<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 September 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.
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(Exact name of registrant as specified in its charter)
Florida 98-0206369
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4223 Glencoe Avenue, Suite C200, Marina del Rey, CA 90292
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(Address and zip code of principal executive offices)
Registrant's telephone number: (310) 301-4171
Not Applicable
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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: 10,089,668 shares as of
November 10, 2000.
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
<PAGE> 2
BINGO.COM, INC.
Quarterly Report on Form 10-Q
for the Third Quarter ended September 30, 2000
Table of Contents
Page
----
PART I - FINANCIAL INFORMATION............................................. 1
Item 1. Condensed Consolidated Financial Statements....................... 1
Condensed Consolidated Balance Sheets as of September 30,
2000 (unaudited) and December 31, 1999............................ 1
Condensed Consolidated Statements of Operations for the
Three Months and Nine Months ended September 30, 2000 and
September 30, 1999 (unaudited).................................... 2
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and September 30,
1999 (unaudited).................................................. 3
Notes to Condensed Consolidated Financial Statements
(unaudited)....................................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 13
PART II - OTHER INFORMATION................................................ 13
Item 1. Legal Proceedings................................................. 13
Item 2. Changes in Securities and Use of Proceeds......................... 13
Item 6. Exhibits and Reports on Form 8-K.................................. 13
SIGNATURES................................................................. 14
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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 SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 878,438 $ 3,382,529
Accounts receivable, net 253,250 102,239
Prepaid expenses and security deposits 112,952 83,030
----------- -----------
1,244,640 3,567,798
----------- -----------
Equipment
Office and computer equipment 449,351 123,506
Software development & website equipment 326,258 157,889
Less: - accumulated depreciation (185,551) (59,727)
----------- -----------
590,058 221,668
----------- -----------
Domain name rights, net 1,741,926 1,200,905
----------- -----------
Total assets $ 3,576,624 $ 4,990,371
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 407,194 $ 187,914
Loan payable -- 53,912
Reserve for discontinued operations 65,344 60,000
Contract payable - current portion 256,819 --
Capital leases - current portion 199,870 14,323
----------- -----------
929,227 316,149
----------- -----------
Contract payable, net of current portion 346,716 --
Capital leases, net of current portion 137,835 9,494
----------- -----------
1,413,778 325,643
----------- -----------
Stockholders' Equity
Common stock - $0.001 par value
Authorized: 50,000,000 shares
Issued and outstanding: 10,089,668 shares
at September 30, 2000 and 9,916,668
at December 31, 1999 10,090 9,917
Additional paid - in capital 7,822,026 7,574,366
Deficit accumulated during development stage (5,666,805) (2,915,444)
Cumulative translation adjustment (2,465) (4,111)
----------- -----------
2,162,846 4,664,728
----------- -----------
Total liabilities and stockholders' equity $ 3,576,624 $ 4,990,371
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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BINGO.COM, INC.
(formerly Progressive General Lumber Corp)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
FROM
INCEPTION
(JANUARY 12, THREE MONTHS ENDED NINE MONTHS ENDED
1987) TO SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, --------------------------- --------------------------
2000 2000 1999 2000 1999
------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 606,284 $ 544,416 $ -- $ 606,284 $ --
Cost of Revenues 303,326 274,726 -- 303,326 --
------------ ----------- ------------ ----------- -----------
Gross Profit 302,958 269,690 0 302,958 0
Operating Expenses
Sales and marketing 1,084,850 290,231 93,694 594,616 351,341
General and administrative 2,925,342 586,345 598,217 1,613,496 1,096,080
Software & website development 591,567 49,103 -- 233,326 --
Stock Based Compensation 534,179 247,833 -- 247,833 --
Depreciation & amortization 400,629 179,880 35,851 359,960 39,405
------------ ----------- ------------ ----------- -----------
Total Operating Expenses 5,536,567 1,353,392 727,762 3,049,231 1,486,826
------------ ----------- ------------ ----------- -----------
Loss from continuing operations (5,233,609) (1,083,702) (727,762) (2,746,273) (1,486,826)
Loss from discontinued operations (494,107) -- -- -- --
Other income (expense)
Loss on disposition of discontinued
operations (105,899) -- -- (45,899) --
Net interest income (expense) 166,810 (4,862) 28,550 40,809 47,855
------------ ----------- ------------ ----------- -----------
NET LOSS $ (5,666,805) $(1,088,564) $ (699,212) $(2,751,363) $(1,438,971)
============ =========== ============ =========== ===========
BASIC AND DILUTIVE LOSS PER SHARE $ (0.11) $ (0.07) $ (0.27) $ (0.16)
=========== ============ =========== ===========
WEIGHTED AVERAGE SHARES 10,069,842 9,916,668 10,054,308 9,062,882
=========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
No. Days Q3 No. Days YTDQ3
-------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES CALCULATION:
Balance 12-31-99 9,916,668 92 9,916,668 272 9,916,668
January 10, 2000 Develop Portal Web Site 125,000 92 125,000 262 120,404
February 18, 2000 Investor Relations 16,000 92 16,000 223 13,118
August 24, 2000 Investor Relations 32,000 35 12,174 35 4,118
----------
TOTAL SHARES OUTSTANDING 10,089,668
==========
---------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING 10,069,842 10,054,308
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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BINGO.COM, INC.
(formerly Progressive General Lumber Corp)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Inception
January 12, Nine Months Nine Months
1987 to Ended Ended
September 30, September 30, September 30,
2000 2000 1999
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,666,805) $(2,751,363) $(1,438,971)
Adjustments to reconcile net loss to net cash
used in operating activities
Loss from discontinued operations 600,006 45,899
Depreciation and amortization 400,629 359,960 39,405
Provision for doubtful accounts 21,126 21,126 --
Stock based compensation costs 534,179 247,833 --
Change in operating assets and liabilities:
Accounts receivable (274,376) (172,137) (111,043)
Prepaid expenses and security deposits (112,952) (29,922) (193,990)
Accounts payable and accrued liabilities 371,663 178,751 (274,105)
----------- ----------- -----------
Cash used by continuing operations (4,126,530) (2,099,853) (1,978,704)
DISCONTINUED OPERATIONS
Net loss from discontinued operations (600,006) (45,899) --
Adjustments to reconcile net loss to net cash
used in discontinued operations
Depreciation and amortization 19,058 -- --
Provision for loss on disposition of
discontinued operations 105,899 45,899 --
----------- ----------- -----------
Cash used by discontinued operations (475,049) 0 --
----------- ----------- -----------
Net cash used by operating activities (4,601,579) (2,099,853) (1,978,704)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (381,703) (100,308) (259,037)
Payments on domain name contract payable (331,870) (130,965) (200,405)
----------- ----------- -----------
Net cash used in investing activities (713,573) (231,273) (459,442)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital lease repayments (96,882) (120,699) --
Loan payable -- (53,912) 50,000
Proceeds from issuance of common stock, net 6,066,374 -- 6,065,874
Shares allocated for issue 226,563 -- --
----------- ----------- -----------
Net cash provided by financing activities 6,196,055 (174,611) 6,115,874
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 880,903 (2,505,737) 3,677,728
Effect of exchange rates on cash and cash equivalents (2,465) 1,646 (406)
Cash and cash equivalents at beginning of period -- 3,382,529 157,600
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 878,438 $ 878,438 $ 3,834,922
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 36,812 $ 23,482 $ 8,824
NON CASH TRANSACTIONS
Equipment acquired under capital lease $ 458,404 $ 434,587
Issuance of common stock for domain name rights $ 1,000,000 $ 1,000,000
Issuance of common stock for investor relations $ 52,000 $ 52,000
Present value adjustment to domain name rights $ 734,500 $ 734,500
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 6
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH
PERIOD ENDED SEPTEMBER 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 Bingo.com, Inc. (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. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included. These Consolidated Condensed Financial
Statements should be read in conjunction with the Financial Statements and Notes
thereto included in the Company's Annual Report on Form 10-K and Form 10-K/A for
the year ended December 31, 1999. Operating results for the nine months ended
September 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 September 30, 2000, the Company's President, CEO and sole director owed the
Company $3,725 through a salary advance from the Company. The salary advance was
unsecured, non-interest bearing and was fully repaid before October 31, 2000. On
October 13, 2000, the Company made an additional salary advance to the
President, CEO and sole director for $56,484 Canadian dollars (U.S. $37,660).
The salary advance is unsecured and non-interest bearing and will be repaid in
24 semi-monthly installments of $2,354 Canadian dollars (U.S. $1,570) from
payroll deductions beginning in November 2000.
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, in conjunction with the Company's initial generation
of advertising revenues. The net present value of future obligations under the
contract, totaling $603,535, have been included in Contracts Payable in the
accompanying Balance Sheet as of September 30, 2000.
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NOTE 5 - COMMON STOCK WARRANTS AND OPTIONS
At September 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.
1999 Non-Qualified Stock Option Plan
The Company did not grant any stock options under its 1999 Non-Qualified Stock
Option Plan (the "1999 Plan") during the quarter ended September 30, 2000. On
June 29, 2000, the Company re-priced options to purchase 800,000 shares of the
Company's common stock 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 9. The re-pricings must be approved by the
shareholders of the Company. At September 30, 2000, outstanding employee and
director stock options granted under the 1999 Plan, with various vesting
provisions, were as follows:
Number of Shares Exercise Price Expiration Date
---------------- -------------- ---------------
600,000 $0.75 July 1, 2004
200,000 3.00 December 1, 2004
200,000 0.75 December 1, 2004
These re-pricings have resulted in variable accounting, which required the
computation and recording of stock-based compensation expense of $195,833 for
the quarter ended September 30, 2000. In accordance with the Financial &
Accounting Standards Board FIN 44, the expense related to these options was
based on the difference between the market value of the stock and the option
exercise price in this reporting period.
2000 Stock Option Plan
On September 1, 2000, the Company granted, subject to shareholder approval,
incentive stock options to purchase 95,000 shares of the Company's common stock
to nine full-time employees and non-qualified stock options to purchase 61,000
shares of the Company's common stock to certain key consultants under the
Company's 2000 Stock Option Plan (the "2000 Plan"). The options were granted at
an exercise price of $.88 per share, which was equal to the fair market value of
the Company's common stock on September 1, 2000, the date of grant. The options
vest over various periods. As of September 30, 2000, 15,000 incentive stock
options and 15,000 non-qualified stock options granted under the 2000 Plan had
vested. Vested stock options may not be exercised until the 2000 Plan is
approved by a majority of the Company's shareholders.
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<PAGE> 8
NOTE 6 - REVENUE RECOGNITION
The Company has contracted with a sales agency to sell advertising on its
website directly to corporate customers or through advertising agencies. The
Company pays an advertising commission to the sales agency for placing
advertisements on its web site. Advertising revenues are recognized as the
advertising campaign or impressions and clicks are made on the website.
Advertisements are billed on a monthly basis with terms of net 15 days. Accounts
receivable are recorded net of advertising commissions. A reserve for doubtful
accounts of $21,126 was recorded in the third quarter ended September 30, 2000,
to provide for potentially uncollectible amounts.
The Company enters into co-branding contracts with its corporate customers. The
contracts provide the customer with the ability to allow its registrants or
visitors the opportunity to play Bingo for free on the customer's website. A
monthly fee is charged per the contract and set-up fees are recognized as
revenue when the set-up process has been completed.
NOTE 7 - LOSS PER SHARE
Net loss per share is determined based 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 nine months ended September 30, 2000
was 10,054,308 shares. Weighted average shares outstanding for the three months
ended September 30, 2000 were 10,069,842.
NOTE 8 - DISCONTINUED OPERATIONS
During the nine months ended September 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 $65,344 has been recorded to cover the disposition of Antigua's remaining net
assets. Management believes the reserve is sufficient for any remaining
obligations and that the Antigua operations will be fully dissolved by the end
of 2000.
NOTE 9 - 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
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<PAGE> 9
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 required the
computation and recording of stock based compensation expense of $195,833 for
the quarter ended September 30, 2000. In accordance with the Financial &
Accounting Standards Board FIN 44, the expense related to these options was
based on the difference between the market value of the stock and the option
exercise price in this reporting period amortized over the remaining vesting
period of the options.
NOTE 10 - RECLASSIFICATIONS
Certain balances in the 1999 Financial Statements have been reclassified to
conform to the presentation of the 2000 Financial Statements.
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 2000, to facilitate the implementation of our revised business plan, which
focuses on the on-line entertainment industry. We believe the relocation
provides us with access to a larger industry talent pool, a larger prize sponsor
base and an audience for future potential revenue generation, financing and
partnering opportunities.
Business Strategy
Initially, our strategy was to develop an on-line gaming operation. In August
1999, our board of directors (the "Board") 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 directed all of
our resources to our revised business plan.
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<PAGE> 10
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
339,300 registered users as of September 30, 2000, compared to 211,100
registered users as of June 30, 2000, and 106,800 at March 31, 2000. This
represents a growth rate of 61% for the third quarter of 2000 compared to the
second quarter of 2000, and 218% growth rate as compared to the first quarter of
2000. During the third quarter of the fiscal year 2000, we attracted
approximately 38,000 visitors per day to our website compared to 27,000 visitors
per day during the second quarter, and 15,000 visitors per day in the first
quarter of the fiscal year 2000. During the third quarter our website received
10.5 million. During the third quarter of the 2000 fiscal year, 3.3 million
player sessions were offered to the Company's registered users. During the third
quarter of the fiscal year 2000, the average visitor session length grew to an
average of approximately 65 minutes compared to 50 minutes in the first quarter
and to 62 minutes in the second quarter. We intend to continue to attempt to
build our registered user database through on-line and offline marketing
strategies, promotional opportunities and strategic alliances.
Board of Directors
The Company is in the process of identifying individuals to serve on its Board.
The Company expects to obtain at least two additional Board members by the end
of the year and also will establish an Audit Committee comprised primarily of
outside independent directors.
Employees
As of September 30, 2000, we had eleven full-time employees, three part-time
employees and six 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 location, or a similar leased space,
our principal offices.
We subleased our previous executive offices located at 702-543 Granville Street,
Vancouver, British Columbia effective May 1, 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. Payments required under
the sublease are sufficient to satisfy the remaining obligation.
We do not presently own or lease any other real property.
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<PAGE> 11
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
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
The Company generated $544,416 in revenues for the quarter ended September 30,
2000 compared to no revenues for the quarter ended September 30, 1999. Revenues
resulted from advertising and the sale of advertising banners ($250,093),
buttons ($1,038) and pop-ups ($97,139) on our website. Revenues were also
generated from co-branding contracts ($25,000), e-mail sponsorships ($22,750)
and set up fees ($2,000). $146,396 of revenue from barter transactions was
recorded with a corresponding cost of $146,396 being included in cost of
revenues. Barter transactions result from an exchange of a like number of
advertising impressions being shown on our web site for a third party. The third
party advertises Bingo.com on its web site to entice its users to visit our web
site. No gross profit has been recognized from barter transactions.
Cost of revenues were $274,726 for the quarter ended September 30, 2000 compared
to none for the quarter ended September 30, 1999. Included in cost of revenues
are advertising commissions and cost of barter revenue. $128,330 in advertising
commissions and $146,396 in cost of barter revenue were recorded during the
quarter ended September 30, 2000.
During the quarter ended September 30, 2000, sales and marketing expenses
increased to $290,231 compared to $93,694 for the quarter ended September 30,
1999. Included in sales and marketing are marketing salaries, travel and
promotion, web site marketing and prizes. The significant increase was a result
of a significant increase in marketing activities.
During the quarter ended September 30, 2000, general and administrative expenses
decreased to $586,345 compared to $598,217 for the quarter ended September 30,
1999. The decrease resulted from a decrease in consulting expense and
professional fees.
Software and website development costs totaled $49,103 for the quarter ended
September 30, 2000, compared to none for the quarter ended September 30, 1999.
Included in these expenses are co-location and bandwidth fees, web hosting costs
and software costs. 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.
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<PAGE> 12
Stock-based compensation costs were $247,833 for the quarter ended September 30,
2000 compared to none for the quarter ended September 30, 1999. Stock-based
compensation costs include $52,000 associated with the issuance of shares for
Investor Relations services. The remaining amount of $195,833 is associated with
the variable accounting for certain stock options that have been re-priced (See
Footnote 9 to the Financial Statements).
Depreciation and amortization increased to $179,880 during the quarter ended
September 30, 2000 from $35,851 for the quarter ended September 30, 1999. This
increase resulted from commencing the amortization of the domain name on April
1, 2000, as well as the addition of new equipment.
A net loss of $1,088,564 or $.11 per share was incurred in the quarter ended
September 30, 2000, compared to a net loss of $699,212 or $.07 per share for the
quarter ended September 30, 1999. The loss resulted from the increased costs
discussed above.
We have experienced net losses and negative cash flows since we began
implementing our current business plan. We expect these losses and negative cash
flows to continue in the future. Based on our current projections, we have
available cash balances sufficient to fund operations at their existing levels
for the remainder of fiscal year 2000, through early 2001, provided that we do
not increase our expenditures.
We do not have a line of credit or a credit facility, nor do we anticipate
securing a line of credit in the foreseeable future. Accordingly, there are no
available borrowings for us to utilize to meet our anticipated cash requirements
to fund our operating losses. We are in discussions with certain equity groups
to obtain additional equity financing. As of the date of this filing, we have
not been able to raise additional funds, and we cannot provide any assurance
that any additional debt or equity will be available to us on acceptable terms,
or at all. Our inability to raise additional financing will materially adversely
affect our business and current operations.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
During the nine months ended September 30, 2000, we generated revenues of
$606,284 compared to none for the nine months ended September 30, 1999. We
recorded $58,250 in co-branding advertising revenues, $373,038 from banner
advertisements and recorded $174,996 in barter revenues. An amount identical to
the barter revenues of $174,996 has been recorded as a cost of revenue for the
period, as the revenue represents an exchanged trade of advertising services.
Cost of revenues were $303,326 for the nine months ended September 30, 2000
compared to none for the nine months ended September 30, 1999. Included in cost
of revenues are advertising commissions of $128,330 and cost of barter revenues
of $174,996. The increase of $303,326 resulted directly from increased
advertising efforts associated with the increase in revenues.
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During the nine months ended September 30, 2000, sales and marketing expenses
increased to $594,616 from $351,341 for the nine months ended September 30,
1999. Included in sales and marketing are marketing salaries, travel and
promotion, web site marketing and prizes. The significant increase was a result
of the increase in our marketing activities.
Our total general and administrative expenses were $1,613,496 during the nine
months ended September 30, 2000, compared to $1,096,080 for the nine months
ended June 30, 1999. The increase in general and administrative expenses
resulted from increased costs related to the implementation of our business plan
and expansion of our operations. General and administrative expenses consist
primarily of payroll and 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 nine months ended September 30, 2000 also
include certain of the costs associated with the relocation of our executive
offices to Marina del Rey, California.
Software and website development expenses were $233,326 for the nine months
ended September 30, 2000, compared to none for the nine months ended September
30, 1999. Software and website development costs consist of co-location and
bandwidth fees, web hosting costs and software costs. These expenses resulted
from the expansion of the website and the addition and relocation of our
equipment to Los Angeles, consistent with the implementation of the operating
plan developed in December 1999.
During the nine months ended September 30, 2000, $45,899 was recorded as a loss
on disposition of discontinued operations, relating to 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. It
is expected that this operation will be completely dissolved by year end 2000.
Our net loss from operations for the nine months ended September 30, 2000 was
$2,751,363 compared to $1,438,971 for the nine months ended September 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 to continue to incur losses
into the foreseeable future as we build our operations and grow our revenue
base.
We recorded a net loss of $2,751,363 or $0.27 per share for the nine months
ended September 30, 2000. We expect to continue to incur losses in the
foreseeable future as we continue to develop our website and the technologies
related to new games. Our ability to generate revenue is 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 September 30, 2000, we held cash and cash equivalents of $878,438 compared to
$3,382,529 at December 31, 1999. Our working capital position at September 30,
2000 was $315,413
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compared to $3,251,649 at December 31, 1999. Our working capital position at
September 30, 2000 was net of $256,819 for the current amounts payable under the
terms of the contract to purchase our domain name and $199,870 for capital lease
obligations, both due in scheduled repayments over the next twelve months.
Our investing activities for the nine months ended September 30, 2000 consisted
of a use of $100,308 for office, computer equipment and software purchases
versus $259,037 for the nine months ended September 30, 1999. During the nine
months ended September 30, 2000, we paid the cash portion of $130,965 for our
bingo.com domain name, required under the purchase contract.
During the nine months ended September 30, 2000, $434,587 was incurred under
capital lease financings for the purchase of computer software and equipment
over terms of one to three years. We repaid $120,699 of capital leases under the
contractual repayment terms. Our financing activities for the comparable nine
month period ended September 30, 1999 consisted of the issuance of our shares of
common stock for cash of $6,075,017 less $9,143 for share issuance costs,
incurring a loan payable of $50,000 and incurring a capital lease obligation of
$12,193.
The net effect of these transactions was a use of cash of $2,505,737 for the
nine months ended September 30, 2000 compared to an increase of cash of
$3,677,728 for the nine months ended September 30, 1999. The increase in cash
for the nine months ended September 30, 1999, resulted from two separate private
placements of equity funds in May and June 1999.
We had a net use of $868,839 of our available cash balances in the third
quarter. During the third quarter we collected approximately $121,000 from
accounts receivable and other cash receipts and collected $17,976 in interest
income. $46,455 in cash was used for scheduled capital lease repayments and
$50,000 was used to pay for our domain name. The balance was used to fund our
operations.
We have experienced net losses and negative cash flows since we began
implementing our current business plan. We expect these losses and negative cash
flows to continue in the future. Based on our current projections, we have
available cash balances sufficient to fund operations at their existing levels
for the remainder of fiscal year 2000, through early 2001, provided that we do
not increase our expenditures.
We do not have a line of credit or a credit facility, nor do we anticipate
securing a line of credit in the foreseeable future. Accordingly, there are no
available borrowings for us to utilize to meet our anticipated cash requirements
to fund our operating losses. We are in discussions with certain equity groups
to obtain additional equity financing. As of the date of this filing, we have
not been able to raise additional funds and we cannot provide any assurance that
any additional debt or equity will be available to us on acceptable terms, or at
all. Our inability to raise additional financing will materially adversely
affect our business and current operations.
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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 made by Pan Pacific Communications, which has previously
been disclosed, we are not aware of any 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.
ITEM 2. CHANGES IN SECURITIES
Under the terms of an Agreement for Financial Public Relations Services dated
February 21, 2000 between the Company and Market Pathways Financial Relations
Services Incorporated ("Market Pathways"), we agreed to issue an aggregate of
64,000 shares of our common stock to Market Pathways in exchange for shareholder
relations services. Market Pathways' right to receive the shares vests in four
equal quarterly installments, commencing in February 2000. As of September 30,
2000, 48,000 of such shares have been issued to Market Pathways. The issuance of
the 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.
We have notified Market Pathways that the agreement will be terminated effective
December 31, 2000. While the agreement is in effect, we will continue pay Market
Pathways $6,000 per month for its services and reimburse its approved
out-of-pocket expenses. Market Pathways' right to the final 16,000 installment
provided for under the agreement vests on November 15, 2000.
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.
Exhibit
Number Description
------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K. On July 31, 2000, we filed a Form 8-K with the
Securities and Exchange Commission to report the appointment of Grant
Thorton, LLP as our independent accountants as of July 24, 2000. On August
18, 2000, we filed a Form 8-K to report the dismissal of Davidson & Company
as our principal accountants. We continue to work with Davidson & Company on
a project-by-project basis.
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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: November 13, 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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EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27.1 Financial Data Schedule
