themselves as being unique
from their competitors, there is little apparent brand differentiation between
them. Although comprehensive, we believe that these sites can be confusing to
the user as they present many more alternatives than are needed by consumers to
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find information and web-sites in a timely and efficient manner. As consumers
are becoming more comfortable with using, interacting with and transacting
commerce over the Internet, we believe they are also looking for direct access
to their specific areas of interest or need. This has lead to the development of
a new class of portal that focuses only on the information content and links
that deal with the issues of specific "niche" markets or categories of interest.
Bingo.com (Canada)'s business strategy will be to create, develop and operate a
portal whose content and links are focused on a niche in the market:
entertainment and lifestyle interests. Some examples of entertainment content
could include movies, music, videos, computer games, sports, or the performing
arts. Lifestyle content might include health, travel, consumer reports,
retirement financial planning, environment, or cooking.
E-commerce
The term "e-commerce" encompasses business to consumer transactions conducted
over the Internet and the World Wide Web. As interest in the Web exploded during
the mid-1990's and, as the number of consumers with access to the Internet at
work or at home grew, companies that originally had established web-sites for
marketing purposes (to promote their corporate or brand identity or to provide
information about their products) soon became interested in using those sites
for sales purposes. Certain businesses identified the Internet as a means to
shorten the sales cycle. The information that is presented on a web-site is
generally delivered in a focused manner to targets who are intentionally looking
for that specific information. The Internet can reduce costs and level the
playing field for small and large businesses, allowing them to extend their
reach globally. As well, the availability of sophisticated Internet and Web
technology, improved security mechanisms, and the increasing acceptance of the
new communications medium are fueling the use of e-commerce by businesses and
consumers. We believe that consumers' trust in the Internet will increase as the
number of successfully completed transactions increases. Studies are
demonstrating that the consumers' attitudes are rapidly changing and that they
are rapidly gaining confidence with transacting business over the Internet.
We believe that the way in which products and services will be directly or
indirectly sold in the future will increasingly shift toward the Internet.
Leading businesses throughout the world are developing their Web strategies to
take advantage of this shift in the way consumers will receive product and
service related information and purchase goods and services. We believe that an
increasing percentage of businesses' advertising budgets will be allocated to
the funding their Web strategy. We believe advertisers are and will increasingly
be advertising on portals with a volume of users matching the demographic
profile of the advertiser's target consumer.
We anticipate that the breadth of Bingo.com (Canada)'s focus on entertainment
and lifestyle content will attract visitors with demographic consumer profiles
that will appeal to advertisers. As a result, we anticipate that Bingo.com
(Canada) will be able to sell banner advertising and enter into promotional
joint ventures with a broad spectrum of businesses.
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Bingo.com (Canada) Marketing Strategy
Our goal is for Bingo.com (Canada)'s portal to become the default browser for
those seeking information with respect to entertainment and lifestyle interests.
Bingo.com (Canada) intends to build an Internet community consisting of a
dedicated and loyal user base that we anticipate will support our ability to
generate advertising revenues and e-commerce sales for Bingo.com (Canada).
Consumers have a number of alternatives as to how to spend their disposable
income. In a general sense they can invest for the future or they can spend
their funds on entertainment or lifestyle activities. The Bingo.com (Canada)
portal will be directed to the user who wants to improve the quality of their
life through gaining information on or participating in entertainment or
lifestyle activities that they identify through the Internet. We believe
entertainment or lifestyle related searching is generally a pleasant experience.
As such, the niche market that the Bingo.com portal will target is based on
interests that people instinctually consider non-threatening and fun. Through
advertising, Bingo.com (Canada) will attempt to create strong branding of its
logo, name and niche category. We believe many of the existing portals do not
incorporate unique design features capable of differentiating themselves from
the competition. Bingo.com (Canada)'s strategy will also be to incorporate
innovative technologies on its portal, which will include full motion three
dimensional (3D) graphics, music and sound effects. We believe this is
consistent with our entertainment focus and the expectation of visitors to our
web-site and will add to the user's Internet experience. Our goal is to capture
the user's initial and future attention in order to create curiosity and loyalty
to the Bingo.com portal. In addition, Bingo.com (Canada)'s portal will be
designed to be user friendly, easier to use and less technical in the eyes of
the user.
Bingo.com (Canada)'s portal will offer services to its visitors that will aid in
establishing a loyal user base. We anticipate many of these services will be
available free of charge and will include web pages, e-mail, news and other
entertainment features designed to maintain and enhance the portal's appeal and
create brand loyalty with the visitors.
Portal Revenue - Advertising
We believe the Internet is changing the advertising community. The Internet is
causing a change in the way companies reach their desired customer base. On-line
advertising is creating a faster, more focused, and dynamic method of reaching
customers who have personally selected their area of interest. The global
proliferation of computers in businesses and the home and the increasing
connectivity through the Internet has presented the advertising community with a
new medium through which to communicate their client's messages. The Internet is
becoming an accepted medium for advertising and e-commerce. In order to better
understand the demographics of the site visitor, companies are asking customers
to first provide information about themselves, allowing marketers to determine
customer needs based on actual preferences. Web-sites are an effective medium to
poll customers quickly, precisely and cost-effectively. This allows the web-site
to make changes rapidly that will attract more target customers and generate
greater advertising revenue through customized advertising and promotions.
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The key for the ad-based Internet business model (wherein the Internet is viewed
as an accepted mass media) is the ability of marketers to measure the Web
audience on a competitive basis with other media such as broadcasting, cable or
print. We believe that measurement criteria focusing on users' interests, page
views and duration is roughly comparable to conventional advertising measurement
criteria such as frequency and reach.
We anticipate that an integral component of the Bingo.com (Canada) portal will
be our ability to analyze on a statistical basis our user base profiles. The
Bingo.com (Canada) portal site currently tracks a number of monthly, daily and
hourly statistical criteria, including user type (.net - network, .gov -
government, .com - commercial, .edu - educational, etc.), duration on line, page
views, geographic location (.ca - Canada, .fr - France, .uk - United Kingdom,
etc.) and download file size. We intend to use this information to justify the
advertising rate structure used by Bingo.com (Canada) and to market our portal
to advertisers. We believe that advertisers evaluate portals and web-sites in
advertising buying decisions based on statistical criteria such as number of
visitors, length of visits, page views and files downloaded. In the future, we
may ask visitors to register for specific information, contests or events, which
will allow us to obtain certain demographic information (age, income, household
size, occupational class, etc.) that may be useful to advertisers.
Marketing Plan and Advertising Campaign - September 1999 to August 2000
Bingo.com (Canada) is currently developing and intends to launch and manage a
three phase marketing plan and advertising campaign that is intended to run from
September 1999 to August 2000. The marketing plan and advertising campaign are
intended to benefit both Bingo.com (Canada) and Bingo.com (Antigua) and
highlight the merits of both the portal and the on-line bingo game.
The first phase of the "Tell the World" strategic marketing plan and advertising
campaign will target Western European markets. This phase of our plan will be
launched during the period from September 1999 to November 1999. With a
combination of on-line Internet and traditional media advertising, strategic
alliances with other web-sites and promotional arrangements with entertainment
and lifestyle marketing companies, Bingo.com (Canada) intends to reach and
penetrate its targeted audiences interested in entertainment and lifestyle
issues. The "Tell the World" campaign will be designed to build consumer
awareness and encourage bingo players and Internet users to become first-time
guests to our portal site. Our on-line marketing plans are intended to influence
advertisers to purchase advertising on the Bingo.com portal. Bingo.com (Canada)
is continuing ongoing negotiations with international advertising agencies and
media buyers. We anticipate Bingo.com (Canada) will enter into agreement with an
advertising agency to launch the "Tell the World" campaign in the third or
fourth quarter of 1999.
The second phase of the strategic marketing plan and advertising campaign will
be launched over the period from November 1999 to February 2000. The campaign is
intended to expand market presence of Bingo.com (Canada) and Bingo.com (Antigua)
in Western and Eastern Europe. Bingo.com (Canada) ;is also expected to launch a
strategic marketing plan and advertising campaign targeted at the Asia Pacific,
Mexico, Central and South American markets. Phase two of the "Tell the World"
campaign is expected to combine a mixture of on-line and off-line advertising,
promotional and strategic alliances with other web-sites. Bingo.com (Canada)
will
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modify its marketing programs and advertising campaigns based on the review of
the effectiveness of the campaign.
The third phase of Bingo.com (Canada)'s advertising campaign will be directed
toward supporting the launch of Bingo.com (Antigua)'s North American
"non-wagering" bingo game. We believe North America is one of the world's
largest advertising markets and represents an opportunity for Bingo.com (Canada)
to generate revenues from selling advertising on the Bingo.com portal to
marketers of entertainment and lifestyle related products and services. We
intend to enter the North American marketplace with an established international
membership base representing strong consumer purchasing power. We anticipate
that this will enable Bingo.com (Canada) and Bingo.com (Antigua) to negotiate
with international and multi-national companies for the opportunity to provide
products and services as prizes for the "non-wagering" bingo game in exchange
for portal viewership.
Bingo.com (Canada) Business Development and Startup Costs
As of July 31, 1999, Bingo.com (Canada) expended approximately $309,320 on
portal research and development activities. Effective February 3, 1999,
Bingo.com (Canada) and Stratford Internet Technologies ("Stratford") entered
into an agreement (the "Stratford Agreement") pursuant to which we retained
Stratford to assist in designing and developing the first phase of the portal
site. Under the terms of the Stratford Agreement, Stratford assigned to us all
right, title and interest in the Bingo.com portal site technology being
developed. We made payments of $15,000 and allotted and agreed to issue
Stratford two-hundred and fifty thousand (250,000) shares of our common stock as
payment for services related to designing and developing the first phase of the
portal site. Bingo.com (Canada) and Stratford are in the process of amending the
terms of the Stratford Agreement, and we anticipate that the Stratford Agreement
will be amended during the third quarter of 1999, and that we will issue
Stratford the common shares.
Bingo.com (Canada) Employees
As of July 31, 1999, Bingo.com (Canada) had seven full-time employees or
consultants. In addition, Shane Murphy, our President, devotes approximately 20%
of his time to Bingo.com (Canada). From time to time, Bingo.com (Canada) may
also retain consultants and consulting firms to provide Bingo.com (Canada) with
special expertise in developing marketing, software and telecommunications
technologies.
Bingo.com (Canada) Competition
Bingo.com (Canada) will face competition primarily from established North
American based branded portals such as Yahoo, AOL, AltaVista, Excite, Hotbot,
Infoseek, Lycos, MSN, Netscape and others. There are also a number of smaller
companies that target the entertainment segment of the market and a number of
companies that may be in the process of developing Internet portals that may
directly compete with the Bingo.com (Canada) portal.
Portals are well established and compete fiercely for market share based on
offering a continually increasing number of free features and content. The free
features, such as
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personalization tools, e-mail, stock updates, tailored news headlines and news
services, message boards, chat areas, enhanced reference and search tools, and
shopping guides are intended to establish loyalty and a relationship between the
portal and the surfer.
The convergence of multimedia communications (voice, data, video, Internet) and
the constantly increasing capability of technologies to deliver these media will
permit increasing interactivity and allow for more media rich content to be
delivered over the Web. This is the driving force behind the joint ventures or
acquisitions of portals with branded media companies such as Time Warner, Walt
Disney Co. or AT&T, or industry consolidation. For example, America Online
acquired Netscape Communications and Yahoo! acquired GeoCities. These portals
are well financed and the strength of the combined entities will further enhance
their ability to attract the considerable amounts of capital that will be
required to keep pace with the market demand and technology advances.
Bingo.com (Canada) Trademarks and Intellectual Property Protection
We anticipate Bingo.com (Canada) will apply for trademark registration and
protection for its logo and various phrases in Canada and the United States.
However, Bingo.com (Canada) has not submitted any applications for trademark
registration. In the event that Bingo.com (Canada) determines that it has
created an asset whose value can be protected, it will attempt to protect its
proprietary asset by applying for patents, copyrights or trademarks. In
addition, Bingo.com (Canada) intends to rely on trade secret laws and
non-disclosure and confidentiality agreements with its employees and
consultants, who have access to its proprietary technology, to protect its
technologies.
The Business of Bingo.com (Antigua) - Bingo Gaming
Overview
Bingo.com (Antigua)'s primary objective is to develop one of the largest on-line
bingo games in the world. We anticipate that Bingo.com (Antigua)'s bingo game
will incorporate innovative design features, surprise jackpots and prizes and a
jackpot of up to $1,000,000. We also anticipate that Bingo.com (Antigua) will
contribute 1% of its gross revenues from the sale of bingo cards to charity.
Bingo.com (Antigua)'s strategy will be to create an on-line environment that
will appeal to bingo players and to which such players will return on a regular
basis to play Bingo.com bingo. The operations of Bingo.com (Antigua) to be
managed by a separate, experienced management team and organization located in
Antigua, where Bingo.com (Antigua) is licensed to operate an Internet gaming
business.
Bingo.com (Antigua) - Licensing
On April 16, 1999, Bingo.com (Antigua) was granted a license to operate an
offshore virtual casino wagering business, effective April 30, 1999. The license
was granted under the authority and jurisdiction of the Antigua and Barbuda Free
Trade and Processing Zone in accordance with Statutory Instruments 1997 No.
20-Virtual Casino Wagering and Sports Book Wagering Regulations, made by the
Minister under Section 27 of the Free Trade and Processing Zone Act No. 12 of
1994. Bingo.com (Antigua) paid a license fee of $100,000 to the Barbuda Free
Trade
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and Processing Zone on April 16, 1999 and began to offer a live version of the
Bingo.com bingo game on July 28, 1999. An annual payment of $100,000 is required
to be paid in order to continue operations under the terms of the license.
On-line Bingo Gaming Software
Bingo.com (Antigua) is in the process of developing proprietary software that
will allow patrons to play a variety of bingo games over the Internet in two
modes: wagering and non-wagering. Bingo.com (Antigua) began beta testing the
proprietary wagering version of its software and its server in April 1999 and
continued beta testing through July 1999. The server systems and software
performed well in test mode. During the duration of the beta test period,
players provided Bingo.com (Antigua) with valuable comments and feedback, which
were considered by Bingo.com (Antigua) and incorporated into the improvement of
its software and on-line bingo game. On July 28, 1999, Bingo.com (Antigua)
launched a live international wagering version of the on-line bingo game, which
allows players who reside in jurisdictions that permit wagering over the
Internet to play a wagering version of the game. Bingo.com (Antigua) is
committed to improving its proprietary software, and we anticipate that an
improved version of the Bingo.com game will be available prior to the launch of
phase two of our "Tell The World" marketing campaign. Bingo.com (Antigua) is
also in the process of creating a non-wagering version of the Bingo.com bingo
game that will be available to players who reside in jurisdictions that do not
permit wagering over the Internet to be played in a free mode. We anticipate
that development will be completed prior to the launch of phase three of our
"Tell The World" marketing campaign.
The Bingo.com (Antigua) on-line bingo game is designed to be entertaining and
captivating. We anticipate that the game will be adapted to overcome the
idiosyncrasies of the Internet in order to minimize the risks associated with
"noise" on telephone lines or other unpredictable technical glitches that may
cause connections between the player's computer and the Antigua based game
server to terminate. The software is designed to keep track of the precise
status of each game, and if a game is interrupted, the player can return to the
Bingo.com (Antigua) web-site to determine the status or outcome of the game they
were playing.
Bingo.com (Antigua) Equipment Capacity
Bingo.com (Antigua) owns a primary server located in a secure third party
Antigua based facility and a back up server, which is in the process of being
installed in Antigua and anticipated to be operational in September 1999. We
believe the server is capable of handling 20,000 simultaneous connections
(users/players). The backup server is intended to provide Bingo.com (Antigua)
with the capacity required to operate in the event the primary server's
operation is temporarily interrupted.
Bingo.com (Antigua) Operations
Our on-line bingo game will be accessible to players over the Internet (also
known as the "World Wide Web" or "Web"). As the name `World Wide Web' suggests,
people located throughout the world who have a computer and access to the
Internet will be able to play a version of our
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on-line bingo game. Internet based commerce, including on-line wagering, is a
relatively new industry that transcends the concept of traditional state and
national borders. Many countries and jurisdictions are currently struggling to
determine how to deal with issues related to Internet commerce, and more
specifically, whether to prohibit, regulate or tax the transactions that flow
over the Internet.
Bingo.com (Antigua) Regulatory Compliance
Bingo.com (Antigua) was granted a license to operate its Internet casino by the
Antigua government, under the "Virtual Casino Wagering and Sports Book Wagering
Regulations" promulgated under Section 27 of the Antigua Free Trade and
Processing Zone Act, 1994. Bingo.com (Antigua) must adhere to the legal
requirements of each jurisdiction in which it operates or offers its services or
is deemed to operate or offer its services. Although Bingo.com (Antigua) has a
license from Antigua to operate its on-line bingo game, the laws of certain
jurisdictions, including Canada and the United States, either directly prohibit
or are indirectly being interpreted as prohibiting on-line wagering. We intend
to comply with the laws of those jurisdictions and to notify the players of
their legal responsibilities and obligations.
In developing, a legal compliance policy, Bingo.com (Antigua)'s management
reviewed certain legal issues related to on-line wagering in certain
jurisdictions and considered different strategies for complying with the laws of
jurisdictions where the on-line bingo game may be played. On July 21, 1999, we
announced that Bingo.com (Antigua) would only accept wagers from jurisdictions
that permit on-line wagering over the Internet and that it would implement a
three tier blocking strategy designed to screen players that are located or
resident in Canada and the United States. Bingo.com (Antigua) currently has a
policy of (i) screening applicants, (ii) blocking credit card transactions of
residents of Canada and the United States, and (iii) blocking transactions
originated through a North American based Internet service provider.
o Screening: Bingo.com (Antigua) will not allow any person that registers
with a Canadian or United States address to play the wagering version of
the Bingo.com bingo game.
o Credit Card Blocking: Bingo.com (Antigua) will not process any credit card
transactions of Canadian or United States credit card holders.
o ISP Blocking: Bingo.com (Antigua) will not allow any person to register if
the registration is originated through a North American based Internet
service provider.
In addition to its blocking strategy, Bingo.com (Antigua) publishes the
following policy notice on its web-site:
`Legal Guidelines
Only those individuals over the legal age under the laws of their
jurisdictions are allowed to play for real money at the Bingo.com on-line
bingo game web-site. If you are playing for real money, be aware that
authorities in some jurisdictions do not currently permit gambling over the
Internet. Before playing you should
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apprise yourself of which laws are applicable to you and act in accordance
with those laws. You should verify that you are in compliance with the laws
applicable to you in your jurisdiction before registering. We reserve the
right to cancel the privileges of anyone playing our on-line bingo game for
real money that is found to be violating the law.'
We believe that our blocking strategy and our disclaimer will prevent Canadian
or United States players from playing the wagering version of Bingo.com
(Antigua)'s bingo game, and in the future, we intend to implement similar
blocking strategies to prohibit players in other jurisdictions where Internet
gaming is prohibited from playing. However, we cannot guarantee that players
will not find methods of disguising the identity of their residence, which may
allow them to wager on Bingo.com (Antigua)'s on-line bingo games.
To accommodate the regulatory schemes of various jurisdictions and the goal of
Bingo.com to have world wide appeal, we anticipate Bingo.com (Antigua) will
develop and introduce a non-wagering version of its on-line bingo game.
Residents in jurisdictions where the legality of Internet gaming is uncertain
will only be allowed to play the non-wagering or free mode version on-line bingo
game. The free mode is intended to promote and generate traffic to our on-line
bingo web-site which in turn, is expected to create a demand for banner
advertisements. We anticipate that winners of the non-wagering version of the
Bingo.com bingo game will receive free gifts or prizes.
Bingo.com (Antigua) Operational Guidelines
Bingo.com (Antigua) has adopted the following operational guidelines and
policies for its wagering mode bingo game:
o acceptable forms of payment to process customer financial transactions
include credit cards, wire-transfers, money-orders and personal account
debits;
o all processing related to authentication of players' credit cards,
processing financial wagering transactions that occur while playing the
Bingo.com bingo game, and distribution of funds to the player will be
completed through Global Payment Systems, an experienced third party
service company;
o process and qualify (accept or reject), in a short period of time, the
relevant personal and financial information when a patron registers to open
an account with Bingo.com;
o allow patrons to elect to play any Bingo.com (Antigua) games offered and
wager on their accounts;
o allow patrons to review their accounts and cash-out at any time;
o extend no credit services to the players;
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o implement procedures and policies designed to protect customer/player data
and information with high-level security systems and password encryption
software;
o offer a 24 hour, 7 days a week support line to the players, which is
anticipated to be staffed by a minimum of two knowledgeable persons at all
times (increased at peak playing periods and when traffic increases);
o offer customers access to customer service for comments or answers to
questions through e-mail or the support line; and
o provide accessibility to customers and a customer satisfaction support
system.
Players who desire to play the Bingo.com (Antigua) bingo game must (i) register
with Bingo.com (Antigua) by providing relevant player information (name,
address, place of citizenship, age, credit/bank card information, etc.); (ii)
download proprietary software and (iii) agree to play under the rules and
guidelines established by Bingo.com (Antigua).
We anticipate the players who play the Bingo.com (Antigua) bingo game in the
free mode will be required to register with Bingo.com (Antigua) for screening
and marketing purposes, but that they will not be subject to the scrutiny
applied to players playing in the wagering mode.
Bingo.com (Antigua) Fulfillment and Security
Bingo.com (Antigua) has entered into an agreement with Global Payment Systems or
"GPS" to process the wagering financial transactions. GPS has significant
experience in processing credit card transactions and offers a real-time payment
processing system. In addition, GPS has experience in the wagering industry. GPS
has been in the business of processing and administering financial transactions
for several years and we believe GPS will offer the benefits of reliable, secure
payment processing functionality. The player will be protected, as their funds
will be on deposit with a recognized international bank, while Bingo.com
(Antigua) is anticipated to benefit from GPS's low incidence of player
charge-backs (payment disputes) and credit card fraud. Bingo.com (Antigua) will
also benefit by not having to bear the cost of developing and maintaining
complex systems, infrastructure, and overhead to process credit card
transactions.
We believe the benefits of the GPS service are: (1) secure communication lines
between Bingo.com (Antigua) and GPS; (2) the customer payment information is
encrypted to prevent alteration or tampering; and, (3) the messages are
authenticated to verify the identity of the parties sending and receiving the
payment processing request. Access to GPS's servers is secure, monitored and
controlled 24 hours a day, seven days a week.
Bingo.com (Antigua) Market Strategy
Wagering over the Internet represents a category of e-commerce. While some forms
of e-commerce have been slow to be accepted by the consumer, we believe that
wagering over the Internet has grown rapidly. There are many forms of Internet
wagering including casinos
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offering poker, blackjack and other games of chance; sports and pari-mutuels
betting; and lotteries. We estimate that there are currently 300 wagering
web-sites.
We believe that bingo is a widely accepted form of wagering, stemming from its
association with churches and charities and its more social character when
compared to poker and other similar games of chance. Bingo has been transformed
during the last two decades from being played in bingo halls with paper cards to
the use of electronic bingo boards to the current offering of bingo over the
Internet. We believe that there are approximately 30 Internet sites that offer
web-based bingo, including, among others, IBingo, Bingomania and Bingo Zone.
We estimate that there are currently 60 to 80 million people worldwide who
regularly access the Internet. Bingo.com (Antigua)'s target market will consist
of on-line users located throughout the world who enjoy the game of bingo.
Bingo.com (Antigua)'s target market for its wagering mode bingo game will
include players who are at least 18 years of age (or such age as is applicable
in their jurisdiction of residence) who wager on games of chance, subject to
Bingo.com (Antigua)'s blocking policy.
We anticipate that Bingo.com (Antigua) will attract players by offering its
unique on-line bingo game, which incorporates innovative multimedia design in a
simple and user-friendly format.
Our "Tell The World" marketing campaign is intended to create player interest
and build market awareness of the Bingo.com portal and interest in Bingo.com
(Antigua)'s on-line bingo game. We intend to target audiences with entertainment
and lifestyle interests that are current and future Internet users.
Anticipated Gaming Revenue
We believe Bingo.com (Antigua) may derive revenue from four sources:
- On-line wagering - gaming revenues from the Bingo.com on-line bingo
game;
- Memberships fees - charged once Bingo.com becomes a popular web-site
and its on-line bingo game is fully established;
- Licensing - an initial license fee from the sale of licenses to third
party gaming companies to use the proprietary bingo gaming software
and an on-going royalty based on the third party gaming companies'
revenue; and
- Banner and advertising revenues.
Initially, we believe Bingo.com (Antigua) will derive substantially all its
revenues from on-line wagering. There can be no assurance Bingo.com (Antigua)
will generate sufficient revenues, if any, from its operations to be
commercially viable.
Bingo.com (Antigua) Business Development and Startup Costs
As of July 31, 1999, we have expended approximately $838,674 on research and
development activities related to the on-line bingo game. Effective February 3,
1999, we entered into an understanding with Mindquake Software for the design
and development of bingo gaming software. We are in the process of finalizing a
definitive agreement with Mindquake, and we
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anticipate we will enter into such agreement during the fourth quarter 1999,
under which Mindquake will assign to Bingo.com (Antigua) all right, title and
interest in the Internet bingo software. As of July 31, 1999, we paid Mindquake
approximately $60,420 related to the development and installation of the gaming
bingo software.
Bingo.com (Antigua) Employees
As of July 31, 1999, Bingo.com (Antigua) had seven full-time employees. In
addition, Shane Murphy, our President, devotes approximately 60% of his time to
Bingo.com (Antigua). From time to time, Bingo.com (Antigua) may also retain
additional consultants and consulting firms to provide expertise in financing,
marketing and developing software and telecommunications technologies related to
its business.
Bingo.com (Antigua) Competition
The Internet wagering business is highly competitive, and Bingo.com (Antigua)
will face competition from North American and foreign casino and bingo
operators. Bingo.com (Antigua) has defined its competition as those web-sites
specifically dedicated to offering the visitor a chance to play bingo or
lotteries on-line and on-line casinos that allow the visitor to play games of
chance such as roulette, blackjack, poker or slot machines. We do not believe
that Bingo.com (Antigua) will compete with traditional bingo halls offering
paper based games, electronic bingo systems or land-based casinos, as the
players who play in those venues have made a decision to play in a tangible
rather than a virtual environment.
Generally, Internet gaming sites can be accessed through any of the established
branded portals by using a key word search. We believe that gaming sites compete
on the basis of:
o Site design;
o Ease and use;
o The variety of games that a player can play;
o Accessibility;
o The number of games that a player can play at any one time;
o Size of the pay-outs;
o Confidentiality and security of information and account status;
o Reputation of the web-site;
o Prompt payment of winnings;
o New game software development;
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o Chat groups;
o Speed of the games; and
o Customer service (including 24 hour, 7 days per week customer support
lines, e-mail support, etc.)
We believe there are over 300 on-line casinos offering gaming on the Internet
and approximately 30 on-line casinos with bingo or keno. Ibingo, Bingomania and
Bingo Zone are a few examples of competitors whose sites are specifically
dedicated to on-line bingo while MaPau Casino, Sands of the Caribbean and
English Harbour Casino are examples of on-line casino competitors.
We believe there are market barriers facing potential providers of Internet
gaming, such as Bingo.com (Antigua), including, among others:
o developing technology that is compatible with the Internet and that
transforms commonly played tangible games of chance into virtual games that
are easy for players play and understand;
o developing a web-site infrastructure that is secure and that can process
transactions on a timely and accurate basis;
o obtaining the regulatory licensing to conduct Internet gaming;
o obtaining an experienced management and technical team to develop an
effective marketing, gaming and Internet strategy; and
o developing a solid reputation among players.
We believe that each of these market barriers must be overcome to establish and
maintain a successful Internet gaming operation.
Bingo.com (Antigua) Patents, Copyrights and Trade Secrets
As of the date of this registration statement, Bingo.com (Antigua) does not own
or otherwise control any registered patents, copyrights or trademarks. However,
on April 29, 1999, we filed a Provisional Application, to seek patent protection
for our proprietary bingo gaming software, with the United States Patent Office
on behalf of Bingo.com (Antigua), anticipating the assignment of the right,
title and interest in the on-line bingo gaming software designed and developed
by Mindquake to Bingo.com (Antigua). Bingo.com (Antigua) will have one year to
prepare and submit a formal patent application to the United States Patent
Office. In addition to this protection, we may attempt to protect our
proprietary technology by relying on trade secret laws and non-disclosure and
confidentiality agreements with their employees and consultants who have access
to their proprietary technology.
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Internet Gaming Regulation
Many countries are currently struggling with issues surrounding wagering and
gambling over the Internet. More specifically, they are considering the merits,
limitations and enforceability of prohibition, regulation or taxation of
wagering and gambling transactions that are transacted over the Internet. There
are significant differences of opinion and law between countries such as the
United States, Canada, Australia, Liechtenstein and Antigua.
In the United States, the ownership and operation of land-based gaming
facilities has traditionally been regulated on a state by state basis, although
the vast majority of states have legalized some form of gaming activities. All
50 states currently have statutes or regulations regarding gaming activities,
and three states have no gaming at all. In most states it is illegal to place or
accept a wager, with specific state-by-state statutory exceptions. Certain of
Bingo.com (Antigua)'s competitors have been the subject of criminal complaints
at the state level in Minnesota (Minnesota v. Granite Gate Resorts, Inc., 568
N.W.2d 715 (1997)), Missouri (Missouri v. Interactive Gaming & Communications
Corp., No. CV 97-7808 (Mo.Cir.Ct. 6/16/97)), and New York (New York v.
World Interactive Gaming Corporation (action filed 7/13/98)).
The United States Federal Interstate Wire Act contains provisions which make it
a crime for anyone in the business of gaming to use an interstate or
international telephone line to transmit information assisting in the placing of
wagers, unless the wagering is legal in the jurisdictions from which and into
which the transmission is made. There are other federal laws impacting gaming
activities including the Interstate Wagering Paraphernalia Act, the Travel Act
and the Organized Crime Control Act. However, it remains unresolved whether
these other laws apply to gaming conducted over the Internet.
Various U.S. regulatory and legislative agencies are conducting studies of
interstate and interactive wagering and one, the National Gambling Impact Study
Commission, has recommended the prohibition of Internet gambling within the
United States and the development of enforcement strategies by the Department of
Justice.
In addition, the United States Congress is considering the 1999 Kyl bill
(S-692), which could prohibit or limit either the intrastate or interstate
activities Bingo.com (Antigua) engages in or the type of activities associated
with such wagering. In May 1999, the Senate Judiciary subcommittee on
technology, terrorism and government information passed the Kyl bill by a voice
vote. We believe that any change in either the substance or the enforcement of
the applicable or proposed rules and regulations in these areas could have an
adverse effect on our business and prospects.
In other areas of the world, there are countries and states that are legalizing
Internet gaming and moving toward regulation and licensing of operators. For
example:
o Queensland, Australia, has chosen to protect gaming consumers who play
games offered over the Internet through regulation embodied in the
Interactive Gambling (Player Protection) Act 1998. The primary aim of
the Act is to regulate Internet gaming, and to
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provide players with protection mechanisms in a secure regulatory
environment. The Act requires all players to be registered, subject to
providing satisfactory proof of identity, residence and age. The
Queensland Office of Gaming Regulation is administering the Act to
ensure that interactive gambling is conducted in accordance with a
consistently high level of probability and integrity.
o The United Kingdom is sponsoring a web-site for its national lottery.
o One of the biggest Internet lotteries `One Billion Through Millions
2000' is sponsored by the principality of Liechtenstein under contract
with the International Red Cross.
o Dominica sponsors its own Internet gambling web-site.
o A number of Caribbean countries accept Internet gambling as legal.
With the implementation of its blocking strategy, we believe that Bingo.com
(Antigua)'s activities will conform to current gaming laws and regulations.
However, there is little case law authority related to the interpretation of
gaming statutes as they relate to the Internet and the wording of many of the
applicable statutes is ambiguous. Consequently, it is possible that Bingo.com
(Antigua)'s planned activities may be alleged to violate an applicable statute
based on an interpretation of the statute, which differs from ours, or based on
a future change of law or interpretation or enforcement policy. Such allegations
could result in either civil or criminal proceedings brought by governmental or
private litigants. As a result of such proceedings, we or Bingo.com (Antigua)
could incur substantial litigation expense, fines, diversion of the attention of
key employees, and injunctions or other prohibitions preventing Bingo.com
(Antigua) from engaging in various anticipated business activities. Also, if it
were finally determined that Bingo.com (Antigua) did violate applicable law,
then civil damages or criminal penalties could be imposed and Bingo.com
(Antigua) might be barred from pursuing that activity. Such an outcome would
have a material adverse effect on our business and our results of operations.
DEVELOPMENT OF THE BUSINESS OF BINGO.COM, BINGO.COM (CANADA) AND BINGO.COM
(ANTIGUA)
Since January 1999, we have taken the following steps to implement our business
plans:
o Incorporated our operating subsidiaries;
o Completed a first and second round of funding in the amounts of
US$1,000,000 and US$5,000,000;
o Purchased the right to use the domain name "Bingo.com";
o Retained experienced senior management and consultants;
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o Conducted market research for the development and marketing of the
Bingo.com (Canada) portal;
o Began developing a cross-functional plan designed to avoid duplicating
marketing and advertising expenditures and to compliment and coordinate the
corporate objectives of the Bingo.com (Canada) portal and the Bingo.com
(Antigua) on-line bingo game;
o Retained Stratford Internet Technologies Inc. to develop the Bingo.com
(Canada) portal site;
o Completed phase one of the development and launch of the Bingo.com (Canada)
portal;
o Obtained the license to operate on-line bingo gaming in Antigua;
o Retained Mindquake Software Inc. to develop the on-line bingo gaming
software;
o Substantially completed beta testing of the on-line bingo gaming software;
o Installed the servers in Antigua for the on-line bingo gaming web-site;
o Substantially completed establishing the on-line bingo gaming operations in
Antigua;
o Implemented internal financial controls;
o Launched the international wagering on-line bingo game;
o Filed a Provisional Application with the United States Patent Office; and
o Initiated the filing process for trademark protection of various brand
logos and phrases related to our business.
RISK FACTORS
Our business is subject to a number of risks due to the nature and the
present state of development of our business. An investment in our securities is
speculative in nature and involves a high degree of risk. You should read this
registration statement carefully and consider the following risk factors.
General
We have a Limited Operating History and a History of Losses, Which Makes Our
Ability to Continue as a Going Concern Questionable
We are a development stage company and our operations and the operation of our
subsidiaries are subject to all of the risks inherent in light of the expenses,
difficulties, complications and delays frequently encountered in connection with
the formation of any new business. We have incurred net losses since our
inception and anticipate that we will continue to incur losses for the
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foreseeable future. During the fiscal years ended December 31, 1996, 1997 and
1998 and the first and second quarters of 1999, we incurred cumulative net
losses of $746,563, including a net loss of $240,647 for the first quarter 1999
and a net loss of $499,112 for the second quarter of 1999. You should evaluate
us in light of the delays, expenses, problems and uncertainties frequently
encountered by companies developing markets for new products and technologies.
We do not believe that revenues generated by our subsidiaries will be sufficient
to support our operations in fiscal 1999 due to a number of factors including,
among others:
o the cost of promoting and marketing our portal site and the Bingo.com bingo
game;
o the anticipated low demand for our banner advertising until we can
establish our brand name and verify traffic on our web-site;
o the start-up cost associated with developing our software and technologies,
installing equipment and establishing our Antigua facilities;
o the anticipated nominal gaming revenues from Bingo.com (Antigua)'s bingo
game until we launch our "Tell the World" campaign and begin to build a
loyal base of players; and
o the costs associated with hiring experienced management and staffing our
operations.
Consequently, in the foreseeable future, we believe that such expenses will
increase our net losses, and we cannot assure you that we will ever be
profitable.
You should evaluate our business in light of the factors affecting and
challenges frequently encountered by early stage companies engaged in Internet
commerce. Such factors and challenges include:
o our ability to generate revenues will depend on selling advertising on a
portal focused on entertainment and lifestyle interests and accepting
wagers from an on-line bingo game, both of which are newly developed
business concepts and currently have only limited market acceptance;
o as our business grows and the expectations of our customers increases, we
must develop and upgrade our infrastructure, including internal controls,
transaction processing capacity, data storage and retrieval systems and
web-site to remain competitive;
o we compete with a number of competitors with greater resources and
experience than us;
o as the markets for our portal and the on-line bingo game develop, our
success will depend on our ability to successful manage and change
operations to meet the demands of our customers;
o our businesses are dependent upon the Internet for commerce and growth;
o general economic conditions could change and adversely affect our business;
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o we intend to rely upon strategic relationships to build market awareness
and to bring visitors to our portal and players to the on-line bingo game;
o our businesses are subject to regulatory risks, which may increase the cost
of operating our businesses or prohibit us from conducting our business;
and
o we depend upon and need to hire key, qualified personnel and management to
fully develop our businesses.
Because we have only recently begun operations, it is difficult to evaluate our
business and our prospects. Our revenue and income potential is unproven and our
business model is still emerging and being developed. We cannot assure you that
Bingo.com (Canada) will attract users, advertisers, consumers or network
affiliates, or generate significant revenues or operating margins in the future.
We also cannot assure you that Bingo.com (Antigua)'s Internet on-line bingo game
will attract players or that Bingo.com (Antigua) will successfully overcome the
technical and regulatory requirements to operate its planned business or
establish a sizable market share. We cannot guarantee we will ever achieve
commercial success.
As of July 31, 1999, we had approximately $4,254,000 in cash, and we will, on
average, expend approximately $400,000 per month through the fourth quarter
1999, and approximately $600,000 to $700,000 per month during the first and
second quarters of 2000 as we fully implement phases 2 and 3 of our "Tell The
World" marketing campaign. We believe that we will have sufficient funds to
commence and conduct our operations for approximately the next 6-7 months,
without considering any revenues generated from the operations of our
subsidiaries. We cannot assure you that we will be able to obtain adequate
financing to support our operations.
We Cannot Assure You that there will be a Continued Market on the OTCBB for Our
Shares, Which May Affect Your Ability to Sell Your Shares
Currently, our common shares are quoted for trading on the OTCBB under the
symbol "BIGR". On January 4, 1999, the SEC approved eligibility rules for
issuers quoted on the OTCBB and established minimum eligibility requirements for
all securities quoted on the OTCBB. As a result of the eligibility rules, (i) we
must register our shares with the SEC under Section 12 of the Exchange Act, (ii)
the staff of the SEC must come to a position of no further comments on this
registration statement, and (iii) we must be current in our required filings to
remain eligible for quotation on the OTCBB.
We cannot assure you we will be able to fully comply with these eligibility
requirements on or before our phase-in date, which is September 1, 1999. We
filed this registration statement to become a reporting company under the
Exchange Act and to maintain eligibility for quotation on the OTCBB. There can
be no assurance that we will maintain eligibility for quotation on the OTCBB or
that an active public market for our shares will be sustained.
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Our Foreign Operations are Subject to Risks that May Adversely Affect or Disrupt
Our Business
Bingo.com (Antigua) and Bingo.com (Canada) may derive substantially all of their
revenues from non-United States sources. Risks inherent in foreign operations
include loss of revenue, property and equipment from such hazards as
expropriation, nationalization, war, insurrection and other political risks,
risks of increase in taxes and governmental royalties, renegotiations of
contracts with governmental entities, as well as changes in laws and policies
governing operations of foreign based companies. There is a risk that some of
our operations may be subject to foreign currency exchange losses if
transactions are completed in currencies other than United States dollars or if
our subsidiaries lack the ability to freely repatriate their earnings under
foreign exchange control laws.
Furthermore, Bingo.com (Antigua) may have to comply with the local laws and
regulations in those foreign jurisdictions in which they elect or are deemed to
elect to offer products and services. We cannot assure you that our subsidiaries
will be able to comply with such laws and regulations.
If Our Key Personnel or the Personnel of Our Subsidiaries Leave Bingo.com, Our
Ability to Succeed will be Adversely Affected
The future success of Bingo.com (Antigua), Bingo.com (Canada) and us will depend
on certain key management, marketing, sales and technical personnel. Our
subsidiaries primarily rely upon consultants and advisors who are not employees.
The loss of key personnel by our subsidiaries could have an adverse effect on
our operations. We do not maintain key-man life insurance on any of our key
personnel, and our subsidiaries do not insure their key personnel. Our
subsidiaries also plan to hire additional key employees in 1999. Competition for
qualified employees is intense, and an inability to attract, retain and motivate
additional, highly skilled personnel required for expansion of operations and
development of technologies could adversely affect our business, financial
condition and results of operations. Our subsidiaries' ability to retain
existing personnel and attract new personnel may also be adversely affected by
their current financial situation. We cannot assure you that our subsidiaries
will be able to retain their existing personnel or attract additional, qualified
persons when required and on acceptable terms.
We May be Required to Sell Additional Common Stock or Parties May Exercise
Options and Warrants that May Cause Dilution of the Value of Your Shares
The number of shares of our outstanding common stock held by non-affiliates is
large relative to the trading volume of the common stock. Any substantial sale
of our common stock or even the possibility of such sales occurring may have an
adverse effect on the market price of the common stock.
As of July 31, 1999, we had outstanding warrants to purchase an aggregate of
916,668 shares of common stock. We have also reserved up to an additional
1,895,000 shares of common stock for issuance upon exercise of options under an
incentive stock option plan, which we intend to approve and adopt during the
fourth quarter of 1999. We have agreed to grant options to acquire a total of
695,000 of our common shares to certain of our officers, directors and
consultants once
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we have approved and adopted our incentive stock option plan, and we granted
Shane Murphy, our President, options to acquire 600,000 shares of our common
stock. See "Executive Compensation -- Stock Options." Holders of such warrants
and options are likely to exercise them when, in all likelihood, we could obtain
additional capital on terms more favorable than those provided by the options
and warrants. Further, while our warrants and options are outstanding, our
ability to obtain additional financing on favorable terms may be adversely
affected.
We have Capacity Constraints and System Development Risks that could Damage Our
Customer Relations or Inhibit Our Possible Growth, and We May Need to Expand Our
Management Systems and Controls Quickly, Which May Increase Our Cost of
Operations
Our success and, in particular, our subsidiaries' abilities to provide high
quality customer service, largely depends on the efficient and uninterrupted
operation of our computer and communications systems and the computers and
communication systems of our third party vendors in order to accommodate any
significant numbers or increases in the numbers of consumers and advertisers
using our service. Our success also depends upon the subsidiaries' and our
vendors' abilities to rapidly expand transaction-processing systems and network
infrastructure without any systems interruptions in order to accommodate any
significant increases in use of our service.
Our subsidiaries and our vendors may experience periodic systems interruptions
and infrastructure failures, which we believe will cause customer
dissatisfaction and may adversely affect our results of operations. Limitations
of our subsidiaries' and vendors' technology infrastructure may prevent us from
maximizing our business opportunities.
We cannot assure you that that our subsidiaries' and vendors' data repositories,
financial systems and other technology resources will be secure from security
breaches or sabotage, especially as technology changes and becomes more
sophisticated. In addition, we expect that many of our subsidiaries' and
vendors' software systems may be custom-developed and that our subsidiaries and
vendors may rely on employees and certain third-party contractors to develop and
maintain these systems. If certain of these employees or contractors become
unavailable, our subsidiaries and vendors may experience difficulty in improving
and maintaining these systems. Furthermore, we expect that our subsidiaries and
vendors may continue to be required to manage multiple relationships with
various software and equipment vendors whose technologies may not be compatible,
as well as relationships with other third parties to maintain and enhance their
technology infrastructures. Our subsidiaries' and our vendors' failure to
achieve or maintain high capacity data transmission and security without system
downtime and to achieve improvements in their transaction processing systems and
network infrastructure could adversely affect our business and results of
operations.
Increased Security Risks of On-line Commerce May Deter Future Use of Our
Subsidiaries' Services, Which May Adversely Affect Our Ability to Generate
Revenues
Concerns over the security of transactions conducted on the Internet and the
privacy of consumers may also inhibit the growth of the Internet and other
on-line services generally, and
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on-line commerce in particular. Our subsidiaries' or vendors' failure to prevent
security breaches could significantly harm our business and results of
operations. We cannot be certain that advances in computer capabilities, new
discoveries in the field of cryptography, or other developments will not result
in a compromise or breach of the algorithms used to protect our vendors' and
subsidiaries' transaction data. Anyone who is able to circumvent our
subsidiaries' or vendors' security measures could misappropriate proprietary
information, cause interruptions in their operations or damage our brand and
reputation. Our subsidiaries may be required to incur significant costs to
protect against security breaches or to alleviate problems caused by breaches.
Any well-publicized compromise of security could deter people from using the
Internet to conduct transactions that involve transmitting confidential
information or downloading sensitive materials.
Our Subsidiaries Face the Risks of System Failures, Which Would Disrupt Our
Operations
A disaster could severely damage our business and results of operations because
our services could be interrupted for an indeterminate length of time. Our
operations depend upon our ability to maintain and protect our computer systems,
most of which are located in our principal business headquarters and at a
third-party facility in Antigua.
The systems and operations of our subsidiaries are vulnerable to damage or
interruption from fire, floods, earthquakes, hurricanes, power loss,
telecommunications failures, break-ins, sabotage and similar events. The
occurrence of a natural disaster or unanticipated problems at our principal
business headquarters or at a third-party facility could cause interruptions or
delays in our business, loss of data or render us unable to provide our
services. In addition, failure of a third-party facility to provide the data
communications capacity required by us, as a result of human error, natural
disaster or other operational disruptions, could cause interruptions in our
service. The occurrence of any or all of these events could adversely affect our
reputation, brand and business.
We Face Risks of Claims from Third Parties for Intellectual Property
Infringement that Could Adversely Affect Our Business
We anticipate that all of the services of our subsidiaries will operate in part
by making Internet services and content available to our users. This creates the
potential for claims to be made against us, either directly or through
contractual indemnification provisions with third parties. These claims might,
for example, be made for defamation, negligence, copyright, trademark or patent
infringement, personal injury, invasion of privacy or other legal theories. Any
claims could result in costly litigation and be time consuming to defend, divert
management's attention and resources, cause delays in releasing new or upgrading
existing services or require us to enter into royalty or licensing agreements.
Litigation regarding intellectual property rights is common in the Internet and
software industries. We expect that Internet technologies and software products
and services may be increasingly subject to third-party infringement claims as
the number of competitors in our industry segment grows and the functionality of
products in different industry segments overlaps. There can be no assurance that
our services do not or will not in the future infringe the
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intellectual property rights of third parties. Royalty or licensing agreements,
if required, may not be available on acceptable terms, if at all. A successful
claim of infringement against us and our failure or inability to license the
infringed or similar technology could adversely affect our business.
Our success and ability to compete are substantially dependent upon our
technology and data resources, which we intend to protect through a combination
of patent, copyright, trade secret and/or trademark law. We currently have no
patents or trademarks issued to date on our technology.
Bingo.com (Antigua)'s bingo gaming software was developed by Mindquake, and we
cannot assure you that we will not be subject to third-party infringement
claims.
We May Not be Able to Protect Our Internet Domain Name, Which Is Important to
Our Branding Strategy
We anticipate that the Internet domain name, "Bingo.com," will be an extremely
important part of our business and the business of our subsidiaries.
Governmental agencies and their designees generally regulate the acquisition and
maintenance of domain names. The regulation of domain names in the United States
and in foreign countries may be subject to change in the near future. Governing
bodies may establish additional top-level domains, appoint additional domain
name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we conduct business. Furthermore, the relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. Therefore, we may be unable to prevent third
parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of our trademarks and other proprietary rights.
Third parties have acquired domain names that include "bingo" or variations
thereof both in the United States and elsewhere.
If Our Subsidiaries Are Unable to Meet the Changing Needs of Their Industries,
Our Ability to Compete Will be Adversely Affected
To remain competitive, our subsidiaries must be capable of enhancing and
improving the functionality and features of their on-line services. The Internet
portal, the on-line advertising industry and the Internet gaming industry are
rapidly changing. If competitors introduce new products and services embodying
new technologies, or if new industry standards and practices emerge, our
subsidiaries' existing services, technology and systems may become obsolete.
Our future success will depend on our subsidiaries' abilities to accomplish the
following:
o license and develop leading technologies useful in our business;
o develop and enhance our planned products and services;
o develop new services and technologies that address the increasingly
sophisticated and varied needs of prospective consumers; and
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o respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
Developing Internet services and other proprietary technology entails
significant technical and business risks, as well as substantial costs. Our
subsidiaries may use new technologies ineffectively, or they may fail to adapt
their services, transaction-processing systems and network infrastructure to
user requirements or emerging industry standards. If our subsidiaries'
operations face material delays in introducing new services, products and
enhancements, their users may forego the use of their services and use those of
their competitors.
We Do Not Intend to Declare Dividends, Which May Affect the Value of Your Shares
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
Our Shares are Considered Penny Stocks and are Subject to the Penny Stock Rules,
Which May Adversely Affect the Ability to Sell Your Shares
Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales
practice and disclosure requirements on certain brokers-dealers who engage in
certain transactions involving "a penny stock." Subject to certain exceptions, a
penny stock generally includes any non-NASDAQ equity security that has a market
price of less than $5.00 per share. Our shares are expected to be deemed penny
stock for the purposes of the Exchange Act. The additional sales practice and
disclosure requirements imposed upon brokers-dealers may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of your shares and impede the sale of our shares in
the secondary market.
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt. In addition, the penny stock regulations
require the broker-dealer to deliver, prior to any transaction involving a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the
securities. Finally, a broker-dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
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Risks Associated with the Bingo.com (Canada) Portal
The Results of Operations for the Bingo.com (Canada) Portal Will Vary Depending
on a Number of Factors, Which May Adversely Affect Our Business
We anticipate the operating results of Bingo.com (Canada)'s Portal will vary
widely depending on a number of factors, some that are beyond the control of
Bingo.com (Canada). These factors are likely to include:
o demand for our on-line services by registered users, advertisers and
consumers, including the number of searches performed by registered
users, consumers and the rate at which they click-through to paid
search listing advertisements;
o prices paid by advertisers using the Bingo.com (Canada) service, which
have not been determined by Bingo.com (Canada);
o our costs of attracting consumers to the Bingo.com (Canada) web-site,
including costs of receiving exposure on third-party web-sites and
advertising costs;
o costs related to forming strategic relationships;
o loss of strategic relationships;
o the mix of paying vs. non-paying search results on the Bingo.com
(Canada) service;
o our ability to significantly increase our distribution channels;
o competition;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;
o costs and delays in introducing new Bingo.com (Canada) services and
improvements to existing services;
o changes in the growth rate of Internet usage and acceptance by
consumers of electronic commerce;
o technical difficulties, system failures or Internet downtime;
o government regulations related to our business and to the Internet;
o our ability to upgrade and develop our information technology systems
and infrastructure;
o costs related to acquisitions of technologies or businesses; and
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o general economic conditions, as well as those specific to the Internet
and related industries.
Because Bingo.com (Canada) has no operating history, it is difficult to
accurately forecast the revenues that will be generated by our subsidiaries.
We plan to significantly increase our operating expenses to expand our marketing
and sales operations related to Bingo.com (Canada), establish customer support
capabilities and fund the development of the Bingo.com (Canada) portal. We have
based our current and future expense levels on the operating plans and estimates
of future revenue for Bingo.com (Canada). We anticipate that the expenses
related to Bingo.com (Canada) may increase. The revenue and operating results
for Bingo.com (Canada) are difficult to forecast because they generally depend
upon the volume of the searches conducted on the Bingo.com (Canada) portal, the
amounts paid by advertisers for keyword search listings on the portal and the
number of advertisers that bid on the service, none of which are under our
control. As a result, we may be unable to adjust our spending in a timely manner
to compensate for any unexpected revenue shortfall. We also may be unable to
increase our spending and expand our operations in a timely manner to adequately
meet user demand to the extent it exceeds our expectations.
If Bingo.Com (Canada) Portal is Unable to Achieve a Critical Mass of Registered
Users, Advertisers and Consumers, Bingo.Com (Canada) Portal May Be Unable to
Sell Advertising or to Generate Revenues
The success of our portal may be dependent upon achieving significant market
acceptance of our portal by registered users, advertisers and consumers. Our
portal has achieved very limited market acceptance to date. Internet advertising
in general is at an early stage of development and most potential advertisers
have only limited experience advertising on the Internet and have not devoted a
significant portion of their advertising expenditures to Internet advertising.
Advertising through priority placement on our search service in particular will
be introduced in the future, and we cannot predict the level of its acceptance
as an advertising medium, even if we achieve initial market acceptance. Our
competitors and potential competitors may offer more cost-effective advertising
solutions, which could damage our business. In addition, our portal may not
achieve significant acceptance by registered users and consumers. Failure to
achieve and maintain a critical mass of registered users; advertisers and
consumers would seriously harm our business.
If We Are Unable to Develop On-line Marketing Partner and Relationships with a
Network of Affiliates, Our Portal May Never Achieve Market Acceptance or
Generate Any Significant Advertising Revenues
We anticipate that our portal may depend on traffic from a limited number of
third-party web-sites. We anticipate Bingo.com (Canada) will obtain traffic from
these sources pursuant to short-term agreements. Bingo.com (Canada) currently
has no agreements in place and there can be no assurance that they will be
successful in obtaining any of these agreements on commercially acceptable
terms.
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We also believe that our future success in penetrating our target markets
depends in part on Bingo.com (Canada)'s ability to further develop and maintain
relationships with network affiliates. These network affiliates provide their
users with the Bingo.com (Canada) portal search capabilities on their sites or
direct their traffic to the Bingo.com (Canada) web-site. We believe these
relationships are important in order to facilitate broad market acceptance of
our service and enhance Bingo.com (Canada)'s sales. Our future ability to
attract consumers to our portal service may be dependent upon the growth of our
network affiliates, which has not yet been established. If we are unable to
obtain agreements or arrangements for traffic on commercially acceptable terms
or to establish a relationship with a network of affiliates, our portal business
may never be successfully launched.
The Portal Industry is Highly Competitive, Which Will Affect Our Ability to
Penetrate the Market
The market for Internet products, services and advertising is new, rapidly
evolving and intensely competitive. Our portal will potentially compete with
many other providers of Web directories, search and information services as well
as traditional media for consumer attention and advertising expenditures. We
expect competition to intensify in the future. Barriers to entry may not be
significant, and current and new competitors may be able to launch new web-sites
at a relatively low cost. Accordingly, we believe that our success may depend
heavily upon achieving significant market acceptance before our competitors and
potential competitors introduce competing services.
We anticipate that Bingo.com (Canada) will compete with on-line services, other
web-sites and advertising networks, as well as traditional offline media such as
television, radio and print for a share of advertisers' total advertising
budgets. We believe that the number of companies selling Web-based advertising
and the available inventory of advertising space has recently increased
substantially. Accordingly, Bingo.com (Canada) may face increased pricing
pressure for the sale of advertisements and direct marketing opportunities,
which could adversely affect our business and operating results.
Bingo.com (Canada) will also compete with providers of Web directories, search
and information services, all of whom offer advertising, including, among
others, America Online, Inc. (AOL.com, NetFind and Netscape Netcenter),
AskJeeves, Inc., CNET, Inc. (Snap), Excite, Inc. (including WebCrawler and
Magellan), LookSmart, Ltd., Lycos, Inc. (including HotBot), Microsoft
Corporation (LinkExchange, Inc. and msn.com), The Walt Disney Company/Infoseek
Corporation (including the Go Network), Goto Net and Yahoo! Inc. In addition, we
expect that other companies will offer directly competing services in the
future. For example, we expect AltaVista, a division of Compaq Computer
Corporation, to offer such a service.
Most providers of Web directories and search and information services offer
additional features and content that Bingo.com (Canada) has elected not to
offer. Also, many of these competitors, as well as potential entrants into our
market, have longer operating histories, larger customer or user bases, greater
brand recognition and significantly greater financial, marketing and other
resources than we do. Many of these current and potential competitors can devote
substantially greater resources to promotion and web-site and systems
development than we can. In addition,
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as the use of the Internet and other on-line services increases, larger,
well-established and well-financed entities may continue to acquire, invest in
or form joint ventures with providers of Web directories, search and information
services or advertising solutions, and existing providers of Web directories,
search and information services or advertising solutions may continue to
consolidate. In addition, providers of Internet browsers and other Internet
products and services who are affiliated with providers of Web directories and
information services in competition with the Bingo.com (Canada) portal service
may more tightly integrate these affiliated offerings into their browsers or
other products or services. Any of these trends may increase the competition we
face and could adversely affect our business and operating results.
Our Portal Business May be Subject to Government Regulation and Legal
Uncertainties that May Increase the Costs of Operating Our Portal or Limit Our
Ability to Sell Advertising
There are currently few laws or regulations directly applicable to access to, or
commerce on, the Internet. Due to the increasing popularity and use of the
Internet, it is possible that laws and regulations may be adopted, covering
issues such as user privacy, defamation, pricing, taxation, content regulation,
quality of products and services, and intellectual property ownership and
infringement. Such legislation could expose Bingo.com (Canada) to substantial
liability as well as dampen the growth in use of the Internet, decrease the
acceptance of the Internet as a communications and commercial medium, or require
Bingo.com (Canada) to incur significant expenses in complying with any new
regulations. The European Union has recently adopted privacy and copyright
directives that may impose additional burdens and costs on international
operations. In addition, several telecommunications carriers, including
America's Carriers' Telecommunications Association, are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission, or FCC, in the same manner as other telecommunications services.
Because the growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure and many areas with high Internet usage have
begun to experience interruptions in phone services, local telephone carriers,
such as Pacific Bell, have petitioned the FCC to regulate the Internet and to
impose access fees. Increased regulation or the imposition of access fees could
substantially increase the costs of communicating on the Web, potentially
decreasing the demand for our service.
A number of proposals have been made at the federal, state and local level that
would impose additional taxes on the sale of goods and services through the
Internet. Such proposals, if adopted, could substantially impair the growth of
electronic commerce and could adversely affect us. Also, Congress recently
passed (and the President has signed into law) the Digital Millennium Copyright
Act, which is intended to reduce the liability of on-line service providers for
listing or linking to third-party web-sites that include materials that infringe
copyrights. Congress also recently passed (and the President has signed into
law) the Children's Online Protection Act and the Children's Online Privacy Act,
which will restrict the distribution of certain materials deemed harmful to
children and impose additional restrictions on the ability of on-line services
to collect user information from minors.
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Further, Congress recently passed (and the President has signed into law) the
Protection of Children from Sexual Predators Act, which mandates that electronic
communication service providers report facts or circumstances from which a
violation of child pornography laws is apparent. Bingo.com (Canada) is currently
reviewing various pieces of legislation, and cannot currently predict the
effect, if any, that this legislation will have on our business. There can be no
assurance that this legislation will not impose significant additional costs on
our business or subject Bingo.com (Canada) to additional liabilities. Moreover,
the applicability to the Internet of existing laws governing issues such as
property ownership, copyright, defamation, obscenity and personal privacy is
uncertain. Bingo.com (Canada) may be subject to claims that our services violate
such laws. Any new legislation or regulation in the United States or abroad or
the application of existing laws and regulations to the Internet could damage
our business.
Due to the global nature of the Internet, it is possible that the governments of
other states and foreign countries might attempt to regulate its transmissions
or prosecute Bingo.com (Canada) for violations of their laws. Bingo.com (Canada)
might unintentionally violate such laws. Such laws may be modified, or new laws
may be enacted, in the future. Any such development could damage our business.
Risk Related to Internet Bingo
The Gaming Industry has Great Risks that May Affect Bingo.com (Antigua)'s
Ability to Operate It Internet Bingo Game
We cannot assure you that we will be able to realize revenues and attain
profitability in the future. Gaming projects are speculative by their nature and
involve a high degree of risk. The gaming business is subject to a number of
factors beyond our control including changes in economic conditions, industry
competition, management risks, changes in gaming products, variability in
operating costs, changes in government and changes in laws and in regulatory
authorities' rules and regulations.
Most Internet markets, including the gaming segment, are growing rapidly and a
large number of competitors are entering the market. We believe there are
certain market barriers that could affect Bingo.com (Antigua)'s ability to enter
the market and compete effectively, including technology, commerce, regulation,
management and reputation. In order to compete, Bingo.com (Antigua) must:
o utilize sophisticated systems to manage its on-line bingo operations,
process financial transactions, encrypt information and provide an
attractive user interface;
o maintain its casino license to offer Internet gaming services to the
public;
o assemble and retain a team made up of employees, consultants and
contractors of software, hardware, telecommunications, marketing,
management and gaming specialists to develop its on-line bingo
operations;
o attract a sufficient number of players to conduct its on-line bingo
games; and
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o develop and maintain an impeccable reputation in order to attract and
retain customers.
We cannot assure you that Bingo.com (Antigua) will be able to compete
effectively or that Bingo.com (Antigua) will be able to earn a profit. Bingo.com
(Antigua) may be required to raise additional financing or to borrow funds for
its operations. We cannot assure you that we will be able to raise additional
financing to fund Bingo.com (Antigua)'s development. We anticipate that
Bingo.com (Antigua) will be a major part of our business and the inability of
Bingo.com (Antigua) to earn a profit will have a material adverse effect on our
business and results of operations.
Changing Technologies and Substantial Competition May Adversely Affect Bingo.com
(Antigua)'s Business
Bingo.com (Antigua)'s primary competition includes, but is not limited to,
CryptoLogic Inc., Venturetech Inc., Internet Casinos Ltd., Interactive Gaming
and Communications Corp. (formerly Sports International - USA), Wager Net Inc.,
Casinos of the South Pacific, World Wide Web Casinos and Virtual Vegas. Many of
our competitors have established client bases and have greater capital resources
and technical resources than Bingo.com (Antigua) and us.
The industry of offering gaming services and casino style games over the
Internet is characterized by rapid and significant technological change in the
computer, software and telephony services. Many entities are engaged in research
and development with respect to offering gaming services on the Internet. A
significant number of companies, organizations and individuals are currently
offering or purporting to offer casino gambling services on the Internet similar
to those developed by the Bingo.com (Antigua). We cannot assure you that
Bingo.com (Antigua)'s competitors will not develop technologies and products
that are more effective and efficient than Bingo.com (Antigua)'s technology and
products or that Bingo.com (Antigua)'s technology and products will not be
rendered obsolete by such developments. There can be no assurance that other
companies with greater financial and technological resources will not develop
gaming services over the Internet with better capabilities than those offered by
Bingo.com (Antigua).
There are Several Risks Related to the Regulation of Internet Gaming that May
Affect Our Business.
There is a risk that the operations of Bingo.com (Antigua) will be illegal if
conducted or if the operations are deemed to be conducted in the United States
or other jurisdictions. Internet gaming may be subject to government regulation
in the future. We cannot assure you that we will be allowed to operate in the
markets in which we plan to offer our services or that we will be able to
generate sufficient interest and revenues where our services are permitted. In
addition, there are several jurisdictions that are proposing legislation to
prohibit Internet gaming or make conducting an Internet gaming business less
profitable.
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The Proposed Internet Gambling Prohibition Act (Kyl Bill) May Potentially Impact
Our Operations
The laws, rules, regulations and policies of the United States may have a
material adverse effect on our business and results of operations. Other
jurisdictions may also adopt laws modeled after laws of the United States or
players in the United States may find ways to circumvent the blocking and
screening mechanisms we may implement to play the Bingo.com game in the wagering
mode. We cannot assure you that any blocking or screening mechanism will be
effective or that our subsidiaries or we will not be subject to enforcement
action in the United States or other jurisdictions.
As such, particular legislation in the United States and enforcement actions by
courts in the United States poses a risk to our business. Below is a description
of the current regulatory environment in the United States:
o On July 23, 1998, the Senate passed an appropriations bill containing an
amendment by Senator John Kyl of Arizona, which would prohibit gaming on
the Internet in the United States (the "Kyl Bill"). If enacted into law,
the Kyl Bill would classify gaming over the Internet as a federal offense.
Although the Kyl Bill allows certain intrastate wagering, it prohibits
operation of most other Internet gaming businesses, as well as use of the
Internet to place, receive or otherwise make a bet or wager. Individuals
convicted of operating an Internet gaming business in the United States
could be punished by up to four years in jail and a fine equal to the
greater of $20,000 or the aggregate amount of bets received by the
operator. Under the Bill, Internet gaming would be a federal crime even if
the states in which bets are placed had legalized the practice.
o The Attorneys General for at least three states (Florida, Minnesota and
Texas) have issued either formal opinions or warnings that certain Internet
gaming activities are illegal in those states. The Attorney General for the
state of Wisconsin has also taken action against Internet gaming companies.
o The Federal Interstate Wire Act contains provisions which may make it a
crime for anyone in the business of gambling to use an interstate or
international telephone line to transmit information in the placing of
bets, unless the betting is legal in the jurisdictions from which and into
which the transmission is made. In March 1998, the United States Attorney
for the Southern District of New York filed several criminal complaints
against the owners and managers of six Internet sports betting companies
headquartered in the Caribbean or Central America under the Wire Act.
o In September 1997, the Minnesota Court of Appeals considered a state civil
consumer protection complaint and concluded that a Belize-based Internet
gambling business was subject to personal jurisdiction in Minnesota because
the company conducted commercial activities in the state over the Internet.
See Minnesota v. Granite Gate Resorts, Inc., 568 N.W.2d 715 (1997), aff'd,
576 N.W.2d 747 (Minn. 1998).
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o In March 1998, the United States District Court for the Western District of
Texas concluded that a California casino that maintained a web-site was
subject to jurisdiction in Texas since the site was available in Texas and
the casino accepted business from Texas residents. See Thompson v.
Handa-Lopez, Inc., 1998 WL 142300 (W.D. Tex. Mar. 28, 1998).
There are Substantial Requirements and Licensing Jurisdictional Issues that May
Affect Bingo.com (Antigua) and Increase the Costs of Operations
The gaming industry is highly regulated in many parts of the world where the
ownership and operation of land-based gaming facilities (i.e., not including
sports wagering) of the type to be conducted by Bingo.com (Antigua) have
traditionally been regulated on both the federal and local levels. Bingo.com
(Antigua) must adhere to the legal requirements of each jurisdiction in which it
operates and offers services or is deemed to operate and offer services.
Bingo.com (Antigua) currently intends to offer its services internationally
where such services are permitted. Bingo.com (Antigua) does not currently intend
to seek licenses to operate its Internet casino in any other jurisdiction nor
does Bingo.com (Antigua) intend to restrict or control access to its web-site
based on user citizenship or location. However, access to the site to play the
on-line bingo game in the wagering mode may be restricted based on the laws of a
particular jurisdiction.
The law of the Internet is not well developed and there can be no assurance that
authorities will not successfully assert jurisdiction over Bingo.com (Antigua)
for its activities in the event a player plays the on-line bingo game in a
jurisdiction where Internet gaming is prohibited. In the event that it is
determined that Bingo.com (Antigua) is subject to the laws of jurisdictions
other than Antigua, Bingo.com (Antigua) would have to obtain a license in order
to offer its gaming services to customers within these jurisdictions. There can
be no assurance that any such licenses could be obtained. Moreover, if it is
determined that Bingo.com (Antigua) is operating gaming operations in a
jurisdiction without a license, Bingo.com (Antigua) and its officers and
directors may become subject to criminal and civil penalties imposed by such
jurisdiction for violating its laws. The occurrence of any of these events could
have a material adverse effect on our business and, if many jurisdictions were
successful in asserting jurisdiction over Bingo.com (Antigua), Bingo.com
(Antigua) could be forced to cease all gaming operations.
Bingo.com (Antigua) May Suffer Losses as a Result of Credit Card Fraud
We anticipate that Bingo.com (Antigua) may suffer losses as a result of
fraudulent credit card data, even though the associated financial institution
approved payment of the orders. Under current credit card practices, a merchant
is liable for fraudulent credit card transactions when, as is the case with the
transactions we process, that merchant does not obtain a cardholder's signature.
A failure to adequately control fraudulent credit card transactions would
adversely affect our business.
There is also some uncertainty with respect to the enforceability of credit card
charges made for gaming debts.
35
<PAGE>
Item 2. Financial Information
Selected Financial Data
The following table sets forth selected financial data regarding our
consolidated operating results and financial position. The data has been derived
from our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States
("US GAAP"). See "Management's Discussion and Analysis of Financial Condition
and Results of Operation." The following selected financial data is qualified in
its entirety by, and should be read in conjunction with, the consolidated
financial statements and notes thereto included elsewhere in this Registration
Statement.
<TABLE>
Six Month Period Year Ended
Ended December 31,
June 30,
---------- ---------- ---------- ----------- ---------- ----------- -----------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ----------- ---------- ----------- -----------
$ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues nil nil 100 nil nil nil nil
General & Administrative
Expenses 497,863 1,904 1,904 nil nil nil 5,000
Marketing & Advertising 257,647 nil Nil nil nil nil nil
Depreciation 3,554 nil Nil nil nil nil nil
Foreign exchange gain nil nil nil nil nil nil nil
Interest income 19,305 nil nil nil nil nil nil
Net (Loss) from Continuing
Operations (739,759) (1,904) (1,804) nil nil nil (5,000)
Net Loss per Share (0.09) (0.00) Nil nil nil nil (0.005)(1)
</TABLE>
(1) After giving effect to a 200 share for 1 share stock split that occurred on
July 17, 1998.
<TABLE>
Six Month Ended Year Ended
June 30, December 31,
----------- --------- ---------- ----------- ---------- ----------- -----------
1999 1998 1998 1997 1996 1995 1994
----------- --------- ---------- ----------- ---------- ----------- -----------
$ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Working Capital (Deficiency) 4,665,791 (1,804) (1,804) nil nil nil nil
Total Assets 6,405,597 Nil 157,600 nil nil nil nil
Total Liabilities 81,417 1,904 159,404 nil nil nil nil
Shareholders' Equity 6,324,180 (1,904) (1,804) nil nil nil nil
</TABLE>
36
<PAGE>
<TABLE>
Six Month Ended Year Ended
June 30, December 31,
----------- --------- ---------- ----------- ---------- ----------- -----------
1999 1998 1998 1997 1996 1995 1994
----------- --------- ---------- ----------- ---------- ----------- -----------
$ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term Obligations Nil Nil Nil nil nil nil nil
Cash Dividends Nil Nil Nil nil nil nil nil
</TABLE>
During the first quarter ended March 31, 1999, we completed a number of
transactions related to implementing our new business plan. These transactions
included a private placement in the amount of $75,000 in January 1999, a private
placement in the amount of $1,000,000 in February 1999, and the acquisition of
our Bingo.com domain name for 500,000 shares of our common stock (at a deemed
value of $2.00 per share) and $200,000 in cash.
During the second quarter ended June 30, 1999, we completed a number of
transactions related to implementing our new business plan. These transactions
included obtaining an Antigua gaming license on behalf of Bingo.com (Antigua)
and completion of a private placement of 416,668 shares at $12.00 per share for
proceeds of $5,000,016.
Management's Discussion and Analysis of Financial Condition and Results of
Operation
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operation contains "forward looking
statements." Actual results may materially differ from those projected in the
forward looking statements as a result of certain risks and uncertainties set
forth in this report. Although management believes that the assumptions made and
expectations reflected in the forward looking statements are reasonable, there
is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual future results will not be different from the
expectations expressed in this Registration Statement.
Overview
Bingo.com, Inc.
Our primarily focus is as a holding company and to provide legal, financial,
securities regulatory and investor relations support to our subsidiaries. We
intend to develop, through our subsidiaries, leading positions as: (1) a niche
Internet portal focused on the worldwide entertainment and lifestyle interests
and (2) a market leader in on-line bingo gaming.
We were incorporated in the State of Florida on January 12, 1987 under the name
"Progressive General Lumber Corp." with an authorized share capital of 7,500
shares of common stock with $1.00 par value per share. On July 17, 1998, we
increased our share capital to 50,000,000 common shares with $0.001 par value,
and on January 13, 1999, we changed our name to "Bingo.com, Inc." to reflect the
focus of our business.
37
<PAGE>
Bingo.com (Canada)
We organized Bingo.com (Canada) in the Province of British Columbia on February
10, 1998, as 559262 B.C. Ltd., and on February 11, 1999 changed its name to
Bingo.com (Canada) Enterprises Inc. Bingo.com (Canada) is our wholly owned
subsidiary.
During the next twelve months, Bingo.com (Canada) intends to initiate the
development of the second phase of its entertainment and lifestyle portal. We,
through Bingo.com (Canada), have spent approximately $309,320 on the development
and launch of the first phase of the entertainment and lifestyle portal.
Bingo.com (Antigua)
We incorporated Bingo.com (Antigua) under the laws of Antigua and Barbuda on
April 7, 1999 as Star Communications Ltd., and changed its name to Bingo.com.
(Antigua), Inc. on April 21, 1999. The registered owners of the shares of
Bingo.com (Antigua) are Arthur G. B. Thomas of Antigua (registered owner of 9%
of the issued common shares), Kelvin John of Antigua (registered owner of 9% of
the issued common shares) and Douglas McLeod a resident of Japan (registered
owner of 82% of the issued common shares). The registered owners have executed a
Trust Agreement acknowledging that we are the sole beneficial owners of the
shares and that all right, title and interest in Bingo.com (Antigua) will accrue
to and for our benefit. We intend to effect the transfer of the shares from the
registered owners to us after our reorganization.
During the next twelve months, Bingo.com (Antigua) intends to establish the
infrastructure and manage and operate an on-line bingo gaming business. We,
through Bingo.com (Antigua), have spent approximately $838,674 on developing the
on-line bingo gaming business prior to the point in time that it will `go live'
at which point in time it will be managed and operated by personnel located in
Antigua.
Bingo.com (Wyoming)
We formed Bingo.com (Wyoming) on July 14, 1999 to effect a reorganization of our
company. We intend to merge into Bingo.com (Wyoming) and then continue out of
Wyoming into Antigua as an Antigua International Business Corporation with our
same name, "Bingo.com, Inc."
Results of Operations
Bingo.com, Inc. is a holding company that owns three subsidiaries:
o Bingo.com (Canada) Enterprises Inc. is a British Columbia corporation;
o Bingo.com. (Antigua), Inc. is an Antigua International Business
Corporation; and
o Bingo.com (Wyoming), Inc. is a Wyoming corporation
Bingo.com executes its primary business objectives through Bingo.com Canada and
Bingo.com Antigua (the "Operating Subsidiaries"). During the period July 1998 to
December 1998, Bingo.com was engaged in the reorganization of its corporate
structure. During the five
38
<PAGE>
preceding calendar reporting periods (1994 to 1998), no material nor substantive
transactions were completed by Bingo.com, or as it was named prior thereto,
Progressive General Lumber Corp. The substantive operations of Bingo.com and its
operating subsidiaries did not commence substantive operations until the first
quarter of 1999.
Six Month Period Ended June 30, 1999 Compared to Six Month Period Ended June 30,
1998
During the six month financial period ended June 30, 1999, we commenced
implementing our business plan and funding the operations of our Operating
Subsidiaries. During the six month financial period ended June 30, 1998, we had
no active business operations and we had no material transactions or results of
operations. As a result, we believe a comparison of our results of operations
for the six month periods ended June 30, 1999 and June 30, 1998 is not
meaningful.
At the end of the financial quarter ended June 30, 1999, our total assets
increased to $6,908,636 from $157,600 at June 30, 1998. The increase was
primarily due to our completion of a $5,000,016 private placement. Our cash and
short-term investments were $4,594,304 at June 30, 1999, representing an
increase from a balance of $157,600 at June 30, 1998. This was a direct result
of our financing activities. Our current liabilities decreased to $81,417 at the
end of the financial quarter ended June 30, 1999, compared to $159,404 at June
30, 1998. This was a result of the settlement of material payment to a creditor
and our maintaining a policy, in the financial quarter ended June 30, 1999, of
remaining current in our payments to our creditors.
Our general and administrative expenses were $497,863 and marketing and
advertising expenses were $257,647 for the six month financial period ended June
30, 1999, as a result of costs associated with implementing our business
strategy. We had net operating loss during the six month financial period ended
June 30, 1999 of $739,759, offset by interest income of $19,305. Our net loss
for the six month period ended June 30, 1998 was $1,804. Our increased loss was
as a result of increase operating expenses associated with implementing our
business strategy, while we were inactive during 1998. During the six month
financial period ended June 30, 1999, we contributed $206,229 to Bingo.com
(Canada) and $290,674 to the development of the on-line bingo gaming software.
The Bingo.com operations for the fiscal quarter ended June 30, 1999 used cash of
$967,096 primarily related to funding the operations of our Operating
Subsidiaries, legal and professional fees, consulting fees, salaries,
administrative and office overhead expenditures.
The funds contributed to Bingo.com (Canada) were primarily used to fund the
development of the portal web-site, legal fees, marketing and sales, staffing
and office overhead expenditures.
The funds contributed to the development of the on-line bingo gaming software
were primarily used to fund the design and alpha development phases of the
on-line bingo gaming software, marketing and sales, legal fees and office
overhead expenditures.
39
<PAGE>
Year Ended December 31, 1998 Compared to December 31, 1997
During the first half of the year ended December 31, 1998, we had no active
business operations. In July 1998, we commenced the reorganization of our
corporate structure. On July 17, 1998, the State of Florida approved our
restated Articles of Incorporation, which increased our capitalization from
7,500 common shares to 50,000,000 common shares, and changed the par value from
$1.00 to $0.001. We also forward split our common stock 200-for-1, thus
increasing the number of outstanding common shares from 5,000 common shares to
1,000,000 common shares. We incurred expenses in the amount of $1,904 during the
year ended December 31, 1998. We had no revenues from operations during the year
ended December 31, 1998.
At December 31, 1998, we had total assets of $157,600, which represented the
proceeds of a private placement that we subsequently did not accept, and which
we returned funds to the investor subsequent to the 1998 year end. We recorded
the liability for this transaction as an accounts payable.
During the year ended December 31, 1997, we had no active business operations.
As a result, we had no material transactions or results of operations that would
require a comparison to our operations during the year ended December 31, 1998.
Year Ended December 31, 1997 Compared to December 31, 1996
During the years ended December 31, 1997 and December 31, 1996, we had no active
business operations. As a result, we had no material transactions or results of
operation.
Liquidity and Capital Resources
Since July 1998, we raised an aggregate of $6,075,016 in capital through private
placements. Since our inception, we have generated no revenues from business
operations.
As of June 30, 1999, we used cash of $967,096 for operations including expenses
of $497,863 for general and administrative expenses and $257,647 for marketing
and advertising expenses. We also had changes in non-working capital items
including $28,619 in account receivables, $124,285 in prepared accounts, and
$144,264 in accounts payables.
As of June 30, 1999, we used cash of $661,943 in investing activities including
$95,822 for software development, $200,936 to purchase our domain name, $246,599
for equipment, $100,000 for the Bingo.com (Antigua) gaming license and $18,589
for security deposits.
We had non-cash investing and financing activities including the following:
o We issued 500,000 shares of our common stock to acquire the domain name
"Bingo.com" (at a deemed value of $2.00 per common share or $1,000,000);
and
o We agreed to issue 250,000 shares of our common stock (at a deemed value of
$2.00 per common share or $500,000) for web site development related to the
Bingo.com (Canada) portal.
40
<PAGE>
As at July 31, 1999 we have $4,254,000 in cash or term deposits, which we
believe will be sufficient to satisfy our cash requirements for working capital
and capital expenditure requirements through approximately January 31, 2000. We
believe that we will, on average, spend approximately $400,000 per month through
the fourth quarter 1999 on expenses related to our operations, including general
and administrative expenses and marketing and advertising expenses, and on
research and development expenses related to the development of our
subsidiaries' technology. During the first and second quarters of 2000, we
anticipate we will spend, on average, approximately $600,000 to $700,000 per
month on expenses related to our operations as we launch phases 2 and 3 of our
"Tell The World" marketing campaign.
We estimate that the total amount of capital required to proceed with current
operations and to bring our subsidiaries' products and services to market will
be approximately $10,000,000 through 2000, including approximately $2,000,000
for research and development, approximately $4,000,000 for advertising,
marketing and promotional efforts, and approximately $3,000,000 for working
capital. We anticipate that we will need to raise additional capital through
issuing equity and/or debt during the fourth quarter 1999 or the first quarter
2000 to continue to implement our business plan as planned. There can be no
assurance that such financing will be available on acceptable terms, if at all.
Our inability to raise additional financing on acceptable terms will have a
material adverse effect on our business and results of operations.
Recent Financings
Our business activities and operations have been funded to date through issuance
of shares of our common stock in the following transactions:
<TABLE>
Summary of Transactions
- --------------------------------------------------------------------------------------------------------------
Number of Total Price of
Shares Shares ($)
-------------------- --------------------
<S> <C> <C>
Balance of Bingo.com at December 31, 1998 1,000,000 5,000
Issued to as consideration to Bingo, Inc.for the Bingo.com
domain name 500,000 1,000,000
Issued for cash at $0.01 per share 7,500,000 75,000
Issued for cash at $2.00 per share (1) 500,000 1,000,000
Issued for cash at $12.00 per share (2) 416,668 5,000,016
-------------------- --------------------
TOTAL 9,916,688 $7,080,016
</TABLE>
(1) We issued Units consisting of one common share and one common share
purchase warrant exercisable to acquire one additional common share at
$2.00 until February 11, 2000.
(2) We issued Units consisting of one common share and one common share
purchase warrant exercisable to acquire one additional common share at
$12.00 per share until April 22, 2000 and at $15.00 per share until April
22, 2001.
41
<PAGE>
Year 2000 Compliance
The Year 2000 issue arises with the change in century and the potential
inability of information systems to correctly "rollover" dates to the new
century. To save on computer storage space, many systems were programmed with a
two-digit century (i.e. December 31, 1999 would appear as 12/31/99) assuming
that all years would be part of the 20th century. On January 1, 2000, systems
with this programming will default to 01/01/1900 instead of 01/01/2000, and
calculations using or reporting the date will not be correct and errors will
arise (the "Year 2000 Issue"). To prevent this from occurring, information
systems need to be updated to ensure they recognize dates during and after the
Year 2000.
The potential exists that we and each of our subsidiaries are exposed to a risk
that certain aspects of their businesses will fail or suffer impairment as a
result of internally operated or externally contracted hardware or software
systems and services not being able to correctly "rollover" dates to the new
century. The risk stems from our reliance on certain hardware, software and
services to carry out the daily operation of our proposed respective businesses.
The exposure may result from, amongst other things, the use of computers,
general software and servers for office purposes and data storage; connections
to and use of the services of Internet Service Providers and telephone companies
for office purposes and customer and investor relations; the software underlying
the operation of the portal web-site and the on-line bingo gaming operation; and
the servers that `play and distribute' the on-line bingo game.
We and our subsidiaries have only been operating and developing our respective
businesses during the last 6 months and the office hardware, administrative
general software, custom developed special purpose software, servers and
services of Internet Service Providers and telephone companies have been
acquired during this period. As a result, and in consultation with the suppliers
of this hardware, software and services, we believe the related systems that we
intend, directly or indirectly, to use in our respective businesses are Year
2000 compliant. Our due diligence also included an evaluation of supplier
provided technology and the implementation of new policies to require our
suppliers to confirm that they have disclosed and will correct Year 2000
compliance issues. Although we are relying primarily on systems developed with
current technology and on systems designed to be Year 2000 compliant, we may
have to replace, upgrade or reprogram certain systems to ensure that all
interfacing technology will be Year 2000 compliant when running jointly.
In the event that we incur expenses associated with resolving Year 2000
compliance issues, we intend to expense the operating costs as they are incurred
and capitalize the capital costs as they are incurred. However, our purchases of
hardware and general and specific purpose software have been relatively recent,
and the more expensive of the hardware and general and specific software items
that we have purchased are covered under warranties that will extend over the
rollover period to January 1, 2000. As a result, we do not expect to incur any
major operating or capital expenditures that would have a material impact on our
financial condition or results of operations.
While we believe that our hardware and general and specific purpose software
applications will be Year 2000 compliant, there can be no assurance until the
Year 2000 occurs that all systems will function adequately.
42
<PAGE>
We do not currently anticipate any disruption in our or our subsidiaries'
operations as the result of the Year 2000 issue. We do not have any information
concerning the Year 2000 compliance status of our suppliers and customers that
would affect our operations. Any failure of our material systems, our vendors'
material systems or the Internet to be Year 2000 compliant may have a material
adverse effect on our business and results of operations.
In order to protect against the possibility of any material disruption in our or
our subsidiaries' operations as the result of the Year 2000 issue we have taken
the following precautions:
- - developed, initiated and maintained procedures that ensure that the
information stored on the office computer hard drives are backed up on a
regular basis and stored safely;
- - copies of the source code for the special purpose software are maintained
in secure offsite locations by the developers of the software;
- - will install a backup server in Antigua; and
- - implemented a policy of acquiring name brand hardware and retained
experienced consultants upon whose warranties we believe that we can rely.
Quantitative and Qualitative Disclosures About Market Risks
None
Item 3. Properties.
We currently lease our principal business office through our subsidiary, at
702-543 Granville Street, Vancouver, British Columbia, pursuant to a lease that
expires on April 30, 2002. The monthly rent payments under the lease are
approximately $2,380. We also pay for a pro rata share of common area expenses
such as insurance, cleaning services, maintenance related to the space we rent.
Our pro rata share of the common area expenses is currently approximately $2,120
per month.
Bingo.com (Antigua) currently leases a business office Ryan's Place, St. John's
Antigua, on a month to month basis $2,250 per month.
Other than described above, neither we nor any of our subsidiaries presently own
or lease any other property or real estate.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners.
The following table sets forth certain information concerning the number of
shares of our common stock owned beneficially as of August 4, 1999 by: (i) each
person (including any group) known to us to own more than five percent (5%) of
any class of our voting securities, (ii) each of our directors, and (iii)
officers and directors as a group. Unless otherwise indicated, the shareholders
listed possess sole voting and investment power with respect to the shares
shown.
43
<PAGE>
<TABLE>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Title of Class Name and Address of Amount and Nature of Percentage of Class(1)
Beneficial Owner Beneficial Ownership
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Common Stock Bingo, Inc. 500,000 5.04%
P. O. Box 1127
The Hansa Bank Bldg.
Anguilla, B.W.I.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Common Stock Dotcom Fund SA 1,000,000(2) 9.16%(2)
Box 571
Providentiales Turks &
Caicos, B.W.I.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Common Stock Goldberg Equity Fund 833,336(3) 7.63%(3)
2001 Leeward Hwy.
Providenciales Turks &
Caicos, B.W.I.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Common Stock Darren Little(4) 765,000 7.71%
c/o Hong Kong Bank Bldg.
Vancouver, BC V6C3H1
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Common Stock Whitecliffe Investment 585,000 5.9%
Fund, Ltd
CEGEI NI 18 STE 36 SNL 3
Cancine, MX 77500
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Common Stock CEDE & Co. (5) 7,112,076(6) 71.7%
P. O. Box 222
Bowling Green Station
New York, NY 10274
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Common Stock Officers and Directors as 1,069,500(7) 10.47%(7)
a Group
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
(1) Based on an aggregate 9,916,668 shares outstanding as of August 4, 1999.
(2) Includes 500,000, shares of common stock that are acquirable pursuant to
the exercise of 500,000 share purchase warrants within sixty days of August
4, 1999.
(3) Includes 416,668 shares of common stock that are acquirable pursuant to the
exercise of 416,668 share purchase warrants within sixty days of August 4,
1999.
(4) Pursuant to an assignment of a Share Purchase Agreement from Michael
Townsend to Darren Little, the beneficial owner of these shares and our
former President, who resigned on June 24, 1999.
(5) CEDE & Co. is a trust depository that holds shares for individual
shareholders.
(6) Our transfer agent's records indicate that there are thirty eight share
certificates registered in the name of CEDE & Co. representing 7,112,076
common shares. CEDE & Co. is a trust depository that holds shares for
individual shareholders, and we do not know the identities of the
individual shareholders of such shares.
(7) Includes stock options granted to Shane Murphy, our President, exercisable
immediately to acquire 300,000 shares of our common stock.
44
<PAGE>
Security Ownership of Management.
We are not aware of any arrangement that might result in a change in control in
the future.
Item 5. Directors and Executive Officers.
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles and Bylaws. Our executive officers are
appointed by and serve at the pleasure of our Board of Directors.
As at July 31, 1999, the following persons were our directors and/or executive
officers:
Name and present office held Director/Officer since
- ---------------------------- ----------------------
Shane Murphy July 1999
President, CEO, Director
Darren Little(1) January 1999
to June 1999
Roger Flowerdew(2) March 1999
CFO to June 1999
Chris Sargent February 1999
V.P. Investor Relations
(1) Darren Little resigned as President, CEO and a Director of Bingo.com, Inc.
effective June 24, 1999.
(2) Roger Flowerdew resigned as CFO effective June 30, 1999, and currently
serves as a consultant to the Company on a month-to-month basis.
The following is a brief biographical information on each of the officers and
directors of listed:
Shane Murphy, President, CEO - Age 39
Shane Murphy is our sole Director and holds the positions of Chief Executive
Officer, President, Secretary and Treasurer. From June 1996 to June 1999, Mr.
Murphy held the positions of Chief Executive Officer and President at Canadian
Capital Management, a private company engaged in providing consulting services
to the marketing industry. From 1986 to 1996, Mr. Murphy served as Chief
Executive Officer and President of Ad Team Canada, a private marketing
communications company that was liquidated in 1996. Mr. Murphy specializes in
developing and implementing marketing, financing and business strategies.
45
<PAGE>
Darren Little - Age 35
Darren Little served as a Director, Chief Executive Officer, President,
Secretary and Treasurer from January 1999 until his resignation on June 24,
1999. Before founding Bingo.com, Little worked as Vice President of Marketing
for GIC Global Entertainment Corp. Prior to that, he was Vice President of
Marketing for Advanced Gaming Technology Inc.
Roger Flowerdew, Chief Financial Officer - Age 48
Roger Flowerdew is a Chartered Accountant who has specialized in structuring and
managing the rapid growth of emerging private and high technology companies. Mr.
Flowerdew has experience in public company regulatory compliance and has
assisted in raising equity financing from institutional markets.
Mr. Flowerdew served as our chief financial officer from March 1, 1999 to June
30, 1999. Mr. Flowerdew currently serves as a consultant on a month-to-month
basis.
Prior to his joining us, Roger Flowerdew was the CFO of Xinex Networks Inc.,
from August 1992 to July 1997. He is currently a director of Zycom Corporation
and was the Executive Vice President Finance for First Cambridge Bancorp from
May 1991 to June 1992. Roger has provided financial and general management
services to companies in the telecommunications, computer based training,
emergency safety, bio-medical and environmental industries located in Canada and
the United States.
Chris Sargent, Vice President Investor Relations - Age 29
Chris Sargent holds the position of Vice President Investor Relations. Mr.
Sargent has spent the past 3 years in investor relations with other companies
and with a private investor relations company. He has expertise in
communications and in public company financial markets and has developed and
implemented investor relations marketing strategies. Mr. Sargent was the Vice
President of Global Intertainment from March to December 1998; employed as an
investor relations specialist with Advance Gaming from March 1997 to March 1998
and employed as an investor relations specialist with Investor Relations Group
from March 1996 to May 1996. Mr. Sargent worked as a real estate professional at
McRae Walker Realty prior to 1996.
Other Information
The Board of Directors is elected by our shareholders. Currently, there is one
member on our Board of Directors, who reviews significant developments affecting
our company and acts on matters requiring Board approval. Although the Board of
Directors may delegate many matters to others, it reserves certain powers and
functions to itself.
None of our directors or executive officers is a party to any arrangement or
understanding with any other person pursuant to which said he was elected as a
director or officer.
46
<PAGE>
None of our directors or executive officers has any family relationship with any
other officer or director.
None of our officers or directors have been involved in the past five years in
any of the following: (1) bankruptcy proceedings; (2) subject to criminal
proceedings or convicted of a criminal act; (3) subject to any order, judgment
or decree entered by any court limiting in any way his or her involvement in any
type of business, securities or banking activities; or (4) subject to any order
for violation of federal or state securities laws or commodities laws.
Item 6. Executive Compensation.
The following table contains information concerning the grant of stock options
to named executive officers and directors during the financial year ended
December 31, 1998. No compensation was paid to an executive officer during the
financial year ended December 31, 1998.
Our Directors do not receive any stated salary for their services as directors
or members of committees of the Board of Directors, but by resolution of the
Board, a fixed fee and expenses of attendance may be allowed for attendance at
each meeting. Directors may also serve our company in other capacities as an
officer, agent or otherwise, and may receive compensation for their services in
such other capacity.
Stock Options
We have reserved 1,895,000 shares of common stock for issuance pursuant to an
incentive stock option plan, which we intend to authorize and adopt. We have
agreed to grant incentive stock options exercisable to acquire up to 695,000
shares of our common stock to certain of our directors, executive officers and
consultants after our stock option plan is adopted. We intend to register our
stock option plan under the Securities Act after we adopt the plan and this
registration statement is declared effective. In addition, we granted Shane
Murphy, our President, options exercisable to acquire 600,000 shares of our
common stock pursuant to his employment agreement. See "Executive Compensation
- -- Employment and Consulting Agreements."
We intend to grant stock options to the following officers, directors and
consultants after we approve and adopt a stock option plan:
<TABLE>
Grantee Number of Options Vesting Schedule Exercise Price
------- ----------------- ---------------- --------------
<S> <C> <C> <C>
Shane Murphy 600,000(2)(3) 300,000 - 2 Years, pro rata $4.75
monthly;
President, CEO, Secretary,
Director 300,000 upon certain stock
appreciation.
</TABLE>
47
<PAGE>
<TABLE>
Grantee Number of Options Vesting Schedule Exercise Price
------- ----------------- ---------------- --------------
<S> <C> <C> <C>
Darren Little 300,000(3)(4)(5) 3 Years, $4.75
President, CEO, Director pro rata annually
Roger Flowerdew 200,000(5) 2 Years, $4.75
CFO pro rata quarterly
Chris Sargent 100,000(5) 2 Years, $4.75
V.P. Investor Relations pro rata annually
Robert MacKay 45,000(5) 3 Months, $4.75
Consultant pro rata monthly
Access World, Inc. 50,000(5) Over 12 Months(6) $4.75
</TABLE>
(1) We reserved for issuance and agreed to grant stock options to certain
directors, officers and consultants pursuant to a stock option plan after such
stock option plan is authorized and adopted. As of August 27, 1999, we have not
authorized or adopted such plan.
(2) Options granted pursuant to Mr. Murphy's employment agreement, vesting as
follows: (i) options to acquire 300,000 shares on July 1, 1999 and (ii) options
to acquire 300,000 shares upon the closing price of our common shares on the
Over-The-Counter Bulletin Board ("OTC BB") equaling or exceeding: $20 as to
options to acquire 100,000 shares; $30 as to options to acquire 100,000 shares;
and $40 as to options to acquire 100,000 shares.
(3) Options expire on July 1, 2004.
(4) Darren Little resigned as President, CEO and a Director of Bingo.com, Inc.
effective June 24, 1999. Such options will expire unvested on September 24,
1999.
(5) Options expire on the earlier of 5 years from the date of grant or 90 days
after ceasing to serve as a director, officer, employee or consultant.
(6) We agreed to grant 50,000 options to Access World, Inc., a consultant to the
Company, pursuant to an Agent Agreement dated April 6, 1999. Such options will
vest according to the following schedule: (i) 2,500 deemed to be vested on
February 28, 1999; (ii) 12,500 deemed to be vested on March 31, 1999; (iii)
12,500 deemed to be vested on April 30, 1999 and (iv) 22,500 vesting pro-rata on
a monthly basis until the termination of the agreement. We reserved for issuance
and agreed to issue such options shares pursuant to a stock option plan after
such stock option plan is authorized and adopted. As of August 27, 1999, we have
not authorized or adopted such plan.
We did not granted any stock options to our executive officers and directors
during the fiscal year ended December 31, 1998.
Employment and Consulting Agreements
We entered into an employment with Shane Murphy, our sole director, Chief
Executive Officer, President, Secretary and Treasurer dated June 17, 1999 and
effective July 1, 1999. The term of the agreement is three years, commencing on
July 1, 1999 and ending on July 1, 2002, renewing
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for additional terms of one year upon the consent of the parties. Under the
terms of our agreement, we agreed to pay Mr. Murphy a salary of $250,000
(Canadian) or approximately US$167,000 per year, and granted Mr. Murphy options
to acquire 600,000 shares of our common stock at $4.75 per share, vesting as to
300,000 shares pro rata monthly over 2 years and as to 300,000 based on the
market price of our common stock. See "Executive Compensation - Stock Options."
Mr. Murphy agreed to serve as our sole director, Chief Executive Officer,
President, Secretary and Treasurer. If we terminate Mr. Murphy without cause
under the agreement, we agreed to pay severance pay as follows: six months'
salary if terminated on or before January 1, 2000; the amount of salary that
would otherwise have been payable to Mr. Murphy up to and including July 1, 2001
if terminated after January 1, 2000 but on or before July 1, 2001; and the
amount of salary that would otherwise have been payable to Mr. Murphy for the
remainder of the term or any extension if terminated after July 1, 2001.
We entered into an agreement with Access World, Inc., a consultant to the
company, dated April 6, 1999. Under the terms of the agreement, Access World,
Inc. agreed to assist us in certain matters related to the business of Bingo.com
(Antigua) including obtaining Antigua legal counsel, submitting an application
for an Internet gaming license with the Antigua Barbuda Free Trade Zone,
establishing an Antigua office and locating employees to staff the Bingo.com
(Antigua) office. We agreed to pay Access World, Inc. $15,000 and to issue
Access World, Inc. options to acquire 50,000 shares of our common stock, subject
to regulatory approval and our stock option plan.
We have no other employment, consulting or other service contracts or
arrangements between us or our subsidiaries and our directors and/or executive
officers.
Item 7. Certain Relationships and Related Transactions.
Except for relationships and transactions that we have disclosed in other
sections of this registration statement such as (a) the ownership of our
securities, (b) the compensation described herein and (c) advances to and by
certain officers to cover expenses, all of which were reimbursed or repaid
without interest, none of our directors, executive officers, holders of ten
percent of our outstanding shares of common stock, or any associate or affiliate
of such person, have, to our knowledge, had a material interest, direct or
indirect, during the three fiscal years ended December 31, 1996, 1997 and 1998
or in any proposed transaction which may materially affect us.
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Item 8. Legal Proceedings.
On July 28, 1999, we were advised by legal counsel for Pan Pacific
Communications, an advisor to Bingo.com, Inc., that we allegedly breached an
agreement between us and Pan Pacific Communications. Pan Pacific Communications
demanded payment, on or before August 5, 1999, in the amount of $34,820, the
alleged balance owed by us to Pan Pacific Communications, and informed us that
they would commence legal seeking the damages with interest and costs. We
believe the claim is without merit and intend to vigorously defend against any
action brought by Pan Pacific Communications. As of August 21, 1999, we not
aware that any legal action been commenced against us.
To the best of our knowledge, we are not subject to any other active or pending
legal proceedings or claims against us or any of our properties. However, from
time to time, we may become subject to claims and litigation generally
associated with any business venture.
Item 9. Market Price of and Dividends on Registrant's Common Equity and Related
Stockholder Matters.
On March 19, 1997, our common stock was approved for trading on the OTCBB under
the symbol PGLB. In January 1999, we changed our name from Progressive General
Lumber Corporation to Bingo.com, Inc., and our OTCBB symbol was changed to BIGG.
On July 26, 1999, we changed our trading symbol from BIGG to BIGR. The following
table sets forth, for the periods indicated, the range of the high and low bid
quotations (as reported by NASD). There were no trades of our securities on the
OTCBB prior to the first quarter 1999.
The bid quotations set forth below, reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not reflect actual transactions:
OTCBB
<TABLE>
---------------------------- -------------------------- ------------------------- --------------------------
1999 High ($) Low ($) Volume
---------------------------- -------------------------- ------------------------- --------------------------
<S> <C> <C> <C>
1st Quarter 8.75 1.875 6,404,500
---------------------------- -------------------------- ------------------------- --------------------------
2nd Quarter 13.125 3.75 12,198,800
---------------------------- -------------------------- ------------------------- --------------------------
</TABLE>
On August 20, 1999, the last reported sales price of our common stock, as
reported by the NASD was $3.00. As of May 15, 1999, there were 76 holders of
record of our common stock.
We have not declared or paid any cash dividends on our common stock since our
inception, and our Board of Directors currently intends to retain all earnings
for use in the business for the foreseeable future. Any future payment of
dividends will depend upon our results of operations, financial condition, cash
requirements and other factors deemed relevant by our Board of Directors.
Item 10. Recent Sales of Unregistered Securities.
Pursuant to a resolution dated June 30, 1988, we initially issued 5,000 shares
of common stock (the "Original Shares") to founders of the corporation at a
deemed price of $1.00 per share for
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services rendered. The shares were issued to the following persons: Joseph
Camillo, Michael Camillo, Isabell Cantera, Paul Caruso, Jessica Cohen, Patricia
Cohen, Stephanie Cohen, Louise Cunningham, Anthony Derrick, Michael Derrick,
David Disner, Nicole Johnson, Alan Kirsch, Sheila Langley, Michael Lewis, Ada
Liebskind, Eric Littman, William Morano, Phyllis Morano, Jim Thorphe, James
Turcharelli, Douglas Ward, Pamela Wilkinson and Terra Wilkinson. On July 17,
1998, we increased our authorized share capital from 7,500 authorized shares of
common stock to 50,000,000 shares of common stock. Pursuant to the resolution
authorizing the increase in authorize share capital, our board of directors of
Bingo.com declared a stock dividend (a forward split) that increased our number
of Original Shares on a 200-for-1 basis, resulting in 1,000,000 outstanding
common shares. The issuance of Original Shares was exempt from registration
under the provisions of Section 4(2) of the Securities Act of 1933, as amended.
The issuance of the shares did not involve a public offering.
We issued 7,500,000 shares of our common stock for $0.01 per share to raise
$75,000. This offering was fully subscribed, and the shares were issued on
January 12, 1999 to the following investors: Terra Growth Investment Fund,
Centennial Growth Investment Fund, GTL Financial Group Inc., Lindlay Equity
Fund, Remington Capital Partners Ltd., E.C. Money Fund Ltd., Geraldine Santini,
Abdolrahim Motalebpoor-Laylabadi, Mohammad R.D. Mashhoor, A. Salem and
Whitecliffe Investment Fund. The offering was not underwritten. This sale was
exempt from registration in reliance upon Rule 504 under Regulation D
promulgated under the Securities Act. The aggregate offering price did not
exceed $1,000,000, and the offering was otherwise in compliance with Rules 501
and 502 promulgated under the Securities Act.
Pursuant to an Asset Purchase Agreement dated January 18, 1999, we issued
500,000 shares of our common stock to Bingo.com, Inc. as consideration for the
acquisition of the domain name "Bingo.com." The shares were issued to Bingo,
Inc., an Antigua corporation, in reliance on an exemption from registration
pursuant to Section 4(2) of the Securities Act of 1933 and Regulation S
promulgated under the Securities Act. No placement agent was retained in
connection with the issuance and no fees or commissions were paid in connection
with the transaction. The shares were issued subject to an Escrow Agreement
dated January 27, 1999, under which the shares were released to Bingo, Inc.
after confirmation of the transfer of the domain name, "Bingo.com".
Pursuant to a Subscription Agreement dated February 12, 1999, we issued units
consisting of one common share and one common share purchase warrant for $2.00
per unit to raise $1,000,000. Each share purchase warrant is exercisable to
acquire one additional common share at $2.00 per share until February 11, 2000.
This offering was made to one subscriber, Dotcom Fund, S.A., a Turks and Caicos
Islands company and a non-U.S. Person, outside the United States. The offering
was not underwritten. The shares were issued on an exemption from registration
pursuant to Regulation S promulgated under the Securities Act. No placement
agent was retained in connection with the offering and no fees or commissions
were paid in connection with the transaction.
Pursuant to a Subscription Agreement dated April 23, 1999, we issued units
consisting of one common share and one common share purchase warrant for $12.00
per unit to raise $5,000,016. Each share purchase warrant is exercisable to
acquire one additional common share at $12.00 per
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share until April 22, 2000 and at $15.00 per share until April 22, 2001. This
offering was made to Goldberg Equity Fund, a Turks and Caicos Islands company
and a non-U.S. Person, outside the United States. The offering was not
underwritten. The shares were issued in reliance on an exemption from
registration pursuant to Regulation S promulgated under the Securities Act. No
placement was retained in connection with the offering and no fees or
commissions were paid in connection with the transactions.
Item 11. Description of Registrant's Securities to be Registered.
Pre-reorganization - Bingo.com (Florida)
Our authorized capital stock consists of 50,000,000 shares of common stock, par
value $0.001 per share. As of July 31, 1999, there were 9,916,668 issued and
outstanding shares of our common stock. On July 31, 1999, there were 84 holders
of record of common stock.
We have also agreed to issue 250,000 shares of our common stock to Stratford as
consideration for services related to the first phase of the development of the
Bingo.com (Canada) portal. We anticipate we will finalize a definitive agreement
with Stratford in the third quarter of 1999 and issue the shares.
Each of our stockholders is entitled to one vote for each share of common stock.
All elections for directors are decided by plurality vote; all other questions
are decided by majority vote except as may otherwise be provided by our Articles
of Incorporation or by the Florida General Corporation Law.
The holders of our common stock are not entitled to cumulative voting rights
with respect to the election of directors, and as a consequence, minority
stockholders will not be able to elect directors on the basis of their votes
alone. Our stockholders are entitled to receive ratably such dividends as may be
declared by our Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the company, our
stockholders are entitled to share ratably in all assets remaining after payment
of liabilities. Our stockholders have no preemptive rights and no right to
convert their common stock into any other securities. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of our common stock are fully paid and non-assessable.
Post Reorganization Rights and Analysis
We anticipate we will restructure our corporate structure to become an Antigua
International Business Corporation pursuant to a plan of reorganization. The
reorganization will be accomplished through the merger of us with and into
Bingo.com (Wyoming), our wholly owned subsidiary, and that immediately after the
merger, Bingo.com (Wyoming) will continue out of the United States to become an
Antigua International Business Corporation. After giving effect to the
reorganization, we anticipate that each of our outstanding shares of common
stock will, subject to the exercise of statutory dissenters' rights under
Florida law, be automatically converted into one outstanding share the resulting
Antigua International Business Corporation.
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Comparison of Your Rights as a Shareholder now and After the Reorganization
Florida law and our Articles of Incorporation and Bylaws govern your rights as a
stockholder of our stock. After the reorganization you will become a stockholder
of an Antigua International Business Corporation (unless you dissent) and the
Antigua International Business Corporation Act or the "IBCA", our Articles of
Continuance and our new Bylaws will govern your rights.
The principal attributes of your shares of our common stock and our shares after
the reorganization will be similar; however, there will be certain differences.
In addition, there are certain differences between our current Articles of
Incorporation and Bylaws, and our Articles of Continuance and Bylaws after
reorganization. The following discussion is a summary of all material
differences in your stockholder rights resulting from the reorganization, but
does not and covers all of the respects in which Antigua law may differ from
laws generally applicable to Florida corporations. You should review the
complete text of the relevant provisions of the Antigua IBCA, the Florida
Business Corporation Act or the "FBCA", our Articles of Incorporation and Bylaws
and our proposed Articles of Continuance and Bylaws.
Stockholder Approval of Business Combinations
Under the FBCA, there is no statutory restriction on a Florida corporation's
ability to acquire the business of another corporation. However, a merger or
consolidation, sale, lease, exchange or other disposition of all or
substantially all of the property of the corporation a "Disposition" not in the
usual and regular course of the corporation's business, or a dissolution of the
corporation, is required to be approved by the holders of a majority of the
shares entitled to vote thereon unless the Articles of Incorporation provides
otherwise. In addition, under the FBCA, class-voting rights exist with respect
to amendments to the Articles of Incorporation that adversely affect the terms
of the shares of a class. Such class voting rights do not exist as to other
extraordinary matters, unless the certificate of incorporation provides
otherwise; our Articles of Incorporation do not provide otherwise.
The IBCA requires the approval of the holders of at least two-thirds (2/3) of
the votes cast at a special meeting called for such purpose for Bingo.com
(Holding) to (i) merge, consolidate or amalgamate with another company or (ii)
reorganize or reconstruct itself pursuant to a plan sanctioned by the Antigua
courts.
Absence of Required Vote for Certain Mergers
Under the FBCA, no vote of the stockholders of a corporation surviving a merger
is required to approve a merger if (i) the agreement of merger does not amend
the Articles of Incorporation of such corporation, (ii) each share of stock of
such corporation outstanding immediately before the merger is to be an identical
outstanding or treasury share of the surviving corporation with identical
designations, preferences, limitations and relative rights.
There is no equivalent provision in the IBCA and therefore the stockholders of
the surviving company in such a situation would be entitled to vote on the
merger as described above.
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Appraisal Rights
Under the FBCA, a stockholder of a corporation does not have appraisal rights in
connection with a merger or consolidation or, in the case of a disposition, if
(i) the shares of such corporation are listed on a national securities exchange
or held of record by more than 2,000 stockholders, as is presently not the case
with our company, or (ii) such corporation will be the surviving corporation of
the merger and no vote of the stockholders of the surviving corporation is
required to approve such merger; provided, however, that a stockholder is
entitled to appraisal rights in the case of a merger or consolidation if such
stockholder is required by the terms of an agreement of merger or consolidation
to accept in exchange for the shares of such stockholder anything other than (i)
shares of stock of the corporation surviving or resulting from such merger or
consolidation, (ii) shares of any other corporation that on the effective date
of the merger or consolidation will be either listed on a national securities
exchange or held of record by more than 2,000 stockholders, (iii) cash in lieu
of fractional shares of the corporation described in the foregoing clauses (i)
and (ii), or (iv) any combination of the foregoing.
The IBCA does not provide for appraisal rights. However, in the case of a court
sanctioned reorganization of an Antigua company as described above, a dissenting
stockholder has the right to express to the court such stockholder's view that
the transaction sought to be approved would not provide the stockholders with
the fair value of their shares.
Stockholder Consent to Action Without Meeting
Under the FBCA, unless otherwise provided in the Articles of Incorporation, any
action that can be taken at a meeting of the stockholders may be taken without a
meeting if written consent thereto is signed by the holders of outstanding stock
having the minimum number of votes necessary to authorize or take such action at
a meeting of the stockholders.
There is no equivalent provision under the IBCA. However, Articles of
Continuance may provide that a resolution in writing signed by all of the
stockholders entitled to vote thereon at a meeting of stockholders is as valid
as if that resolution had been approved at a meeting of the stockholders.
Special Meetings of Stockholders
Under the FBCA, a special meeting of stockholders may be called only by the
board of directors or by persons authorized in our Articles of Incorporation or
the Bylaws. Our Bylaws provide for the call of a special meeting of stockholders
by our President or Secretary, or by resolution of our Board of Directors.
Under the IBCA, a special meeting will be able to be called by the Board of
Directors or by the holders of not less than five percent (5%) of the issued
shares of a corporation that carry the right to vote at the meeting sought to be
held.
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Distributions and Dividends; Repurchases and Redemptions
Under the FBCA, a corporation may pay dividends out of surplus and, if there is
no surplus, out of net profits for the current and/or the preceding fiscal year,
unless the net assets of the corporation are less than the capital represented
by issued and outstanding stock having a preference on asset distributions.
Surplus is defined in the FBCA as the excess of the net assets over capital, as
the board may adjust such capital. A Florida corporation may purchase or redeem
shares of any class except when its capital is impaired or would be impaired by
such purchase or redemption. A corporation may, however, purchase or redeem out
of capital shares that are entitled upon any distribution of its assets to a
preference over another class or series of its stock if such shares are to be
retired and the capital reduced. Under the IBCA, the directors may pay to the
stockholders such dividends as appear to the directors to be justified by the
profits of the Corporation unless the corporation is unable or would, after the
payment, be unable to pay its liabilities as they become due, or the realizable
value of the corporation's assets would thereby be less than the aggregate of
its liabilities and stated capital of all classes.
Vacancies on Board of Directors
Under the FBCA, a vacancy and a newly created directorship may be filled by a
majority of the remaining directors, although less than a quorum, unless
otherwise provided in the Articles of Incorporation or Bylaws. Neither our
Articles of Incorporation nor our Bylaws provides otherwise so.
The IBCA and our proposed Bylaws after the reorganization will provide that a
vacancy and a newly created directorship may be filled by a majority of the
remaining directors, so long as a quorum of directors continues to exist at all
times.
Removal of Directors
Under the FBCA, except in the case of a corporation with a classified board, any
director or the entire board may be removed, with or without cause, by the
holders of a majority of the shares entitled to vote at an election of
directors.
The IBCA provides that directors may be removed by the affirmative vote of the
holders of at least a majority of the outstanding shares entitled to vote.
Inspection of Books and Records
Under the FBCA, any stockholder may inspect the corporation's books and records
for a proper purpose.
Shareholders of an Antigua corporation may inspect or obtain copies of the list
of shareholders, corporate records or financial statements.
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Amendment of Articles of Incorporation
Under the FBCA, our Articles of Incorporation may be amended if (i) the board of
directors sets forth the proposed amendment in a resolution, declares the
advisability of the amendment and directs that it be submitted to a vote at the
meeting of stockholders and (ii) the holders of at least a majority of shares of
stock entitled to vote thereon approve the amendment, unless the Articles of
Incorporation requires the vote of a greater number of shares. If the holders of
the outstanding shares of a class are entitled to vote as a class upon a
proposed amendment, the holders of a majority of the outstanding shares of such
class must also vote in favor of the amendment.
Under the IBCA, Articles of Incorporation may be amended if the holders of at
least a majority of shares of stock entitled to vote thereon approve the
amendment, unless the Articles of Incorporation requires the vote of a greater
number of shares.
Amendment of Bylaws
Under the FBCA, our Board of Directors may amend our Bylaws as our Articles of
Incorporation authorize such amendment. Our stockholders also have the power to
amend our Bylaws. Under the IBCA, our Bylaws after the reorganization may only
be amended by a special resolution.
Indemnification of Directors and Officers
The IBCA and the FBCA have different provisions and limitations regarding
indemnification by a corporation of its officers, directors, employees and
agents. If the reorganization is approved, the IBCA indemnification provisions
will not apply to any act or omission that occurs before the reorganization. The
following is a summary comparison of the IBCA and FBCA indemnification
provisions:
Under the FBCA, indemnification rights are expressly non-exclusive. A
corporation is permitted to provide indemnification or advancement of expenses,
by bylaw provisions, agreement or otherwise, against judgments, fines, expenses
and amounts paid in settlement actually and reasonably incurred by the person in
connection with such proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. Our Articles of Incorporation and Bylaws make indemnification
mandatory on the part of our Officers and Directors to the fullest extent
permitted by law.
Antigua law does not limit the extent to which a corporation's Articles of
Incorporation and/or Bylaws may provide for the indemnification of officers and
directors, except to the extent that such provision may be held by the Antigua
courts to be contrary to public policy (for instance, for purporting to provide
indemnification against the consequences of committing a crime). In addition, an
officer or director may not be indemnified for his own dishonesty or willful
neglect or default.
Our Articles of Continuance are anticipated to contain provisions providing for
the indemnity of our officers, directors, employee and agents to the same extent
as permitted under our Articles of Incorporation.
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Limited Liability of Directors
The FBCA permits the adoption of Articles of Incorporation provisions limiting
or eliminating the monetary liability of a director to a corporation or its
stockholders by reason of a director's breach of the fiduciary duty of care. The
FBCA does not permit any limitation of the liability of a director for (i)
breaching the duty of loyalty to the corporation or its stockholders, (ii)
failing to act in good faith, (iii) engaging in intentional misconduct or a
known violation of law, (iv) obtaining an improper personal benefit from the
corporation or (v) paying a dividend or approving a stock repurchase that was
illegal under the FBCA. Our Articles of Incorporation eliminates the monetary
liability of a director to the fullest extent permitted by the FBCA.
There is no equivalent provision under the IBCA.
Stockholders' Suits
The FBCA requires only that the stockholder bringing a derivative suit must have
been a stockholder at the time of the wrong complained of or that the stock
devolved to him by operation of law from a person who was such a stockholder. In
addition, the stockholder must remain a stockholder throughout the litigation.
Under of the IBCA a complainant may, for the purpose of prosecuting, defending
or discontinuing an action on behalf of a corporation, apply to an Antigua court
for leave to bring an action in the name and on behalf of the corporation or any
of its subsidiaries, or intervene in an action to which any such corporation or
any of its subsidiaries is a party. However, no derivative action may be brought
and no intervention may be made unless the court is satisfied (i) that the
complainant has given reasonable notice to the directors of the corporation or
its subsidiary of his intention to apply to the court if the directors of the
corporation or its subsidiary do not bring, diligently prosecute or defend or
discontinue the action, (ii) that the complainant is acting in good faith and
(iii) that it appears to be in the interest of the corporation or its subsidiary
that the action be brought, prosecuted, defended or discontinued.
Rights of Dissenting Stockholders
General
Our stockholders who follow the procedures specified in the FBCA will be
entitled to have their shares of common stock appraised and to receive payment
of the "fair value" of such shares, exclusive of any element of value arising
from the accomplishment or expectation of the reorganization, as determined by a
Florida court of competent jurisdiction. In order to take advantage of such
rights, the procedures set forth in the dissenter's rights provisions of the
FBCA must be strictly followed. Failure to comply with any of the procedures may
result in a termination or waiver of appraisal rights.
The following is a summary of FBCA ss.607.1320 the dissenter's rights provision.
Under FBCA ss.607.1320, a stockholder of Bingo.com (Florida) electing to
exercise appraisal rights must both:
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(1) Deliver to us (or effectively our resolution Antigua
Corporation within 20 days after the date of approval of the
reorganization, a written demand for appraisal of his shares
which reasonably informs us of the identity of the stockholder of
record and that such record stockholder intends thereby to demand
the appraisal of his shares; and
(2) Not approve or vote in favor of the proposal relating to the
reorganization.
The written demand for appraisal must be made by or for you in your registered
name.
Within 120 days after the date of the reorganization, we or any stockholder who
has satisfied the foregoing conditions and is otherwise entitled to appraisal
rights under FBCA ss.607.1320, may file a petition in the Florida court of
competent jurisdiction demanding a determination of the fair value of the shares
of held by all stockholders entitled to appraisal rights. If no such petition is
filed, appraisal rights will be lost for all stockholders who had previously
demanded appraisal of their shares.
Within 120 days after the date of the reorganization, any dissenting stockholder
who has complied with the provisions of FBCA ss.607.1320 is entitled, upon
written request, to receive from us, a statement setting forth the aggregate
number of shares of not voted in favor of adoption of the reorganization with
respect to which demands the appraisal we received, and the number of holders
seeking appraisal. The statement must be mailed within 10 days after we receive
the written request or within 10 days after expiration of the time for delivery
of demands for appraisal under FBCA ss.607.1320, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such petition
the court will determine who is entitled to appraisal rights and will appraise
the value of the common stock owned by these stockholders, determining its "fair
value" exclusive of any element of value arising from the accomplishment or
expectation of the reorganization. The Court will direct us to pay the fair
value of such shares together with a fair rate of interest, if any. A
stockholder may also request the Court to order that all or a portion of the
expenses incurred in connection with an appraisal proceeding, including,
reasonable attorneys' fees and the fees and expenses of experts, be charged pro
rata against the value of all the shares entitled to appraisal.
Item 12. Indemnification of Directors and Officers.
Our Bylaws require us to indemnify to the fullest extent permitted by law each
person that is empowered by law to indemnify. Our Articles of Incorporation
require us to indemnify to the fullest extent permitted by Florida law, each
person that we have the power to indemnify.
Florida law permits a corporation, under specified circumstances, to indemnify
its directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit, or proceeding
brought by third parties by reason of the fact that they were or are
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directors, officers, employees or agents of the corporation, if such directors,
officers, employees or agents acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reason to believe their conduct was unlawful. In a derivative action, i.e. one
by or in the right of the corporation, indemnification may be made only for
expenses actually and reasonably incurred by directors, officers, employees or
agents in connection with the defense or settlement of an action or suit, and
only with respect to a matter as to which they shall have acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation, unless and only
to the extent that the court in which the action or suit was brought shall
determine upon application that the defendant directors, officers, employees or
agents are fairly and reasonably entitled to indemnity for such expenses despite
such adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no
director shall be liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Florida law (for unlawful payment
of dividends, or unlawful stock purchases or redemptions) or (4) a transaction
from which the director derived an improper personal benefit. The intention of
the foregoing provisions is to eliminate the liability of our directors or our
stockholders to the fullest extent permitted Florida law.
There is no equivalent provision under the IBCA.
Item 13. Financial Statements and Supplementary Data.
Not Applicable.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
On August 31, 1998, Barry L. Friedman, P.C. resigned as our independent
auditors. Our financial statements for the years ended December 31, 1997 and
1996 contain no adverse opinion or disclaimer of opinion and have not been
qualified or modified as to uncertainty, audit scope, or accounting opinion.
Barry L. Friedman, P.C. has not been associated with any of our financial
statements subsequent to August 31, 1998. The change in independent chartered
accountants was effective for fiscal 1998, was approved by our board of
directors and was not due to any disagreement between us and Barry L. Friedman,
P.C.
During the period two financial years prior to and preceding the change in
independent auditors, there were no disagreements with Barry L. Friedman, P.C.
on any matter of accounting principles or practices, financial statement
disclosures or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Barry L. Friedman, P.C. would have caused them to make
reference thereto in their report on our financial statements for the period. We
59
<PAGE>
have authorized Barry L. Friedman, P.C. to respond fully to any subject matter
of any potential disagreement with respect to our financial statements.
We have not been advise by Barry L. Friedman, P.C. or our current auditors,
Davidson and Company, Chartered Accountants, of any of the following: (A) lack
of internal controls necessary to for us to develop reliable financial
statements; (B) any information that has come to the attention of our auditors
that has led them to no longer be able to rely on management's representations
or that has made them unwilling to be associated with the financial statements
prepared by management; (C) any need to expand significantly the scope of our
auditors' audit or information that has come to our auditors' attention during
the period two financial years prior to and preceding the change in our
independent auditors that if further investigated, would (i) materially impact
the fairness or reliability of the previously issued audit report or the
financial statements issued or covering such period or (ii) cause our auditors
to become unwilling to rely on management's representations or that has made
them unwilling to be associated with our financial statements, or due to the
resignation of Barry L. Friedman, P.C. or any other reason, our auditor did not
so expand the scope of the audit or conduct such further investigation; and (D)
any information that has come to the attention of our auditors that has led them
to conclude that such information materially impacts the fairness or reliability
of the audit reports or the financial statements issued covering the period two
financial years prior to and preceding the change in our independent auditors
(including information that, unless resolved, to the satisfaction of such
auditor, would prevent it from rendering an unqualified audit report on those
financial statements) and due to the resignation of Barry L. Friedman, P.C. or
any other reason, any issue has not been resolved to such auditor's satisfaction
prior to Barry L. Friedman, P.C.'s resignation.
We engaged Davidson and Company, Chartered Accountants, as our independent
auditors on February 1, 1999. We engaged Davidson and Company to audit our
financial statement for the year ended December 31, 1998. There were no
disagreements with Barry L. Friedman, P.C. on any matter of accounting
principles or practices, financial statement disclosures or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of Barry L.
Friedman, P.C. would have caused them to make reference thereto in their report
on our financial statements for the period
Item 15. Financial Statements and Exhibits.
The following financial statements and related schedules are included in this
Item:
(a) Financial Statements
Unaudited Financial Statements
Bingo.com, Inc. (formerly Progressive General Lumber Corp.)
Consolidated Balance Sheets as at June 30, 1999 (unaudited).
Bingo.com, Inc. (formerly Progressive General Lumber Corp.)
Consolidated Statements of Income and Deficit for the periods ended
June 30, 1999 and 1998 (unaudited).
60
<PAGE>
Bingo.com, Inc. (formerly Progressive General Lumber Corp.)
Consolidated Statements of Changes in Financial Position for the
periods ended June 30, 1999 and 1998 (unaudited).
Notes to Unaudited Consolidated Financial Statements.
Audited Financial Statements
Auditors' Report
Progressive General Lumber Corp. Consolidated Balance Sheets as at
December 31, 1998 and 1997.
Progressive General Lumber Corp. Consolidated Statements of Income and
Deficit for the years ended December 31, 1998, 1997 and 1996.
Progressive General Lumber Corp. Consolidated Statements of Changes in
Financial Position for the years ended December 31, 1998, 1997 and
1996.
Notes to Consolidated Financial Statements.
o Exhibits
Exhibit
Number Description
------ -----------
3.1* Articles of Incorporation of Progressive Lumber Corp.
effective January 12, 1987.
3.2* Articles of Amendment to Progressive Lumber Corp. filed on
July 17, 1998.
3.3* Articles of Amendment to Progressive Lumber Corp. effective
January 22, 1999.
3.4* Bylaws of Bingo.com, Inc.
10.1* Form of Stock Subscription Agreement dated December 1998.
10.2* Asset Purchase Agreement by and between Bingo, Inc. and
Progressive Lumber, Corp. dated January 18, 1999.
10.3* Escrow Agreement by and among Bingo.com, Inc., Bingo, Inc.
and Clark, Wilson dated January 27, 1999.
10.4* Registrant Name Change Agreement by and among Network
Solutions, Bingo, Inc. and Bingo.com, Inc. dated January
1999.
10.5 Lease Agreement by and between Harwood Corporation and
Bingo.com (Canada) Enterprises Inc. & 559262 B.C. Ltd.
commencing February 1, 1999.
61
<PAGE>
Exhibit
Number Description
------ -----------
10.6* Development Agreement by and between Stratford Internet
Technologies Inc. and Bingo.com, Inc. dated February 17,
1999.
10.7* Private Placement Subscription Agreement by and between
Bingo.com, Inc and Dotcom Fund, S.A. dated February 11,
1999.
10.8* Share Purchase Warrant issued to Dotcom Fund, S.A. dated
February 12, 1999.
10.9 Application and Agreement for Merchant Services by and
between State Communications Ltd. and Global Payment
Services dated April 21, 1999.
10.10* Subscription Agreement by and between Bingo.com, Inc and
Goldberg Equity Fund dated April 23, 1999.
10.11* Share Purchase Warrant issued to Goldberg Equity Fund dated
April 23, 1999.
10.12* Declaration of Trust made by Douglas Albert Lorne McLeod
dated May 1999.
10.13 Employment Agreement by and between Bingo.com, Inc. and
Shane Murphy dated June 17, 1999, effective July 1, 1999.
10.14 Agent Agreement by and between Bingo.com, Inc. and Access
World, Inc. dated April 6, 1999,
16.1 Consent and Acknowledgement of Barry L. Friedman.
21.1 List of Subsidiaries of Registrant
* Previously filed with the Registrant's registration statement on Form 10 on
June 9, 1999.
62
<PAGE>
BINGO.COM, INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
SIX MONTHS ENDED JUNE 30, 1999
<PAGE>
BINGO.COM INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
<TABLE>
===================================================================================================================
(Audited)
June 30, December 31,
1999 1998
- ---------------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents(Note 3) $ 4,594,304 $ 157,600
Accounts receivable (allowance - Nil) 28,619 -
Prepaid expenses 124,285 -
--------------- -------------
4,747,208 157,600
Equipment
Office and computers 71,079 -
Gaming 175,520 -
Less: accumulated depreciation (3,554) -
--------------- -------------
243,045 -
--------------- -------------
Other
Security deposits 18,586 -
Software development costs(Note 4) 95,822 -
Gaming licence (Note 5) 100,000 -
Domain Name rights (Note 6) 1,200,936 -
--------------- -------------
1,415,344 -
--------------- -------------
$ 6,405,597 $ 157,600
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable $ 15,140 $ 159,404
Accrued liabilities 16,277 -
Loan payable 50,000 -
--------------- -------------
81,417 159,404
--------------- -------------
Stockholders' equity
Capital stock
Authorized
50,000,000 common shares with a par value of $0.001
(December 31, 1997 - 1,500,000 common shares
with a par value of $1.00)
Issued
9,916,968 shares (December 31, 1997 - 1,000,000 shares) 9,917 1,000
Additional paid in capital 7,061,457 4,000
Deficit accumulated during the development stage (746,563) (6,804)
Accumulative Comprehensive Other Income (631) -
--------------- -------------
6,324,180 (1,804)
--------------- -------------
$ 6,405,597 $ 157,600
===================================================================================================================
</TABLE>
Commitments (Note 11)
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BINGO.COM INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
<TABLE>
=============================================================================================================================
Three Months Six Months
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ -
-------------- -------------- -------------- -------------
EXPENSES
General and administrative 302,412 - 497,863 1,904
Depreciation 3,554 - 3,554 -
Marketing and advertising 217,704 - 257,647 -
-------------- -------------- -------------- -------------
Operating loss (523,670) - (759,064) (1,904)
OTHER
Interest 24,558 - 19,305 100
-------------- -------------- -------------- --------------
Net loss $ (499,112) $ - $ (739,759) $ (1,804)
=============================================================================================================================
Basic and dilutive loss per share $ (0.05) $ - $ (0.09) $ -
Weighted average shares 9,756,411 1,000,000 8,628,914 1,000,000
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BINGO.COM INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
<TABLE>
=============================================================================================================================
Three Months Six Months
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $ (499,112) $ - $ (739,759) $ (1,804)
Other comprehensive income, net of tax:
Foreign currency translation adjustments (631) - (631) -
- ---------------------------------------------------------------------------------------------------- ------------------------
Other comprehensive income (631) - (631) -
Comprehensive Income $ (499,743) $ - $ (740,390) $ (1,804)
=============================================================================================================================
Basic and dilutive loss per share $ (0.05) $ - $ (0.09) $ -
Weighted average shares 9,756,411 1,000,000 8,628,914 1,000,000
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BINGO.COM INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
<TABLE>
Deficit
Accumulated
Capital Stock Additional Cumulative During
-------------- ------------- Paid-in Translation Development
Shares Amount Capital Adjustment Stage Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995, 1996
and 1997 1,000,000 $ 1,000 $ 4,000 $ - $ (5,000) $ -
Loss for the year - - - - (1,804) (1,804)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 1,000,000 1,000 4,000 - (6,804) (1,804)
January, 1999 Private placement 7,500,000 7,500 67,500 - - 75,000
January, 1999 Domain name rights 500,000 500 999,500 - - 1,000,000
February, 1999 Private placement
(Note 7a) 500,000 500 999,500 - - 1,000,000
April, 1999 Private placement
(Note 7b) 416,668 417 4,999,600 - - 5,000,017
Share issuance costs - - (8,643) - - (8,643)
Loss for the period - - - - (739,759) (739,759)
Accumulative Comprehensive
Other Income - - - (631) - (631)
------------ ------------ ------------ ------------ ------------ ------------
Balance, June 30, 1999 9,916,668 $ 9,917 $ 7,061,457 $ (631) $ (746,563) $ 6,324,180
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BINGO.COM INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
<TABLE>
=============================================================================================================================
June 30, June 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (739,759) $ -
Adjustment to reconcile net loss to net cash used in operating activities
Depreciation 3,554 -
Change in non-cash working capital items
Accounts receivable (28,619) -
Prepaid expenses (124,285) -
Accounts payable (144,264) -
Accrued liabilities 16,277 -
Loan payable 50,000 -
-------------- -------------
Net cash used in operating activities (967,096) -
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Software development costs (95,822) -
Domain name rights (200,936) -
Purchase equipment (246,599) -
Gaming license (100,000) -
Security deposits (18,586) -
-------------- -------------
Net cash used in investing activities (661,943) -
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 6,075,017 -
Share issuance costs (8,643) -
-------------- -------------
Net cash provided by financing activities 6,066,374 -
-------------- -------------
Net increase in cash and cash equivalents 4,437,335 -
Effect of exchange rates on cash and cash equivalents (631) -
Cash and cash equivalents at the beginning of period 157,600 -
-------------- -------------
Cash and cash equivalents at end of period $ 4,594,304 $ -
=============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 7,253 $ -
Non cash investing and financing activities:
Issuance of common stock for domain name rights 1,000,000 -
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BINGO.COM, INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
JUNE 30, 1999
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on January 12, 1987, under the laws of the State
of Florida as Progressive General Lumber Corp. The Company currently has no
operations and, in accordance with SFAS #7, is considered a development
stage company. On January 22, 1999, the Company changed its name to
Bingo.com, Inc.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through private placements.
On July 17, 1998, the State of Florida approved the Company's restated
Articles of Incorporation, which increased its capitalization from 7,500
common shares to 50,000,000 common shares. The par value was changed from
$1.00 to $0.001.
In addition, the Company forward split its common stock 200:1, thus
increasing the number of outstanding common stock shares from 5,000 shares
to 1,000,000 shares. All common shares and per share data have been
retroactively adjusted to reflect these stock splits.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary (consisting only of normal
recurring accruals) to present fairly the financial information contained
therein. These statements do not include all disclosures required by
generally accepted accounting principles and should be read in conjunction
with the audited financial statements of the Company for the year ended
December 31, 1998. The results of operations for the six months ended June
30, 1999 are not necessarily indicative of the results to be expected for
the year ending December 31, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
These consolidated financial statements include the accounts of the Company
and the accounts of its wholly owned subsidiaries, Bingo.com (Canada) Inc.
and Bingo.com (Antigua) Inc. All intercompany balances and transactions
have been eliminated upon consolidation.
Foreign currency translation
The Company accounts for foreign currency transactions and translation of
foreign currency financial statements under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52").
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transactions dates. Carrying values of
monetary assets and liabilities are adjusted at each balance sheet date to
reflect the exchange rate at that date. Non monetary assets and liabilities
are translated at the exchange rate on the original transaction date. Gains
and losses from restatement of foreign currency monetary and non-monetary
assets and liabilities are included in income. Revenues and expenses are
translated at the rates of exchange prevailing on the dates such items are
recognized in earnings.
Financial statements of the Company's Canadian subsidiary, Bingo.com
(Canada) Inc. are translated into U.S. dollars using the exchange rate at
the balance sheet date for assets and liabilities. The functional currency
of Bingo.com (Canada) Inc. is the local currency, the Canadian dollar.
Translation adjustments, if necessary, are recorded as a separate component
of Stockholders' Equity.
<PAGE>
BINGO.COM, INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
JUNE 30, 1999
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
Taxes on income
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been recognised in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events
other than enactment's of changes in the tax laws or rates.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the year. Actual results could differ from these estimates.
Loss per share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). Under SFAS 128, basic and diluted earnings per share are to be
presented. Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding in the period. Diluted earnings per share takes into
consideration common shares outstanding (computed under basic earnings per
share) and potentially dilutive common shares.
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components.
New accounting standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the
type of hedge transaction. The Company does not expect that the adoption of
SFAS No. 133 will have a material impact on its consolidated financial
statements because the Company does not currently hold any derivative
instruments.
<PAGE>
BINGO.COM, INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
JUNE 30, 1999
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Software development
The Company has adopted Statement of Position 98-1 ("SOP 98-1") "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use",
as its accounting policy for internally developed computer software costs.
Under SOP 98-1, computer software costs incurred in the preliminary
development stage are expensed as incurred. Computer software costs
incurred during the application development stage are capitalized and
amortized over the software's estimated useful life of three years.
Domain name
The Company has capitalized the cost of the purchase of the domain name
Bingo.com and will amortize the cost over 10 years from the date of
commencement of operations.
Capital assets
Capital assets will be recorded at cost less accumulated amortization.
Amortization will be provided for annually using the declining balance
method at the following rates:
Office & computers 20%
Gaming equipment 20%
Revenue Recognition
The Company will be recognizing revenues as follows:
a) Bingo gaming - as cash is received
b) Banner advertising - revenue is recognized equal to the cash to
be received from banner advertisement, when the buyer has made an
unconditional commitment to pay and the earnings process has been
completed by the rendering of the required services.
Advertising costs
The Company recognizes advertising expenses in accordance with Statement of
Position 98-7, "Reporting on Advertising Costs'. As such, the Company
expenses the cost of communicating advertising in the period in which the
advertising space or airtime is used.
3. CASH AND CASH EQUIVALENTS
An amount of $22,352 represents a pledge collateral for a corporate credit
card.
4. SOFTWARE DEVELOPMENT COSTS
Software development costs represent amounts incurred to develop the
Company's portal website.
<PAGE>
BINGO.COM, INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
JUNE 30, 1999
================================================================================
5. GAMING LICENSE
The company's gaming license represents an annual cost of securing and
maintaining a license to operate an online internet bingo in the Country of
Antigua.
The annual costs of the license will be amortized over 12 months upon the
commencement of operations.
6. DOMAIN NAME RIGHTS
An agreement to purchase the right to use the domain name Bingo.com was
acquired as follows:
- $200,000 cash (paid)
- 500,000 common shares (issued) at a deemed price of $2.00 per share
In addition, the Company is required to pay quarterly royalties of 4% of
gross revenues with a minimum guarantee of $1,100,000.
<TABLE>
Domain name 1999 1998
---------------------------------------------------------------------------------------------
<S> <C> <C>
Bingo.com 1,200,000 -
Other 936 -
------------- ------------
1,200,936 $ -
=============================================================================================
</TABLE>
7. CAPITAL STOCK
a) The Company issued 500,000 units of a private placement consisting of
one common share and one share purchase warrant for $2.00 per unit for
total proceeds of $1,000,000. Each share purchase warrant entitles the
holder to acquire one additional common share at $2.00 per share until
February 11, 2000.
b) The Company issued 416,668 units of a private placement consisting of
one share and one share purchase warrant for $12.00 per unit for total
proceeds of $5,000,016. Each share purchase warrant entitles the
holder to acquire one additional common share at $12.00 per share
until April 22, 2000 and at $15.00 per share until April 22, 2001.
8. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO OPERATING, FINANCING AND INVESTING
ACTIVITIES
For the six month period ended June 30, 1999, the Company issued 500,000
common shares at a deemed price of $2.00 for the purchase of a domain name
(Note 6). There were no non-cash transactions for the six month period
ended June 30, 1998.
<PAGE>
BINGO.COM, INC.
(formerly Progressive General Lumber Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
JUNE 30, 1999
================================================================================
9. INCOME TAXES
Subject to certain restrictions, the Company has certain operating losses
available to reduce taxable income of future years. Future tax benefits
which may arise as a result of these losses and resource deductions have
not been recognized in these financial statements.
The Company has not recorded potential future income tax benefits of $6,904
in operating losses which expire as follows:
2003 $ 5,000
2008 1,904
--------------
$ 6,904
10. COMPREHENSIVE INCOME
Total comprehensive loss for the year ended December 31, 1998, and the six
month period ended June 30, 1999 was $(1,804) and $(740,390), respectively.
The only item included in other comprehensive loss is foreign currency
translation adjustments in the amounts of $Nil for the year ended December
31, 1998 and $631 for the six month period ended June 30, 1999.
<TABLE>
============================================================================================
Foreign
Currency Accumulated
Translation Comprehensive
Adjustment Income (loss)
--------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance, December 31, 1998 $ - $ -
-------------- -----------------
Current - period change (631) (631)
-------------- -----------------
Ending balance, June 30, 1999 $ (631) $ (631)
============================================================================================
</TABLE>
11. SUBSEQUENT EVENT
The Company retained the services of its new President and Chief Executive
Officer, Shane Murphy, on July 1, 1999 for a term of 3 years. He will be
paid a salary of Cdn$250,000 per year and have 300,000 stock options
reserved, but not granted, for him at a price of US$4.75.
12. COMMITMENTS
a) The Company has entered into an agreement with Stratford Technologies
Inc. ("Stratford") to develop the Company's portal website. In return
for Stratford's services, the Company has agreed to issue 250,000
common shares.
b) The Company has entered into an agreement with Access World, Inc.
("Access") to act as a consultant to license and set up the Company's
structure and operations in Antigua. The Company agreed to compensate
Access as follows:
i) Payment of $15,000 (paid).
ii) Reserve, and grant in the future, a total of 50,000 stock options
of the Company, exercisable at $4.75 per share.
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1998
<PAGE>
A Partnership of
Incorporated Professionals
DAVIDSON & COMPANY=========Chartered Accountants================================
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Progressive General Lumber Corp.
(A Development Stage Company)
We have audited the balance sheet of Progressive General Lumber Corp. as at
December 31, 1998 and the statements of operations, stockholders' deficiency and
cash flows for the year then ended and the cumulative amounts from incorporation
on January 12, 1987 to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1998 and the
results of its operations and stockholders' deficiency and its cash flows for
the year then ended and the cumulative amounts from incorporation on January 12,
1987 to December 31, 1998 in accordance with generally accepted accounting
principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The audited financial statements as at December 31, 1997 and 1996 and for the
years then ended were examined by another auditor who expressed an opinion
without reservation on those statements in his report dated August 3, 1998.
/s/ Davidson & Company
Vancouver, Canada Chartered Accountants
March 17, 1999 (except as to Note 6
which is as of August 24, 1999)
A Member of Accounting Group International
==========================================
Suite 1270, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors August 3, 1998
Progressive General Lumber Corp.
Orlando, Florida
I have audited the accompanying Balance Sheets of Progressive General
Lumber Corp., (A Development Stage Company), as of July 31, 1998, December 31,
1997, and December 31, 1996, and the related statements of operations,
stockholders' equity and cash flows for the two years ended December 31, 1997,
December 31, 1996, and the period January 1, 1998, to July 31, 1998. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Progressive General Lumber
Corp., (A Development Stage Company) as of July 31, 1998, December 31, 1997, and
December 31, 1996, and the results of its operations and cash flows for the two
years ended December 31, 1997, and December 31, 1996, and the period January 1,
1998, to July 31, 1998, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note 4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Barry L. Friedman
- ----------------------------
Barry L. Friedman
Certified Public Accountant
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
BALANCE SHEETS
(Expressed in United States Dollars)
AS AT DECEMBER 31
<TABLE>
==================================================================================================================
1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash (Note 3) $ 157,600 $ -
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current
Accounts payable (Note 3) $ 159,404 $ -
------------- ------------
Stockholders' deficiency
Capital stock
Authorized
50,000,000 common shares with a par value of $0.001
(December 31, 1997 - 1,500,000 common shares with
a par value of $1.00)
Issued
1,000,000 shares (December 31, 1997 - 1,000,000 shares) 1,000 5,000
Additional paid in capital 4,000 -
Deficit accumulated during the development stage (6,804) (5,000)
------------- ------------
(1,804) -
------------- ------------
$ 157,600 $ -
==================================================================================================================
</TABLE>
Subsequent events (Note 4)
The accompanying notes are an integral part of
these financial statements.
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
<TABLE>
==============================================================================================================================
Cumulative
Amounts from
Incorporation
on January 12, Years Ended December 31
1987 to -------------------------------------------------
December 31,
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 100 $ 100 $ - $ -
EXPENSES
General, selling and administrative 6,904 1,904 - -
--------------- -------------- -------------- -------------
Net loss for the period $ (6,804) $ (1,804) $ - $ -
==============================================================================================================================
Basic and dilutive loss per common share (Note 2) $ - $ - $ - $ -
==============================================================================================================================
Weighted average number of common
shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
(Expressed in United States Dollars)
<TABLE>
==============================================================================================================================
Deficit
Accumulated
Capital Stock Additional During the
--------------- --------------- Paid-in Development
Shares Amount Capital Stage Total
- -------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,000,000 $ 1,000 $ 4,000 $ (5,000) $ -
Loss for the year - - - - -
-------------- -------------- -------------- -------------- ------------
Balance, December 31, 1996 1,000,000 1,000 4,000 (5,000) -
Loss for the year - - - - -
-------------- -------------- -------------- -------------- ------------
Balance December 31, 1997 1,000,000 1,000 4,000 (5,000) -
Loss for the year - - - (1,804) (1,804)
-------------- -------------- -------------- -------------- -------------
Balance, December 31, 1998 1,000,000 $ 1,000 $ 4,000 $ (6,804) $ (1,804)
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
<TABLE>
==============================================================================================================================
Cumulative
Amounts from
Incorporation
on January 12, Years Ended December 31
1987 to ------------------------------------------------
December 31,
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (6,804) $ (1,804) $ - $ -
Adjustment to reconcile net loss to net cash
provided by operating activities - - - -
Change in non-cash working capital items
Increase in accounts payable 164,404 159,404 - -
--------------- -------------- -------------- -------------
Net cash provided by operating activities 157,600 157,600 - -
--------------- -------------- -------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES - - - -
--------------- -------------- -------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES - - - -
--------------- -------------- -------------- -------------
Change in cash position for the period - - - -
Cash, beginning of period - - - -
--------------- -------------- -------------- -------------
Cash, end of period $ 157,600 $ 157,600 $ - $ -
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1998
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized January 12, 1987, under the laws of the State of
Florida as Progressive General Lumber Corp. The Company currently has no
operations and, in accordance with SFAS #7, is considered a development
stage company.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through private placements.
On July 17, 1998, the State of Florida approved the Company's restated
Articles of Incorporation, which increased its capitalization from 7,500
common shares to 50,000,000 common shares. The par value was changed from
$1.00 to $0.001.
In addition, the Company forward split its common stock 200:1, thus
increasing the number of outstanding common stock shares from 5,000 shares
to 1,000,000 shares. All common shares and per share data have been
retroactively adjusted to reflect these stock splits.
2. SIGNIFICANT ACCOUNTING POLICIES
Foreign currency translation
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transactions dates. Carrying values of
monetary assets and liabilities are adjusted at each balance sheet date to
reflect the exchange rate at that date. Non-monetary assets and liabilities
are translated at the exchange rate on the original transaction date. Gains
and losses from restatement of foreign currency monetary and non-monetary
assets and liabilities are included in income. Revenues and expenses are
translated at the rates of exchange prevailing on the dates such items are
recognized in earnings.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
Taxes on income
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been recognised in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events
other than enactment's of changes in the tax laws or rates.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the year. Actual results could differ from these estimates.
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1998
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Loss per share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"). Under FAS 128, basic and diluted earnings per share are to be
presented. Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding in the period. Diluted earnings per share takes into
consideration common shares outstanding (computed under basic earnings per
share) and potentially dilutive common shares. FAS 128 is effective for
interim and annual financial statements ending after December 15, 1997.
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS No. 130 had no impact on total
stockholders' equity as of December 31, 1998.
New accounting standards
In March 31, 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". This standard
requires companies to capitalize qualifying computer software costs which
are incurred during the application development stage and amortize them
over the software's estimated useful life. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998. The Company does not expect that
the adoption of SOP 98-1 will have a material impact on its consolidated
financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting on the Costs of Start-Up Activities". SOP 98-5
is effective for fiscal years beginning after December 31, 1998. SOP 98-5
requires costs of start-up activities and organization costs to be expensed
as incurred. Adoption is not expected to have a material effect on the
Company's consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the
type of hedge transaction. The Company does not expect that the adoption of
SFAS No. 133 will have a material impact on its consolidated financial
statements because the Company does not currently hold any derivative
instruments.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Capital assets
Capital assets will be recorded at cost less accumulated amortization.
Amortization will be provided for annually using the declining balance
method at the following rates:
Office & computers 20%
Gaming equipment 20%
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1998
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Domain name
The Company will be capitalizing the cost of the purchase of the domain
name Bingo.com and will amortize the cost over 10 years from the date of
commencement of operations.
Revenue Recognition
The Company will be recognizing revenues as follows:
a) Bingo gaming - as cash is received
b) Banner advertising - revenue is recognized equal to the cash to
be received from banner advertisement, when the buyer has made an
unconditional commitment to pay and the earnings process has been
completed by the rendering of the required services.
Advertising costs
The Company recognizes advertising expenses in accordance with Statement of
Position 98-7, "Reporting on Advertising Costs'. As such, the Company
expenses the cost of communicating advertising in the period in which the
advertising space or airtime is used.
3. CASH
The amount of $157,500 represents amounts payable to third parties is
included in accounts payable, and was paid subsequent to year end.
4. SUBSEQUENT EVENTS
i) Intangible asset - domain name rights
On January 18, 1999, the Company finalized an agreement to purchase
the domain name www.bingo.com. The Company is in the process of
arranging for the domain name to be transferable to the Company at the
Domain Name Registry maintained by Network Solutions, Inc. The
agreement allowed the Company to change it's name to Bingo.com Inc..
The purchase was financed as follows:
o $200,000 cash (paid), plus
o 500,000 common shares of the Company (issued), plus
o ongoing quarterly royalty payments equal to 4% of the Company's
gross revenues, with a total minimum guarantee of $1,100,000.
ii) Equity funding
The Company completed a financing under Regulation D, Rule 504, by
issuing 7,500,000 common shares for proceeds of $75,000 on January 7,
1999. In February, 1999, the Company completed Phase I of its
financing requirements with a $1,000,000 private placement of 500,000
units, each consisting of one common share and one common share
purchase warrant at a price of $2.00 per unit. The warrants are
exercisable at a price of $2.00, for a period of one year.
<PAGE>
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1998
================================================================================
4. SUBSEQUENT EVENTS (cont'd.....)
iii) Stock options and warrants
In February, 1999, the Company reserved a total of 1,145,000 options
and intends to grant in the future a total of 645,000 options,
exercisable at $4.75 per share, to certain employees and advisors of
the Company.
iv) Name change
The Company underwent a change of control in January, 1999 and changed
its name to Bingo.com Inc. on January 22, 1999.
v) The Company has entered into a preliminary agreement to assist in the
design and implementation of the Company's Web site. The Company will
issue 250,000 shares as payment of fees incurred in providing the
consulting services referred to in the agreement.
5. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO OPERATING, FINANCING AND INVESTING
ACTIVITIES
There were no non-cash transactions for the years ended December 31, 1998,
1997 or 1996. Prior to December 31, 1996, the Company issued 5,000 common
shares for services relating to the organization and formation of the
Company.
6. INCOME TAXES
Subject to certain restrictions, the Company has certain operating losses
available to reduce taxable income of future years. Future tax benefits
which may arise as a result of these losses have not been recognized in
these financial statements.
The Company has not recorded potential future income tax benefits of $6,904
in operating losses which expire as follows:
2003 $ 5,000
2008 1,904
--------------
$ 6,904
==============
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
BINGO.COM, INC.
Date: August 30, 1999
/s/ Shane Murphy
- ----------------------------------------
Shane Murphy, President
<PAGE>
Exhibit
Number Description
------ -----------
3.1* Articles of Incorporation of Progressive Lumber Corp.
effective January 12, 1987.
3.2* Articles of Amendment to Progressive Lumber Corp. filed on
July 17, 1998.
3.3* Articles of Amendment to Progressive Lumber Corp. effective
January 22, 1999.
3.4* Bylaws of Bingo.com, Inc.
10.1* Form of Stock Subscription Agreement dated December 1998.
10.2* Asset Purchase Agreement by and between Bingo, Inc. and
Progressive Lumber, Corp. dated January 18, 1999.
10.3* Escrow Agreement by and among Bingo.com, Inc., Bingo, Inc.
and Clark, Wilson dated January 27, 1999.
10.4* Registrant Name Change Agreement by and among Network
Solutions, Bingo, Inc. and Bingo.com, Inc. dated January
1999.
10.5 Lease Agreement by and between Harwood Corporation and
Bingo.com (Canada) Enterprises Inc. & 559262 B.C. Ltd.
commencing February 1, 1999.
10.6* Development Agreement by and between Stratford Internet
Technologies Inc. and Bingo.com, Inc. dated February 17,
1999.
10.7* Private Placement Subscription Agreement by and between
Bingo.com, Inc and Dotcom Fund, S.A. dated February 11,
1999.
10.8* Share Purchase Warrant issued to Dotcom Fund, S.A. dated
February 12, 1999.
10.9 Application and Agreement for Merchant Services by and
between State Communications Ltd. and Global Payment
Services dated April 21, 1999.
<PAGE>
Exhibit
Number Description
------ -----------
10.10* Subscription Agreement by and between Bingo.com, Inc and
Goldberg Equity Fund dated April 23, 1999.
10.11* Share Purchase Warrant issued to Goldberg Equity Fund dated
April 23, 1999.
10.12* Declaration of Trust made by Douglas Albert Lorne McLeod
dated May 1999.
10.13 Employment Agreement by and between Bingo.com, Inc. and
Shane Murphy dated June 17, 1999, effective July 1, 1999.
10.14 Agent Agreement by and between Bingo.com, Inc. and Access
World, Inc. dated April 6, 1999,
16.1 Consent and Acknowledgement of Barry L. Friedman.
21.1 List of Subsidiaries of Registrant
* Previously filed with the Registrant's registration statement on Form 10 on
June 9, 1999.
EXHIBIT 10.5
THIS LEASE is dated the 22nd day of February, 1999/
BETWEEN:
Harwood Corporation
(the "Landlord")
- and -
Bingo.com (Canada) Enterprises, Inc.
&
559262 B.C. Ltd.
(the "Tenant")
Section 1: Grant and Premises
In consideration of the performance by the Tenant of its obligations under this
Lease, the Landlord leases to the Tenant the mutually agreed upon Rentable Area
(the "Premises") comprising 2,155 square feet, situated on the 7th floor of the
Bower Building (the "Building") located at 543 Granville Street, Vancouver,
British Columbia on lands and premises which are legally described as: Lot 2,
Block 32, DL 541 (the "Lands") for the Term. Useable area comprises 2,155 square
feet, shown outlined in red on the plan attached as Schedule "A" The parties
hereto mutually agree that the above figures are the correct figures and will be
used in all calculations under this Lease.
Section 2: Term
The term of this Lease (the "Term") is 3 (three) years and 3 (three) months
commencing from the 1st day of February 1999 (the "Commencement Date") and
expiring on April 30, 2002.
Section 3: Rent
(a) The Rent for the Premises shall be $13.25 per square foot. The annual Rent
during this time shall be $28,553.75 payable in monthly installments of
$2,379.48. The Tenant shall pay rent (the "Rent") throughout the Term, to the
Landlord, at the office of the Landlord or at such other place designated by the
Landlord, in lawful money of Canada, without prior demand and without any
deduction, abatement, setoff or compensation. Rent will be payable to the
Landlord in equal monthly installments, each in advance, on the first day of
each calendar month of the Term commencing on the Commencement Date.
(b) The Tenant shall also pay to the Landlord the Tenant's proportionate share
of Operating Costs (outlined in Schedule "B") and the estimated property taxes
for the Premises in equal monthly installments. This rate is currently estimated
at $11.81 per square foot (Operating Costs and Property Taxes combined). Such
payment shall be included with the Rent payment set out in Section 3(a). In the
event that the actual taxes exceed the estimated amount, the Tenant shall pay
such deficiency on demand. In the event the actual taxes are less than the
estimated amount paid by the Tenant, the Landlord shall refund to the Tenant the
amount paid in excess of the actual taxes.
(c) The Tenant shall also pay to the Landlord or to the appropriate taxing
authority if required by the Landlord, all goods and services taxes, sales
taxes, value added taxes, business transfer taxes, or any other taxes imposed on
the Landlord with respect to Rent or in respect of the rental of space under
this Lease, whether characterized as a goods and services tax, sales tax, value
added tax, business transfer tax or otherwise. The Landlord shall have the same
remedies and rights with respect to the payment or recovery of such taxes as it
has for the payment or recovery of Rent under this Lease.
(d) A deposit cheque for $28,892.22 payable to the Harwood Corporation, has
been received, and $4,815.37 shall be credited to the Tenant for its payment of
the first Basic Rent due, plus Goods and Services Tax. The balance shall be held
as security and credited towards the last 5 (five) months rent due in the Term.
In the event of default under the terms hereof, the Landlord may terminate this
agreement and retain the deposit in full satisfaction of any remedies available
to the Landlord.
<PAGE>
Section 4: Option to Renew
The Tenant shall have the right to renew the Lease with respect to the Premises
and any additional space leased for an additional Term of 5 (five) years on the
same terms and conditions, save and except for any inducements, option and the
Rent. The Rent during the renewal period shall be at a fair market rent for the
space at the time of renewal. Such rate shall be mutually agreed upon by the
Tenant and Landlord, failing which the rate shall be determined by an arbitrator
mutually agreed to by the Tenant and Landlord. To exercise the right, the Tenant
shall give written notice to the Landlord no later than 4 (four) months prior to
the date of expiry of the Term, otherwise this Option to Renew shall be deemed
waived.
Section 5: Use
The Premises shall be used for the purposes of a business office only. The
Tenant shall conduct its business in the Premises in a reputable and first class
manner. The number of employees is not to exceed 8 (eight) without Landlord
approval.
Section 6: Taxes and Utilities
(a) The Tenant shall pay when due all business taxes attributable to the
personal property, trade fixtures, business, income, occupancy or sales of the
Tenant or any other occupant of the Premises and to any leasehold improvements
installed in the Premises and to the use of the Building by the Tenant.
(b) The Landlord shall replace bulbs, tubes and ballasts in the lighting system
in the Premises,
Section 7: Landlord's Services
(a) The Landlord shall make available to the Premises electricity for normal
lighting and miscellaneous power requirements and, in normal quantities, water
and other public utilities generally made available to other tenants of the
Building by the Landlord. Elevators, Building access and washrooms are available
at all times to Tenant, subject to Section 20b.
(b) The Landlord may: (i) alter the Building (ii) do such things on, or in the
Lands as are required to comply with any laws, regulations, orders or directives
affecting the Lands; and (iii) do such other things on or in the Lands as the
Landlord, in the use of good business judgment determines to be advisable;
provided that notwithstanding anything contained in this Section, access to the
Premises shall at all times be available. The Landlord shall not be in breach of
its covenant for quiet enjoyment or liable for any loss, costs or damages,
whether direct or indirect, incurred by the Tenant due to any of the foregoing.
(c) The Landlord will provide janitorial and cleaning services consistent with
the standard of first class buildings in the City of Vancouver.
Section 8: Receiving, Shipping, Movement of Articles
(a) The Tenant shall not receive or ship articles of any kind except through
facilities and designated doors and at hours designated by the Landlord and
under the supervision of the Landlord.
(b) Hand trucks, carryalls or similar appliances shall only be used in the
Building with the consent of the Landlord and shall be equipped with rubber
tires, slide guards and other such safeguards as the Landlord requires.
(c) The Tenant, its agents, servants, contractors, invitees or employees, shall
not bring in or take out, position, construct, install or move any safe,
business machinery or other heavy machinery or equipment or anything liable to
injure or destroy any part of the Building without first obtaining the consent
in writing of the Landlord.
Section 9: Access and Entry
(a) The Landlord shall be entitled at all reasonable times, and at any time in
case of emergency, to enter the Premises to examine them; to make such repairs,
alterations or improvements in the Premises or to the Building as the Landlord
considers necessary or desirable and for any other purpose necessary to enable
the Landlord to perform its obligations or exercise its rights under this Lease
or in the administration of the Building. The Landlord shall exercise its rights
under this Section, to the extent
2
<PAGE>
possible in the circumstances, in such manner so as to minimize interference
with the Tenant's use and enjoyment of the Premises.
(b) The Landlord and its agents shall have the right to enter the Premises at
all reasonable times, with prior consent not to be unreasonably withheld, to
show them to prospective purchasers and, during the last four months of the Term
(or the last four months of any renewal term if this Lease is renewed), to
prospective tenants.
(c) No entry into the Premises or anything done hereunder by the Landlord
pursuant to a right granted by this Lease shall constitute a breach of any
covenant for quiet enjoyment, or (except where expressed by the Landlord in
writing) shall constitute a re-entry or forfeiture, or an actual or constructive
eviction.
Section 10: Maintenance
(a) The Landlord may enter the Premises at all reasonable times to view their
condition and the Tenant shall at its sole cost maintain and keep the Premises
in good and substantial repair, reasonable wear and tear excepted, according to
notice in writing. At the expiration or earlier termination of the Term, the
Tenant shall surrender the Premises to the Landlord in as good condition and
repair as the Tenant is required to maintain the Premises throughout the Term.
(b) If the Tenant fails to carry out any maintenance, repairs or work required
to be carried out by it under this Lease to the reasonable satisfaction of the
Landlord, the Landlord may at its option carry out such maintenance or repairs
without any liability for any resulting damage to the Tenant's property or
business. The cost of such work, plus a sum equal to 15% of such cost
representing the Landlord's overhead, shall be paid by the Tenant to the
Landlord.
Section 11: Landlord's Work
The Landlord shall, at its cost, provide improvements as detailed in Schedule C,
hereof.
Section 12: Parking
The Landlord shall provide to the Tenant 2 reserved parking stalls in the
Building at market rate (currently $150.00 per month plus GST and PST).
Section 13: Time of The Essence
Time is of the essence in this agreement.
Section 14: Compliance with Laws
The Tenant shall, at its own expense, promptly comply with all laws, by-laws and
government orders and all reasonable requirements or directives of the Landlord
affecting the Premises or their use, repair or alteration.
Section 15: Lease Provisions
All provisions of this Lease shall survive the completion of this transaction.
In the event of any conflict between the provisions of this Lease and the Offer
to Lease, the provisions of this Lease shall prevail.
Section 16: Tenant's Alterations
(a) No repairs or alterations shall be made to the Premises without the
Landlord's written approval, such approval not to be unreasonably withheld. The
Tenant shall submit to the Landlord details of the proposed work including
drawings and specifications prepared by qualified engineers conforming to good
engineering practice. All such alterations shall be performed: (i) at the sole
cost of the Tenant; (ii) by contractors and workmen approved by the Landlord;
(iii) in a good and workmanlike manner; (iv) in accordance with drawings and
specifications approved by the Landlord; (v) in accordance with all applicable
legal and insurance requirements; (vi) subject to the reasonable regulations,
supervision, control and inspection of the Landlord; (vii) subject to such
indemnification against liens and expenses as the Landlord reasonably requires;
and (viii) in accordance with all applicable laws, by-laws and government
orders. The Landlord's reasonable cost incurred with respect to the Tenant's
repairs and alterations including without limitation the cost of approving,
supervising and inspecting all such work shall be paid by the Tenant if any
alterations are completed after the Commencement Date.
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(b) The Tenant shall promptly pay for all materials supplied and work done with
respect to repairs and alterations of the Premises so as to ensure that no lien
is registered against any portion of the Lands. If a lien is registered, the
Tenant shall discharge it at its expense forthwith, failing which the Landlord
may at its option discharge the lien by paying the amount claimed to be due into
court or directly to the lien claimant and the amount so paid and all expenses
of the Landlord including reasonable legal fees (on a solicitor and client
basis) shall be paid by the Tenant to the Landlord.
(c) The Tenant shall be entitled to erect signage in the Premises. All signage
must meet City of Vancouver by-laws, and be in keeping with the stature of the
Building. The Landlord shall have the sole determination whether any signage is
in keeping with said stature.
Section 17: Repair Where Tenant at Fault
Notwithstanding any other provision of this Lease, if the Building is damaged or
destroyed or requires repair, replacement or alteration as a result of the act
or omission of the Tenant, its employees, agents, invitees, licensees,
contractors or others for whom it is in law responsible, the cost of the
resulting repairs, replacements or alterations plus a sum equal to 15% of such
cost representing the Landlord's overhead, shall be paid by the Tenant to the
Landlord. Landlord has sole discretion.
Section 18: Removal of Tenant Improvements
(a) All Tenant Improvements (other than trade fixtures) shall immediately upon
their placement, before or during the Term, become the Landlord's property
without compensation to the Tenant. Except as otherwise agreed by the Landlord
in writing, no improvements shall be removed from the Premises by the Tenant
either during or at the expiration or sooner termination of the Term except
that:
(i) the Tenant may, during the Term, in the usual course of its business,
remove its trade fixtures, provided that the Tenant is not in default under this
Lease; and
(ii) the Tenant shall, at the expiration or earlier termination of the
Term, at its sole cost, remove its trade fixtures from the Premises, failing
which, at the option of the Landlord, the trade fixtures shall become the
property of the Landlord and may be removed from the Premises and sold or
disposed of by the Landlord in such manner as it deems advisable.
Section 19: Tenant's Insurance
(a) The Tenant shall, throughout the Term, take out and keep in full force and
effect, insurance for all contents and Tenant Improvements. In addition,
comprehensive general liability insurance which includes the following
coverages: owners protective; personal injury; occurrence property damage; and
employers and blanket contractual liability must be in effect. Such policies
shall: contain inclusive limits of not less than $5,000,000; provide for cross
liability; and name the Landlord as an insured. Such insurance may be in the
form of a binder on the Tenant's existing blanket insurance policy. All policies
shall contain (i) the Landlord's mortgagee(s) (if any) standard mortgage clause,
(ii) a waiver of any subrogation rights which the Tenant's insurers may have
against the Landlord, its mortgagees and against those for whom the Landlord is
in law responsible, and (iii) an undertaking by the insurers to notify the
Landlord and the Landlord's mortgagee(s) (if any) in writing not less than
thirty (30) days prior to any material change, cancellation or termination
thereof.
(b) The Tenant shall not keep or use in the Premises any article which may be
prohibited by any fire insurance policy in force from time to time covering the
Premises. If: (i) the conduct of business in, or use or manner of use of the
Premises; (ii) or any acts or omissions of the Tenant cause or result in any
increase in premiums for any insurance carried by the Landlord with respect to
the Building, the Tenant shall pay any such increase in premiums.
Section 20: Loss or Damage
(a) The Landlord shall not be liable for any death or injury arising from or
out of any occurrence in, upon, at, or relating to the Lands or damage to
property of the Tenant or of others located on the Premises or elsewhere except
in the case of negligence. The Landlord shall not be liable for any such damage
caused by other tenants or persons on the Lands, or the public. All property of
the Tenant kept or stored on the Premises shall be so kept or stored at the risk
of the Tenant only and the Tenant releases
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and agrees to indemnify the Landlord and save it harmless from any claims
arising out of any damage to the same including, without limitation, any
subrogation claims by the Tenant's insurers.
(b) The Landlord shall not be responsible for any damages caused to the Tenant
by reason of failure of any equipment or facilities serving the Building except
in the case of negligence. The Landlord shall have the right to stop, interrupt
or reduce any services, systems or utilities provided to, or serving the
Building to perform repairs, alterations or maintenance or to comply with laws
or regulations, or requirements of its insurers, or for causes beyond the
Landlord's reasonable control.
Section 21: Indemnification of the Landlord
Notwithstanding any other provision of this Lease, the Tenant shall indemnify
the Landlord and save it harmless from all loss (including loss of Rent) claims,
actions, damages, liability and expense in connection with loss of life,
personal injury, damage to property or any other loss or injury whatsoever
arising out of this Lease, or any occurrence in, upon or at the Premises, or the
use by the Tenant of the Premises or any part thereof, or occasioned wholly or
in part by any act or omission of the Tenant or by anyone permitted to be on the
Premises by the Tenant. If the Landlord shall, without fault on its part, be
made a party to any litigation commenced by or against the Tenant, then the
Tenant shall protect, indemnify and hold the Landlord harmless in connection
with such litigation. The Landlord may, at its option, participate in or assume
carriage of any litigation or settlement discussions relating to the foregoing,
or any other matter for which the Tenant is required to indemnify the Landlord
under this Lease. Alternatively, the Landlord may require the Tenant to assume
carriage of and responsibility for all or any part of such litigation or
discussions.
Section 22: Destruction of or Damage to Building
(a) Notwithstanding anything contained in this Lease, if:
(i) thirty-five percent (35%) or more of the Building; or
(ii) a portion of the Building or of the Lands or any other improvements on
the Lands which affect access or services essential to the Premises;
is damaged or destroyed by any cause whatsoever (irrespective of whether the
Premises are damaged or destroyed) and if, in the opinion of the Landlord
reasonably arrived at, the Building or the essential portion described above, as
the case may be, so damaged or destroyed cannot be rebuilt or made fit for the
purposes of the respective tenants of such space within one hundred and eighty
(180) days of the happening of the damage or destruction; then, the Landlord or
Tenant may at its option (to be exercised by written notice to the other party
within sixty (60) days following any such occurrence), elect to terminate this
Lease. In the case of such election, the Term and the tenancy hereby created
shall expire upon the thirtieth (30th) day after such notice is given, without
indemnity or penalty payable by, or any other recourse against the Landlord, and
the Tenant shall, within such thirty (30) day period, vacate the Premises and
surrender them to the Landlord with the Landlord having the right to re-enter
and repossess the Premises discharged of this Lease. Rent shall be due and
payable without reduction or abatement subsequent to the destruction or damage
and until the date of termination.
(b) If the Landlord is entitled to, but does not elect to terminate this Lease
under Section 23(a), the Landlord shall, following such damage or destruction,
diligently repair if necessary that part of the Building damaged or destroyed,
but only to the extent of the Landlord's obligations under the terms of the
various leases for premises in the Building and exclusive of any tenant's
responsibilities with respect to such repair. If the Landlord elects to repair
the Building, the Landlord may do so in accordance with plans and specifications
other than those used in the original construction of the Building.
Section 23: Assignments, Subleases and Transfers
The Tenant shall not enter into, consent to, or permit any assignment, sublease
or other assignment, sublease or other transfer of this Lease or its rights with
respect to the Premises without prior written consent of the Landlord, which
consent shall not be unreasonably withheld.
Section 24: Assignment by Landlord
The Landlord shall have the unrestricted right to sell, lease, convey or
otherwise dispose of all or any part of the Building or Lands or this Lease or
any interest of the Landlord in this Lease. To the extent that the purchaser or
assignee from the Landlord assumes the obligations of the Landlord under this
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Lease, the Landlord shall thereupon and without further agreement be released
from all subsequent liability under this Lease.
Section 25: Defaults
An "Event of Default" shall occur whenever:
(a) any Rent is in arrears and is not paid within 5 (five) days after written
demand by the Landlord;
(b) the Tenant has breached any of its obligations in this Lease (other than
the payment of Rent) and:
(i) fails to remedy such breach within 15 (fifteen) days (or such shorter
period as may be provided in this Lease) of the receipt of written
notification of the alleged breach;
(ii) if such breach cannot be reasonably remedied within 15 days or such
shorter period, the Tenant fails to commence to remedy such breach
within such 15 days or shorter period or thereafter fails to proceed
diligently to remedy such breach; in either case after notice in
writing from the Landlord; or
(c) the Tenant becomes bankrupt or insolvent or takes the benefit of any
statute for bankrupt or insolvent debtors or makes any proposal, assignment or
arrangement with its creditors, or any steps are taken or proceedings commenced
by any person for the dissolution, winding-up or other termination of the
Tenant's existence or the liquidation of its assets; or
(d) the Tenant abandons or attempts to abandon the Premises or disposes of its
goods so that there would not after such disposal be sufficient goods of the
Tenant on the Premises subject to distress to satisfy Rent for at least 3
months, or the Premises become vacant and unoccupied for a period of 10 (ten)
consecutive days or more without the consent of the Landlord.
Section 26: Default and Remedies
(a) If and whenever an Event of Default occurs, then without prejudice to any
other rights which it has pursuant to this Lease or at law, the Landlord shall
have the following rights and remedies which are cumulative and not alternative:
(i) on providing the Tenant with notice of the default, and allowing
15 (fifteen) days to remedy said default, to terminate this Lease whether or not
the Landlord has, with respect to the same or another Event of Default,
previously elected or pursued a right or remedy which is inconsistent with
termination of this Lease;
(ii) to enter the Premises as agent of the Tenant and to relet the
Premises for whatever term, and on such terms as the Landlord in its discretion
may determine and to receive the Rent therefor and as agent of the Tenant to
take possession of any property of the Tenant on the Premises, to store such
property at the expense and risk of the Tenant or to sell or otherwise dispose
of such property in such manner as the Landlord may see fit without notice to
the Tenant; to make alterations to the Premises to facilitate their reletting;
and to apply the proceeds of any such sale or reletting first, to the payment of
any expenses incurred by the Landlord with respect to any such reletting or
sale; second, to the payment of any indebtedness of the Tenant to the Landlord
other than Rent; and third, to the payment of Rent in arrears; with the residue
to be held by the Landlord and applied in payment of future Rent as it becomes
due and payable. The Tenant shall remain liable for any deficiency to the
Landlord. If any reletting extends for a period beyond the end of the Term, such
reletting shall not constitute a termination of this Lease, but a reletting as
agent of the Tenant up to the end of the Term and a letting thereafter by the
Landlord for its own account;
(iii) to recover from the Tenant all damages, and expenses incurred by
the Landlord as a result of any breach by the Tenant including, if the Landlord
terminates this Lease, any deficiency between those amounts which would have
been payable by the Tenant for the portion of the Term following such
termination and the net amounts actually received by the Landlord during such
period of time with respect to the Premises;
(iv) to remedy or attempt to remedy any default of the Tenant under
this Lease for the account of the Tenant and to enter upon the Premises for such
purposes. No notice of the Landlord's intention to perform such covenants need
be given the Tenant unless expressly required by this Lease. The Landlord shall
not be liable to the Tenant for any loss, injury or damage caused by acts of the
Landlord in remedying or attempting to remedy such default and the Tenant shall
pay to the Landlord all
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expenses incurred by the Landlord in connection with remedying or attempting to
remedy such default; and
(v) to recover from the Tenant the full amount of the current month's
Rent together with the next 3 month's installments of Rent, all of which shall
immediately become due and payable as accelerated rent.
(b) Notwithstanding any provision of this Lease or any provision of applicable
legislation, none of the goods and chattels of the Tenant on the Premises at any
time during the Term shall be exempt from levy by distress for Rent in arrears,
and the Tenant waives any such exemption. If the Landlord makes any claim
against the goods and chattels of the Tenant by way of distress, this provision
may be pleaded as an estoppel against the Tenant in any action brought to test
the right of the Landlord to levy such distress.
Section 27: Damages and Costs
The Tenant shall pay to the Landlord all reasonable damages and costs
(including, without limitation, all legal fees on a solicitor and his client
basis) incurred by the Landlord in enforcing or interpreting the terms of this
Lease, or with respect to any matter or thing which is the obligation of the
Tenant under this Lease, or in respect of which the Tenant has agreed to insure,
or to indemnify the Landlord. Landlord has sole. discretion, subject to
arbitration.
Section 28: Survival of Obligations
If the Tenant has failed to fulfill its obligations under this Lease with
respect to the payment of Rent or the removal of improvements and fixtures from
the Premises at the end of the Term, such obligations and the Landlord's rights
in respect thereto shall remain in full force and effect notwithstanding the
expiration, surrender or sooner termination of the Term.
Section 29: Subordination
(a) This Lease and all rights of the Tenant shall be subject and subordinate to
any and all mortgages, charges or like security agreements arranged by the
Landlord of its interest in the Building (the "Mortgages"). On request, the
Tenant shall acknowledge in writing the subordination of this Lease and its
rights under this Lease to any and all such Mortgages and to all advances made
under such Mortgages, provided however, the Landlord has obtained a
non-disturbance agreement in favour of the Tenant. The form of such
subordination shall be mutually agreeable to the Landlord and Tenant.
(b) Within 10 days after written request by the Landlord, the Tenant shall
deliver in a form supplied by the Landlord a statement or estoppel certificate
to the Landlord as to the status of this Lease, including as to whether this
Lease is unmodified and in full force and effect; the amount of Rent then being
paid; and any other matters pertaining to this Lease as to which the Landlord
shall request such statement or certificate, provided that in no event does such
estoppel certificate adversely affect in any way the rights of the Tenant or its
security of tenure.
Section 30: Rules and Regulations
The Tenant shall comply with all Rules and Regulations, and amendments thereto,
adopted by the Landlord from time to time. Such Rules and Regulations may
differentiate between different types of businesses in the Building, and the
Landlord shall have no obligation to enforce any Rule or Regulation or the
provisions of any other lease against any other tenant, and the Landlord shall
have no liability to the Tenant with respect thereto.
Section 31: Registration
Neither the Tenant nor anyone claiming under the Tenant shall register this
Lease.
Section 32: Notices
Any notice, consent or other instrument which may be or is required to be given
under this Lease shall be in writing and shall be delivered in person or sent by
registered mail postage prepaid, addressed: (a) if to the Landlord: #1700 - 543
Granville Street, Vancouver, B.C. V6C 1X8; and (b) if to the Tenant: #702 - 543
Granville Street, Vancouver B.C. V6C 1X8. Any such notice or other instrument
shall be deemed to have been given and received on the day upon which personal
delivery is made or, if mailed, then 48 hours following the date of mailing.
Either party may give notice to the other of any change of address
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and after the giving of such notice, the address therein specified is deemed to
be the address of such party for the giving of notices. If postal service is
interrupted or substantially delayed, all notices or other instruments shall be
delivered in person.
Section 33: Entire Agreement
This Lease sets forth the entire agreement between the Landlord and Tenant
concerning the Premises and there are no agreements or understandings between
them other than as are herein set forth. Subject to Section 30, this Lease may
not be modified except by agreement in writing executed by the Landlord and
Tenant.
Section 34: Overholding
If the Tenant remains in possession of the Premises after the end of the Term
with the consent of the Landlord but without having executed and delivered a new
lease or an agreement extending the Term, there shall be no tacit renewal of
this Lease, and the Tenant shall be deemed to be occupying the Premises as a
Tenant from month to month at a monthly Rent payable in advance on the first day
of each month equal to twice the monthly amount of Rent payable during the last
month of the Term, and otherwise upon the same terms as are set forth in this
Lease, so far as these are applicable to a monthly tenancy.
Section 35: Housekeeping
(a) The Tenant shall permit window cleaners to clean the windows of the
Premises during normal business hours.
(b) The Tenant shall not place any debris, garbage, trash or refuse or permit
same to be placed or left in or upon any part of the Lands or Building outside
of the Premises, other than in a location provided by the Landlord specifically
for such purposes, and the Tenant shall not allow any undue accumulation of any
debris, garbage, trash or refuse in or outside of the Premises.
Section 36: Execution
The Tenant confirms and agrees that this Lease has been executed by its
authorized signatories and that if only one signatory has signed this Lease, the
Tenant is authorized by its articles of incorporation or other constating
documents to execute leases by such sole authorized signatory and if this Lease
is not executed under seal by the Tenant, the Tenant is authorized by its
articles of incorporation or other constating documents to execute leases
without a seal. The officers of Harwood Corporation are Rachel Campbell, Daen
Campbell and Jordan Campbell and any or all of them are authorized to execute
this Lease on one another's behalf and have signing authority for Harwood
Corporation.
Section 37: Bicycles
No bicycle or other vehicle shall be brought within the Lands or Building
without consent of the Landlord.
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IN WITNESS WHEREOF the Landlord and Tenant have signed this Lease under seal.
Harwood Corporation
[Illegible]
(The Landlord) --------------------------------
Bingo.com (Canada) Enterprises, Inc.
& 559262 B.C. Ltd.
(The Tenant) Per: [Illegible]
--------------------------
Authorized Signature
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SCHEDULE A
----------
BOWER BUILDING 7th FLOOR
[DIAGRAM DEPICTING 7TH FLOOR OF BOWER BUILDING]
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SCHEDULE B
----------
The Tenant will pay their proportionate share of the Buildings Property Taxes
and Operating Costs as set out below;
RENT.AREA OF FLOOR 2,155.0 SQ.FT
------------------ ---------------
BUILDING AREA = 57,780.0 SQ.FT = 3.73%
Operating Costs means any amount paid or payable whether by the Landlord or by
others on behalf of the Landlord for maintenance, operation, repair, replacement
to and administration of the Building or allocated by the Landlord to the
Building and for services provided to Tenants, calculated as if the Building
were 100% occupied by Tenants during the Term, including without limitation:
(a) The cost of insurance which the Landlord is obligated or permitted to
obtain under this Lease and any deductible amount applicable to any claim made
by the Landlord under such insurance;
(b) The cost of security, janitorial, landscaping, window cleaning, garbage
removal, snow removal services and relamping;
(c) The cost of heating, ventilation and air-conditioning;
(d) The cost of all fuel, steam, water, electricity, telephone and other
utilities used in the maintenance, operation or administration of the Building,
including charges and imposts related to such utilities to the extent such
costs, charges and imposts are not recovered from other Tenants;
(e) Salaries, wages and other amounts paid or payable for all personnel
involved in the repair, maintenance, operation, security, supervision or
cleaning of the Building, including fringe benefits, unemployment and workmen's
compensation insurance premiums, pension plan contributions and other employment
costs and the cost of engaging contractors for the repair, maintenance,
security, supervision or cleaning of the Building;
(f) Auditing, accounting, legal and other professional and consulting fees and
disbursements incurred in the preparation of certificates of operating and other
costs, together with legal and consulting fees and disbursements;
(g) The costs: (i) of repairing, operating and maintaining the Building and the
equipment serving the Building and of all replacements and modifications to the
Building or such equipment, including those made by the Landlord in order to
comply with laws or regulations affecting the Building; (ii) incurred by the
Landlord in providing and installing energy conservation equipment or systems
and life safety systems; (iii) incurred by the Landlord to make alterations,
replacements or additions intended to reduce operating costs, improve the
operation of the Building or maintain its operation as a first class office
building; and (iv) incurred to replace machinery or equipment which by its
nature requires periodic replacement; all to the extent that such costs are
fully chargeable in the Fiscal Year in which they are incurred in accordance
with sound accounting principles;
(h) The cost of the rental of all equipment, supplies, tools, materials and
signs;
(i) All costs incurred by the Landlord in contesting or appealing Taxes or
related assessments including legal appraisal and other professional fees, and
administration and overhead costs;
(j) Capital Tax;
(k) Depreciation or amortization of the Operating Costs as determined by the
Landlord in accordance with sound accounting principles, if such costs have not
been charged fully in the Fiscal Year in which they are incurred;
(l) A fee for the administration and management of the Building equal to an
amount which the Landlord might reasonably pay to a third party for the
administration and management of the Building.
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SCHEDULE C
----------
LANDLORD'S WORK
The Landlord shall provide the following:
(a) Exterior vertical venetian blinds.
(b) Tenant's name on directory in Building lobby.
(c) Security Alarm with three (3) motion sensors (Tenant is responsible for
monitoring).
EXHIBIT 10.9
APPLICATION AND AGREEMENT FOR
MERCHANT SERVICES
STAR COMMUNICATIONS LTD. (hereinafter referred to as "Client") wishes to apply
for GLOBAL PAYMENT SYSTEMS LIMITED international merchant account services,
payment, and reporting services offered by GLOBAL PAYMENT SYSTEMS LIMITED
(hereinafter referred to as "GPS"). Client understands that the following
information will be used to established a GPS account and may be verified as
necessary)
Name of Company: STAR COMMUNICATIONS LTD
Address: Street: RYAN'S PLACE, HIGH STREET
City: ST. JOHN'S
State/District: ----- ------ ZIP: ----- Country: ANTIGUA.
Tel: (268) 460-5860/1 Fax: (268) 462-9114
E-Mail:
Contact Person: ARTHUR G.B. THOMAS
Title: DIRECTOR
2. Expected Monthly Volume, (dollar volume of transactions per month)
$ --------------------------
By signing this Application and Agreement, the undersigned affirm. that all
information provided herein or in support of this Application and Agreement is
true and correct. and agrees to and is bound by the provisions herein and to the
Terms and Conditions, Schedule of Fees attached hereto, and by reference
incorporated herein.
For: STAR COMMUNICATIONS, LTD. For: GLOBAL PAYMENT SYSTEMS LIMITED
By: /s/ A.G.B Thomas By:
--------------------------------- -------------------------------
Title: DIRECTOR Title: ----------------------------
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GLOBAL PAYMENT SYSTEMS LIMITED
The following documentation must be submitted with this application:
A. Copy of Client's Certificate of Incorporation and a copy of Client's
Certificate of Good Standing (if company is more than one year old)
B. A signed list of person(s) from Client authorized to discuss or direct
transactions with GPS staff, to request changes to reporting, payment and
transfer schedules, and to whom GPS release information. Client may provide a
code name for each such person.
C. A bank reference letter for each person authorized to conduct business
with GPS on behalf of Client (use form attached).
D. A clear and legible photocopy of the signature and photograph page of
the passport of the person or persons authorized to enter into this Agreement
with GPS and make business and financial decisions on behalf of Client with GPS.
E. Such other additional information as may be reasonably requested by GPS
to complete the processing and approval of this Application and Agreement.
Corporate Resolution
On behalf of the board of Directors of the above named Company (referred to
above as "Client"), it is hereby Resolved: That the above Application and
Agreement was properly executed by and entered into by an authorized Officer or
Director of the Company, is hereby ratified and authorized by the Directors of
the Company, and fully and legally binds the Company. All appropriate documents
and resolutions further necessary to support this Corporate Resolution are
hereby affirmed to be in place.
Resolved, this 21 day of Apr. 1999
By: /s/ A.G.B Thomas Title: DIRECTOR
----------------------------------- ---------------------------
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GLOBAL PAYMENT SYSTEMS LIMITED
Terms and Conditions
Client and GLOBAL PAYMENT SYSTEMS LIMITED (hereinafter referred to as "GPS")
agree as follows:
1. GPS agrees to act as an agent of Client to receive payments from Clients
Customers on behalf of Client. Client will instruct its Customers to provide
GPS, or any of its service providers, with (a) the Customer account number to
which payment is to be credited; (b) the Client's identification reference
number allocated by GPS; and cash equal to the amount to be paid for the
transaction plus all transmission fees charged by the service provider.
2. GPS will remit to the Client, either by fax or e-mail, a report listing all
transactions of payments received-from Client's Customers, for each daily
period.
3. GPS agrees to transfer to Client's nominated bank account, at the frequency
of weekly, the total sum for all transactions (less agreed to fees) received
since the last such transfer on the understanding that all such transfers will
be effected only after all respective funds have first been received by GPS.
Client further agrees that GPS will deduct any and all outstanding fees due GPS
from each transfer to Client prior to such transfer. Client agrees to be bound
by and to honor GPS's anti-money laundering policy, and confirms that all
transactions shall be legal and proper. Client further agrees to irrevocably and
unconditionally indemnify and hold harmless, and keep indemnified at all times,
GPS and all of its services providers, and the employees thereof, or any company
under their direct or indirect control, or any director or employee thereof,
from all actions' suits, proceedings, claims, demands, costs, expenses and
liabilities of whatsoever nature which may arise or occur or be taken,
commenced, made or sought from or against them, or any of them in connection
with or arising from any transaction or service undertaken by GPS on behalf of
Client.
4. Client agrees to communicate solely with GPS regarding the details of
any transactions. Client will not, directly or indirectly, contact any of GPS's
intermediate service providers. Further, Client shall not use, in any manner
whatsoever, in any print, Internet, computer, electronic or any medium the name
of any of GPS's intermediate service providers, or make any claim or
representation that Client has any contractual, business or other relationship
or arrangement, directly or indirectly, with any such intermediate service
provider.
5. Client shall be responsible for responding to and resolving inquiries and
complaints from its Customers arising out of GPS's services. Only GPS shall
initiate or be in any Communication with GPS's intermediate service providers to
further the resolution of any problems. Client will actively cooperate with GPS
in resolving such inquiries and complaints and will be responsible for resolving
any inquires or complaints other than those caused by GPS or arising out of the
GPS transfer.
6. GPS agrees to keep the names and addresses of Customers confidential and to
make no disclosure thereof to any third party, except Pursuant to law. Client
agrees to keep its contracts, terms, agreements with GPS confidential.
7. GPS's sole responsibility for damages for error, delay, or nonpayment whether
or not caused by negligence (apart from GPS's responsibility to transfer
payments of the principal amount accepted from Customer) shall be limited to a
refund of the service fee paid to GPS in conjunction with the affected
transaction, and GPS shall
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have no liability thereto to Client. Under no circumstances will GPS be liable
to Client or Customers for indirect, incidental, special or consequential
damages, whether or not GPS knew or had reason to know that they might be
incurred.
8. In case of any overpayment by GPS to Client whether caused by a misdirected
or duplicated transaction or otherwise, Client will promptly upon notification
or request refund the overpayment to GPS. GPS shall have the right to set-off,
from Client's funds remaining to be transferred, such overpayment.
9. Either party on thirty days notice can terminate this Agreement. Violation of
any provisions of the Agreement with GPS, including these Terms and Conditions,
the Anti Money Laundering Policy or failure to pay the fees and charges due to
GPS shall result in the immediate termination of services to Client.
10. This Terms and Conditions document, and all of its provisions, is expressly
made a part of, and incorporated into, the Application and Agreement between GPS
and Client.
5
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SCHEDULE OF FEES
Each transaction processed by Global Payment Systems Limited shall be subject to
the following:
A. 10% of each transaction accumulated per month, shall be deducted
from the amount of the initial charge and deposited into a "chargeback
reserve account", to be utilized as the "first form of payback" to the
bank for charges that are disputed by cardholder. These funds shall be
held in the chargeback reserve account for 6 months. At the end of six
month period, customer shall receive any remaining funds from the
first months reserve fund, at the end of the seventh month remaining
funds from the second month, and so forth. SHOULD CHARGEBACKS, PLUS
ASSOCIATED CHARGEBACK FEES, IN ANY MONTH EXCEED THE AMOUNT AVAILABLE
IN THE "CHARGEBACK RESERVE FEE FUND" IT SHALL BE THE SOLE
RESPONSIBILITY OF THE CLIENT TO REMIT ANY AND ALL ADDITIONAL FUNDS
REQUIRED TO SETTLE THE IDENTIFIED LOSSES UPON DEMAND. FAILURE TO DO SO
WILL RESULT IN IMMEDIATE TERMINATION OF THIS AGREEMENT.
B. Customer agrees that each transaction shall be subject to a 6.5%
"Processing Fee" to be deducted from the initial amount of the
transaction.
C. Customer agrees that GPS shall remit to customer "funds available
for transfer" within 5 business days from receipt of funds from the
merchant bank. Funds available for transfer are defined as those funds
remaining after the "Chargeback Reserve Fee" and the "Processing Fee"
are deducted from the total amount processed.
D. GPS shall require a one-time "customized software fee" of $5100.00,
$2550.00 due upon contract signing, the balance due upon delivery of
the software to STAR COMMUNICATIONS, LTD. By GPS's acceptance of the
of the "Customized Software Fee" from STAR COMMUNICATIONS, LTD., GPS
agrees to make available to STAR COMMUNICATIONS, LTD. the required
software no later than April 30, 1999.
Customer agrees to the above stated charges and fees and the terms and
conditions related to them and authorizes GPS to deduct the charges associated
with each transaction as the transaction is processed, and further agrees to the
one time charges stated in SCHEDULE OF FEES - Paragraph D.
Agreed to: /s/ Arthur G.B. Thomas
---------------------------------------------
By: ARTHUR G.B. THOMAS
Title: DIRECTOR
Date: 21st day of April, 1999
6
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GLOBAL PAYMENT SYSTEMS LIMITED
ANTI-MONEY LAUNDERING POLICY
Primarily, the Anti-Money Laundering Act requires that a "business transaction
record" be maintained for each transaction undertaken by a financial services
provider. This record should include, where relevant, the following information:
a) the identification of all the persons party to the transaction.
b) a description of that transaction efficient to identify its purpose
and method of execution.
c) the details of any account used for that transaction, including bank,
branch and sort code.
d) the total value of the transaction.
A financial services provider commits a criminal offence if it fails to keep a
business transaction record as required by the Act.
GPS is very mindful of the fact that the potential exists for an unscrupulous or
deceitful client to abuse the services it offers and, accordingly, has chosen to
implement this anti-money laundering policy. Strict adherence to the Guidelines
and due diligence procedures set out herein will help to mitigate any unknowing
involvement of any member of GPS in any such illicit activity, and will protect
GPS, it's bona fide clients, service providers and affiliated companies.
Anti-Money Laundering Policy
----------------------------
GPS will:
*Conduct all necessary due diligence procedures in order to ascertain the
true identities of all clients and potential clients. In this way, it will
not be possible to transfer any assets to any of the GPS's operating
companies anonymously.
*Take steps to very that all assets transferred to any operating company
are from legitimate sources in order to ensure that such assets are not the
proceeds of crime.
*Ensure that all of its staff are aware of the need to maintain vigilance
regarding all unusual transactions or series of transactions.
*Where there is reasonable suspicion that any such transaction or series of
transactions constitute money laundering, forthwith report such suspicions
required by law.
*Scrupulously maintain the business transaction records required by law.
*Confirm, define and conform with the established rules of good conduct in
all facts of financial business.
These guidelines constitute the official policy of GLOBAL PAYMENT SYSTEMS
LIMITED They will remain in force until amended by the Board of Directors of GPS
in compliance enacted by the Government.
Provisions for Client Confidentiality: These guidelines are subject to the
following conditions.
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A. Except where specifically provided by the Money Laundering (Prevention) Act,
or other relevant law, GPS's obligation to maintain the confidentiality of its
clients affairs continues in full force. It is not the intention of these
guidelines to deviate from the standard legal and fiduciary relationship between
GPS and its clients.
B. These guidelines set out standard rules for avoiding money laundering
activities in the conduct of the GPS's business and are in accordance with the
code of professional ethics; they are not intended to impede the efficient
provision of services to bona fide clients.
These guidelines are intended to ensure the careful determination of a clients
identity and to permit thereby the efficient accomplishment of the GPS's
obligation to maintain adequate business transaction records and to furnish
appropriate information, as provided for under the law. All such records must be
kept for a minimum of five years.
All of GPS's clients are expected to conduct their business affairs with GPS in
conformance with the letter and spirit of these guidelines. Any violation of the
guidelines will result in immediate termination of GPS's services.
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Request for Bank Reference and
Verification of Client Identity
In accordance with our "Know Your Customer" Policy, we request that the
principal person(s) of each Client with financial responsibility for the
Client's business with have his/her/their current bank or financial institution
provide the information as detailed below:
To be completed by Client/Principal:
Name: ----------------------------------------------
Address: -------------------------------------------
Signature(s): -------------------------------------
To be completed by Financial Institution:
1. We confirm that the above person(s) is/are - is/are not known to us and
has/have been a customer since ___________ (date).
2. We confirm/cannot confirm the address given by the customer.
3. We confirm/cannot confirm that the signature(s) shown above appears to
be that of the above customer(s),
4. We believe that he/she/they may be considered respectable, trustworthy
and reliable in operating an account.
Name of Confirming Institution: ------------------------------
Address: -----------------------------------------------------
Telephone and Fax: -------------------------------------------
Name/Title of Confirming Officer: -----------------------------
Signature of Officer: -----------------------------------------
Institution Stamp:
We appreciate your cooperation and confirm the above information will be treated
in strict confidence. We acknowledge that information may only be provided to
the best of available knowledge and is given without responsibility on the part
of the confirming institution and its officers. This response may either be
returned to the requesting person(s), or sent directly to GPS.
9
EXHIBIT 10.13
BINGO.COM, INC.
BINGO.COM (CANADA) ENTERPRISES INC.
Suite 702 - 543 Granville Street
Vancouver, British Columbia, V6C 1X8
June 17, 1999
To: SHANE MURPHY
#26 Sandy Port
Nassau, Bahamas
Re: Employment Agreement
This Agreement contains the terms and conditions of your employment with
Bingo.com (Canada) Enterprises Inc. and Bingo.com, Inc. You will be employed for
a term (the "Term") of three years commencing on July 1, 1999 (the "Commencement
Date") ending on July 1, 2002, unless your employment is terminated or the Term
of this Agreement is extended in accordance with the provisions of this
Agreement.
1. Definitions
In this Agreement:
(a) "Affiliate" has the same meaning as in the Company Act (British
Columbia) or any successor legislation, as amended from time to time.
(b) "Agreement" means this letter agreement and schedules attached to this
letter agreement, as amended or supplemented from time to time.
(c) "at arms-length" has the meaning given to that term in the Income Tax
Act (Canada);
(d) "Bingo.com" means Bingo.com, Inc., a company incorporated under the
laws of Florida.
(e) "Board" means the board of directors.
(f) "Business of the Group" means (i) the business of internet gaming; and
(ii) any other material business carried on from time to time by any
member of the Group.
(g) "Cause" includes, without limiting the usual meaning of just cause
under the common law or the laws of British Columbia or the United
States of America:
(i) any wilful failure by you in the performance of any of your
duties under this Agreement;
(ii) your conviction of a crime (indictable level or penalized by
incarceration or a lesser crime involving moral turpitude),
or any act involving money or other
<PAGE>
property involving any member of the Group that would
constitute a crime in the jurisdiction involved;
(iii) any act of fraud, misappropriation, dishonesty, embezzlement
or similar conduct against any member of the Group or
customer of any member of the Group;
(iv) the use of illegal drugs or the habitual and disabling use
of alcohol or drugs;
(v) any material breach of any of the terms of this Agreement
which remains uncured after the expiration of ten days
following the delivery of written notice of such breach to
you by the Company or Bingo.com;
(vi) any threatened or actual attempt by you to secure any
personal profit in connection with the Business of the Group
or the corporate opportunities of any member of the Group;
(vii) any act which is materially injurious to the Business of the
Group; and
(viii) your failure to devote adequate time to the Business of the
Group, or conduct by you amounting to insubordination or
inattention to, or substandard performance of your duties
and responsibilities under this Agreement, which remains
uncured after the expiration of 30 days following the
delivery of written notice of such failure or conduct to you
by the Company or Bingo.com.
(h) "Change of Control" means and will be deemed to have occurred when:
(i) any Person acquires or becomes the beneficial owner of, or a
combination of Persons acquires or becomes the beneficial
owner of, directly or indirectly, more than 20% of the
voting securities of Bingo.com, whether through the
acquisition of previously issued and outstanding voting
securities, or of voting securities that have not been
previously issued, or any combination thereof, or any other
transaction having a similar effect;
(ii) any resolution is passed or any action or proceeding is
taken with respect to the liquidation, dissolution or
winding-up of Bingo.com;
(iii) 20% or more of the issued and outstanding voting securities
of Bingo.com become subject to a voting trust;
(iv) Bingo.com amalgamates or enters into a plan of arrangement
with one or more companies other than a member of the Group;
(v) Bingo.com sells, leases or otherwise disposes of all or
substantially all of its assets and undertaking, whether
pursuant to one or more transactions;
(vi) Bingo.com or any member of the Group enters into any
transaction or arrangement which would have the same or
similar effect as the transactions referred to in paragraphs
(ii), (iv) or (v) above;
(vii) the Incumbent Directors cease to constitute a majority of
the Board of Bingo.com;
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<PAGE>
(viii) there is a merger or amalgamation of the Company with
another company at arms-length to the Company;
(ix) there is any transaction whereby all of the Company's issued
and outstanding shares are acquired by or become subject to
a takeover bid by another Person at arms-length to the
Company; or
(x) there is a sale or conveyance by the Company or one or more
of its shareholders, or both, to a Person that is dealing
with the Company or such shareholder at arms-length in a
single transaction or series of transactions, of shares of
the Company's capital stock representing a majority of the
votes that may then be cast by all of the shareholders of
the Company.
(i) "Company" means Bingo.com (Canada) Enterprises Inc., a company
incorporated under the laws of British Columbia.
(j) "Competitive Business" means any business or enterprise that competes
with the Business of the Group.
(k) "Confidential Information" means all confidential or proprietary
facts, data, techniques and other information relating to the Business
of the Group which may before or after the date of this Agreement be
disclosed to you by any member of the Group or which may otherwise
come within your knowledge or which may be developed by you in the
course of your employment or from any other Confidential Information.
(l) "Group" means the Company, Bingo.com and their Affiliates.
(m) "Incumbent Director(s)" means any member of the Board (other than you,
if you are a member of the Board) who was a member of the Board prior
to the occurrence of the transaction, transactions or elections giving
rise to a Change of Control and any successor to an Incumbent Director
who was recommended or elected or appointed to succeed an Incumbent
Director by the affirmative vote of a majority of the Incumbent
Directors then on the Board.
(n) "Intellectual Property Rights" means all rights in respect of
intellectual property including, without limitation, all patent,
industrial design, integrated circuit topography, know-how, trade
secret, privacy and trade-mark rights and copyright, to the extent
those rights may subsist anywhere in the universe.
(o) "Person" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with
or without share capital, unincorporated association, trust, trustee,
executor, administrator or other legal personal representative,
regulatory body or agency, government or governmental agency or entity
however designated or constituted.
2. Employment
The terms of your employment will be as follows:
(a) Position and Responsibilities: You will serve in the offices of
President and Chief Executive Officer of the Company reporting to the
Board of the Company. You will
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<PAGE>
perform or fulfil such duties and responsibilities as the Board of the
Company may prescribe from time to time or as are incidental to the
position of President and Chief Executive Officer, subject to the
Company Act (British Columbia) and the memorandum and articles of the
Company. You will provide the Board of the Company with such
information regarding the affairs of the Group as the Board of the
Company may require, and at all times you will conform to the
reasonable instructions and directions of the Board of the Company.
You will also serve in the offices of President and Chief Executive
Officer of Bingo.com reporting to the Board of Bingo.com. You will
perform or fulfil such duties and responsibilities as the Board of
Bingo.com may prescribe from time to time or as are incidental to the
position of President and Chief Executive Officer, subject to the laws
of Florida and the memorandum, articles and by-laws of Bingo.com. At
all times you will conform to the reasonable instructions and
directions of the Board of Bingo.com. You will provide the Board of
Bingo.com with such information regarding the affairs of the Group as
the Board of Bingo.com may require, and at all times you will conform
to the reasonable instructions and directions of the Board of
Bingo.com.
Your covenants and agreements in this Agreement will be for the
benefit of, and be enforceable by, the Company as well Bingo.com.
(b) Director: During the Term of this Agreement or any extension thereof,
you will serve as a director of both the Company and Bingo.com if so
elected or appointed and subject to the memorandum, articles and
by-laws of the Company and Bingo.com and the laws of British Columbia
and Florida.
(c) Scope of Duties: During your employment, you will devote the whole of
your time, attention and abilities during normal business hours to the
duties hereby granted and accepted and you will give the Company and
Bingo.com the full benefit of your knowledge, expertise, technical
skill and ingenuity.
(d) Salary: You will receive an annual salary (the "Salary") from the
Company in the amount of CDN$250,000 payable in accordance with the
Company's standard salary payment schedule. Payment of your Salary
will be subject to source deductions and other deductions required to
be deducted and remitted under applicable provincial or federal laws
of Canada or Company policy.
(e) Stock Options: Subject to regulatory approval, Bingo.com will grant to
you:
(i) stock options which in the aggregate will enable you to
purchase 300,000 common shares of Bingo.com at a price of
US$4.75 per share. The stock options granted must be
exercised no later than five years after the Commencement
Date. The right to take up 1/24 of the shares will vest on
the last day of the month during which this Agreement
commences and thereafter on the last day of each month until
all of the shares are so vested; and
(ii) stock options which in the aggregate will enable you to
purchase a further 300,000 common shares of Bingo.com at a
price of US$4.75 per share. The stock options granted must
be exercised no later than five years after the Commencement
Date. The right to take up shares pursuant to the stock
options will vest with you as follows:
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<PAGE>
(A) the right to take up 1/3 of the shares will vest on the
date immediately following the first business day the
closing price of the shares on the Over-The-Counter
Bulletin Board ("OTC BB") equals or exceeds US$20;
(B) the right to take up 1/3 of the shares will vest on the
date immediately following the first business day the
closing price of the shares on the OTC BB equals or
exceeds US$30; and
(C) the right to take up 1/3 of the shares will vest on the
date immediately following the first business day the
closing price of the shares on the OTC BB equals or
exceeds US$40.
(f) Vacation Entitlement: You will receive paid vacation equal to three
weeks per annum, pro-rated for any partial year of employment. Your
vacation must be taken in accordance with the Company's vacation
policy in effect from time to time.
(g) Medical Insurance and Other Benefits: You will have the same rights as
all other executive employees to participate in any medical insurance,
health insurance, life and accident insurance programs as are now or
may hereafter be established by the Company for the benefit of its
executive employees.
You will have the benefits provided, from time to time, in accordance
with the practise of the Company.
(h) Travel Expenses: The Company and Bingo.com will reimburse you for all
reasonable travelling and other out-of-pocket expenses actually and
properly incurred by you in connection with your duties under this
Agreement provided that you first furnish statements and vouchers for
all such expenses to the Company and Bingo.com.
(i) Relocation: You will work out of the Company's office in Vancouver,
British Columbia. On the Commencement Date, the Company will pay you a
relocation allowance equal to CDN$15,000.
(j) Extension of Term: If the Company and Bingo.com do not, on or before
the date that is 90 days before the end of the Term of this Agreement
or any extension thereof, provide you with written notice that the
Company and Bingo.com do not wish to extend the Term of this Agreement
for an additional one year period, the Term of this Agreement will,
subject to your consent, be deemed to be extended for an additional
one year period on the same terms and conditions as provided for under
this Agreement.
(k) Indemnification and Liability Insurance: The Company and Bingo.com
agree, subject to obtaining any necessary court approval, to indemnify
you, your heirs and personal representatives, against all costs,
charges and expenses, including an amount paid to settle an action or
satisfy a judgment, actually and reasonably incurred by you, including
an amount paid to settle an action or satisfy a judgment in a civil,
criminal or administrative action or proceeding to which you are made
a party because of being or having been a director or officer of the
Company or Bingo.com, including an action brought by the Company or
Bingo.com, if:
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<PAGE>
(i) you acted honestly and in good faith with a view to the best
interests of the Company or Bingo.com, as applicable; and
(ii) in the case of a criminal or administrative action or
proceeding, you had reasonably grounds for believing your
conduct was lawful.
The Company and Bingo.com agree to use their best efforts to purchase
and maintain insurance for your benefit against any liability incurred
by you as a director or officer.
(l) Prior Employers: The Company and Bingo.com are not employing you to
obtain the confidential information or business opportunities of any
prior employer and you are hereby requested and directed to comply
with any obligations to any prior employer.
3. Assignment of Interest in Inventions
As consideration for your employment, you covenant and agree as follows:
(a) Disclosure: You will make prompt and full disclosure to the Company
and Bingo.com of any discovery, invention, development, production,
process or improvement relating to the Business of the Group,
conceived, made, improved upon or participated in by you, solely or
jointly, in the course of or relating to your employment with the
Company and Bingo.com (the "Inventions").
(b) Assignment: You agree that the Company and Bingo.com will hold all
Intellectual Property Rights in respect of the Inventions for the
exclusive benefit of the Company and Bingo.com and you agree not to
claim or apply for registration or challenge the Company's or
Bingo.com's registration of any such Intellectual Property Rights.
Your acceptance of the terms of this Agreement constitutes your
absolute, unconditional and irrevocable assignment, transfer and
conveyance of all past, present and future right, title, benefit and
interest in and to all Intellectual Property Rights in respect of the
Inventions. You hereby waive in favour of the Company and Bingo.com
all claims of any nature whatsoever that you now or hereafter may have
for infringement of any Intellectual Property Rights for the
Inventions so assigned to the Company and Bingo.com. To the extent
that copyright may subsist in the Inventions, you hereby waive all
past, present and future moral rights you may have.
(c) Intellectual Property Protection: By your acceptance you irrevocably
agree the Inventions and all related Intellectual Property Rights will
be the absolute and exclusive property of the Company and Bingo.com.
The Company and Bingo.com may apply for patent, copyright or other
intellectual property protection in their names or, where such
procedure is proper, in your name, anywhere in the world. You will, at
the Company's or Bingo.com's request, execute all documents and do all
such acts and things considered necessary by the Company or Bingo.com
to obtain, confirm or enforce any Intellectual Property Rights in
respect of the Inventions. If the Company or Bingo.com requires but is
unable to secure your signature for any such purpose in a timely
manner, you hereby irrevocably designate and appoint the Company and
Bingo.com and any duly authorized officer or agent of the Company and
Bingo.com as your agent and attorney, to act for you and in your
behalf and stead to execute any such documents and to do all other
lawfully permitted acts to carry out the intent of this provision,
with the same legal force and effect as if executed or done by you.
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<PAGE>
4. Obligations of Employment
You further covenant and agree as follows:
(a) Performance and Duty: Throughout your employment you will well and
faithfully serve the Company and Bingo.com and use all reasonable
endeavours to promote the interests of the Company and Bingo.com. You
will act honestly, in good faith and in the best interests of the
Company and Bingo.com. You will adhere to all applicable policies of
the Company and Bingo.com.
(b) Business of the Group: You will not, during your employment with the
Company and Bingo.com, engage in any business, enterprise or activity
that is contrary to or detracts from the due performance of the
Business of the Group.
(c) Confidentiality: You will retain all Confidential Information
developed, utilised or received by each member of the Group in the
strictest confidence and will not disclose or permit the disclosure of
Confidential Information in any manner other than in the course of
your employment with and for the benefit of the Company and Bingo.com
or as required by law or a regulatory authority having jurisdiction.
You will not use Confidential Information for your own personal
benefit or permit it to be used for the benefit of any Person other
than the Company or Bingo.com, either during your employment with the
Company and Bingo.com or thereafter. You will take all reasonable
precautions to prevent any Person from having unauthorized access to
Confidential Information or use of it. In particular, you will not
copy, modify or part with any Confidential Information, in whole or in
part, except with the written approval of the Company or Bingo.com or
as may be required to carry out your duties under this Agreement. All
copies of Confidential Information, and all documents and electronic
or other records which now or hereafter may contain Confidential
Information, are and will remain the exclusive and absolute property
of the Company and Bingo.com.
(d) Exceptions: Any obligations specified in subsection 4(c) will not
apply to the following:
(i) any information which is presently in the public domain; or
(ii) any information that subsequently becomes part of the public
domain through no fault of your own.
(e) Restrictions: You agree to comply with all of the restrictions set
forth below at all times during your employment and for a period of
one year after the termination of your employment and this Agreement:
(i) you will not, either individually or in conjunction with any
Person, as principal, agent, director, officer, employee,
investor or in any other manner whatsoever, directly or
indirectly, engage in or become financially interested in an
internet-based Competitive Business. The foregoing will not
prevent you from holding any class of publicly held shares
of a company, partnership or other organization provided
that you, alone or in conjunction with any other Person,
will not directly or indirectly hold more than 5% percent of
the shares of any such class;
(ii) you will not, either directly or indirectly, on your own
behalf or on behalf of others, solicit, divert or
appropriate or attempt to solicit, divert or appropriate to
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<PAGE>
any Competitive Business, any Business or actively sought
prospective Business of the Group or any customers with whom
any member of the Group has current agreements relating to
the Business of the Group, or with whom you have dealt, or
with whom you have supervised negotiations or business
relations, or about whom you have acquired Confidential
Information in the course of your employment;
(iii) you will not, either directly or indirectly, on your own
behalf or on behalf of others, solicit, divert or hire away,
or attempt to solicit, divert, or hire away, any independent
contractor or any person employed by the any member of the
Group or persuade or attempt to persuade any such individual
to terminate his or her employment with any member of the
Group; and
(iv) you will not directly or indirectly impair or seek to impair
the reputation of any member of the Group, nor any
relationships that any member of the Group has with its
employees, customers, suppliers, agents or other parties
with which any member of the Group does business or has
contractual relations.
(f) No Personal Benefit: You will not receive or accept for your own
benefit, either directly or indirectly, any commission, rebate,
discount, gratuity or profit from any Person having or proposing to
have one or more business transactions with any member of the Group,
without the prior approval of the Board of such member of the Group.
(g) Customer Contacts: During your employment you will communicate and
channel to the Company and Bingo.com all knowledge, business and
customer contacts and any other information that could concern or be
in any way beneficial to the Business of the Group. Any such
information communicated as aforesaid will be and remain the property
of the Company and Bingo.com notwithstanding the subsequent
termination of your employment.
(h) Return of Company Property: Upon termination of your employment, you
will promptly return to the Company and Bingo.com all Company and
Bingo.com property including all written information, tapes, discs or
memory devices and copies thereof, and any other material on any
medium in your possession or control pertaining to the Business of the
Group, without retaining any copies or records of any Confidential
Information whatsoever. You will also return any keys, pass cards,
identification cards or other property belonging to the Company or
Bingo.com.
5. Termination
(a) Resignation: If for any reason you should wish to leave the Company
and Bingo.com prior to the expiry of the Term or any extension
thereof, you will provide the Company and Bingo.com 30 days' prior
written notice of your intention.
(b) With Cause: The Company and Bingo.com may terminate your employment at
any time for Cause, provided no Change of Control has occurred within
the preceding 90 days, immediately after delivery by the Company or
Bingo.com to you of a notice of termination of your employment for
Cause, in which case you will not be entitled to receive any further
amounts (except for amounts, if any, accrued under this Agreement up
to the date of termination of your employment and unpaid at the date
of such
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<PAGE>
termination), severance pay, notice, payment in lieu of notice or
damages of any kind and you will have thereupon released all claims
and entitlements thereto, without limitation.
(c) Without Cause: The Company and Bingo.com may terminate your employment
at any time prior to the expiry of the Term or any extension thereof
without Cause, provided no Change of Control has occurred within the
preceding 90 days, by providing you with 30 days' prior written
notice. In the event your employment is terminated pursuant to this
subsection 5(c):
(i) on or before January 1, 2000, then the Company will pay to
you immediately upon such termination six months' Salary
based on your Salary in effect immediately prior to such
termination; or
(ii) after January 1, 2000 but on or before July 1, 2001, then
the Company will pay you the amount of Salary that would
otherwise have been payable to you up to and including July
1, 2001 based on your Salary in effect immediately prior to
such termination; or
(iii) after July 1, 2001, then the Company will pay you the amount
of Salary that would otherwise have been payable to you
during the remainder of the Term or any extension thereof
based on your Salary in effect immediately prior to such
termination.
In addition, in the event your employment is terminated pursuant to
this subsection 5(c), all outstanding stock options granted to you by
Bingo.com pursuant to paragraph 2(e)(i) will immediately vest upon
such termination.
You understand that you will be limited to the aforesaid compensation
and that upon providing you with such compensation the Company and
Bingo.com will have satisfied all of their contractual, common law and
statutory obligations. You will not be entitled to receive any further
severance pay, notice, payment in lieu of notice or damages of any
kind and you will not be entitled to receive any further amounts
(except for amounts, if any, accrued under this Agreement up to the
date of termination of your employment and unpaid at the date of such
termination) and you will have thereupon released all claims and
entitlements thereto including, without limitation, any claims and
entitlements under the Employment Standards Act (British Columbia).
The aforesaid compensation will be subject to all source deductions
and other deductions required to be deducted and remitted under
applicable provincial or federal laws of Canada or Company policy.
(d) Change of Control: You may terminate your employment if there is a
Change of Control, upon giving the Company and Bingo.com not less than
30 days' prior written notice of your resignation, provided that such
resignation is given to the Company and Bingo.com within 90 days of
your learning of the Change of Control and makes express written
reference to the Change of Control. In the event your employment is
terminated pursuant to this subsection 5(d):
(i) the Company will pay to you immediately upon such
termination an amount equal to two times the annual Salary
in effect immediately prior to such termination; and
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<PAGE>
(ii) all outstanding stock options granted to you by Bingo.com
pursuant to subsection 2(e) will immediately vest upon such
termination.
You understand that you will be limited to the aforesaid compensation
and that upon providing you with such compensation the Company and
Bingo.com will have satisfied all of their contractual, common law and
statutory obligations. You will not be entitled to receive any further
severance pay, notice, payment in lieu of notice or damages of any
kind and you will not be entitled to receive any further amounts
(except for amounts, if any, accrued under this Agreement up to the
date of termination of your employment and unpaid at the date of such
termination) and you will have thereupon released all claims and
entitlements thereto including, without limitation, any claims and
entitlements under the Employment Standards Act (British Columbia).
The aforesaid compensation will be subject to all source deductions
and other deductions required to be deducted and remitted under
applicable provincial or federal laws of Canada or Company policy.
6. Agreement Voluntary and Equitable
The parties agree that you each have carefully considered and understand the
terms of employment contained in this Agreement, that the terms are mutually
fair and equitable, and that you each have executed this Agreement voluntarily
and of your own free will.
7. Irreparable Harm
You acknowledge and agree that any breach of section 3, subsection 4(c) or
subsection 4(e) of this Agreement by you will cause irreparable harm to the
Company and Bingo.com and in addition to all of the remedies available to the
Company and Bingo.com by law, the Company and Bingo.com will be entitled to
equitable relief including without limitation, injunctive relief to ensure your
compliance with section 3 and subsections 4(c) and 4(e) of this Agreement.
8. Assignment and Enurement
You may not assign this Agreement, any part of this Agreement or any of your
rights under this Agreement without the prior written consent of the Company and
Bingo.com. This Agreement enures to the benefit of and is binding upon you, the
Company and Bingo.com and your respective heirs, executors, administrators,
successors and permitted assigns.
9. Severability
If any provision or portion of this Agreement is determined to be invalid or
unenforceable for any reason, then that provision or portion will be severed
from this Agreement. The rest of this Agreement will remain in full force and
effect.
10. Entire Agreement
This Agreement contains the whole agreement between you and the Company and
Bingo.com with respect to your employment by the Company and Bingo.com, and
there are no representations, warranties, collateral terms or conditions,
express or implied, other than as set forth in this Agreement. This Agreement
supersedes any written or oral agreement or understanding between you and the
Company and Bingo.com. No change or modification of this Agreement will be valid
unless it is in writing and initialled by all parties.
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<PAGE>
11. Notice
Any notice required or permitted to be given hereunder must be in writing and
will be sufficiently given or made if delivered or sent by registered mail to
the address of the parties set out on page 1 hereof. Any notice so given will be
deemed to have been given and to have been received on the day of delivery if it
is a business day and otherwise on the next succeeding business day or, if
mailed, on the third business day following the mailing thereof (excluding each
day during which there exists any interruption of postal services due to strike,
lockout or other cause). Addresses for notice may be changed by giving notice in
accordance with this section.
12. Non-waiver
No failure or delay by you or by the Company or Bingo.com in exercising any
power or right under this Agreement will operate as a waiver of such power or
right. Any consent or waiver by you or by the Company or Bingo.com to any breach
or default under this Agreement will be effective only in the specific instance
and for the specific purpose for which it was given.
13. Survival of Terms
The provisions of sections 1, 3, 5 and 7 and of subsections 4(c), 4(e), 4(g) and
4(h) of this Agreement will survive the termination of your employment and this
Agreement.
14. Further Assistance
The parties will execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
15. Time
Time is of the essence of this Agreement.
16. Governing Laws
This Agreement will be construed in accordance with and governed by the laws of
British Columbia and the laws of Canada applicable in British Columbia.
17. Counterparts
This Agreement may be executed in two or more counterparts, each of which will
be deemed to be an original and all of which will constitute one Agreement.
BINGO.COM (CANADA) ENTERPRISES INC.
By: /s/ Darren Little
-----------------------------------------
Name: Darren Little
-----------------------------------------
Title: President
-----------------------------------------
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<PAGE>
BINGO.COM, INC.
By: /s/ Darren Little
-----------------------------------------
Name: Darren Little
-----------------------------------------
Title: President
-----------------------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company and Bingo.com as set out above.
DATED this 17th day of June, 1999.
/s/ Shane Murphy
-----------------------------------------
SHANE MURPHY
EXHIBIT 10.14
AGENT AGREEMENT
("Agreement")
Agreement dated 6 April, 1999 is between BINGO.Com, herein referred to as
"BINGO" and Access World, Inc., herein known as "ACCESS".
OBJECTIVES:
Phase I Licensing and Setting Up Company Structure in Antigua for Internet
Gaming
BINGO hereby appoints ACCESS to act in the capacity of an independent
contractor: to create, develop and implement Phase I notes in this Agreement
1) DEFINITION
The relationship of ACCESS to BINGO shall be that of a consultant, herein
referred to, as "Consultant" as a third party representative and under no
circumstances shall Consultant contractually obligate BINGO to another third
party, unless otherwise specified in writing by BINGO.
Consultant shall engage in normal activities to implement the first phase as
noted below.
BINGO will provide timely and responsive telephone support to consultant.
2) CONFIDENTIALITY
ACCESS will sign a confidentiality and non-disclosure agreement to be provided
by BINGO and which shall be made a part of this Agreement.
PHASE I
Licensing and Setting Up Company Structure in Antigua
March 12, 1999 - April 30, 1999
BINGO will:
a. Provide ACCESS with the legal structure of the company so as to facilitate
the duties of ACCESS in a timely and professional manner and the imposed date of
April 30, 1999 for launch. This legal structure shall be provided in writing by
fax to (212) 740-1097.
ACCESS will assist in the following:
a. Legal Representation: Recommend an attorney in Antigua who is familiar with
the Internet Gaming Process;
b. Filing Corporate Document: Oversee the filing of IBC (International Business
Corporation(s) ) as required with said attorney;
c. Internet Gaming License: Assist in the filing and securing of the Internet
Gaming Licenses in the Antigua/Barbuda Free Trade Zone. This is to be completed
on or before April 30, 1999 with the condition that BINGO supply the necessary
structure and signed documents in a timely manner to meet the time constraints
for such licensing with the Antigua Commission. In the event this cannot be
accomplished due to delays on the part of BINGO, ACCESS will be held harmless
and receive compensation as outlined in this agreement;
[Initials]
<PAGE>
d. Office Set Up: Locate and secure an office in the designated IBC name to
include office lease and office utilities, i.e. telephone, toll free telephone
service, electric, cleaning service;
e. Office Staff: Locate and employ part and/or full time management as per
requirements set by Stratford Internet; and
Compensation:
US$7,500 March 1999 (this has been wired as instructed).
US$7,500 April 1999 (this has been wired as instructed).
50,000 stock options in public company with symbol BIGG at the rate of $4.75 per
share (subject to regulatory regulations). The stock options shall vest to
ACCESS in 12 monthly installments in arrears (at the month end) or until the
date of termination. The stock options shall vest as to 2,500 stock options on
February 28, 1999, 12,500 stock options on March 31, 1999 and 12,500 stock
options on April 30, 1999 (subject to BINGO having the ability to accept wagers
on April 30, 1999 but only if BINGO contracts with MPACT or WINR on or before
April 12, 1999 and MPACT or WINR accept BINGO as a client), and the balance of
22,500 stock options shall vest in 9 equal monthly installments in arrears (at
the month end) through the term of this Agreement or until the date of
termination. In the event of termination those stock options that remain
unvested will expire as at the date of termination.
4) EXPENSES
Office related day to day, incidental airfare, accommodations and travel
expenses shall be billed separately. Receipts shall be provided on all items in
excess of $10.00. BINGO shall reimburse ACCESS within 5 working days of
submission, wired as instructed.
5 (TERMINATION)
In the event that BINGO or ACCESS shall desire to terminate this Agreement each
shall give one to the other 30 days notice in writing.
6) NOTICES
All notices required or permitted under this and all subsequent agreements shall
be in writing and shall be deemed delivered when delivered in person or received
by postal mail, certified return receipt requested via overnight US or private
delivery service to the following addresses:
BINGO.Com
Suite 702 - 543 Granville Street Vancouver, B.C.
V6C 1X8
Attn: Bob MacKay
Access World, Inc.
42 Hillsborough Street
Roseau, Commonwealth of Dominca, West Indies
Attn: Kevin Williams
Such addresses may be changed from time to time by either party by providing
notice in the manner set forth above.
7) INDEMNIFICATION
BINGO agrees to indemnify Consultant and hold Consultant harmless on account of
any liability that may arise by reason of the performance or non-performance of
any of BINGO actions. Consultant agrees to indemnify and
[Initials]
<PAGE>
hold BINGO harmless on account of any liability, which may arise by reason of
the performance or non-performance of Consultant's actions.
8) ARBITRATION
In the event of a dispute between the parties, a mutually agreed independent
arbitrator from the American Arbitration Board in New York will be appointed.
Failing an agreement each party will choose a United States based arbitrator and
these two arbitrators will appoint an independent arbitrator whose decision will
be accepted by both parties. Any expenses will be borne by the non-prevailing
party. ACCESS shall continue to represent BINGO as outlined in this Agreement or
subsequent agreements and any and all compensation due and payable will continue
as set forth in this agreement until a determination has been decided by
arbitration.
9) EXECUTION OF AGREEMENT
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one in the
same instrument. A facsimile of the signatures of the parties will be deemed
originals and accepted by both parties until hard copies are exchanged.
10) ASSIGNMENT
This Agreement shall be binding on the heirs, successors and assigns of each
party hereto.
11) ENTIRE AGREEMENT
This Agreement supercedes all previous invitations, proposals, letters,
correspondence, negotiations, promises, agreements, covenants, conditions,
representations and warranties with respect to the subject matter of this
Agreement. There is no representation, warrantee, collateral term or condition
or collateral agreement affecting this Agreement, other that as expressed in
writing in this Agreement.
Agreed and Accepted By:
per /s/ [Illegible] 8/4/99
- ---------------------------------------------------
Darren Little, President Dated
For: BINGO.com
Suite 702 - 543 Granville Street
Vancouver, B.C.
V6C 1X8
Agreed and Accepted By:
/s/ [Illegible] 8/4/99
- ---------------------------------------------------
Access World, Inc. Dated
Liz Grayson, Accredited Representative
Access World, Inc.
75 Kennedy Avenue
Roseau, Dominica, West Indies
Tel: (212) 740-5051
EXHIBIT 16.1
Barry Friedman
Certified Public Accountant
1582 Tulita Drive
Las Vegas, Nevada
USA 89123
August 31, 1999
The Board of Directors
Bingo.Com, Inc.
702 - 543 Granville Street
Vancouver, BC
V6C 1X8
United States Securities and Exchange Commission
Washington, D.C.
USA 20549
Ladies and Gentlemen:
I have reviewed Amendment No. 1 to the Form 10 registration statement (the "Form
10") filed by Bingo.Com, Inc. (the "Company"), and agree with the statements
disclosed by the Company under Item 14, Changes in the Disagreements with
Accountants on Accounting and Financial Disclosure.
I consent to the use of my report included herein and to the reference to my
firm in this registration statement on Form 10.
/s/ Barry Friedman
Certified Public Accountant
Las Vegas, Nevada
EXHIBIT 21.1
Subsidiaries
------------
The following is a list of Registrant's subsidiaries:
o Bingo.com (Canada) Enterprises Inc., a British Columbia corporation;
o Bingo.com (Antigua), Inc., an Antigua International Business Corporation;
and
o Bingo.com (Wyoming), Inc., a Wyoming corporation.
