<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number: 000-26319
BINGO.COM, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 98-0206369
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4223 Glencoe Avenue, Suite C200, Marina del Rey, CA 90292
(Address and zip code of principal executive offices)
Registrant's telephone number: (310) 301-4171
Not Applicable
--------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 10,057,668 shares as of August
7, 2000.
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
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BINGO.COM, INC.
Quarterly Report on Form 10-Q
for the Second Quarter ended June 30, 2000
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION..............................................................1
Item 1. Financial Statements...............................................................1
Consolidated Balance Sheets as of June 30, 2000 (unaudited)
and December 31, 1999..............................................................1
Consolidated Statements of Operations for the Three Months and
Six Months ended June 30, 2000 (unaudited).........................................2
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and June 30, 1999 (unaudited)..................................3
Notes to Interim Consolidated Financial Statements (unaudited).....................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................6
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................11
PART II - OTHER INFORMATION................................................................11
Item 1. Legal Proceedings.................................................................11
Item 2. Changes in Securities and Use of Proceeds.........................................12
Item 6. Exhibits and Reports on Form 8-K..................................................12
SIGNATURES.................................................................................13
</TABLE>
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BINGO.COM, INC.
( formerly Progressive General Lumber Corp )
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 1,747,277 $ 3,382,529
Accounts receivable 131,145 102,239
Prepaid expenses and security deposits 124,530 83,030
----------- -----------
2,002,952 3,567,798
----------- -----------
Equipment
Office and computer equipment 602,419 123,506
Software development & website equipment 154,572 157,889
Less: - accumulated depreciation (103,387) (59,727)
----------- -----------
653,604 221,668
----------- -----------
Domain name rights 1,838,676 1,200,905
----------- -----------
Total assets $ 4,495,232 $ 4,990,371
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 327,817 $ 187,914
Loan payable -- 53,912
Reserve for discontinued operations 65,344 60,000
Contract payable - current portion 256,819 --
Capital leases - current portion 251,871 14,323
----------- -----------
901,851 316,149
----------- -----------
Contract payable 427,681 --
Capital leases 129,103 9,494
----------- -----------
1,458,635 325,643
----------- -----------
Stockholders' Equity
Common stock - $0.001 par value
Authorized: 50,000,000 shares
Issued and outstanding: 10,057,668 shares 10,058 9,917
Additional paid - in capital 7,601,025 7,574,366
Deficit accumulated during development stage (4,578,241) (2,915,444)
Cumulative translation adjustment 3,755 (4,111)
----------- -----------
3,036,597 4,664,728
----------- -----------
Total liabilities and stockholders' equity $ 4,495,232 $ 4,990,371
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE> 4
BINGO.COM, INC.
( formerly Progressive General Lumber Corp )
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Inception
January 12, 1987 Three Months Ended Six Months Ended
to June 30, 2000 JUNE 30 JUNE 30
---------------- ------------------------------ ---------------------------
2000 1999 2000 1999
------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 61,868 $ 57,588 $ -- $ 61,868 $ --
Expenses
General and administrative 2,788,080 826,582 302,412 1,189,886 497,863
Marketing and advertising 684,175 93,054 217,704 193,941 257,647
Software & website development 518,769 115,644 -- 160,528 0
Depreciation & amortization 220,749 168,992 3,554 180,080 3,554
------------ ----------- ------------ ----------- ---------
Loss from continuing operations (4,149,905) (1,146,684) (523,670) (1,662,567) (759,064)
Loss from discontinued operations (494,107) -- -- -- --
Other income (expense)
Loss on disposition of
discontinued operations (105,897) (45,899) -- (45,899) --
Net interest income 171,668 24,307 24,558 45,667 19,305
------------ ----------- ------------ ----------- ---------
NET LOSS $ (4,578,241) $(1,168,276) $ (499,112) $(1,662,799) $(739,759)
============ =========== ============ =========== =========
BASIC AND DILUTIVE LOSS PER SHARE $ (0.12) $ (0.05) $ (0.17) $ (0.09)
=========== ============ =========== =========
WEIGHTED AVERAGE SHARES 10,035,068 9,756,411 10,046,368 8,628,914
=========== ============ =========== =========
WEIGHTED AVERAGE SHARES CALCULATION:
No. Days Q1 No. Days YTDQ2
------------ ------------- ------------- ----------
Balance 12-31-99 9,916,668 90 9,916,668 180 9,916,668
January 10, 2000
Develop Portal Web Site 125,000 80 111,111 170 118,056
February 18, 2000 Investor Relations 16,000 41 7,289 131 11,644
------------ ----------
WEIGHTED AVERAGE SHARES OUTSTANDING 10,035,068 10,046,368
============ ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 5
BINGO.COM, INC.
( formerly Progressive General Lumber Corp )
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Inception Six Months Ended Six Months Ended
January 12, 1987 June 30, June 30,
to June 30, 2000 2000 1999
---------------- ----------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,578,241) $(1,662,799) $ (739,759)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 239,807 180,080 3,554
Provision for loss on discontinued operations 105,899 45,899 --
Stock based compensation costs 313,146 26,800 --
Change in operating assets and liabilities:
Accounts receivable (131,145) (28,906) (28,619)
Prepaid expenses and security deposits (124,530) (41,500) (322,416)
Accounts payable and accrued liabilities 1,067,317 139,903 (144,264)
----------- ----------- -----------
Cash used by continuing operations (3,107,747) (1,340,523) (1,231,504)
----------- ----------- -----------
Discontinued operations (534,662) (40,555) --
----------- ----------- -----------
Cash used by discontinued operations (534,662) (40,555) --
----------- ----------- -----------
Net cash used by operating activities (3,642,409) (1,381,078) (1,231,504)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (410,367) (152,789) (246,599)
----------- ----------- -----------
Net cash used in investing activities (410,367) (152,789) (246,599)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital lease repayments (19,140) (5,339) --
Loan payable -- (53,912) 50,000
Payments on domain name contract payable (250,936) (50,000) (200,936)
Proceeds from and issuance of common stock 6,075,017 -- 6,075,017
Share issuance costs (8,643) -- (8,643)
----------- ----------- -----------
Net cash provided by financing activities 5,796,298 (109,251) 5,915,438
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 1,743,522 (1,643,118) 4,437,335
Effect of exchange rates on cash and cash equivalents 3,755 7,866 (631)
Cash and cash equivalents at beginning of period -- 3,382,529 157,600
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,747,277 $ 1,747,277 $ 4,594,304
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 13,330 $ 700
NON CASH TRANSACTIONS
Equipment acquired under capital lease $ 386,313 $ 362,496
Issuance of common stock for domain name rights $ 1,000,000
Issuance of common stock for investor relations $ 26,800 $ 26,800
Present value adjustment to domain name rights $ 734,500 $ 734,500
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2000
NOTE 1 - BASIS OF PRESENTATION
These unaudited, consolidated financial statements have been prepared by
management in accordance with the instructions to Form 10-Q, and include the
accounts of the Company and its wholly owned subsidiaries, Bingo.com (Canada)
Enterprises Inc., Bingo.com (Antigua) Inc. and Bingo.com (Wyoming) Inc.
Therefore, they do not include all information and footnotes necessary for a
complete presentation of financial position, results of operations, cash flows,
and stockholders' equity in conformity with generally accepted accounting
principles. Except as disclosed herein, there has been no material change in the
information disclosed in the notes to the financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999. In the opinion of management, all adjustments considered necessary for a
fair presentation of the results of operations and financial position have been
included. Operating results for the six months ended June 30, 2000 are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2000.
NOTE 2 - GOING CONCERN
These financial statements have been prepared on the basis that the Company will
continue as a going concern. The Company has incurred significant operating
losses since its incorporation and must raise additional equity financing to
finance its operations. However, there can be no assurance that funds required,
if any, would be available to the Company when required or on terms acceptable
to the Company. Failure to obtain acceptable equity financing could have a
material adverse effect on the Company's business, financial condition or
operations and these financial statements do not include any adjustments that
could result therefrom.
NOTE 3 - RELATED PARTY TRANSACTIONS
At June 30, 2000, the Company's President, CEO and sole Director owed the
Company $18,912. The loan is unsecured, non-interest bearing and is repayable in
monthly installments of $5,833 Canadian Dollars (approximately $3,990 US
dollars).
NOTE 4 - DOMAIN NAME
The Company has elected to capitalize the cost of the purchase of its domain
name and the net present value of the future minimum amounts payable under the
purchase contract. The cost of the domain name is amortized over five years
beginning on April 1, 2000. The net present value of future obligations under
the contract, totaling $684,500, have been included in Contracts Payable in the
accompanying Balance Sheet as of June 30, 2000.
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NOTE 5 - COMMON STOCK WARRANTS AND OPTIONS
At June 30, 2000, there were 416,668 warrants outstanding to purchase shares of
the Company's common stock, exercisable at a price of $15.00 per share before
April 22, 2001. The warrants were issued in connection with a private placement
in June 1999. The warrants were not assigned a value due to the difference
between the market value of the Company's stock and the exercise price of the
warrants.
The Company did not grant any stock options during the quarter or six months
ended June 30, 2000. On June 29, 2000, the Company's sole Director re-priced
options previously granted to the person serving as sole Director, CEO and
President and the person serving as the Senior Vice President of the Company, as
described in Note 8. The re-pricings must be approved by the shareholders of the
Company. At June 30, 2000, outstanding employee and director stock options, with
various vesting provisions, were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------
Number of Shares Exercise Price Expiration Date
---------------------------------------------------------
<S> <C> <C>
600,000 $ 0.75 July 1, 2004
---------------------------------------------------------
200,000 3.00 December 1, 2004
---------------------------------------------------------
200,000 0.75 December 1, 2004
---------------------------------------------------------
</TABLE>
NOTE 6 - LOSS PER SHARE
Net loss per share is determined on the weighted average number of common shares
and common share equivalents outstanding. Outstanding stock options have not
been included in the computation of diluted loss per share as the inclusion of
these securities would be antidilutive. Consequently, no differences exist
between basic and diluted loss per share for the period. The weighted average
number of common shares outstanding for the six months ended June 30, 2000 was
10,046,368 shares. Weighted average shares outstanding for the three months
ended June 30, 2000 were 10,035,068.
NOTE 7 - DISCONTINUED OPERATIONS
During the six months ended June 30, 2000, the Company incurred additional costs
associated with the wind-up of its Antigua-based on-line gaming operations. The
Company officially closed the operation in the first quarter of fiscal year
2000. A reserve for loss on disposition of discontinued operations of $65,244
has been recorded to cover the disposition of Antigua's remaining net assets.
Management believes the reserve is sufficient for any remaining obligations.
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NOTE 8 - RE-PRICING OF 1999 STOCK OPTION PLAN
On November 17, 1999, the Company's sole Director approved the re-pricing of
600,000 stock options previously granted to the person serving as the Company's
sole Director, CEO and President amending the original exercise price of $4.75
per share to $1.31 per share, which was the then - current market value.
On June 29, 2000, the Company's sole Director approved the second re-pricing of
options to purchase 600,000 shares of the Company's common stock previously
granted to the person serving as the Company's sole Director, CEO and President
amending the exercise price of $1.31 per share to $0.75 per share. Stock options
previously granted to the person serving as the Company's Senior Vice President
were also re-priced. Options to purchase 200,000 shares granted to the Company's
Senior Vice President with an exercise price of $1.45 per share were re-priced
to $0.75 per share. Options to purchase an additional 200,000 shares granted to
the Company's Senior Vice President with an exercise price of $3.00 were not
re-priced. The re-pricing reflects the closing price of the Company's common
shares on June 29, 2000 and is subject to ratification by the Company's
shareholders.
These re-pricings have resulted in variable accounting, which will require the
computation and recording of compensation expense for each reporting period for
the remaining life of the option. In accordance with the Financial & Accounting
Standards Board FIN 44, an expense related to these options will be accounted
for prospectively after July 1, 2000, based on the difference between the market
value of the stock and the option exercise price in each reporting period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
BUSINESS
Background
We are in the business of developing and operating an entertainment and service
based website designed to provide a variety of free games and other forms of
entertainment, initially focused on the game bingo and including chat,
sweepstakes, and more. We are attempting to create a value-based website and
on-line services, planned to include an extensive database of registered users
and their buying preferences.
We relocated our principal executive offices to Los Angeles, California earlier
in the year, to facilitate the implementation of our revised business plan,
which focuses on the on-line entertainment industry. The relocation provides us
with access to the industry talent pool, a larger prize sponsor base and
audience for future revenue generation, financing and partnering opportunities.
Our wholly owned subsidiaries may continue to support the implementation of
certain segments of our business plan.
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<PAGE> 9
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 have not been subject to any bankruptcy, receivership or other
similar proceeding.
Business Strategy
Our objective is to become the premier on-line destination for web-based bingo
entertainment and a leading entertainment destination on the Internet. We had
211,092 registered users as of June 30, 2000, compared to 106,779 at March 31,
2000, representing a growth rate of 97% for the second quarter. We experienced a
32% increase in our quarterly growth rate over the first quarter of the fiscal
year 2000. During the second quarter of the fiscal year 2000, we attracted in
excess of 27,000 unique visitors per day to our website, compared to 15,000 in
the first quarter of the fiscal year 2000 and, during the second quarter of the
fiscal year 2000, our website received up to 11 million visitors per day. During
the second quarter of the fiscal year 2000, the average visitor session length
grew from an average of approximately 50 minutes to 62 minutes. We intend to
continue to attempt to build our registered user database through on-line and
offline marketing strategies, promotional opportunities and strategic alliances.
During the second quarter of the fiscal year 2000, we were independently ranked
among the top 10 e-businesses by Bain & Company, a leading global strategy
consulting firm. The Bain survey evaluated on-line firms on the basis of
third-party interviews and public information, and utilized a ranking criteria
that considered strategic innovation, website impact, plan execution, funding
and fame. We achieved top ranks for innovation, impact and execution. As we
continue to execute our overall build-out strategy, we plan to continue to focus
on these key strategic elements.
In keeping with our strategy to build value through our registered user data
base, we filed a provisional patent application with the U.S. Patent and
Trademark Office during the second quarter of the fiscal year 2000, entitled
"Method and Apparatus for Directing Interleaved Messages in a Network Based
Interactive Application", a software application program which we believe will
enhance the websites visitors' experience and allow us to better facilitate the
delivery of our on on-line advertising and merchandising opportunities. The
application will allow the users to browse products and play games or
participate in other activities simultaneously. We anticipate that the
application will be integrated into our on-line playing environment in the near
future. We are constructing this feature as a modular add-on to our existing
software applications and we may potentially be able to generate related
revenues through the future licensing of the software.
Board of Directors
The Company is in the process of identifying individuals to serve on its Board
of Directors. The Company expects to obtain additional Board members by the end
of the year and also will establish an Audit Committee comprised primarily of
outside independent Directors.
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Employees
As of June 30, 2000 we had ten full-time employees and four regular consultants
located in our principal executive offices at 4223 Glencoe Avenue, Suite C200,
Marina del Rey, California. From time to time, we may retain consultants and
consulting firms to provide us with specialized expertise in development,
marketing, software and telecommunications technologies.
Properties
We are renting our current executive offices at 4223 Glencoe Avenue, Suite C200,
Marina del Rey, California on a month-to-month basis. Base rent payments are
$6,341 per month. We expect to make this or a similar leased space our principal
offices.
We subleased our previous executive offices located at 702-543 Granville Street,
Vancouver, British Columbia at the end of the first quarter of the fiscal year
2000. The monthly rent payments under the lease are approximately $2,380 and the
lease expires on April 30, 2002. The sublease runs for the remainder of the term
and payments required under the sublease are sufficient to satisfy the remaining
obligation.
We do not presently own or lease any other real property.
FORWARD LOOKING STATEMENTS
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
including those 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 Quarterly Report. We assume no
obligation to update the forward looking information, risks or uncertainties set
forth in this report or to reflect actual results.
RESULTS OF OPERATIONS
Initially, our strategy was to develop an on-line gaming operation. In August
1999, our board of directors prohibited gaming in jurisdictions with laws
prohibiting on-line gaming. From August to December 1999, we revised our
business plan and focused on the alternative of developing our prize-based,
play-for-free games emphasizing entertainment. In December 1999, we launched a
beta version of our first play-for-free game and our revamped website.
Subsequent to our year ended December 31, 1999, our Board announced the
discontinuation of our Antigua-based gaming operation. We then applied all of
our resources to our revised business plan.
Our Registration Statement on Form 10 was filed on August 31, 1999. We produced
our initial financial statements for the six months ended June 30, 1999.
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THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
The Company generated $57,588 in revenues for the quarter ended June 30, 2000
compared to no revenues for the quarter ended June 30, 1999. Revenues resulted
from advertising and the sale of advertising banners on our website. $28,600 was
recorded in barter revenue with a corresponding cost of revenue of $28,600
included in marketing expenses.
During the quarter ended June 30, 2000, general and administrative expenses
increased to $826,582 from $302,412 for the quarter ended June 30, 1999. The
increase resulted from an increase in salaries and benefits associated with
hiring additional employees, the expansion and relocation of our offices to the
Los Angeles area and an increase in consulting expense and professional fees.
Marketing, advertising, software and website development costs totaled $208,698
for the quarter ended June 30, 2000, compared to $217,704 for the quarter ended
June 30, 1999. Included in these expenses are consulting, travel, promotion, and
leased equipment and software. The Company expects that these expenses will
increase in the future in connection with the addition of new equipment and the
expansion of the website.
Depreciation and amortization increased to $168,992 during the quarter ended
June 30, 2000 from $3,554 for the quarter ended June 30, 1999. This increase
resulted from commencing the amortization of the domain name on April 1, 2000,
when revenues commenced and the addition of new equipment.
A loss of $45,899 on the disposition of the discontinued Antigua operations was
incurred in the second quarter of 2000 compared to none for the quarter ended
June 30, 1999. This loss is associated with the closure of the Antigua
operations early in the quarter. Net interest income generated on cash and cash
equivalents remained relatively the same for both quarters.
A net loss of $1,168,276 or $.12 per share was incurred in the quarter ended
June 30, 2000, compared to a net loss of $499,112 or $.05 per share for the
quarter ended June 30, 1999. The loss resulted from the explanations mentioned
above.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
During the six months ended June 30, 2000, we generated revenues of $ 61,868
compared to none for the six months ended June 30, 1999. We received $8,500 in
co-branding advertising revenues, $24,768 from banner advertisements and
recorded $28,600 in barter revenues. An amount identical to the barter revenues
of $28,600 has been recorded as marketing expense for the period, as the revenue
represents an exchanged trade of services.
Our total general and administrative expenses were $1,189,886 during the six
months ended June 30, 2000, compared to $497,863 for the six months ended June
30, 1999. The increase in general and administrative expenses resulted from
increased costs related to the ramp-up and refinement of our operations. General
and administrative expenses consist primarily of payroll and
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<PAGE> 12
consultant costs for the Company's executive staff, accounting and
administrative personnel, premises costs, legal and professional fees, insurance
and other general corporate and office expenses. General and administrative
expenses for the six months ended June 30, 2000 also include certain of the
costs associated with the relocation of our executive offices to Marina del Rey,
California.
Marketing, advertising, software and website development expenses were $354,469
for the six months ended June 30, 2000, compared to $257,647 for the six months
ended June 30, 1999. Marketing expenses relate primarily to the discontinued
gaming operations. This amount includes funds expended for awareness
advertising, banner advertising, prizes related to the site, and $28,600 in
exchanged bartered services described previously. The balance of marketing and
advertising expenses consists of payroll and consultant's costs, travel and
office costs. The increase in these expenses resulted from the expansion of the
website, consistent with the implementation of the operating plan developed in
December 1999.
During the six months ended June 30, 2000, $45,899 was recorded as additional
provision for loss on the disposition of Antigua operations, which were closed
in the first quarter of 2000. The reserve is considered adequate to cover future
obligations of the Antigua operation.
Our net loss from continuing operations for the six months ended June 30, 2000
was $1,662,567 compared to $759,064 for the six months ended June 30, 1999. The
increase in our loss resulted from the relocation of our primary office,
expansion of our website capacity and increased amortization expense associated
with the amortization of our domain name. We expect similar or greater losses
into the foreseeable future as we build our operations.
We recorded a net loss of $1,662,799 or $0.17 per share for the six months ended
June 30, 2000. We expect similar or greater losses into the foreseeable future
as we continue to develop our website and the technologies related to new games.
Revenue generation and operating income are dependent upon the utilization of
significant cash resources for advertising and promotion, new games, new service
features and our future successes at attracting prize sponsors and advertising
customers.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, we held cash and cash equivalents of $1,747,277 versus
$4,594,304 at June 30, 1999. Our working capital position at June 30, 2000 was
$1,101,101 compared to $4,880,199 at June 30, 1999. Our working capital position
at June 30, 2000 is net of $256,819 for the current amounts payable under the
terms of the contract to purchase our domain name and $251,871 for capital lease
obligations, both due in scheduled repayments over the next twelve months.
Our investing activities for the six months ended June 30, 2000 consisted of a
use of $152,789 for office, computer equipment and software purchases versus
$246,599 for the six months ended June 30, 1999. During the six months ended
June 30, 1999, we paid the cash portion of $50,000 for our bingo.com domain
name, required under the purchase contract.
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<PAGE> 13
During the six months ended June 30, 2000, $362,496 was incurred under capital
lease financings for the purchase of computer software and equipment over terms
of one to three years. We repaid $5,339 of capital leases under the contractual
repayment terms, and the balance of the outstanding lease of $28,027 was secured
by computer equipment located in our Canadian offices, when we relocated the
equipment to our offices in California. Our financing activities for the
comparable six month period ended June 30, 1999 consisted solely of the issuance
of our shares of common stock for cash of $6,075,017 less $8,643 for share
issuance costs.
The net effect of these transactions was a use of cash of $1,643,118 for the six
months ended June 30, 2000 compared to an increase of cash of $4,437,335 for the
six months ended June 30, 1999. The increase in cash for the six months ended
June 30, 1999 resulted from two separate private placements of equity funds in
May and June 1999.
We used $928,206 of our available cash balances in the second quarter. We
purchased $152,789 of new office and computer equipment and obtained $362,496 in
capital lease financing secured by certain of the computer equipment and
software purchases. $70,331 in cash was used for scheduled capital lease
repayments and initial down payments.
We currently project that available cash balances will be sufficient to fund our
existing operations for the remainder of the fiscal year, provided that we do
not undertake significant advertising campaigns or identify and complete any
acquisitions. We are currently seeking additional equity financing to implement
planned investments in advertising, software development and personnel to expand
our registered user data base and service offerings for future revenue
generation and to preserve our working capital. We have not made a final
determination regarding the terms and conditions of an equity placement, nor can
we provide any assurance that such financing will be available on acceptable
terms, if at all. Our inability to raise additional financing would have a
material adverse effect on our business and on our operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of our business, we are exposed to certain market risks,
including changes in interest rates and foreign currency exchange rates. After
an assessment of these risks to our operations, we believe that our primary
market risk exposures (within the meaning of Item 305 of Securities and Exchange
Commission Regulation S-K) are not material and are not expected to have any
material adverse effect on our financial condition, results of operations or
cash flows for the next fiscal year.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than the claim brought by Pan Pacific Communications, disclosed in our
Form 10-Q for the quarter ended March 31, 2000 and earlier filings, we are not
aware of any further legal action 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.
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<PAGE> 14
ITEM 2. CHANGES IN SECURITIES
Effective May 15, 2000, we became obligated to issue 16,000 shares of our common
stock in accordance with terms of the agreement with Market Pathways Financial
Relations Incorporated entered into on February 21, 2000, as disclosed in our
Form 10-Q for the quarter ended March 31, 2000. The shares are being issued in
exchange for shareholder relations services. The issuance of shares was deemed
to be exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), by virtue of Section 4(2) of the Securities Act because the
issuance did not involve a public offering, and Rule 504 of Regulation D
promulgated under Section 3(b) of the Securities Act. While the agreement is in
effect, we will continue to pay Market Pathways $6,000 per month plus
pre-approved expenses for shareholder relations services. The 16,000 shares that
were due to Market Pathways on May 15, 2000 have been recorded as a liability as
of June 30, 2000 based upon the market value of the stock as of the vesting
date. Market Pathways is entitled to a further 32,000 shares of our common
stock, with 16,000 shares vesting on each of August 15, 2000 and November 15,
2000, provided that the agreement is then in effect.
On May 23, 2000 the Company adopted a 2000 Stock Option Plan for the Company's
director, employees and consultants and reserved an aggregate of 2,000,000
shares of the authorized but unissued common stock for issuance upon the
exercise of options granted under the plan. The plan will be submitted to the
shareholders of the Company for their approval.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The exhibits listed below are filed with the U.S. Securities
and Exchange Commission as part of this report.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K. On July 31, 2000, we filed a Form 8-K with the U.S.
Securities and Exchange Commission reporting the appointment of Grant
Thornton LLP as our independent accountants as of July 24, 2000.
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Bingo.com, Inc.,
a Florida corporation
Date: August 17 , 2000 By: /s/ SHANE MURPHY
---------------------- -----------------------------------------
Shane Murphy
Chairman of the Board, Chief Executive
Officer, President, Treasurer and Secretary
(Principal Financial and Accounting Officer)
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<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
-14-
