UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
Commission file number: 0-22242
BOUNCEBACKTECHNOLOGIES.COM, Inc.
(Name of the Small Business Issuer in its Charter)
Minnesota 41-0950482
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
707 Bienville Boulevard
Ocean Springs, Mississippi 39564
--------------------------------
(Address of principal executive officers)
Issuer's telephone number: (228) 872-5558
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] Yes [ ] No
As of July 28, 2000, 12,461,508 Shares of Common Stock of the Company were
outstanding.
1
<PAGE>
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BOUNCEBACKTECHNOLOGIES.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000 AND SEPTEMBER 30, 1999
June 30, 2000 September 30, 1999
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $ 244,000 $ 957,000
Accounts receivable - trade and other 103,000 184,000
Inventories 24,000 --
Prepaid expenses 213,000 70,000
Net assets held for sale - gaming 1,351,000 1,471,000
Net assets held for sale - entertainment 1,105,000 1,045,000
---------------------------------
Total Current Assets 3,040,000 3,727,000
Property and Equipment, Net 327,000 279,000
---------------------------------
Noncurrent Assets
Cost of assets held in excess of fair market value 127,000 --
Notes and advances receivable-related parties, -- --
net of allowance for uncollectibles 285,000 410,000
Other assets - net 24,000 74,000
---------------------------------
Total Noncurrent Assets 436,000 484,000
TOTAL ASSETS $ 3,803,000 $ 4,490,000
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 374,000 275,000
Subordinated convertible debentures -- 121,000
Current maturities of long-term debt 600,000 843,000
Accrued expenses and other liabilities 385,000 580,000
---------------------------------
Total Current Liabilities 1,359,000 1,819,000
Long-Term Liabilities
Long-term debt, less current maturities 751,000 1,424,000
Deferred revenue 2,000,000 2,000,000
---------------------------------
Total Long-Term Liabilities 2,751,000 3,424,000
Total Liabilities 4,110,000 5,243,000
Stockholders' Equity
Preferred stock, 8% cumulative; $.01 par value;
authorized 5,000,000 shares; none issued
Common stock, $.01 par value; authorized 30,000,000
shares; 12,461,508 and 10,768,223 shares issued and
outstanding as of 06/30/00 and 9/30/99, respectively 125,000 108,000
Additional paid-in capital 23,118,000 22,950,000
Deficit (23,550,000) (23,811,000)
---------------------------------
Total Stockholders' (Deficit) Equity (307,000) (753,000)
---------------------------------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 3,803,000 $ 4,490,000
---------------------------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
BOUNCEBACKTECHNOLOGIES.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
REVENUE
Continuing operations 95,000 --
Cost and Expenses
Continuing operations 427,000 --
General and administrative 1,985,000 2,010,000
Other (income) expense 32,000 270,000
Gain on sale of joint venture -- (103,000)
--------------------------------
Total Cost and Expenses 2,444,000 2,177,000
Loss from continuing operations before taxes (2,349,000) (2,177,000)
Income tax expense -- (2,000,000)
Loss from continuing operations (2,349,000) (4,177,000)
Income from discontinued operations - entertainment 2,294,000 1,237,000
Loss from discontinued operations-gaming (75,000) (740,000)
Extraordinary gain on early extinquishment of 391,000 --
debt & refinancing
Net Income (Loss) 261,000 (3,680,000)
==========================================================================================
Income (Loss) per Common Share
Continuing operations (0.22) (0.40)
Discontinued operations 0.20 0.05
Extraordinary gain 0.04 --
Net Income (Loss) 0.02 (0.35)
Weighted Average Number of Common Shares
Outstanding 10,799,639 10,537,188
================================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
BOUNCEBACKTECHNOLOGIES.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDING JUNE 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations (2,349,000) (4,177,000)
Adjustments to reconcile loss to net cash
Depreciation 34,000 66,000
Reversal of deferred tax asset -- 2,000,000
Gain on sale of joint venture -- (103,000)
Discount upon conversion of convertible debentures 370,000 19,000
Loss on Impairment of Palace note receivable -- 56,000
Early extinguishment of subordinated debentures 21,000 --
Accretion of note receivable interest -- (7,000)
Change in Assets and Liabilities
Accounts receivable 71,000 (117,000)
Inventories (24,000) --
Prepaid expense (143,000) (72,000)
Other assets (50,000) 247,000
Accounts payable 99,000 (75,000)
Accrued expense and other liabilities (195,000) (657,000)
--------------------------------
Net Cash used in Operating Activities (2,166,000) (2,820,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (119,000) (37,000)
Proceeds from sale of joint venture -- 20,000
Decrease (Increase) in due from related parties 125,000 9,000
--------------------------------
Net cash provided by (used in) investing activities 6,000 (8,000)
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of debentures and draws on line of credit -- 50,000
Reduction of long-term debt (986,000) (288,000)
--------------------------------
Net cash provided by (used in) financing activities (986,000) (238,000)
Cash provided by (used in)
Discontinued Operations-Gaming 45,000 (494,000)
--------------------------------
Cash provided by
Discontinued operations-entertainment 2,388,000 2,887,000
--------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (713,000) (673,000)
Cash and Cash Equivalents, at beginning of period 957,000 761,000
Cash and Cash Equivalents, at end of period 244,000 88,000
================================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE>
BOUNCEBACKTECHNOLOGIES.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
REVENUE
Continuing Operations 58,000 --
Cost and Expenses
Continuing operations 274,000 --
General and administrative 742,000 711,000
Other (income) expense 7,000 (22,000)
Gain on sale of joint venture -- --
---------------------------------
Total Cost and Expenses 1,023,000 689,000
Loss from continuing operations (965,000) (689,000)
Income from discontinued operations - entertainment 1,748,000 626,000
Loss from discontinued operations-gaming (6,000) (344,000)
Net Income (Loss) 777,000 (407,000)
==========================================================================================
Income (Loss)per Common Share
Continuing operations (0.09) (0.07)
Discontinued operations 0.16 0.03
Net Income (Loss) 0.07 (0.04)
Weighted Average Number of Common Shares
Outstanding 10,799,639 10,537,188
=================================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE>
BOUNCEBACKTECHNOLOGIES.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDING JUNE 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations (965,000) (1,032,000)
Adjustments to reconcile loss to net cash
Depreciation 17,000 22,000
Gain on sale of joint venture -- (12,000)
Early extinguishment of subordinated debentures -- --
Change in Assets and Liabilities
Account receivable (59,000) (131,000)
Inventories (11,000) --
Prepaid expense (39,000) (121,000)
Other assets 39,000 105,000
Accounts payable (161,000) 151,000
Accrued expense and other liabilities 32,000 58,000
-------------------------------
Net Cash used in Operating Activities (1,147,000) (960,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (65,000) (23,000)
Decrease (Increase) in due from related parties 43,000 41,000
-------------------------------
Net cash provided by (used in) investing activities (22,000) 18,000
CASH FLOW FROM FINANCING ACTIVITIES
Reduction of long-term debt (157,000) (141,000)
-------------------------------
Net cash provided by (used in) financing activities (157,000) (141,000)
Cash provided by (used in)
Discontinued Operations-Gaming 38,000 (160,000)
-------------------------------
Cash provided by
Discontinued operations-entertainment 1,493,000 1,254,000
-------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 205,000 11,000
Cash and Cash Equivalents, at beginning of period 39,000 77,000
Cash and Cash Equivalents, at end of period 244,000 88,000
===============================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
7
<PAGE>
BOUNCEBACKTECHNOLOGIES.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Business
BounceBackTechnologies.com, Inc. and Subsidiaries (the "Company") was formerly
known as Casino Resource Corporation. The name change, effective January 4,
2000, reflects the Company's intent to focus on marketing, sales and business
solutions to the Internet and e-commerce industries. It is the Company's intent
to utilize its marketing and sales expertise by providing services to a new
media marketplace which is experiencing strong growth. The Company's new ticker
symbol for its common stock is "BBTC" and the stock is traded on the NASDAQ
Bulletin Board.
To strengthen its position and bolster its efforts in penetrating the e-commerce
industry, the Company acquired all of the assets of Raw Data, Inc., on December
31, 1999. Raw Data, Inc. focused on the development, sales and distribution of
e-commerce business solutions through direct advertising of mini-CDs used by
consumers and businesses to link potential customers to web sites and e-commerce
centers. Upon acquisition, the Company changed the name of its new subsidiary to
BounceBackMedia.com, Inc.
BounceBackMedia.com, Inc., a Nevada corporation, will be headquartered in
Fresno, California to take advantage of the technological innovations and
skilled personnel available in the Silicon Valley. In addition to sales and
marketing support services, the Company's corporate offices, located in Ocean
Springs, Mississippi, will provide administrative and accounting support
services to BounceBackMedia.com, Inc.
The Company entered into a letter of intent to purchase the assets of
Go2Technologies, Inc., a company in the business of distributing CD-ROM
technology on mini-CDs. After subsequent review and due diligence, the Company
has determined not to complete a transaction for the acquisition of
Go2Technologies, Inc. as the Company believes an acquisition is not necessary.
On April 5, 2000, the Company announced that BounceBackMedia.com, Inc. began
implementing its new business plan and marketing campaign with a focus on
advertising agencies, multi-media houses and major retail suppliers. The
Company's marketing strategy includes a direct mail campaign utilizing a
demonstration CD card, which will link prospective clients to the client
companies' web site. It is anticipated that BounceBackMedia.com will also target
industry specific trade publications and trade shows later in the next fiscal
quarter.
As reported earlier, the Company accomplished the restructuring and elimination
of a majority of its long-term debt during the first fiscal quarter.
Additionally, the Company implemented a strategy to divest itself of its gaming
segment, Casino Caraibe, located in Tunisia, North Africa and its entertainment
segment including the Country Tonite Theatre in Branson, Missouri and its
musical production company, Country Tonite Enterprises in Pigeon Forge,
Tennessee. These business segments are reported as discontinued operations
herein.
8
<PAGE>
On April 20, 2000 the Company granted a license to the owner/operator of the
Pigeon Forge, Theatre venue, ("CTT, PF"). This license grants CTT,PF the rights
to market, promote, produce and direct the Country Tonite Show within a 150 mile
radius surrounding Pigeon Forge, Tennessee, excluding Nashville, Tennessee. CTT,
PF agreed to pay $1.3 million for the licensing rights for a forty-year term.
CTT, PF paid $900,000 in cash to BBTC and will make eight annual payments of
$50,000 per year beginning December 2000.
The cash from the licensing agreement allows the Company to immediately
intensify its marketing efforts of the new mini CD-ROM technology. The
divestiture of its remaining segments held for sale should provide the long-term
capital needed to continue the Company's efforts in its Internet and e-commerce
endeavors.
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company are
unaudited. However, this information reflects all normal and recurring
adjustments, which, in the opinion of management, are necessary for a fair
presentation of results for the nine-month and three-month periods ended June
30, 2000.
Certain reclassifications of prior period amounts have been made to conform to
current period presentation. The Company's entertainment and gaming segments are
reported in the financial statements as "discontinued operations." The results
of operations and related assets and liabilities of the discontinued operations
for the prior period have been restated in conformity with current period
presentation.
The results of operations for the nine-month and three-month periods ending June
30, 2000 are not necessarily indicative of the results expected for the full
fiscal year.
Non-Compliance with Requirement for Timely Interim Review
The SEC adopted amendments to Item 310(b) of Regulation S-B, effective for
fiscal quarters ending on or after March 31, 2000, which require that a
company's interim financial statements be reviewed by an independent auditor
prior to filing its form 10-QSB with the Commission. The Company's interim
financial statements for the period ended June 30, 2000 have not been reviewed
by the Company's independent auditor due to their resignation effective July 25,
2000. A form 8-K filed by the Company on August 1, 2000, reporting the
resignation, is herein incorporated by reference as an exhibit to this filing.
The Company is in the process of selecting a new independent auditor. Once
selected, the new independent auditor will review the Company's interim
financial statements and any material changes, if any, will be reported in an
amended form 10-QSB for the respective period, if necessary.
9
<PAGE>
NOTE 1 Prepaid Expenses
As of June 30, 2000 prepaid expenses consist primarily of insurance payments,
rent and other contractual payments. These payments will be recorded as expense
or applied against outstanding obligations in the next quarter.
NOTE 2 Net Assets Held for Sale
Entertainment
In conjunction with the Company's decision to focus its business efforts on
marketing and sales applications in the e-commerce industry, it has implemented
a plan to divest itself of its entertainment segment. The entertainment segment
is comprised of the Company's wholly owned subsidiaries, Country Tonite
Enterprises, Inc., which was under contract to perform at the Country Tonite
Theatre in Pigeon Forge, Tennessee, and CRC of Branson, Inc. which leases and
operates the Country Tonite Theatre in Branson, Missouri.
On April 20, 2000, the Company granted a license to the owner/operator of the
Country Tonite Theatre in Pigeon Forge, Tennessee, ("CTT, PF"). This license
grants CTT, PF the rights to market, promote, produce and direct the Country
Tonite Show within a 150 mile radius surrounding Pigeon Forge, Tennessee,
excluding Nashville, Tennessee. As a result, the Company's subsidiary Country
Tonite Enterprises, Inc. will no longer perform at Pigeon Forge and the
accompanying overhead costs are eliminated. In exchange for the rights granted
under the licensing agreement, CTT, PF will pay an aggregate of $1,300,000 to
the Company. The Company received $900,000 upon the execution of the agreement
and will receive eight payments of $50,000 on an annual basis beginning December
31, 2000. The revenue recognized from the licensing agreement during the three
month period ended June 30, 2000 was $1,171,000.
The remaining subsidiary, CRC of Branson, Inc. continues to be held for sale.
Assets and liabilities of the entertainment segment at June 30, 2000 and
September 30, 1999 were as follows;
June 30, September 30,
---------- -------------
Current Assets $ 667,000 $ 934,000
Fixed Assets 647,000 762,000
Current Liabilities 209,000 651,000
---------- ----------
Net assets held for sale $1,105,000 $1,045,000
========== ==========
Gaming
In addition to divesting itself of its entertainment segment, the Company is
reviewing its options relative to the sale or lease of its gaming operation in
Tunisia, North Africa. Upon the completion of
10
<PAGE>
either potential transaction, the Company would no long incur overhead costs
associated with the casino.
Assets and liabilities for the gaming segment at June 30, 2000 and September 30,
1999 were as follows:
March 31, September 30,
---------- -------------
Current Assets $1,040,000 $ 694,000
Net Property & Equipment 1,156,000 1,584,000
Current Liabilities 845,000 807,000
---------- ----------
Net assets held for sale $1,351,000 $1,471,000
========== ==========
NOTE 3 Supplemental Disclosure of Cash Flow Information
Cash expended during the nine months ended June 30, 2000 and 1999 for interest
was $61,000 and $89,000, respectively.
NOTE 4 Long-Term Liabilities
The Company has restructured and eliminated a majority of its long-term debt
during the first quarter of fiscal 2000.
Subordinated Convertible Debentures
The remaining balance of the $800,000, 13% subordinated convertible debenture as
of September 30, 1999 in the amount of $121,325 was settled in full by a cash
payment of $100,000 in October 1999. This transaction resulted in an
extraordinary gain of $21,325, which was recognized during the three-month
period ending December 31, 1999.
Long-Term Debt
On December 31, 1999, the Company and Roy Anderson Holding Corp agreed to amend
and restate the 6%, $1,530,000 (face amount) debenture agreement which had an
outstanding principal balance as of September 30, 1999 in the amount of
$1,195,729. In connection with the transaction, Roy Anderson Holding Corp was
granted an option to purchase 300,000 shares of the common stock of the Company
at an exercise price of $0.17 per share. The option was exercised on May 30,
2000. The remaining balance of the debenture, as of December 31, 1999, in the
amount of $1,028,553 was separated into two debentures. The first debenture, in
the amount of $342,655, is payable in monthly installments with simple interest
fixed at 6% per annum. Monthly payments of $44,326 begin in April 2000 with the
last payment due in November 2000. The second debenture, in the amount of
$685,898, with simple interest fixed at 6% per annum is payable in one lump sum
at its maturity on
11
<PAGE>
December 31, 2002. The second debenture provides for mandatory prepayments if
certain conditions arise. These most notably relate to the Company's completion
of the sale of its discontinued operations, sale or other disposition of its
existing business or assets, collection of any proceeds from litigation or any
payments from the Lakes Gaming agreement. Currently, 1,100,000 shares of the
Company's common stock are held in escrow as collateral. Upon the Company's
satisfaction in full of all outstanding amounts due under these debentures, the
common stock held in escrow will be cancelled.
In October 1999, the Company entered into an agreement to retire the $1,000,000,
10% note payable due August 2022. The note was discounted to an effective rate
of 9.5% and retired in consideration for a cash payment of $150,000 and a
non-interest bearing note in the amount of $512,500. The new note is payable in
18 equal monthly installments of $28,472 beginning on December 1, 1999. An
extraordinary gain on this transaction in the amount of $369,501 was recognized
as a result of this transaction.
The Company has a revolving line of credit in the amount of $200,000 guaranteed
by Mr. Pilger personally. As of June 30, 2000, the Company had no outstanding
balance under this line of credit.
The Company's subsidiary, BounceBackMedia.com, Inc. entered into a non-interest
bearing note payable in the amount of $65,000 to the principals of Raw Data,
Inc. as part of Raw Data's acquisition. The note becomes payable within 30 days
if BounceBackMedia.com, Inc., has achieved a prescribed cumulative revenue
threshold within two years of the acquisition.
NOTE 5 Deferred Revenue
During 1999, the Company received a $2 million cash down payment as a result of
its Revised Conditional Release Agreement and Termination Agreement with Lakes
Gaming. The terms of the agreement calls for the payment of up to $16.1 million,
including the cash down payment mentioned above. The $2 million cash down
payment is recorded as deferred revenue until such time as a casino is opened in
Michigan by the Pokagon Band of Potawatomi Indians (the "Pokagons"). The balance
of $14.1 million is payable if certain events occur relative to the location of
the Tribe's casino, the actual fact that the casino does open, that Lakes Gaming
is the manager when the casino opens, and Lakes Gaming continues to manage the
casino during the five year term of the management agreement with the Pokagons,
other than a buy-out by the Pokagons of the remainder of Lakes Gaming management
term. The remaining balance of $2.5 million is due only if the Pokagons build a
casino in Indiana and Lakes Gaming is the manager. The agreement also calls for
the Company to repay the $2 million cash down payment if after five years there
is no casino open in either Michigan or Indiana.
Note 6 Deferred Tax Asset
Included in the results of operations for the nine month period ending June 30,
1999, is the reversal of a deferred tax asset in the amount of $2,000,000 and
recorded as income tax expense. The deferred tax asset was originally recorded
in fiscal 1998.
12
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is management's discussion and analysis of certain factors which
have affected the Company's financial position and operating results during the
period included in the accompanying condensed consolidated financial statements.
NINE MONTHS ENDED JUNE 30, 2000 COMPARED TO NINE MONTHS ENDED JUNE 30, 1999.
Continuing Operations-BounceBackMedia.com, Inc.
BounceBackMedia.com, Inc. commenced operations in January 2000. Revenues through
the nine month period ended June 30, 2000 were $95,000. Costs and expenses
incurred during this period totaled $427,000. These costs and expenses consisted
primarily of cost of goods sold, wages, marketing and promotional expenses and
office costs. Since, BounceBackMedia.com, Inc. was in a start-up mode, certain
expenses were incurred in advance of future revenues to be generated. A loss
from operations of $332,000 was incurred for the nine month period ended June
30, 2000.
No comparative results of operations are presented for the same period of the
prior year.
General and Administrative Expenses
The Company's general and administrative expenses aggregated $1,985,000 for the
nine months ended June 30, 2000. This was a decrease of $25,000 or 1.0%, from
the $2,010,000 incurred in the same period in 1999. The decrease is due
primarily to a reduction in a variety of expenses most notably professional
fees, public relation costs and new venture costs which were offset by increases
in legal costs and bad debt expense.
Interest Expense
Interest expense totaled $61,000 for the nine months ended June 30, 2000
compared to $89,000 for the same period in fiscal 1999. The reduction was
primarily due to the refinancing and early extinguishment of debt.
Extraordinary Gain
The Company recognized a gain on the early extinguishment of debt on the
subordinated convertible debenture in the amount of $21,325 in October 1999. In
addition, a gain of $369,501 was recognized on the refinancing of the $1 million
10% note payable originally due August 2022. The negotiated discount was granted
as consideration for the Company's $150,000 payment and agreement to pay down
the $512,500 balance in 18 monthly interest free payments of $28,472 beginning
December 1, 1999.
13
<PAGE>
Income Taxes
No federal income tax expense was recorded for the nine months ended June 30,
2000. Income tax expense in the amount of $2,000,000 is recorded for the nine
months ended June 30, 1999 due to a reversal of a deferred tax asset originally
recorded in fiscal 1998.
Discontinued Operations
Entertainment Segment
Operating results of the entertainment segment, exclusive of corporate charges,
for the nine month periods ended June 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Revenues $5,957,000 $5,225,000
Net Income $2,294,000 $1,237,000
========== ==========
Included in the operating results of the discontinued entertainment segment is
the revenue recognized for the licensing agreement entered into on April 28,
2000. The revenue recognized as a result of this transaction was $1,171,000.
Gaming Segment
Operating results of the gaming segment, exclusive of corporate charges, for the
nine month period ended June 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Revenues $ 2,176,000 $ 1,959,000
Net Loss $ (75,000) $ (740,000)
=========== ===========
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999.
Continuing Operations-BounceBackMedia.com, Inc.
BounceBackMedia.com, Inc. commenced operations in January 2000. Revenues during
the three month period ended June 30, 2000 were $58,000. Costs and expenses
incurred during this period totaled $274,000. These costs and expenses consisted
primarily of cost of goods sold, wages, marketing and promotional expenses and
office costs. Since, BounceBackMedia.com, Inc. was in a start-up mode these
expenses were incurred in advance of future revenues to be generated. A loss
from operations of $216,000 was incurred for the period ended June 30, 2000.
No comparative results of operations are presented for the same period of the
prior year.
14
<PAGE>
General and Administrative Expenses
The Company's general and administrative expenses aggregated $742,000 in the
three months ended June 30, 2000. This was an increase of $31,000 or 4.4%, from
the $711,000 incurred in the same period in 1999. The increase was due primarily
to increases in legal costs.
Interest Expense
Interest expense totaled $15,000 for the three months ended June 30, 2000
compared to $28,000 for the same period in fiscal 1999. The reduction was due to
the refinancing and early extinguishment of debt.
Income Taxes
No federal income tax expense was recorded for the three months ended June 30,
2000 and 1999.
Discontinued Operations
Entertainment Segment
Operating results of the entertainment segment, exclusive of corporate charges,
for the three month periods ended June 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Revenues $2,962,000 $2,042,000
Net Income $1,748,000 $ 970,000
========== ==========
Included in the operating results of the discontinued entertainment segment is
the revenue recognized for the licensing agreement entered into on April 28,
2000. The revenue recognized as a result of this transaction was $1,171,000.
Gaming Segment
Operating results of the gaming segment being held for sale, exclusive of
corporate charges, for the three month periods ended June 30, 2000 and 1999 were
as follows:
2000 1999
---- ----
Revenues $ 712,000 $ 818,000
Net Loss $ (6,000) $(344,000)
========= =========
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from $957,000 as of September 30, 1999 to
$244,000 as of June 30, 2000. Cash and cash equivalents do not reflect any cash
balances from the discontinued entertainment or gaming segments.
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The Company anticipates using the proceeds from the licensing agreement and sale
of its remaining discontinued operations to provide capital for its marketing
and sales applications relative to mini-CD technology. As of June 30, 2000, the
Company has provided $523,000 in working capital to BounceBackMedia.com, Inc.
Under the Revised Conditional Release and Termination Agreement with Lakes
Gaming, the Company could receive up to $16.1 million over the life of the
management contract Lakes Gaming has with the Pokagon Band of Potawatomi
Indians. A $2 million down payment was received in fiscal 1999. The agreement
also calls for the Company to repay the $2 million cash down payment if after
five years a Pokagon casino is not opened. The Company will not receive any
further payments under the agreement until a Michigan or Indiana casino opens.
The Company anticipates that cash on hand and cash provided from the licensing
agreement and future operations will not be sufficient to meet the working
capital and debt service requirements of its existing business for the next
fiscal year. The Company anticipates that its cash requirements will be met by
the sale or lease of its discontinued operations. However, there are no
assurances that the timing of the sale or lease of these assets will be
sufficient to meet the working capital required of the Company on a going
forward basis. The Company is continuing to look at additional methods of
raising capital to supply the short term working capital needs of the Company.
However, there are no assurances that the Company will be successful in meeting
those objectives.
Capital expenditures by the Company were $119,000 for the nine months ended June
30, 2000, compared to $14,000 for the same period in 1999. These expenditures
were primarily due to year 2000 compliance issues and accounting software costs
associated with a new computer system upgrade and start-up equipment purchases
for BounceBackMedia.com, Inc.
SEASONALITY
The theatre operations of the discontinued entertainment segment are affected by
seasonal factors. The Country Tonite Theatre in Branson, Missouri, was closed
from mid-December 1999 through the first week of March 2000. The Country Tonite
Theatre in Pigeon Forge, Tennessee, was closed from January 2, 2000 through
mid-March 2000. These closings coincide with the historical closings of similar
theatres in the Branson, Missouri, and Pigeon Forge, Tennessee areas.
The casino operations of the discontinued gaming segment are also subject to
seasonal factors. Primarily the slow tourist season occurs from October through
April each year.
IMPACT OF INFLATION
Management of the Company does not believe inflation has had any significant
effect on the Company's financial condition or results of operations for the
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periods presented. However, an increase in the rate of inflation could adversely
affect the Company's future operations and expansion plans.
FOREIGN CURRENCY TRANSACTIONS
The Company's transactions with respect to its discontinued gaming segment in
Tunisia are in dinars. As such, there are risks that pertain to fluctuations in
foreign exchange rates and potential restrictions or costs associated with the
transfer of funds to the United States.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Accounting Standards Board issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This standard establishes
accounting and reporting standards for derivative instruments and for hedging
contracts. This standard is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. When the Company adopts this statement, it
is not expected to have a material impact on the Company's financial statements
or their presentation.
PRIVATE SECURITIES LITIGATION ACT OF 1995
All statements contained herein that are not historical facts are based on
current expectations. These statements are forward looking in nature and involve
a number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause actual results to differ materially are the
following: changes in travel patterns which could affect demand for the
Company's theatres or casino; changes in development and operating costs,
including labor, construction, land, equipment, and capital cost; general
business and economic conditions; political unrest in Tunisia or the region; and
other risk factors described from time to time in the Company's reports filed
with the Securities and Exchange Commission. The Company wishes to caution
readers not to place undue reliance on any such forward looking statements,
which statements are made pursuant to the Private Securities Litigation Reform
Act of 1995, and as such, speak only as to the date made.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In 1995, James Barnes and Prudence Barnes, two former officers of a subsidiary
of the Company, brought suit in State District Court, Clark County, Nevada,
against the Company in connection with their employment termination in June
1995. The Barnes have alleged the Company breached their contracts based on the
termination of the Barnes employment; intentional misrepresentation; and breach
of contract based on the untimely registration of their stock. No specific
amount of damages has been claimed, however the plaintiffs have informally
indicated that they would entertain a settlement offer between $250,000 and
$350,000. On May 31, 2000, the Clark County, Nevada Court dismissed the Barnes'
claims of intentional misrepresentation and breach of contract based on the
untimely registration by the Company of the Barnes' stock but found in favor of
the plaintiffs
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with respect to breach of the Barnes' employment contracts. The Court awarded
the Barnes' the balance of wages under their employment agreement plus interest
and certain attorney expenses, which total approximately $160,000. The Company
maintains that it had the right to transfer the Barnes under the terms of their
employment agreement and did not breach their contracts. Thus, the Company is
weighing the financial merits of appealing the Court's decision versus settling
with the Barnes.
On December 31, 1997, the Company's former chairman, Kevin Kean, defaulted on
repaying $1,232,000 plus accrued interest due the Company. The Company filed
suit against Mr. Kean which resulted in a settlement agreement (the "Settlement
Agreement"). Under the Settlement Agreement, 220,000 Shares of Company stock
were canceled along with the 150,000 Shares then pledged to the Company, at the
market price of $1.19 per Share. Additionally, Mr. Kean executed a new
promissory note in favor of the Company (the "Renewal Note"). The Renewal Note
in the amount of $1,196,885, bears interest at 7% per annum and matures on
January 15, 2001. The Renewal Note was collateralized by Mr. Kean's 5% interest
in the Company's Pokagon management fee. The Settlement Agreement also permitted
that in the Company's sole discretion, and at any time prior to maturity, the
Company could take the collateral as payment in full for the note. Further,
under the terms of the Settlement Agreement: "in the event that the Company
shall sell, assign or transfer its interest in the Pokagon Project, in whole or
in part, to any other party, by way of sale, loan, settlement, fee or otherwise
for consideration in an amount in excess of $1 million, Kean's obligation under
the Renewal Note shall be fully discharged and satisfied and the Company shall
mark the Renewal Note "Paid" and return it to Kean." In August 1999, the Company
and Lakes Gaming entered into a Revised Conditional Release Agreement and
Termination Agreement regarding the Pokagon Project pursuant to which the
Company received a $2 million cash down payment, which is subject to repayment
if certain future events do not occur, and the Company may receive additional
consideration if certain future events do occur. The Company has marked the
Renewal Note "Paid" and returned it to Kean with the understanding that the
obligations thereunder are now discharged.
The Company initiated a civil suit against Harrah's on September 4, 1998 in
United States District Court for District of Minnesota. The Company alleges that
Harrah's breached the Technical Assistance and Consulting Agreement and
tortuously interfered with the Company's contractual and prospective economic
advantage associated with the Pokagon Band of Potawatomi Indians' Management
Agreement. The suit further alleges that Harrah's withheld vital business
information from the Company. The Court granted Harrah's motion for Summary
Judgment and the Company's complaint was dismissed with prejudice on May 24,
1999. The Company filed an appeal in the Eighth Circuit United States Court of
Appeals on September 16, 1999. The Company asserts that it has the right to
resolve the dispute with Harrah's in some forum and the trial court erred by
dismissing the Company's complaint without granting the Company leave to file an
amended complaint which would include a claim for an accounting and damages
under the Uniform Partnership Act. The Company plans to vigorously pursue the
claim and seeks a judgment against Harrah's plus interest and legal fees.
The Company initiated a civil suit against Willard Smith and Monarch Casinos,
Inc. on December 19, 1998 in the Circuit Court of Jackson, Mississippi. The
Company alleges that Mr. Smith and
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Monarch Casinos, Inc. have breached the terms of the Memorandum of
Understanding, Amendment and Modification Agreement, and Consulting Agreement by
failing to provide the services required under the terms of the agreements,
breaching their obligations of good faith to the Company and by attempting to
secure the termination of the Company's interest in the Pokagon project. The
suit further alleges Mr. Smith has defaulted on his obligations to pay rent and
maintain the up-keep of the Company residential property located at 303 LaSalle
Street, Ocean Springs, Mississippi and defaulted on repayment of loans from the
Company in excess of $300,000.
The Company seeks a judgment against Monarch Casinos, Inc. and Willard Smith
plus interest and attorneys fees for notes due and material breach of
agreements; removal of Smith from the rental property and punitive damages. Mr.
Willard Smith filed a counter claim on February 16, 1999, alleging breach of
contract; breach of duty of fair dealing; tortuous interference with prospective
business advantage; specific performance of contract to purchase real property
and fraud. Additionally, Willard Smith filed a suit on July 10, 2000 against
CEO, John J. Pilger, alleging he is the alter ego of CRC and as such liable for
the acts of CRC including breach of contract; breach of duty of good faith and
fair dealing; tortuous interference with prospective business advantage; breach
of contract to purchase real property and fraudulent inducement. The Company and
Mr. Pilger each plan to vigorously defend themselves in these counterclaim and
are asking the court to dismiss the matter. A trial date has been set for
November 2000.
Norm D. Holm, and N.D. H. Inc., ("NDH"), a Minnesota corporation, brought suit
in the Tenth Judicial District Court, county of Sherburne, Minnesota, against
the Company on August 11, 1998. NDH alleges that the Company entered into an
indemnification and hold harmless agreement to indemnify and hold NDH harmless
from loss of claims, etc., incurred as a result of services provided to real
property known as "Pintail Woods", which claim purportedly totals $158,000.
These claims were brought before the American Arbitration Association ("AAA") in
December 1992, which ruled that the arbitration was not appropriate at that
time. On July 7, 1999, the Tenth Judicial District Court, county of Sherburne,
Minnesota, ordered this matter submitted to arbitration. The matter was heard by
an arbitrator on April 25, 2000. NDH submitted claims against BBTC during
arbitration totaling $177,034.69 plus $80,000 for alleged lost equity in a
parcel of land. On June 2, 2000 the AAA ruled that BBTC was liable to NDH under
a previous indemnification agreement for the amount of $23,775.25, which shall
bear interest of 6% per annum from June 2, 2000 until paid.
The Company initiated suit against Mark McKinney and Mana Corporation, on March
12, 1999, in the Circuit Court of Benton County, Arkansas. The Company alleges
that Mr. McKinney and Mana Corporation breached the terms of the Letter of
Intent and the Extension Agreement dated December 4, 1998, by prematurely
terminating the agreement before April 30, 1999, and failure to repay a short
term loan made to Mark McKinney, personally. The Company seeks a judgment
against Mark McKinney and Mana Corporation in the amount of $150,000 plus
interest and attorney's fees. Due to the uncertainty of Mr. McKinney's ability
to make payment, $75,000 of this receivable was reserved. In November 1999, Mana
Corporation petitioned an Arkansas Court for reorganization under Chapter 11 of
the Bankruptcy Code; therefore the balance of the receivable was reserved in
November 1999. The Company received a judgment against Mark McKinney, personally
in the amount of $165,000 in Benton County, Arkansas Circuit Court. On April 10,
2000 a writ of execution was forwarded to the Sheriff of Benton County to take
into possession from Mark
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McKinney certain property with an equivalent value of $165,000. On June 7, 2000,
Mark McKinney, personally, petitioned the Western District, Arkansas Court for
protection under Chapter 13 of the Bankruptcy Code.
On March 9, 2000, IGT brought suit in Circuit Court of Harrison County,
Mississippi against the Company in connection with the final two payments due it
under a slot machine purchase agreement. IGT alleges the Company defaulted on
two invoices totaling $66,638 and seeks a judgment in that amount plus interest
and attorney fees. The Company does not dispute the amount due IGT, but has
withheld payment until IGT produces original invoices to CRC Tunisia, SA so that
the Company may seek reimbursement from that subsidiary. IGT has requested IGT
Europe supply CRC of Tunisia with original invoices. As this is an open issue,
both parties have agreed to extend the timeline for discovery in the hopes of
settling this matter.
Cunningham, Hamilton, Quiter, P.A. ("CHQ") filed suit in the Circuit Court of
Jackson County, Mississippi alleging the Company and John J. Pilger defaulted on
$40,000 in payments due for services rendered in 1994. The Circuit Court awarded
CHQ $22,500 which was settled by the Company on March 28, 2000.
Item 2. Exhibits and Reports on Form 8-K
a) Exhibits
b) From 8-K, filed on August 1, 2000, reporting independent auditor
resignation is incorporated herein by reference.
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SIGNATURES
In accordance with requirements of the Exchange Act, the registrant
caused this report to be signed on behalf by the undersigned, hereunto duly
authorized.
BOUNCBACKTECHNOLOGIES.COM, INC.
Date: August 14, 2000 By: s/ John J. Pilger
-------------------------------------
John J. Pilger, President, CEO & CFO
Date: August 14, 2000 By: s/ Michael J. Wesaw
-------------------------------------
Michael J. Wesaw, Financial Controller
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