UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended September 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number 0-22242
BOUNCEBACK TECHNOLOGIES.COM, INC.
(Name of the Small Business Issuer in its Charter)
MINNESOTA 41-0950482
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(State or Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
707 Bienville Boulevard
Ocean Springs, Mississippi 39564
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(Address of Principal Executive Offices)
Issuer's telephone number (228) 872-5558
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Securities registered pursuant to Section 12(b) of the Exchange Act: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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. Yes X No
.
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of
registrant's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X ]
The Company's revenues for the fiscal year ended September 30, 2000 were
$537,213.
As of December 29, 2000, 11,361,258 shares of Common Stock were
outstanding, and the aggregate market value of such Common Stock (based upon the
last reported sale price on the OTCBB), excluding outstanding shares
beneficially owned by affiliates, was approximately $1,331,550.
Transitional Small Business Disclosure Format (Check one): Yes ; No X
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PART I
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ITEM 1. BUSINESS
Recent Developments
Effective November 21, 2000, the Company entered into a letter of
intent with On Stage Entertainment, Inc. ("On Stage") to sell the Company's
assets relating to the Country Tonite Theatre in Branson, Missouri, and the
Country Tonite production show, for $3.8 million. The sale does not include the
licensing agreement with Country Tonite Theatre, Pigeon Forge, Tennessee. On
Stage has placed a $100,000 non-refundable deposit in escrow, in anticipation of
closing the transaction on or about January 31, 2001, subject to completion of
On Stage's due diligence and subject to On Stage obtaining acceptable financing
of the purchase price. The Company and On Stage expect to execute a purchase
agreement which calls for On Stage to pay $350,000 in cash at closing, $650,000
by no later than February 15, 2001 and the balance of $2.8 million payable by
the drawing of a 7% interest bearing note due not later than July 31, 2001.
Historical Developments
BounceBack Technologies.com, Inc. (together with its subsidiaries the
"Company") was formerly known as Casino Resource Corporation. The name change,
effective January 1, 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 NASD OTCBB.
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-CD's 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, is headquartered in
Fresno, California to take advantage of the technological innovations and
skilled personnel available on the West Coast. In addition to sales and
marketing support services, the Company's corporate offices, located in Ocean
Springs, Mississippi, provides administrative and accounting support services to
BounceBackMedia.com, Inc.
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, as previously reported, 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. Accordingly, these business segments are
reported as discontinued operations herein.
On April 20, 2000, the Company granted a license to the owner/operator
of the Pigeon Forge Theatre venue (CTTPF) granting CTTPF the right, for a term
of forty years, to market, promote, produce, and direct the Country Tonite Show
within a 150 mile radius surrounding Pigeon Forge, Tennessee, excluding
Nashville, Tennessee. CTTPF agreed to pay $1.3 million for the license. CTTPF
paid $900,000 in cash to the Company and will make eight annual payments of
$50,000 per year beginning December, 2000.
The cash from the licensing agreement allowed 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
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long-term capital needed to continue the Company's efforts in developing sales
and business solutions for the internet and e-commerce industries.
General
The Company was organized in 1969. In 1987, the Company merged into an
inactive public corporation, and in 1993, changed its name to Casino Resource
Corporation. Prior to 1987, the Company engaged in various business activities
unrelated to its current or proposed businesses. Between 1987 and 1991, the
Company's primary business was owning and managing recreational vehicle resorts,
and providing related direct marketing services. The Company sold its
capital-intensive camp resort properties during 1988 through 1991 and began
offering its direct marketing services to the recreational real estate industry.
The marketing services provided were primarily focused toward timeshare and camp
resort developments and, eventually, to the casino industry. The Company sold
its timeshare and camp resort direct marketing business in May 1994, and
directed its focus to the hospitality and entertainment industry in both gaming
and high tourist areas, and to the emerging gaming industry.
The Company entered the hospitality and entertainment industries by
acquiring or developing four businesses. In March 1994, the Company purchased a
musical production company, which staged an award-winning show at the Aladdin
Hotel in Las Vegas, Nevada, which closed on November 15, 1997 with the closing
of the Aladdin Hotel. Also in March 1994, the Company purchased its "Country
Tonite Theatre" in Branson, Missouri. In May 1994, the Company completed
construction and opened its 154 room hotel, the "Grand Hinckley Inn," on 7.5
acres of leased land in northern Minnesota adjacent to the Grand Casino
Hinckley, an Indian gaming facility currently operated by the Mille Lacs Band of
Ojebwe Indians. This facility was sold to the Mille Lacs Band of the Ojibwe
Indians in June 1998. Also, in May 1994, the Company opened the Biloxi Star
Theatre, a 1,900 seat deluxe theater in Biloxi, Mississippi, which was
subsequently sold to Grand Casinos, Inc. in September 1994. In March 1997, a
third venue for the Country Tonite Show opened in Pigeon Forge, Tennessee. CTT,
LLC, formerly a joint venture between the Company and Burkhart Ventures, LLC,
presents the Country Tonite Show in a 1,500-seat theater in Pigeon Forge,
Tennessee. The Company was the operating manager and owned 60% of the joint
venture. Effective December 31, 1998, the Company sold its 60% interest in CTT,
LLC to its minority partner, Burkhart Ventures, LLC. The Company's Country
Tonite show continued to perform under contract in the Pigeon Forge Theatre
until April 20, 2000, when the Company granted CTT, LLC a license to perform the
show for $1.3 million for a 40 year term. On October 18, 1997, the Company,
through its subsidiary CRC of Tunisia, Inc., opened Casino Caraibe in a leased
facility in Sousse, Tunisia, North Africa. The Company has decided to sell its
interest in the Tunisian Casino and exit the gaming industry.
In December 1998, the Company entered into a Memorandum of
Understanding to form a joint venture with Lakes Gaming, Inc. for the purpose of
pursuing a management and development agreement to develop one or more casinos
on behalf of the Pokagon Band of Potawatomi Indians (the "Pokagon Tribe") in
southwestern Michigan and northern Indiana. In May 1999, the Company and Lakes
Gaming entered into an agreement to terminate the Memorandum of Understanding,
in the event that the Pokagon Tribe chose to enter into management and
development agreements solely with Lakes Gaming. In June 1999, Lakes Gaming was
selected by the Pokagon Tribe to negotiate a management and development
agreement. On August 31, 1999, the newly elected tribal council of the Pokagon
Tribe ratified the Management and Development Agreement with Lakes Gaming and
the Company's Revised Conditional Release and Termination Agreement with Lakes
Gaming became effective. The terms of the Revised Conditional Release and
Termination Agreement call for the payment by Lakes Gaming, Inc. to the Company
of an aggregate maximum sum of $16.1 million, which includes a $2 million cash
down payment. The balance of $14.1 million is payable if certain events occur
relative to the location of the Tribe's casino, the opening of the casino and
Lakes Gaming manages the casino. The Company received the $2 million down
payment on August 31, 1999. The agreement calls for the Company to repay the $2
million if after five years the casino has not opened. Further, $2.5 million of
the $16.1 million payment is due only if the Tribe builds a casino in Indiana
and Lakes Gaming is the manager.
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The Company is not scheduled to receive any further payments until a
Michigan or Indiana casino opens. Lakes Gaming anticipates the commencement of
construction on a Michigan casino in 2001. However, there can be no assurances
provided with respect to timing of completion of the casino as the proposed
gaming site must be accepted into trust by the U.S. government before
construction can begin.
Continuing Operations
BounceBackMedia.com, Inc. (Fresno, California)
The Company acquired all of the assets of RawData Inc. a privately
owned California company focused on the development, sales and distribution of
e-commerce business solutions through direct advertising of mini CD's used by
business and consumers to link potential customers to web sites and e-commerce
centers. Upon acquisition December 31, 1999, the Company changed the name of its
new 80% owned subsidiary to BounceBackMedia.com, Inc.
BounceBackMedia.com, Inc. is a Nevada corporation headquartered in
Fresno, California. In January 2000, the Company entered employment agreements
with Roger Birks and Ricardo Gonzalez. Mr. Birks subsequently terminated his
employment in November, 2000. Mr. Gonzalez is a graduate of the University of
California, Berkley and received a Masters Degree in Interactive Computing and
multi-media from Columbia University. Mr. Gonzalez is a specialist in multimedia
design and software engineering and is currently acting as Chief Operating
Officer of BounceBackMedia.com, Inc.
Internet technology and the rapid growth in e-commerce business along
with advances in CD-Rom technology are changing the fundamentals of business and
the way businesses market their products and services. BounceBackMedia.com, Inc.
is being developed to provide its products and services to multimedia houses,
direct marketing companies, advertising agencies, and retail industries via mini
CD-Roms and customized shaped CD-Roms. Additionally, the Company specializes in
cutting edge multimedia content development.
In order to facilitate the manufacturing process and reduce overall
manufacturing costs, the Company purchased a DCD Mark 3 Compact Disc Shaping
Machine and Dust Extraction Unit. The cutting machine is capable of re-shaping a
standard 5-inch CD-Rom disc into virtually whatever shape a business or consumer
desires. The Company has processed CD-Rom units or developed multimedia for
several prominent companies such as AT&T, IBM, Mississippi Air National Guard,
Monster.com, Charles Schwab and Sun Micro Systems. Due to the novelty and
newness of the technology the Company has had to educate the market to the
advantages and advancements in the technology. The majority of the CD-Rom unit
orders received to date are part of research and development or testing of the
CD-Rom product. Average quantity order sizes range from 1000 units to 10,000
units. The Company is working to develop larger re-orders as a result of
successful initial individual customer testing. BounceBackMedia.com, Inc., is
focusing on specific business applications of its mini CD-Rom products utilizing
in-house templates and customized use of available software technology.
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Discontinued Operations
Country Tonite Theatre (Branson, MO)
The Company entered into an agreement to purchase the former Ray
Stevens Theatre, renamed the Country Tonite Theatre (the "Theatre") located at
4080 W. Highway 76, Branson, Missouri 65616 in March 1994, for a purchase price
of $10 million. In May 1994, the 2,000-seat theater began running two Country
Tonite shows daily, featuring dancers, singers, comics and other variety acts.
The show is produced by the Company's Las Vegas-based subsidiary, "CTE". The
Theatre includes 38,000 square feet on two floors with an auditorium, a stage
area, control booths, dressing rooms, upstairs offices, a lounge, a gift shop,
which offers a wide variety of souvenirs with the Country Tonite theme, and two
concession stands. In addition, the Theatre parking lot accommodates 600 cars
and 30 buses.
Branson, Missouri is a popular resort destination for country music
lovers from across the nation. Branson is located at the intersection of U. S.
Highway 76 and Interstate Highway 65, which connects Branson and Springfield,
Missouri. Branson is located approximately 250 miles from St. Louis and 40 miles
from Springfield. Branson's population is approximately 3,000. The city includes
over 30 theaters featuring music stars such as Andy Williams, Bobby Vinton and
the Osmond family and provides a wide range of family entertainment for all
ages. In addition to approximately 22,500 hotel rooms, Branson offers diverse
eating, shopping and recreational activities to its approximately 6.5 million
annual visitors (according to the Branson Chamber of Commerce), most of whom
visit between the months of March and December. Typical visitors to Branson
include senior citizens participating in bus tours through Missouri. Families
also comprise a large part of Branson's visitors during the summer months and
are drawn to Branson not only by the country music, but also by the additional
activities offered in the summer months by the many lakes in the Branson area
and the Arkansas Ozarks, another popular tourist destination area only 50 miles
from Branson.
The Theatre attracts "walk-up" patrons, both through local media
advertising and "word-of-mouth," and markets to pre-arranged bus tours. The
large number of competing theaters and the number of shows could attract ticket
buyers away from the Company's theatre. Also, other area tourist attractions
could limit the growth or even decrease ticket sales. In addition, other
geographic areas are currently actively seeking to increase their tourist bases,
which could, at some point, negatively affect the number of annual visitors to
Branson. The Country Tonite Show, although having won major awards, could
provide the format to a similar show developed by a competing theatre with
possible adverse consequences to the Company. In October 1999, the Country
Tonite Theatre received the Branson 1999 Show of the Year Award.
CRC of Branson was indebted to Ahab of the Ozarks ("Ahab"), the
mortgage holder of the Country Tonite Theatre, in the principal amount of $7
million. This obligation matured October 1, 1999. in September of 1999, the
Company entered into an agreement, which was finalized in October 1999 with Ahab
whereby the Theatre asset (with an appraisal value of approximately $7 million)
was transferred to Ahab and the Company's $7 million mortgage obligation to Ahab
was canceled. In addition, Ahab entered into a two-year triple net lease with
CRC of Branson, guaranteed by the Company, for a rental payment of $70,000 per
month. CRC of Branson has five one-year options to renew the lease at that rent,
plus a cost of living index increase not to exceed 3% per year. The Company has
agreed to make approximately $100,000 in capital improvements to the Theatre,
which were completed by June 1, 2000. The Company has negotiated an option to
purchase the Theatre from Ahab of the Ozarks for $6.5 million through the period
ending September 30, 2001 and has a right of first refusal during the period
ending September 30, 2004. The transaction required the Company to recognize a
loss of $536,000 in its 1999 Income Statement. The transaction, however, removed
$7 million in debt and $6.5 million in assets from the Company's balance sheet
and reduced its monthly cash flow obligation by approximately $5,000.
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The Company entered a letter of intent with On Stage Entertainment,
Inc., a publicly traded (NASD OTCBB: "ONST") Nevada corporation on November 21,
2000, to sell the assets of CRC of Branson, Inc., relating to the Country Tonite
Theatre in Branson, Missouri and the Country Tonite Production Show. The parties
intend to close the proposed transaction on or about January 31, 2001.
Country Tonite Theatre - Pigeon Forge
CRC of Tennessee, Inc. ("CRCT"), a wholly owned subsidiary of the
Company and Burkhart Ventures, LLC formed a joint venture, CTT, LLC, to present
the Country Tonite Show in a 1,500-seat theatre located in Pigeon Forge,
Tennessee, which opened on March 21, 1997. CRCT owned 60% of the joint venture
and managed the theater. The Company and Burkhart Ventures, LLC, entered into an
agreement, which terminated the Company's 60% ownership of CTT, LLC effective
December 31, 1998 for a purchase price of $20,000 (the "Purchase Price"). The
Purchase Price was payable on September 30, 1999, subject to ticket sales at the
Theatre between January 1, 1999 and September 30, 1999 increasing 10% over the
comparable period for 1998 or the Purchase Price would be discounted to $10,000.
As of September 30, 1999, average ticket sales were 13% higher than ticket sales
for the same period 1998. Therefore, the Company received $20,000 on October 6,
1999 as payment in full for its 60% interest in CTT, LLC. Termination of the
Company's 60% Joint Venture interest with CTT, LLC has reduced the Company's net
out-of-pocket expenditures by $337,000 for the nine month period in 1999 versus
the same period in 1998 related to the Company's 60% contribution to fund CTT,
LLC operating losses. Further, under the terms of the Agreement, the Company
manages CTT, LLC for a fee of $2,000 per week in season and $1,000 per week
during the off season for the period January 1, 1999 through December 31, 1999.
The Company has had no vested ownership interest in or financial obligation to
CTT, LLC after December 31, 1998. Burkhart Ventures, LLC, representing 100% of
the interest of CTT, LLC as of January 1, 1999, contracted with CTE to produce
shows for the 1999 calendar season for a fee of $36,750 per 12 show week.
Burkhart Ventures, LLC, gave notice to CTE that it wished to extend the contact
term for the 2000 show season, which began March 10, 2000 at a contract rate of
$34,600 per week. On April 20, 2000, the Company entered a license agreement
with the owner/operator of CTTPF, Tennessee. The license grants CTTPF the right
for a forty year term to market, promote and direct the Country Tonite show
within a 150 mile radius surrounding Pigeon Forge, Tennessee, excluding
Nashville, Tennessee. CTTPF paid $1.3 million for the license. CTTPF paid
$900,000 in cash and will make payments of $50,000 per year for eight years
beginning December, 2000.
Tunisia Casino
The Company, through its subsidiary, CRC of Tunisie, S.A., leases and
operates a casino and 500-seat theatre in Sousse, Tunisia, North Africa. The
42,000 square foot casino resort, which opened October 18, 1997, has over 10,000
square feet of gaming space with approximately 281 slot machines and 21 table
games. CRC of Tunisia also operates a gourmet restaurant, gift shop and
additional food and bar service on the property.
The entertainment complex and casino is a freestanding building, which
is located on a triangular piece of property in front of the 425-room Hotel
Samara, one of three hotels that Samara controls in Sousse. The two other hotels
have 125 and 275 rooms, respectively. The site is located on the main street of
Sousse in the heart of the tourist center and directly off the beach. The site
is approximately 1.5 acres in size. The casino was the first of its kind in the
city of Sousse. Approximately 120 days ago, the Stardust Casino opened
approximately three miles from Casino Caraibe. While the Stardust Casino is
smaller than Casino Caraibe, it does offer some competition. Additionally, two
other casinos are open in other Tunisian municipalities at distances of
approximately fifty to three hundred miles from Sousse.
The Republic of Tunisia is a small country in the most northern part of
North Africa and is bordered on the north and east by the Mediterranean Sea, on
the southeast by Libya, and on the west by Algeria. It is approximately 62,608
square miles in size or relatively the same size as Illinois. Tunisia is a
destination resort area frequented by Europeans and known for its beaches. The
city of Sousse borders the Mediterranean. Casinos are a recent attraction for
the tourist trade in Tunisia.
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According to the Ministry of Tourism, the number of annual tourists
visiting Tunisia is estimated to be 4.5 million per year, and the average length
of stay for tourists is approximately 6 days. There are approximately 20,000
hotel rooms in the city of Sousse with many more in the outlying areas. The
tourist season is May 15 through October. According to the Ministry of Tourism,
during this time, the hotel rooms are historically, on average, 80% occupied and
the average occupancy rate year-round is 53%. The closest airport to Sousse is
approximately 30 minutes away. Tourists are typically bused from the airport to
Sousse.
The Company is desirous of selling its casino operation in Tunisia,
N.A. Accordingly, the Tunisian operation is reported on the financial statements
of the Company as a "discontinued operation."
Regulation and Licensing of Gaming Activity
The ownership and operation of casinos in the U.S., Tunisia and other
gaming jurisdictions is highly regulated. The Company obtained its operating and
gaming license in Tunisia and opened the casino on October 18, 1997. The Company
was required to renew its gaming license this October, 2000. The Company has
received notice that the Tunisian government has agreed to extend Casino
Caraibe's gaming license for a three-year period.
The Company's gaming venture is subject to Tunisian laws and
regulations affecting the ownership and operation of the casino. Tunisian
nationals are prohibited from gaming in Tunisia. Casino guests are required to
present a passport or valid identification for entry into the Casino. Operations
outside the U.S. are subject to inherent risks, including fluctuations in the
value of the U.S. dollar relative to foreign currencies, tariffs, quotas, taxes
and other market barriers, political and economic instability, currency
restrictions, difficulty in staffing and managing international operations,
language barriers, difficulty in obtaining working permits for employees,
limitations on technology transfers, potential adverse tax consequences, and
difficulties in operating in a different cultural and legal system.
Employees
At September 30, 2000, the Company had 10 employees at its headquarters
in Ocean Springs, Mississippi; 7 employees at its Fresno, California
BounceBackMedia.com, Inc., office; 105 employees at the Country Tonite Theatre
in Branson, Missouri (reduced to approximately 6 employees during the off
season); and 100 employees in Sousse, Tunisia. The entertainers are contracted
for the subsequent season between December and February each year.
The Company maintains an employment agreement with its CEO. See Item
10, "Executive Compensation." None of the Company's employees are represented by
a union, and management considers its labor relations to be good.
ITEM 2. PROPERTIES
The Company's leased properties include principally: the Country Tonite
Theatre in Branson, Missouri; the casino and theatre complex in Sousse, Tunisia,
the Company's executive office in Ocean Springs, Mississippi;
BounceBackMedia.com office in Fresno, California, and a residential property in
Ocean Springs, Mississippi.
The 2,000-seat Country Tonite Theatre in Branson, Missouri is leased by
CRC of Branson for an initial two year triple net lease, guaranteed by the
Company, for rental of $70,000 per month until September 30, 2001, and the
Company has five one-year options to renew the lease at that rent, plus a cost
of living index increase, not to exceed three percent (3%) per year. The Company
has an option to purchase the theatre for $6.5 million through the period ending
September 30, 2001 and has a right of first refusal through the period ending
September 30, 2004.
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The Company leases pursuant to a 2 year lease, an office in Fresno,
California at a cost of $30,000 annually for its subsidiary BounceBackMedia.com,
Inc.
The Company leases pursuant to a five-year lease, expiring in 2002,
executive office space in Ocean Springs, Mississippi at a rate of $67,500 per
annum.
The 42,000 square foot casino resort in Tunisia is leased pursuant to a
revised lease agreement (with two, three-year renewal options) dated June 6,
2000. The revised lease agreement provides for an adjusted annual base rent of
480,000 dinars, which is approximately $400,000 US at the current exchange rate,
plus value added taxes. In addition, a scaled variable rental fee is incurred
when gross gaming revenues exceed 125,000 dinars monthly. The Company also pays
rent on the Casino Theatre at the rate of 10% of theatre revenue with a minimum
payment due of one dinar (currently worth approximately $.85 US) per paying
customer.
The Company owns a residence in Ocean Springs, Mississippi, which is
rented to a principal of Monarch Casinos, Inc. at a below-market rate. The lease
is in default. See Item 3, "Legal Proceedings."
Finally, the Company owns several small lots and real estate parcels in
Wisconsin, which it is attempting to sell. Proceeds, if any, from the sale are
not expected to be material. Additionally, the Company owns two parcels of land
in Ocean Springs, MS.
ITEM 3. 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. 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 with respect to breach of the
Barnes' employment contracts. The Court awarded the Barnes the balance of wages
under their employment agreements plus interest and certain attorney expenses,
which total $185,000. The judgment was paid with respect to this matter and the
claims Barnes asserted with respect to the matter are now fully and finally
resolved.
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 was in the amount of $1,196,885, and was to mature 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 advance, which is subject to repayment if certain future events do
not occur. The Company marked the Renewal Note "Paid" after offsetting any fee
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due Mr. Kean under the Pokagon Management Agreement 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 trial court dismissed the case on May
24, 1999 for lack of jurisdiction stating that the Company's claims were
preempted by the Indian Gaming Regulatory Act. Accordingly, the court held that
the Company's claims could not be heard in Federal Court. 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 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 the Company's 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
against the alleged counterclaims and are asking the court to dismiss the
matter. A trial date has been set for April, 2001.
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,
9
<PAGE>
personally. The Company sought 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, Mark
McKinney, personally, petitioned the Western District, Arkansas Court for
protection under Chapter 13 of the Bankruptcy Code.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended September 30, 2000.
--------------------------------------------------------------------------------
PART II
--------------------------------------------------------------------------------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
The Company's common stock (symbol "CSNR") and its Class A warrants
(symbol "CSNRW") were formerly traded on the NASDAQ National Market System. On
May 24, 1999, the Company was notified by NASD that the Company had not met the
net tangible asset listing requirement of NASDAQ and, therefore, the Company's
common stock and its warrants would be moved to the OTCBB effective at the
opening of trading on May 25, 1999. Each warrant entitled the holder to purchase
one share of common stock at an exercise price of $6.75. The warrants expired on
September 15, 1999. The following table sets forth, for the fiscal periods
indicated, the high and low sales prices of the common stock and Class A
warrants as reported by NASDAQ from October 1, 1998 through May 24, 1999, and
the high and low bid prices of such securities as reported by NASDAQ since May
24, 1999 until September 15, 1999. Quotations prices for May 24, 1999 reflect
inter-dealer prices without retail mark-up, mark-down or commission, and may not
represent actual transactions:
<TABLE>
<CAPTION>
Common Stock Warrants
----------------- -------------------
High Low High Low
---- ----- ---- -----
<S> <C> <C> <C> <C>
FISCAL 2000
First Quarter $0.21 $0.13 N/A N/A
Second Quarter $0.75 $0.40 N/A N/A
Third Quarter $0.84 $0.28 N/A N/A
Fourth Quarter $0.38 $0.16 N/A N/A
FISCAL 1999
First Quarter $0.97 $0.31 $0.03 $0.11
Second Quarter $0.75 $0.25 $0.03 $0.13
Third Quarter $0.84 $0.25 $0.01 $0.08
Fourth Quarter $0.59 $0.20 $0.03 $0.001
</TABLE>
10
<PAGE>
Holders
On December 29, 2000 there were approximately 300 record holders of the
common stock.
Sales of Unregistered Securities
On December 31, 1999 the Company and Roy Anderson Holding Corp. (the
current debenture holder) agreed to amend and restate the debenture. The
agreement separated the remaining outstanding balance of the original debenture
as of December 31, 1999 in the amount of $1,028,553 into two debentures. The
first debenture called for the Company to pay $342,655 along with simple
interest fixed at 6% per annum. The first debenture was paid in monthly
installments of $44,238 beginning April 2000 with the last payment completed on
November 2000, fully satisfying the related debt. The second debenture calls for
the Company to pay $685,897 along with simple interest fixed at 6% per annum.
This debenture is payable in one lump sum at its maturity on December 31, 2002.
In addition, the second debenture provides for mandatory prepayments if certain
conditions should 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 operations or assets, collection of any proceeds from
litigation and the collection of any payments from the Lakes Gaming agreement.
Due to the nature of the potential On Stage Entertainment, Inc. asset purchase
transaction contemplated to close January 31, 2001, Roy Anderson Holding Corp.
agreed on November 20, 2000, to modify the timing of the mandatory prepayment of
debenture two so that full settlement of debenture two will coincide with the
Company's receipt of its final payment of the purchase price from On Stage
Entertainment, Inc. In consideration for the adjustment by Roy Anderson Holding
Corp., the Company has agreed to revise the maturity date of debenture two from
December 31, 2002 to December 31, 2001. In connection with the restructuring of
the debt, the Company granted Roy Anderson Holding Corp. an option to purchase
300,000 shares of the Company's common stock at an exercise price of $.17 per
share. The option was exercised on May 30, 2000. Upon Company's satisfaction in
full of all outstanding amounts due under the second debenture 1,100,000 shares
of common stock held in escrow shall be cancelled.
Mr. Pilger purchased 852,250 shares of Company common stock held by Roy
Anderson Holding Corp. on December 31, 1999 for purchase price of $.10 per
share.
Dividends
No dividends have been declared or paid since September 30, 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Following is management's discussion and analysis of significant
factors which have affected the Company's financial position and operating
results during the periods reflected in the accompanying consolidated financial
statements.
CONSOLIDATED
The Company's revenues from continuing operations were $537,213 during
the fiscal year ending September 30, 2000.
11
<PAGE>
CONTINUING OPERATIONS
GENERAL AND ADMINISTRATIVE
The Company's general and administrative expenses aggregated $2,514,402
in fiscal 2000 compared to $2,877,534 for fiscal 1999, a decrease of $363,132.
The decrease was primarily due to reductions of bad debt expense ($197,633) and
reductions in general and administrative bonuses ($269,559) in fiscal 2000.
INTEREST EXPENSE
Interest expense totaled $212,486 for fiscal 2000 compared to $659,762
for fiscal 1999. The decrease of $447,276 in 2000 from 1999 was primarily due to
the sale lease back transaction with Ahab of the Ozarks in October, 1999.
OTHER
Interest income as of September 30, 2000 was $43,769 compared to
$45,354 for the same period in 1999, a decrease of $1,585 or 4%. This is
consistent with the prior year.
BOUNCEBACKMEDIA.COM, INC.
BounceBackMedia.com, Inc. commenced operation January, 2000 with the
acquisition of all of the assets of Raw Data, Inc. The Company entered into two
employment agreements with multi-media professionals, Roger Birks and Ricardo
Gonzalez, January, 2000. Mr. Birks was CEO of BounceBackMedia.com from January,
2000 until his termination in November, 2000. Mr. Gonzalez, a specialist in
multimedia design and software engineering is Chief Operating Officer of
BounceBackMedia.com.
BounceBackMedia.com's business strategy includes development of
interactive promotional messages delivered digitally through various storage
media, with emphasis on CD-Rom and the internet. The Company believes that
internet technology and advances with CD-Rom will change the fundamentals of
business operations in the future. BounceBackMedia.com's new media production
talent and understanding of CD-Rom storage media will allow the Company the
ability to capitalize on internet-centric marketing communications.
Revenues for fiscal 2000 were $486,499. Operating expenses, including
cost of goods sold, wages, marketing, promotional expense and office expenses
were $898,258. Additionally, BounceBackMedia.com, Inc., was in its first year
start-up mode and incurred certain one-time costs which were expensed as
incurred. There is no basis for comparison for revenue or operating expenses, as
this is the first year of operations. Due to the novelty and newness of the
technology the Company has been required to focus its marketing efforts on
educating and building awareness of its products and their potential
applications in the marketplace. The thrust of BounceBackMedia.com, Inc.'s first
year business has come from major U.S. companies who were desirous of testing
the mini CD-Rom products under various application formats in smaller order
sizes ranging from 1000 to 10,000 increments. Actual operating losses paralleled
the first year budget projections. Due to growing competition in the customized
mini CD market, slower than anticipated acceptance of the mini CD technology and
its applications by businesses and consumers alike and the perceived threat of
obsolescence due to rapid advances in the technology industry, there can be no
assurances that BounceBackMedia.com, Inc. will ever be profitable. However,
BounceBackMedia.com, Inc. is reacting to marketplace conditions by focusing its
efforts on specific business applications of its mini CD products by utilizing
in-house templates and customized use of available software technology.
12
<PAGE>
LAKES GAMING AGREEMENT
See Note 12 to the Financial Statements and discussion under Item 1.
"Business".
DISCONTINUED OPERATIONS
ENTERTAINMENT
Country Tonite Theatre - Branson, MO
The Country Tonite Theatre in Branson, Missouri, had fiscal 2000
revenue of $6,004,507, an increase of $146,747 or 2% from fiscal 1999 total of
$5,857,760. Paid attendance for the Country Tonite show was 27% of capacity in
2000 compared to 27% of capacity in fiscal 1999. Average ticket price was $18.79
in fiscal 2000 compared to $17.33 in fiscal 1999. Operating expenses decreased
(including project, general and administrative costs, depreciation and cost of
sales) $369,717 to $4,255,073 in fiscal 2000 from $4,524,790 in fiscal 1999.
Operating income increased $416,464 to $1,749,434 in fiscal 2000 from $1,332,970
in fiscal 1999. This increase is due predominately to the elimination of
depreciation expense as a result of the sale/lease back transaction with Ahab of
the Ozarks.
Country Tonite Production Show
Country Tonite revenues totaled $1,754,553 in fiscal 2000, an increase
of $191,495 from revenues of $1,563,058 for fiscal 1999. This increase is
primarily related to the sale of the Country Tonite Production license to
Country Tonite Theatre, Pigeon Forge (CTTPF) in mid-May 2000. Operating expenses
(including project, general and administrative costs and depreciation) decreased
$843,255 to $677,324 in fiscal 2000 from $1,520,579 in fiscal 1999 as CTTPF
assumed all operating expenses under the licensing agreement. Operating income
increased $1,049,349 to $1,091,828 in fiscal 2000 from $42,479 in fiscal 1999.
Country Tonite Theatre - Pigeon Forge
CRC of Tennessee, Inc., ("CRCT") and Burkhart Ventures, LLC formed a
joint venture to present beginning March, 1997, the Country Tonite Show in
Pigeon Forge, Tennessee. CRCT, the 60% joint venture partner, terminated its
relationship with Burkhart Ventures, LLC on December 31, 1998. Under the terms
of the agreement, the Company continued to manage the Country Tonite Theatre at
Pigeon Forge for a fee of $1000.00 per week off-season, and $2,000.00 per week
in-season, during fiscal 1999. Revenues for fiscal 1999 were $807,402 and
expenses for fiscal 1999 were $678,743.
GAMING, TUNISIA
Revenue for fiscal 2000 was $3,259,814 compared to $2,526,193 for 1999,
an increase of $733,621, or 29% which was primarily due to increases in the
junket business. Operating expenses including project, general and
administrative costs, depreciation and cost of sales increased $77,530 from
$4,113,841 in 1999 to $4,036,311 in fiscal 2000. While operating expenses for
fiscal 2000 were comparable to fiscal 1999, expenses directly related to gaming
revenue increased. The operating loss was $776,497 (net of $395,000 management
fees which is eliminated in consolidation) for fiscal 2000 compared to a loss of
$1,587,648 (including $240,000 of management fees is eliminated in
consolidation).
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company had cash of $98,208 compared to
$957,254 as of September 30, 1999.
The Company's principal source of cash, its entertainment segment,
provided cash of $2,259,947 and $1,895,826 in 2000 and 1999, respectively, is
now reported as discontinued operations. Also reported as discontinued
operations is the Company's gaming segment, which used cash totaling $32,420 and
$378,153 in 2000 and 1999, respectively.
During 2000, the Company focused on the marketing, sales and business
solutions to the Internet and e-commerce industries. In pursuit of this focus,
the Company used $85,000 cash to acquire RawData Inc. and an additional $554,296
to fund its first year operations. BounceBackMedia, Inc. (formerly RawData,
inc.) is now poised to avail itself of the ever expanding Internet and
e-commerce markets.
In connection with its change in focus, the Company reduced the long
term debt of continuing operations in 2000 by $1,255,242 with cash payments of
$816,600 and a noncash gain of $438,642 on the early extinguishment of debt. In
November, 2000, Roy Anderson Holding Corp. agreed to modify the timing of the
mandatory prepayment of Debenture Two so that full payment of Debenture Two will
coincide with the Company's receipt of the final payment of the purchase price
from On Stage. In consideration for the adjustment by Roy Anderson Holding
Corp., the Company agreed to revise the maturity date of Debenture Two from
December 31, 2002, to December 31, 2001. The impact on cash will be $685,897
with simple interest fixed at 6% per annum.
The Company expects cash from continuing operations to be sufficient to
meet capital expenditures, debt service and working capital requirements in
2001. The Company also anticipates cash to be provided from the sale or lease of
its discontinued operations. The Company also has a line-of-credit arrangement
with regional bank, which provides for borrowing up to $200,000 with interest at
prime plus 1%. This line-of-credit is secured by the accounts receivable of the
Company and the personal guaranty of the Company's CEO, John Pilger. At
September 30, 2000 and 1999, there were no advances under the line-of-credit.
The Company has executed a Revised Conditional Release and Termination
Agreement with Lakes Gaming for a maximum aggregate amount of $16.1 million,
which included a $2 million refundable cash down payment received by the Company
in August 1999. The down payment is refundable if a casino is not opened within
five years and has been recorded as deferred revenue in 2000 and 1999. Payment
of the remaining $14.1 million is contingent upon opening of the casino and
other events occurring in the future. Lakes Gaming anticipates construction of
the Michigan casino commencing in 2001. However, there can be no assurances as
to timing the start of construction since the proposed gaming site must be
accepted into trust by the U.S. government before construction can begin.
In August, 1999, the Company marked the renewal note of Kevin Kean paid
after offsetting any fee due Mr. Kean under the Pokagon Management Agreement,
with the understanding that all obligations were discharged. This transaction
had no impact on cash for fiscal 2000.
During the year ended September 30, 2000, capital expenditures totaled
$105,764 compared to $33,423 for the 1999 fiscal year. Capital expenditures in
2000 consisted principally of purchases and implementation of a new accounting
software system ($23,000) and the purchase of equipment for BounceBackMedia,
Inc. ($80,000).
SEASONALITY
The theatre operations in Branson, Missouri and Pigeon Forge, Tennessee
are affected by seasonal factors and, in addition, will be closed from
14
<PAGE>
mid-December through mid-March. This period is historically when theatres like
the Company's normally close in Branson and Pigeon Forge. The casino in Tunisia
is also subject to seasonal factors as the period from October to April is
considered the slow tourist season.
IMPACT OF INFLATION
Management of the Company does not believe that inflation has had any
significant effect on the Company's financial condition or results of operations
for the periods presented. However, an increase in the rate of inflation could
adversely affect the Company's future operations.
FOREIGN CURRENCY TRANSACTIONS
The Company's transactions with respect to its casino venture in
Tunisia will be in dinars. As such, there are all the risks that pertain to
fluctuations in foreign exchange rates and potential restrictions or costs
associated with the transfer of funds to the United States.
NEW ACCOUNTING PRONOUNCEMENTS
Implementation of SAB 101
The Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements, in December
1999. The SAB 101 summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. Concurrent with the audit of its financial statements for fiscal
2000, the Company performed a comprehensive review of its revenue recognition
policies and determined that they are in compliance with SAB 101.
Forward-Looking Statements:
The Private Securities Litigation Reform Act of 1995 (the Act) provides
a safe harbor for forward-looking statements made by or on behalf of the
Company. The Company and its representatives may from time to time make written
or oral statements that are "forward-looking," including statements contained in
this report and other filings with the Securities and Exchange Commission and in
reports to the Company's stockholders. Management believes that all statements
that express expectations and projections with respect to future matters,
including but are not limited to, those relating to expansion, acquisition, the
sale of assets and business segments and other development activities,
dependence on existing management, leverage and debt service, domestic or global
economic conditions (including sensitivity to fluctuations foreign currencies),
changes in federal or state tax laws or the administration of such laws, changes
in gaming laws or regulations (including legalization of gaming in certain
jurisdictions) and the requirement to apply for licenses and approvals under
applicable jurisdictional laws and regulations (including gaming laws and
regulations) are forward-looking statements within the meaning of the Act. These
statements are made on the basis of management's views and assumptions, as of
the time the statements are made, regarding future events and business
performance. There can be no assurance, however, that management's expectations
will necessarily come to pass.
15
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index to Financial Statements appears at page F-1 hereof, the
Report of Registrant's Independent Accountants appears at pages F-2 and F-3
hereof and the Consolidated Financial Statements and Notes to Consolidated
Financial Statements of the Registrant appear beginning at page F-4 hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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 periods ending March 31 and June 30, 2000 were not
reviewed by the Company's independent auditor. The June 30 statement was not
reviewed by the Company's independent auditor due to their resignation effective
July 25, 2000. A Form 8-K was filed by the Company August 1, 2000 reporting the
resignation of the Company's auditor, BDO Seidman, LLP. Ciro Adams, CPA was
engaged as the Company's auditor on December 12, 2000.
--------------------------------------------------------------------------------
PART III
--------------------------------------------------------------------------------
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information as of September 30, 2000 regarding the
directors and executive officers of the Company, including information as to
their principal occupations for the last five years, certain other directorships
held by them, and their ages as of the date hereof.
John J. Pilger, age 54, has been the Chief Executive Officer and a
director of the Company since 1984, and served as President from 1984 to 1993.
Mr. Pilger was previously Chairman of the Board until July 1994 and resumed such
role in April 1995. Mr. Pilger oversees all Company activities including
operations, acquisitions, development and construction.
John W. Steiner, age 58, has been a director of the Company since
January 1994. Since 1990, he has served as Chairman of the Board of the Ace
Worldwide Group of Companies, a leading provider of moving, trucking,
warehousing and overall logistics services. Mr. Steiner also serves on the Board
of Directors and Executive Committee of Atlas World Group, Inc. Mr. Steiner is
President of the Associate Board of the Milwaukee County Zoological Society, a
Board member of the Metropolitan Milwaukee Association of Commerce and the
Better Business Bureau of Wisconsin.
Dr. Timothy Murphy, age 40, has been a director since March 17, 1997.
Dr. Murphy resides on the Mississippi coast and is a Chiropractic doctor
maintaining his own practice. Dr. Murphy serves as a trustee on the Board of
Parker College, as well as its finance chairman. Additionally, Dr. Murphy is a
member of the American Chiropractic Association; serves on the Council of
Diagnostic Imaging and Council on Sports Injury. Dr. Murphy serves as team
Chiropractor to Mercy Cross High School, D'Iberville High School and Mississippi
Sea Wolves Professional Hockey Team.
16
<PAGE>
Dennis Evans, age 54, has been a director since March 17, 1997. Mr.
Evans brings more than 30 years of sales and marketing business experience to
the Board. Mr. Evans has acted as President of several large sales and marketing
firms, as well as consultant to several mid-western development companies. Mr.
Evans has acted as a marketing consultant to the Country Tonite Theatres in
Branson and Pigeon Forge and to the Company's casino development in Tunisia,
North Africa. Mr. Evans is currently employed by the Company as Vice President
of Marketing.
Noreen Pollman, age 52, has served as Secretary to the Company since
March 1995 and as a director since March 1995 and from 1987 to 1993. Since 1984,
Ms. Pollman was Vice President of Operations for each of the Company's operating
businesses with responsibility for the development and implementation of
operating budgets to February 1998. Ms. Pollman currently serves as a consultant
to the Company.
Robert J. Allen, age 40, was named Vice President of Entertainment of
the Company on August 1, 1994. He has served as a director of the Company since
March 1995 and from 1987 to 1993. Mr. Allen served as Executive Vice President
and Chief Marketing Officer of the Company's former subsidiary Recreational
Property Management, Inc. from 1986 to 1987. He also previously served as Vice
President of Telecommunications.
Officers serve at the discretion of the Board of Directors.
OTHER MATTERS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors, and certain shareholders to file
reports of ownership and changes in ownership of the Common Stock with the
Securities and Exchange Commission. To the Company's knowledge, based on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the Company's fiscal
year ended September 30, 2000 all Section 16(a) filing requirements were
complied with and filed in a timely fashion.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual and
long-term compensation earned by John J. Pilger and Robert J. Allen, the Named
Executive Officers (as defined below) for services rendered in all capacities to
the Company for the fiscal years ended September 30, 2000, 1999 and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
(2)
Other Annual Restricted Securities
Stock Underlying All Other
Fiscal Salary Bonus Comp. Awards Options Compensation
Name and Principal Position (1) Year ($) ($) ($) ($) (#) ($)
------------------------------- ---- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Pilger (5) . . . . . . . 2000 253,845(6) -0- -0- -0- -0- 165,306(7)
Chief Executive Officer 1999 486,396(2) 161,000(3) -0- -0- -0- -0-
1998 464,747(4) -0- -0- -0- -0- -0-
Robert J. Allen . . . . . . . . . 2000 124,786(8) 3,580(9) -0- -0- -0- -0-
Executive Vice President, 1999 130,777 41,434(3) -0- -0- -0- -0-
Entertainment 1998 119,412 -0- -0- -0- -0- -0-
<FN>
1) Under Securities and Exchange Commission rules, the "Named Executive
Officers" include (i) each person who served as Chief Executive Officer
during fiscal 2000, (ii) each person who (a) served as an executive
officer at September 30, 2000, (b) was among the four most highly paid
executive officers of the Company, not including the Chief Executive
Officer, during fiscal 2000 and (c) earned total annual salary and
bonus compensation in fiscal 2000 in excess of $100,000 and (iii) up to
two persons who would be included under clause (ii) above had they
served as an executive officer at September 30, 2000.
</FN>
</TABLE>
17
<PAGE>
2) Includes salary of $237,417 and contractual compensation of $125,000
which was paid for services rendered for CRC of Tunisia. An additional
$123,979 of non-cash compensation is reflected, which was used to
reduce Mr. Pilger's loan payable to CRC.
3) A one time discretionary bonus was approved by the Board in conjunction
with the successful completion of the Lakes Gaming contract for $16.1
million. This bonus was issued in August 1999. As a result, Mr. Pilger
was awarded $161,000 and Mr. Allen was awarded $37,500 for their
instrumental efforts in securing this contract.
4) Includes contractual compensation and a $150,000 fee paid for services
rendered for CRC Tunisia.
5) During fiscal 1999, 1998 and 1997, Mr. Pilger received personal
benefits, the aggregate amounts of which did not exceed the lesser of
$50,000 or 10% of the total of the annual salary and bonus reported for
Mr. Pilger in such years.
6) Includes gross salary for payroll periods starting October 1, 1999
through September 30, 2000 of $253,845.24 which includes $18,182.80 for
1999 calendar year vacation paid in lieu of time off.
7) Noncash compensation of $165,305.64 which reduced Mr. Pilger's payable
to BounceBack Technologies.com, Inc. In turn, Mr. Pilger canceled
monies due him the last year of his three-year agreement whereby he was
to receive $125,000.00 in fees from CRC Tunisia S.A. for fiscal year
2000, as compensation for his serving as Chairman on the Foreign
subsidiary as granted by the Board of Directors of the Company.
8) Includes gross salary for payroll periods starting October 1, 2000
through September 30, 2000 of $128,366.22.
9) A bonus dated January 10, 2000 for $3,580.00.
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with John J. Pilger on
May 20, 1996, providing for an annual salary of $225,000, subject to annual cost
of living adjustments. The Agreement also provides for use of an automobile and
payment of insurance premiums the value of which does not exceed 10% of his
annual salary. The agreement also provides for bonuses if certain financial
performance guidelines are met. This Agreement was amended April 3, 1999 to
extend the annual expiration date from July 19 to September 30 annually with
cost-of-living adjustments to be calculated at that time so to correspond with
the Company's fiscal year end. Additionally, the Agreement provides that if
either party wishes to terminate the Agreement a written notice of intent must
be delivered to the other party one year prior to the employment expiration date
and in the absence of such notice the Agreement renews automatically for a three
year term.
In 1998, the Company entered into a Supplementary Employment Agreement
with John J. Pilger which provides Mr. Pilger certain benefits upon a Change of
Control Event, which is defined therein as: a) The acquisition after the date of
this Agreement by an individual, entity or group (within the meaning of Section
13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, (a
"Person") of beneficial ownership of 20% or more of either (i) the issued and
outstanding shares of common stock of the Company or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors; or b) if any two or more members within
a class of the staggered Board of seven or more directors, as constituted on the
date hereof, are removed without the express approval or consent of the CEO and
Chairman of the Board, of if two or more members of the Board assume office
18
<PAGE>
within any period of eighteen months after one or more contested elections; or
c) A reorganization or hostile merger or consolidation which results from either
an actual or threatened election contest or actual or threatened solicitation of
proxies; or d) A complete liquidation or dissolution of the Company, or the sale
or other disposition of all or substantially all of the assets of the Company,
which liquidation, sale or dissolution occurs as a result of either actual or
threatened solicitation of proxies or consents by or on behalf of persons other
than the incumbent Board. The benefits which inure to Mr. Pilger upon a
voluntary termination under a Change of Control include: 2.99 times his annual
average salary and bonuses and all taxes, including income taxes and any excise
tax which may be imposed.
Further, in 1998 the Company entered into an Agreement with Robert J.
Allen where upon a Change of Control Event, which is substantially similar to
that defined in Mr. Pilger's Supplementary Employment Agreement and set out
above, Mr. Allen has the right to receive upon termination 2.99 times his
average annual salary including bonuses payable within 30 days plus other
benefits.
Other
John J. Pilger received $125,000 in October 1998 for services to be
rendered in Fiscal 1999 for CRC of Tunisia. Under a Board approved resolution
Mr. Pilger was to receive an additional $125,000 compensation for fiscal 2000,
however Mr. Pilger canceled the agreement, and therefore, did not receive the
third year payment of $125,000, which would have been due him thereunder.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 20, 2000, certain
information with respect to each shareholder known to the Company to be the
beneficial owner of more than 5% of its Common Stock, each director, each named
executive officer, and all directors and executive officers of the Company as a
group. Unless otherwise indicated, the address of the people included in the
table is the principal office of the Company and each person named in the table
has sole voting and investment power as to the Common Stock shown.
<TABLE>
<CAPTION>
Number of Shares(12) Percentage of
Name and Address of Beneficial Owner Beneficially Owned (1) Outstanding Shares
------------------------------------ ---------------------- ------------------
<S> <C> <C>
John J. Pilger........................ 1,964,018 (2)(10) 14.2%
Noreen Pollman..................... 155,000 (3) 1.2%
John W. Steiner.................... 111,975 (4) *%
Dr. Timothy Murphy.............. 51,756 (5) *%
Dennis Evans........................ 95,100 (6) *%
Robert J. Allen..................... 170,338 (7) 1.3%
Kevin M. Kean..................... 1,400,944 (8) 10.8%
Roy Anderson Holding Corp..... 1,100,000 (9) 9.0%
All Directors and Executive Officers as a group (6 Persons) 2,528,187 (11) 15.2%
<FN>
-------------------------
*Less than 1%
1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or member of a group to acquire them within 60 days upon
exercise of options or warrants are treated as outstanding only when
determining the amount and percent owned by such person or group.
2) Includes 235,000 Shares deemed beneficially owned pursuant to options,
which are immediately exercisable or which will be exercisable within 60
days. Of the Shares reflected above 111,000 are owned by Mr. Pilger's wife,
and 11,000 Shares are owned by minor children of Mr. Pilger. In addition to
the number of shares reflected in the table, Mr. Pilger holds proxies to
vote 1,330,944 shares owned by Kevin M. Kean (see Note 8 below), 175,000
19
<PAGE>
shares owned by Richard A. Howarth, Jr., (a former officer of the Company)
and 1,100,000 Shares (as of January 1, 2000) held in escrow as collateral
under the Restated Debenture Agreement dated December 31, 1999 (see Note 9
below). Mr. Pilger, his wife and children have the right to vote a total of
4,569,962 outstanding shares or 35.7% of the shares outstanding.
3) Includes 149,000 shares deemed beneficially owned pursuant to options,
which are immediately exercisable or which will be exercisable within 60
days.
4) Includes 90,000 shares deemed beneficially owned pursuant to options, which
are immediately exercisable.
5) Includes 30,000 shares deemed beneficially owned pursuant to options, which
are immediately exercisable. 6) Includes 45,000 shares deemed beneficially
owned pursuant to options, which are immediately exercisable.
7) Includes 149,000 shares deemed beneficially owned pursuant to options,
which are immediately exercisable or which will be exercisable within 60
days.
8) Includes 70,000 shares of Common Stock deemed beneficially owned pursuant
to an option which is immediately exercisable. Mr. Kean has granted an
irrevocable proxy with respect to 1,330,944 shares of the Company's common
stock to John J. Pilger until such time as Mr. Kean sells or transfer such
Shares to an unaffiliated third party in a bona fide transaction. Mr.
Kean's address is 2644 E. Lakeshore Drive, Baton Rouge, Louisiana 70808.
9) Includes 1.1 million shares being held in escrow as collateral to satisfy
certain obligations of the Company under Debentures dated as of December
31, 1999. Mr. Pilger or Mr. Allen holds a proxy for these Shares until
Company has satisfied its obligations in full to Roy Anderson Holding Corp.
Upon full satisfaction of debt the stock will be cancelled. Roy Anderson
Holding Corp's, address is: P.O. Box 2, Gulfport, Mississippi 39502.
10) Includes 852,250 shares of Company common stock purchased by Mr. Pilger
from Roy Anderson Holding Corp. on December 31, 1999.
11) See Notes 2,3,4,5,6, 7, and 10.
</FN>
</TABLE>
OPTION GRANTS AND EXERCISES
The Company has not granted, repriced or canceled any options to
executive officers during fiscal 2000, nor have any executives exercised any
options during fiscal 2000.
The following Table sets forth with respect to the Named Executive
Officers Information concerning the exercise of stock options during fiscal 2000
and unexercised options held as of the end of fiscal 2000. The Company has never
granted stock appreciation rights.
20
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES
AND FISCAL 2000 YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT 9/30/00 (#) OPTIONS AT 9/30/00 ($)
EXERCISE REALIZED ------------------------------------- --------------------------------------
NAME (#) ($) UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John J. Pilger -0- -0- 0 235,000 -0- -0-
Noreen Pollman -0- -0- 0 149,000 -0- -0-
Robert J. Allen -0- -0- 0 149,000 -0- -0-
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Company Loans
At September 30, 2000, John J. Pilger was indebted to the Company in
the amount of $272,460 including principal and interest.
On December 31, 1997, the Company's former chairman (Kevin Kean)
defaulted on repaying $1,232,000 plus interest due the Company. The Company
filed suit against Mr. Kean, which resulted in a settlement agreement. Under the
agreement, 220,000 shares of the Company's common stock owned by Mr. Kean were
cancelled along with the 150,000 collateral shares held (valued at the market
price of $1.19 per share). Additionally, the Company and Mr. Kean entered into a
$1,196,885 note agreement. which included $143,000 of previously reserved
interest and was scheduled to mature on January 15, 2001. The note was
collateralized by Mr. Kean's 5% interest in the Company's Pokagon management
fee. Solely at the Company's discretion, at any time prior to maturity, the
Company could take the collateral as payment in full for the note. Under the
terms of the Loan and Settlement Agreement, ". . . In the event that CRC 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..." The Company has marked
the Renewal Note "Paid" after offsetting any fee due Mr. Kean under the Pokagon
Management Agreement and returned it to Kean with the understanding that the
obligations thereunder are now discharged.
Relationship with Consultants
Ms. Pollman terminated her employment relationship with the Company in
February 1998 and entered into a Consulting Agreement for a two-year term to
provide business and consulting services to the Company. Ms. Pollman will
continue to act as Secretary of Company with responsibility for maintaining the
Company's corporate books and records. The Company anticipates it will reduce
its long term out-of-pocket expenses associated with Ms. Pollman's employment.
The Board approved Agreement features Change of Control provisions where upon
termination of this Agreement Ms. Pollman will receive 2.99 times her average
annual compensation which moneys will be payable in thirty days. Additionally,
this Agreement provides for a one-time bonus of up to $156,000 in stock or cash
payable in full no later than December 31, 1999, $100,000 of which bonus was
utilized to pay in full the $86,000 loan plus interest due the Company on
September 1998. Ms. Pollman's consulting agreement has been extended for a
two-year period and the rate per hour increased from $67.00 to $85.00 per hour
as of September 1999. Ms. Pollman is a Director of the Company.
Indemnification of Directors and Officers
Under Section 302A.521 of the Minnesota Statutes, the Company is
required to indemnify its directors, officers, employees, and agents against
liability under certain circumstances, including liability under the Securities
Act of 1933, as amended.
21
<PAGE>
As permitted under the Minnesota Statutes, the Restated Articles of
Incorporation of the Company provide that directors shall have no personal
liability to the Company or to its shareholders for monetary damages arising
from breach of the Directors' duty of loyalty to the Company or with respect to
certain enumerated matters, excluding payment of illegal dividends, acts not in
good faith, and acts resulting in an improper personal benefit to the director.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Exhibit Numbered Pages
--------------------------------------------------------------------------------
2.1 Palace Casino Asset Acquisition Agreement (6)
3.1 Restated Articles of Incorporation of the Company, as amended (2)
3.3 Bylaws of the Company, as amended (3)
4.1 Form of $300,000 Convertible Debenture between the Company and G.P.S.
Fund, Ltd., due September 10, 1998 (7)
4.2 Form of $500,000 Convertible Debenture, between the Company and Gifford
Fund, Ltd., due September 9, 1998 (7)
4.3 Form of Registration Rights Agreement, between the Company and
Investor, dated August 29, 1997 (7)
4.4 Form of Debenture Subscription Agreement, between the Company and
Subscriber, dated August 29, 1997 (7)
4.5 Common Stock Purchase Warrant (The Gifford Fund, Ltd.), between the
Company and Gifford Fund, Ltd., dated September 1997 (7)
4.6 Common Stock Purchase Warrant (G.P.S. Fund, Ltd.), between the Company
and G.P.S. Fund, Ltd. (7)
4.7 Common Stock Purchase Warrant (Joseph B. LaRocco), between the Company
and Joseph B. LaRocca, dated September, 1997 (7)
4.8 Common Stock Purchase Warrant (International Holding Company, Ltd.),
between the Company and International Holding Company, Ltd., dated
September 1997 (7)
4.9 $1,500,000 6% Cumulative Convertible Debenture, between the Company and
Maritime Group, Ltd., dated January 31, 1997 (8)
4.10 Amendment to 13% Convertible Debentures Due September 9, 1998, and
September 10, 1998, between the Company, G.P.S. Fund, Ltd., and Gifford
Fund, Ltd. (8)
10.1 Employment Agreement dated May 20,1996 between the Company and John J.
Pilger (6)
22
<PAGE>
10.2 Ground Lease dated as of August 11,1993, as amended by the Amendment to
Ground Lease dated as of April 5, 1995, between Casino Building
Corporation and Grand Casinos, Inc. relating to the site for the Grand
Hinckley Inn (5)
10.3 Hotel Development Agreement dated July 23,1993, between the Company and
Grand Casinos, Inc. relating to the development of the Grand Hinckley
Inn (1)
10.4 Marketing Enhancement and Purchase/Put Option Agreement dated as of
August 11, 1993, between the Company, the Corporate Commission and
Grand Casinos, Inc. relating to the Grand Hinckley Inn (1)
10.5 Form of Warrant Agreement between the Company and Norwest Bank
Minnesota, N. A., as Warrant Agent, dated September 15, 1993 (1)
10.6 Promissory Note dated as of September 15, 1993, made by John J. Pilger
in favor of the Company (3)
10.7 Contract to Produce Show dated December 28, 1995, between JMJ, Inc.,
d/b/a Aladdin Hotel & Casino and Country Tonite Enterprises, Inc.
relating to the Las Vegas production show (2)
10.8 Agreement for Purchase and Sale of Theatre dated March 11, 1994, among
the Company, CRC of Branson, Inc. and Ahab of the Ozarks, Inc. relating
to the acquisition of the Country Tonite Theatre (2)
10.9 Construction and Term Loan Agreement dated as of April 1,1994, as
amended by the Amendment to Construction and Term Loan Agreement dated
as of May 1,1994, between Casino Building Corporation and Miller &
Schroeder Investments Corporation relating to the construction and
financing of the Grand Hinckley Inn (5)
10.10 Promissory Note dated April 5, 1994, made by Casino Building
Corporation in favor of Miller & Schroeder Investments Corporation in
the amount of $3,300,000 (5)
10.11 Mortgage, Security Agreement and Financing Statement dated as of April
1, 1994, between Casino Building Corporation and Miller & Schroeder
Investments Corporation (5)
10.12 Guaranty Agreement dated April 1, 1994, by the Company in favor of
Miller & Schroeder Investments Corporation (5)
10.13 Assignment of Rents and Leases dated as of April 1,1994, as amended by
the Amendment to of Rents and Leases dated as of May 1,1994, between
Casino Building Corporation and Miller & Schroeder Investments
Corporation (5)
10.14 Subordination Agreement dated as of April 1,1994, among the Company,
Casino Building Corporation and Miller & Schroeder Investments
Corporation (5)
10.15 Loan Purchase Agreement dated April 1, 1994, among the Company, Casino
Building Corporation and Miller & Schroeder Investments Corporation (5)
10.16 Assignment dated as of April 1,1994, between Casino Building
Corporation and Miller & Schroeder Investments Corporation relating to
the assignment of the Marketing Enhancement and Purchase/Put Option
Agreement (5)
23
<PAGE>
10.17 Common Stock Purchase Warrant dated April 5, 1994, granted to Grand
Casino, Inc. by the Company with respect to 98,130 shares (5)
10.18 Common Stock Purchase Warrant dated April 19, 1994, granted to Grand
Casino Inc. by the Company with respect to 151,870 shares (5)
10.19 Promissory Note dated March 29, 1994, made by Casino Building
Corporation for $939,739.50 in favor of PDS Financial Corporation
relating to the financing of furniture, fixtures and equipment for the
Grand Hinckley Hotel (5)
10.20 Security Agreement dated March 29, 1994, between Casino Building
Corporation and PDS Financial Corporation (5)
10.21 Guaranty dated March 29, 1994, made by the Company in favor of PDS
Financial Corporation (5)
10.22 Debt Subordination Agreement dated March 29,1994, among Casino Building
Corporation, the Company and PDS Financial Corporation (5)
10.23 Assignment dated March 29, 1994, among Casino Building Corporation, the
Company and PDS Financial Corporation (5)
10.24 Biloxi Star Theater Asset Purchase Agreement dated August 18, 1994,
among Grand Casinos, Inc., Grand Casinos of Mississippi, Inc.-Biloxi,
the Company and Casino Building Corporation of Mississippi, Inc. (2)
10.25 Assignment and Assumption of Ground Sublease and Related Documents
dated September 30, 1994, between Casino Building Corporation of
Mississippi, Inc. and Grand Casinos Biloxi Theater, Inc. (2)
10.26 Bill of Sale date September 30,1994, between Casino Building
Corporation of Mississippi, Inc. and Grand Casinos Biloxi Theater, Inc.
(2)
10.27 Assignment of Warranties, Permits, Licenses, Contracts, Service
Agreements and other Intangible Rights dated September 30, 1994,
between Casino Building Corporation of Mississippi, Inc, and Grand
Casinos Biloxi Theater, Inc. (2)
10.28 Indemnification Agreement dated September 30, 1994, among the Company,
Casino Building Corporation of Mississippi, Inc., Grand Casinos, Inc.,
Grand Casinos, of Mississippi, Inc.-Biloxi, and Grand Casinos Biloxi
Theater, Inc. (2)
10.29 Non-Compete Agreement dated September 30, 1994, among the Company,
Casino Building Corporation of Mississippi, Inc., Grand Casinos, Inc.,
Grand Casinos Biloxi Theater, Inc. and John J. Pilger (2)
10.30 Termination Agreement dated as of September 30, 1994, among the
Company, Casino Building Corporation of Mississippi, Inc., Grand
Casinos, Inc., Grand Casinos of Mississippi, Inc.-Biloxi (2)
10.31 Registration Rights Agreement dated as of September 30, 1994, between
the Company and Grand Casinos, Inc. (2)
10.32 Term Loan Agreement dated as of August 18, 1994, between Casino
Building Corporation and Grand Casinos, Inc. relating to the line of
credit (2)
24
<PAGE>
10.33 Term Note dated as of September 23, 1994, between Casino Building
Corporation and Grand Casinos, Inc. (2)
10.34 Mortgage, Security Agreement, Fixture Financing Statement and
Assignment of Leases and Rents, dated as of September 23, 1994, made by
Casino Building Corporation to Grand Casinos, Inc., securing $1,750,000
Term Note (2)
10.35 Continuing Guaranty (Unlimited) made by the Company in favor of Grand
Casinos, Inc. dated as of September 23, 1994, relating to the
$1,750,000 Term Note (2)
10.36 Third Party Pledge Agreement dated as of September 23, 1994, made by
the Company in favor of Grand Casinos, Inc. and relating to the Term
Loan (2)
10.37 Warrant to Purchase Common Stock dated as of September 27, 1994,
granted to Grand Casinos, Inc. (2)
10.38 Rights of First Refusal Agreement dated as of September 23,1994,
between the Company and Grand Casinos, Inc., with respect to the sale
of the Grand Hinckley Inn. (2)
10.39 Stock Purchase Agreement, dated as of December 18, 1992, between Mr.
Pilger and Mr. Howarth(1) as amended by First Amendment dated June 2,
1993(5), Second Amendment dated July 2,1993(5), and Third Amendment
dated November 30, 1994 (4)
10.40 Settlement Agreement dated as of September, 1994, between the Company
and Gerald North (2)
10.41 Settlement Agreement dated December 8, 1994 between the Company and
Resource Financial Services (2)
10.42 Agreement dated as of October 15, 1993, between the Company and Kevin
Kean Company, Inc.(3) as amended by the Amendment dated as of December
15, 1994, relating to Cherokee gaming project (5)
10.43 Management Agreement dated February 1995 between CRC West, Inc. and Hoh
Indian Tribe (5)
10.44 Mutual Release dated August 31, 1995, between CRC West, Inc. and Hoh
Indian Tribe (5)
10.45 Memorandum of Understanding dated January 10, 1995, between The Promus
Companies Incorporated and the Company with respect to the development
of certain gaming projects (3)
10.46 Memorandum of Understanding dated January 18, 1995, between Monarch
Casinos, Inc. and the Company with respect to the development of
certain gaming projects (3)
10.47 Memorandum of Understanding dated March 10, 1995, between the Company,
the Kevin Kean Company, Inc. and James E. Barnes with respect to the
development of certain gaming projects (5)
10.48 Agreement dated May 8, 1995, between Monarch Casinos, Inc. an the
Company with respect to the January 18, 1995, Memorandum of
Understanding (5)
10.49 Lease Modification Agreement dated August 7, 1995, with respect to the
Elkhorn Wisconsin Lease (3)
10.50 Settlement Agreement dated August 7, 1995, between the Company, John J.
Pilger and Richard A. Howarth, Jr. (3)
25
<PAGE>
10.51 Letter Agreement dated August 22, 1995, relating to extension of
maturity date for September 23, 1994 Term Note (3)
10.52 Agreement dated December 1, 1995, between the Company and Kevin M. Kean
(5)
10.53 Warrant Purchase Agreement and Cherokee Dispute Resolution dated
December 1, 1995, between the Company and Kevin M. Kean (5)
10.54 Promissory Notes dated December 1, 1995, made to Kevin M. Kean in favor
of the Company (5)
10.55 Promissory Note dated December 31, 1994, between the Company and John
J. Pilger (6)
10.56 Promissory Note dated October 25, 1995, between the Company and John J.
Pilger (6)
10.57 Promissory Note dated April 8, 1996 between the Company and John J.
Pilger (6)
10.58 Non-Circumvention and Non-Disclosure Agreement dated July 26, 1996,
between the Company and Huong "Henry" Le (6)
10.59 Consulting Agreement dated December 6, 1995, between the Company and
Monarch Casinos (6)
10.60 Technical Assistance and Consulting Agreement dated June 10,1996,
between the Company and Harrah's Southwest Michigan Casino Corporation
(6)
10.61 Lease Agreement dated September 4, 1996, between J. MacDonald Burkhart,
M.D. and Country Tonite Theatre L.L.C (6)
10.62 Operating Agreement of Country Tonite Theatre, L.L.C. dated September
24, 1996 (6)
10.63 Limited Liability Company Operating Agreement of New Palace Casino,
L.L.C. (6)
10.64 Lease Contract dated June, 1996 between the Company and Samara Casino
Company (6)
10.65 Consulting Agreement between the Company and Mondhor Ben Hamida (6)
10.66 $800,000 Lyle Berman Family General Partnership Loan Agreement (7)
10.67 $800,000 Promissory Note, between the Company and Lyle Berman Family
General Partnership, dated August 29, 1997 (7)
10.68 Stock Pledge Agreement, between the Company and the Lyle Berman Family
General Partnership, dated August 29, 1997 (7)
10.69 Mutual Release Agreement, between the Company, Casino Building
Corporation, and the Lyle Berman Family General Partnership, dated
August 29, 1997 (7)
10.70 $1,000,000 SeaMar Ventures, LLC Loan Agreement, between the Company and
SeaMar Ventures LLC, dated August 29, 1997 (7)
26
<PAGE>
10.71 $1,000,000 Term Note, between the Company and SeaMar Ventures LLC,
dated August 29, 1997 (7)
10.72 Guaranty Agreement, between the Company and SeaMar Ventures LLC, dated
August 29, 1997 (7)
10.73 Matt Walker Consulting Agreement, between the Company and Matt Walker,
dated September 29, 1997 (7)
10.74 Tunisia Casino License (7)
10.75 Agreement with Robert and Lawana Low (8)
10.76 Lease for 707 Bienville Blvd., Ocean Springs, MS (8)
10.77 Kevin Kean Settlement Agreement (8)
10.91 Employment Agreement (9)
10.92 Amendment to Employment Agreement (9)
10.93 Asset Purchase Agreement by and among On Stage Entertainment, Inc.,
Casino Resource Corporation, Country Tonite Enterprises, Inc., and CRC
of Branson, Inc., dated September 21, 1998, relating to the sale of
certain of the assets of the entertainment division of Casino Resource
Corporation, including the theatre in Branson Missouri, and the Country
Tonite Show (10)
10.94 Asset Purchase Agreement by and among Corporate Commission of the Mille
Lacs Band of Ojibwe Indians and Casino Resource Corporation and Casino
Building Corporation, dated June 29, 1998 relating to the sale of Grand
Hinckley Inn hotel property to the Mille Lacs Band of Ojibwe Indians
for $5.4 million dollars (10)
10.95 Burkhart Agreement by and among Burkhart Ventures, LLC and Casino
Resource Corporation and Casino Resource Corporation of Tennessee
executed this agreement November 4, 1998, which terminated the
Company's 60% Joint Venture ownership interest in CTT, LLC December 31,
1998 (10)
10.96 Extension of Promissory Note Maturity Date between Ahab of the Ozarks,
Inc. and Casino Resource Corporation and CRC of Branson, Inc. dated
December 22, 1998 extending maturity date of note with outstanding
principal balance of approximately $7.1 million dollars from April 1,
1999 to October 1, 1999 (10)
10.97 Consulting Agreement, between the Company and Noreen Pollman, dated
February 15, 1998 (10)
10.98 Robert J. Allen Agreement, between the Company and Robert J. Allen,
dated April 3, 1998 (10)
10.99 John J. Pilger Executive Employment Agreement Golden Parachute, between
the Company and John J. Pilger, dated March 9, 1998 (10)
10.100 Amendment to Employment Agreement, between the Company and John J.
Pilger, dated April 3, 1998 (10)
10.101 Agreement by and among the Company, CRC of Branson, Inc. and Ahab of
the Ozarks, Inc., dated September 30, 1999 (12)
27
<PAGE>
10.102 Lease Agreement by and between CRC of Branson, Inc. and Ahab of the
Ozarks, Inc., dated September 30, 1999 (12)
10.103 Termination Agreement by and among the Company, Casino Resource
Corporation of Tunisie, S.A., and SeaMar Ventures, LLC dated November
5, 1999 (11)
10.104 Promissory Note made by Casino Resource Corporation of Tunisie, S.A. in
favor of SeaMar Ventures, LLC dated November 5, 1999 (11)
10.105 Guaranty given by the Company in favor of SeaMar Ventures, LLC dated
November 5, 1999 (11)
10.106 Agreement to Amend and Restate Debenture by and between the Company and
Roy Anderson Holding Corp. Dated December 31, 1999 (11)
10.107 Asset Purchase Agreement by and among the Company,
BounceBackMedia.com,Inc., Digital Development & Distribution, LLC and
Roger Birks, dated December 31, 1999 (11)
10.108 Employment Agreement by and among the Company,
BounceBackMedia.com,Inc., Digital Development & Distribution, LLC and
Roger Birks, dated December 31, 1999 (11)
10.109 Employment Agreement by and among the Company,
BounceBackMedia.com,Inc., Digital Development & Distribution, LLC and
Ricardo Gonzalez, dated December 31, 1999 (11)
10.110 Letter of Intent to purchase Country Tonite made by and between the
Company, CRC of Branson, Inc., Country Tonite Enterprises, Inc., and On
Stage Entertainment, Inc. dated November 21, 2000.
10.111 Escrow Agreement between Company, On Stage Entertainment, Inc. and
Schnader Harrison Segal & Lewis, LLP, dated November 21, 2000.
10.112 Letter amending Debenture Two between Company and Roy Anderson Holding
Corp. dated November 20, 2000.
10.113 Notice of Election to exercise 300,000 stock option between Company and
Roy Anderson Holding Corp. dated April 28, 2000 with closing May 26,
2000.
21.1 List of Subsidiaries of Registrant
27.1 Financial Data Schedule
1) Incorporated by reference to the Company's Registration Statement on Form
SB-2, File No. 33-66504, declared effective September 15, 1993.
2) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended September 30, 1994, filed on January 12, 1995.
3) Incorporated by reference to the Company's Registration Statement on Form
SB-2, File No. 33-90114, originally declared effective May 5,1995.
4) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended September 30, 1995, filed on January 16, 1996.
28
<PAGE>
5) Incorporated by reference to the Company's Registration Form S-3, File No.
33-31534, originally declared effective February 29,1996.
6) Incorporated by reference to the Company's Annual Report on Form 10-KSB, as
amended for the fiscal year ended September 30, 1996, filed on January 9,
1997.
7) Incorporated by reference to the Company's Registration Statement on Form
S-3, as amended, File 333-37267, filed on November 19, 1997.
8) Incorporated by reference to the Company's Annual Report on 10-KSB, as
amended for fiscal year ended September 30, 1997, filed on January 20,
1998.
9) Incorporated by reference to the Company's Quarterly Report on 10-QSB, for
the fiscal quarter ended March 31, 1998 filed on May 15, 1998.
10) Incorporated by reference to the Company's Annual Report on Form 10-KSB,
for the fiscal year ended September 30, 1998 filed on January 13, 1999.
11) 8-K filed August 1, 2000.
12) 8-K filed December 12, 2000.
13) 8K/A filed December 20, 2000.
14) Form 12b-25 filed December 26, 2000.
15) NT 10-K/A filed January 5, 2001.
29
<PAGE>
SIGNATURES
In Accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOUNCEBACKTECHNOLOGIES.COM, INC.
January __, 2000 By:
--------------------------------
John J. Pilger,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE AND TITLE
January __, 2000 s/ John J. Pilger
----------------------------------
John J. Pilger, Chief Executive
Officer, President and Chairman of
the Board of Directors ("principal
executive officer")
January __, 2000 s/John J. Pilger
----------------------------------
Chief Financial Officer and Chief
Accounting Officer ("principal
financial and accounting officer")
January __ 2000 s/Noreen Pollman
----------------------------------
Noreen Pollman, Secretary and
Director
January __, 2000 s/Robert J. Allen
----------------------------------
Robert J. Allen, Vice President of
Entertainment and Director
January __, 2000 s/Timothy Murphy
----------------------------------
Dr. Timothy Murphy, Director
January __, 2000 s/Dennis Evans
----------------------------------
Dennis Evans, Director
January __, 2000 s/John W. Steiner
----------------------------------
John W. Steiner, Director
30
<PAGE>
BOUNCEBACKTECHNOLOGIES.COM, INC. AND SUBSIDIARIES
Index to Financial Statements
--------------------------------------------------------------------------------
Independent Auditors' Report 2000 F-2
Independent Auditor's Report 1999 F-3
Consolidated Financial Statements
Balance Sheets F4-F-5
Statements of Operations F-6
Statements of Stockholders' Equity F-7
Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F9-F22
F-1
31
<PAGE>
BOUNCEBACKTECHNOLOGIES.com, INC.
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2000 AND 1999
707 BIENVILLE BOULEVARD
OCEAN SPRINGS, MS 39564
228-872-5558
CIRO E. ADAMS, CPA
2 BARRY DRIVE
P.O. BOX 306
MANTUA, NJ 08051-0306
856-468-7300
January 3, 2001
32
<PAGE>
Independent Auditor's Report
----------------------------
To the Shareholders and Board of Directors
BounceBackTechnologies.com, Inc.
707 Bienville Boulevard
Ocean Springs, MS 39564
I have audited the accompanying consolidated balance sheet of
BounceBackTechnologies.com, Inc. (a Minnesota corporation) and subsidiaries as
of September 30, 2000, and the related consolidated statements of operations,
cash flows and changes in stockholders' equity for the year then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BounceBackTechnologies.com, Inc.
and subsidiaries as of September 30, 2000, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
Ciro E. Adams
Certified Public Accountant
F-2
33
<PAGE>
INDEPENDENT AUDITOR'S REPORT
BounceBackTechnologies.com, Inc.
707 Bienville Boulevard
Ocean Springs, Mississippi 39564
We have audited the accompanying consolidated balance sheet of
BouncebackTechnologies.com, Inc. and Subsidiaries (formerly Casino Resource
Corporation) as of September 30, 1999, and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
BounceBackTehnologies.Com, Inc. and Subsidiaries at September 30, 1999, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
Chicago, Illinois
November 6, 1999, except for the
second paragraph of Note 11(a) and Note 18
which are as of January 3, 2000
F-3
34
<PAGE>
BounceBackTechnologies.com, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
September 30, 2000 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Current Assets:
Cash $ 98,208 $ 957,254
Accounts receivable - trade and other (Note 6) 121,132 182,860
Inventory 12,149 --
Prepaid expenses 174,123 70,055
Net assets for sale - entertainment (Note 3) 505,274 647,281
Net assets held for sale - gaming (Note 3) 698,475 1,471,234
------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,609,361 3,328,684
------------------------------------------------------------------------------------------------------------------
Deferred Tax Assets -- --
Property and Equipment, less accumulated depreciation and amortization 368,873 279,011
(Note 7)
------------------------------------------------------------------------------------------------------------------
Noncurrent Assets
Goodwill (Note 2) 523,300 454,349
Notes and advances receivable - related parties, net of 244,145 410,472
allowance for uncollectibles of $220,692 in 2000 and
$384,913 in 1999 (Note 8)
Other assets - net 24,201 74,201
------------------------------------------------------------------------------------------------------------------
Total Assets $2,769,880 $4,546,717
==================================================================================================================
The accompanying notes are an integral part of the financial statements. F-4
</TABLE>
35
<PAGE>
BounceBackTechnologies.com, Inc., and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Balance Sheets
September 30, 2000 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 335,820 $ 274,942
Subordinated convertible debentures -- 121,325
Current maturities of long-term debt (Note 11) 390,342 1,541,734
Accrued expenses and other liabilities (Note 9) 269,906 564,166
--------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 996,068 2,502,167
Long-Term Liabilities
Long-term debt, less current obligations (Note 11) 815,351 797,879
Deferred revenue (Note 12) 2,000,000 2,000,000
Minority Interest (Note 1) (82,602) --
--------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,728,817 5,300,046
Commitments and Contingencies (Notes 1, 13 and 18)
Stockholders' Equity (Note 15 and 16)
Preferred stock, 8% cumulative; $.01 par value: authorized
5,000,000 shares; none issued -- --
Common stock, $.01 par value; authorized 30,000,000 shares;
11,361,258 shares and 10,431,880 issued and outstanding in
2000 and 1999, respectively 113,613 104,319
--------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 23,155,247 22,953,761
Deficit (24,227,797) (23,811,409)
--------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity (958,937) (753,329)
--------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 2,769,880 $ 4,546,717
--------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
F-5
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
BounceBackTechnologies.com, Inc. and Subsidiaries
Consolidated Statements of Operations
Years ended September 30,
2000 1999
------------------------------------
<S> <C> <C>
Operating Revenues:
Management fees $ 50,714 $ --
Technology Revenue
486,499 --
------------------------------------
537,213 --
Operating Expenses:
Technology cost of sales 439,326 --
Technology general and administrative expenses 458,932 --
Corporate selling, general and administrative expenses 2,514,402 2,802,534
Development costs of abandoned projects -- 75,000
------------------------------------
Total Cost and Expenses: 3,412,660 2,877,534
------------------------------------
Operating Profit (2,875,447) (2,877,534)
Other Income and Expenses:
Other Income 56,366 30,674
Interest Income 43,769 45,354
Interest Expense (212,486) (659,762)
------------------------------------
Total Other Income and Expense (112,351) (583,734)
------------------------------------
Net Income/Loss before Minority Interest (2,987,798) (3,461,268)
Minority Interest (Note 1) 82,602 48,537
------------------------------------
Net Income/Loss before Income Taxes (2,905,196) (3,412,731)
Provision for income taxes (Note 14)
-- 2,000,000
------------------------------------
Net Income/(Loss) (2,905,196) (5,412,731)
------------------------------------
Discontinued Operations:
Income from discontinued operations - entertainment (Note 3) 2,826,663 1,504,108
Loss from discontinued operations - gaming (Note 3) (776,497) (1,587,648)
------------------------------------
Net Income/(Loss) - Discontinued Operations 2,050,166 (83,542)
Extraordinary Item - Gain on early extinguishment of debt (Note 4) 438,642 --
------------------------------------
Net Income/(Loss) $ (416,388) $ (5,496,273)
------------------------------------
Net Income per Share - Basic and Diluted
Operating loss
$ (0.26) $ (0.55)
Discontinued operations (Note 3) 0.18 (0.01)
Extraordinary item - gain on early extinguishment of debt (Note 4) $ 0.04 --
------------------------------------
Net Income/(Loss) per share (0.04) (0.56)
------------------------------------
Weighted average common shares outstanding 11,161,805 9,796,373
------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
F-6
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2000 and 1999
Common Additional Accumulated
Stock Common Paid-In Retained Comprehensive
Outstanding Stock Capital Deficits Income
----------- ----- ------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE at
October 1, 1998 9,489,314 $ 94,893 $ 22,630,909 $(18,315,136) $ --
Common stock issued on
conversion of debentures 776,756 7,768 265,508 -- --
Common stock issued for
services rendered 70,000 700 34,300 -- --
Common stock issued to
employees 95,810 958 23,044 -- --
Net loss (5,496,273)
--------- ------------ ------------ ------------ --------
BALANCE at
September 30, 1999 10,431,880 104,319 22,953,761 (23,811,409) --
Common stock issued on
conversion of debentures 629,378 6,294 144,486 -- --
Options issued on
conversion of debentures -- -- 9,000 -- --
Common stock issued 300,000 3,000 48,000 -- --
Net loss (416,388)
--------- ------------ ------------ ------------ --------
BALANCE at
September 30, 2000 11,361,258 $ 113,613 $ 23,155,247 $(24,227,797) $ --
============ ============ ============ ============ =======
The accompanying notes are an integral part of these consolidated financial statements.
F-7
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
BounceBackTechnologies.com, Inc. and Subsidiaries
-------------------------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
Years ended September 30, 2000 1999
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $ (416,388) $(5,496,273)
Adjustments to reconcile loss from continuing operations
to net cash provided by (used in) operating activities
Gain on early extinguishment of debt (438,642) --
Depreciation and amortization 70,936 34,059
Minority interest in net loss of a consolidated subsidiary (82,602) --
Deferred tax asset -- 2,000,000
Developmental costs and abandoned projects -- 75,000
Reserve for uncollectible accounts 98,977 --
Net change in working capital accounts (1,560,588) (5,487)
Net change in long term accounts 164,848 2,143,269
-----------------------------
Net cash provided by (used in) operating activities (2,163,459) (1,249,432)
Cash Flows From Investing Activities
Purchase of property and equipment (105,764) (33,423)
-----------------------------
Net cash provided by investing activities (105,764) (33,423)
Cash flows from financing activities
Repayments of long term debt (868,350) (401,296)
Issuance of common stock 51,000 --
Net cash provided by financing activities (817,350) (401,296)
-----------------------------
Cash flows provided by operations (3,086,573) (1,684,151)
Cash Flows From Discontinued Operations
Entertainment segment 2,259,947 1,895,826
Gaming segment (32,420) (378,153)
-----------------------------
Net Cash Provided by Discontinued Operations 2,227,527 1,517,673
-----------------------------
Net Increase (Decrease) in cash (859,046) (166,478)
Cash at Beginning of Year 957,254 1,123,732
-----------------------------
Cash at End of Year $ 98,208 $ 957,254
-----------------------------
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest expense 136,411 726,972
Cash paid during the year for income taxes -- 62,437
Disclosure of Non-Cash Financing and Investing Activities
Common Stock issued on conversion of debentures 150,780 273,276
The accompanying notes are an integral part of these consolidated financial statements.
F-8
</TABLE>
39
<PAGE>
BounceBack Technologies.com, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Note 1 - Business
BounceBackTechnologies.com, Inc. (the "Company") is a Minnesota corporation
organized in 1969. The Company focuses on marketing, sales and business
solutions to the Internet and e-commerce industries. The Company's new ticker
symbol for its common stock is "BBTC" and the stock is traded on the NASDAQ
Bulletin Board.
Prior to January 4, 2000, the Corporation conducted its business under the name
of Casino Resource Corporation. The name change reflects the Company's intent to
focus on marketing, sales and business solutions to the Internet and e-commerce
industries.
Through its 80% owned subsidiary, BounceBackMedia.com, Inc., the Company is
engaged in marketing e-commerce business-to-business solutions. The Company
acquired all of the assets of RawData Inc., a privately owned California
company, focused on the development, sales and distribution of e-commerce
business solutions through direct advertising of mini CDs used by business and
consumers to link potential customers to web sites and e-commerce centers. Upon
the acquisition on December 31, 1999, the Company changed the name of its new
80% owned subsidiary to BounceBackMedia.com, Inc. BounceBackMedia.com, Inc., a
Nevada corporation, is headquartered in Fresno, California to take advantage of
the technological innovations and skilled personnel available on the West Coast.
In addition to sales and marketing support services, the Company's corporate
offices, located in Ocean Springs, Mississippi provides administrative and
accounting support services to BounceBackMedia.com, Inc.
Through its wholly owned subsidiary CRC of Branson, the Company operates the
Country Tonite Theatre in Branson, Missouri.
Through its wholly owned subsidiary Country Tonite Enterprises ("CTE"), a Nevada
corporation, the Company produces a country and western musical variety show
known as "Country Tonite" (the "Show"). The production venue is The Country
Tonite Theatre in Branson, Missouri.
Prior to 1999, the Company owned a 60% interest in a joint venture, CTT, LLC,
which operated a theatre for the Show in Pigeon Forge, Tennessee. The Company
sold its interest to the minority partner, Burkhart Ventures, LLC, on December
31, 1998. CTT, LLC continued to contract CTE to produce the Show through April
20, 2000. On April 20, 2000, CTE granted a partnership related to Burkhart
Ventures, LLC, CTTPF, a license to produce the Country Tonite show within a 150
mile radius, excluding Nashville, Tennessee, for a 40 year term. The
partnership, CTTPF, agreed to pay CTE $1.3 million for the license.
In November, 2000, On Stage Enterprises, Inc., a Nevada corporation, executed a
letter of intent with the Company to purchase the assets of CRC of Branson and
CTE, excluding the CTTPF license agreement, for $3.8 million. The transaction is
tentatively scheduled to close January 31, 2001. Therefore, CRC of Branson and
CTE are reported as discontinued operations.
Through its wholly owned subsidiary CRC of Tunisia, S.A., the Company leases and
operates a casino and 500 seat theatre in Sousse, Tunisia, North Africa. The
Company desires to sell its casino operation in Tunisia, and reports its
activity as a discontinued operation.
F-9
40
<PAGE>
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation. The consolidated financial statements include the
accounts and operations of BounceBackTechnologies.com, Inc., its wholly-owned
subsidiaries, and its 80%-owned subsidiary (collectively, the "Company" or
"BBT"). All material intercompany balances and transactions have been
eliminated.
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash. Holdings of highly liquid investments with maturities of three months or
less when purchased are considered to be cash equivalents.
Fair Value of Financial Instruments. The carrying amounts reported in the
balance sheet for cash, accounts receivable, accounts payable, payroll taxes
payable and convertible notes payable are considered to be representative of
their respective fair values due to their short-term nature.
Inventories. Inventories, consisting primarily of materials to manufacture mini
CDs, are stated at the lower of cost or market using the first-in, first out
method.
Property and Equipment. Property and equipment are carried at cost. Depreciation
is provided principally on the straight-line method over the estimated useful
lives of the assets. Betterments and large renewals which extend the life of the
asset are capitalized whereas maintenance and repairs and small renewals are
expended as incurred.
Goodwill. Cost in excess of fair value of assets acquired is amortized using the
straight-line method over fifteen years.
Deferred development costs. External costs incurred in the evaluation of
potential ventures. The costs are expensed if a determination is made to abandon
the project. Losses related to abandonment totaled $0 and $75,000 in 2000 and
1999, respectively.
Revenue Recognition. Technology sales are product sales for cash and on normal
credit terms of 90 days or less. Generally, sales are recorded when the products
are shipped to the customer. Management fees are recognized ratably over the
period of the management contract.
Implementation of SAB 101. The Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial
Statements, in December 1999. The SAB summarizes certain of the SEC staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. Concurrent with the audit of its financial
statements at year end, the Company performed a comprehensive review of its
revenue recognition policies and determined that they are in compliance with SAB
101.
F-10
41
<PAGE>
Note 2 - Summary of Significant Accounting Policies (continued)
Income Taxes. Income taxes are accounted for utilizing the asset and liability
method. Under this method, deferred income taxes are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using presently enacted tax rates and regulations. Future tax
benefits, such as net operating loss carryforwards, are recognized to the extent
that realization of such benefits are more likely than not.
Concentration of Credit Risk. Substantially all of the Company's accounts
receivable are with companies for whom products were shipped. However,
concentrations of credit risk are limited due to the number of the Company's
clients as well as their dispersion across many different geographical regions.
Net Income Per Share. Net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share is computed by dividing net
income (loss) by the sum of weighted average number of common shares outstanding
during the period plus common stock equivalents. Common stock equivalents are
shares assumed to be issued if the Company's outstanding stock option was
exercised. However, the effect of the exercise of the Company's stock option was
not included in the computation of diluted net income (loss) per share as it
would have been anti-dilutive for all periods presented.
Currency Translation. The Company accounts for currency translation in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation." The Tunisian results of discontinued operations and the
net assets for sale are translated from Tunisian dinars to US dollars. Certain
fixed assets and intangibles are valued at historical exchange rates, while
other balance sheet accounts are translated at the exchange rate in effect at
each year end. Income accounts are translated at the average rate of exchange
prevailing during the year.
Reclassifications. Certain reclassifications have been made to prior year
amounts to conform to the classifications used in the current year presentation.
F-11
42
<PAGE>
Note 3 - Discontinued Operations
Entertainment Segment
In November, 2000 On Stage Enterprises, inc., a Nevada corporation, executed a
letter of intent with the Company to purchase the assets of CRC of Branson and
CTE, excluding the CTTPF license agreement, for $3.8 million. The transaction is
tentatively scheduled to close January 31, 2001. Therefore, CRC of Branson and
CTE are reported as discontinued operations.
2000 1999
---------------------------
Revenues
CRC of Branson 6,004,507 5,857,760
CTE 1,754,553 1,563,058
CTTLLC 0 807,402
---------------------------
Total Revenues $7,759,060 $8,228,220
===========================
Expenses
CRC of Branson 4,255,073 4,524,790
CTE 677,324 1,520,579
CTTLLC 678,743
Total Expenses 4,932,397 6,724,112
---------------------------
Net Icome (Loss) $2,826,663 $1,504,108
===========================
Assets:
Current Assets 664,415 934,448
Property and equipment 220,070 307,627
Other assets 0
Total Assets $ 884,485 $1,242,075
Liabilities
Current Liabilities $ 379,211 $ 594,794
Long term debt 0 0
Other liabilities 0 0
Total Liabilities 379,211 594,794
---------------------------
Net assets for sale $ 505,274 $ 647,281
===========================
F-12
43
<PAGE>
Gaming Segment
Through its wholly owned subsidiary CRC of Tunisia, S.A., the Company leases and
operates a casino and 500 seat theatre in Sousse, Tunisia, North Africa. The
Company desires to sell its casino operation in Tunisia, and reports its
activity as a discontinued operation.
2000 1999
----------- -----------
Revenues $ 3,259,814 $ 2,526,193
Expenses 4,036,311 4,113,841
----------- -----------
Income (Loss) $ (776,497) $(1,587,648)
=========== ===========
Assets:
Current assets $ 854,442 $ 694,317
Property and equipment 1,019,676 1,563,533
Other assets -- --
----------- -----------
Total assets $ 1,874,118 $ 2,257,850
----------- -----------
Liabilities
Current liabilities $ 1,167,918 $ 807,574
Long term debt -- --
Currency translation 7,725 (20,958)
----------- -----------
Total liabilities 1,175,643 786,616
----------- -----------
Net assets for sale $ 698,475 $ 1,471,234
=========== ===========
F-13
44
<PAGE>
Note 4 - Extraordinary Item - Gain on early extinguishment of debt
In September 1997, the Company completed a placement of $800,000, 13%
subordinated convertible debentures (with net proceeds of $707,000). During
1999, $107,000 of the principal amount of the debentures were converted into
311,093 common shares. In October 1999, the remaining balance of $121,325 plus
accrued interest of $42,675 was settled in full by a cash payment of $100,000
resulting in an gain on early extinguishment of debt of $64,000.
In August 1997, the Company executed a note payable with interest at 10% of
operating income, as defined, of the subsidiary that operates the Tunisian
casino, due August 2022. In October 1999, the Company entered into an agreement
to retire this debt in consideration for a cash payment of $150,000 and a
noninterest-bearing note payable in the amount of $512,500. The note has been
discounted to an effective interest rate of 9.5% and is payable in 18 equal
monthly payments of $28,472 that commenced December 1, 1999. This transaction
resulted in an gain on the extinguishment of debt in the amount of $374,642.
Note 5 - Comprehensive Income
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting
Comprehensive Income, requires that the Company disclose comprehensive income
and its components. The objective of SFAS 130 is to report a measure of all
changes in equity of a company that result from transactions and other economic
events of the period other than transactions with stockholders. Comprehensive
income is the total of net income and all other non-stockholder changes in
equity ("Accumulated Comprehensive Income").
The Company has recorded currency translation adjustments of $28,683 and
$(20,958) in 2000 and 1999 as Accumulated Comprehensive Income in the
accompanying financial statements, however, those amounts are now reported in
discontinued operations of its gaming segment as an adjustment to net assets for
sale. Please see Note 3.
Note 6 - Accounts Receivable, Net
2000 1999
--------- ---------
Accounts receivable - trade $ 27,166 $ --
Allowance for doubtful accounts (4,223) --
--------- ---------
22,943 --
Accounts receivable - employees 71,614 18,364
Accounts receivable - other 26,575 164,496
--------- ---------
$ 121,132 $ 182,860
========= =========
Bad debt expense was $4,233 and $0 in 2000 and 1999 respectively.
F-14
45
<PAGE>
Note 7 - Property and Equipment
2000 1999
--------- ---------
Buildings and improvements $ 239,517 $ 239,517
Equipment 252,380 150,116
Furniture and fixtures 80,363 76,863
--------- ---------
572,260 466,496
Accumulated depreciation (203,387) (187,485)
--------- ---------
Property and equipment, net $ 368,873 $ 279,011
========= =========
The Company rents its corporate office in Biloxi, MS, on a month-to-month basis
at a cost of $5,833 per month and its technology office and plant in Fresno, CA,
on a month-to-month basis at a cost of $1,795 per month.
Note 8 - Related Party Transaction
Notes and advances receivable include notes and related interest due from
officers and stockholders totaling $278,219 and $410,472 at September 30, 2000
and 1999 at interest rates ranging from 6% to 11%. The notes mature from October
1, 1999 to December 31, 2001.
Note 9 - Accrued Expenses and Other Liabilities
2000 1999
-------- --------
Professional fees $ 75,881 $159,514
Payroll and payroll taxes 54,417 45,248
Interest 741 180,741
Sales tax 145 145
Insurance 77,367 63,200
Other 61,355 115,318
-------- --------
$269,906 $564,166
======== ========
F-15
46
<PAGE>
Note 10 - Credit Arrangements
The Company has a line-of-credit arrangement with a regional bank, which
provides for borrowing up to $200,000 with interest at prime plus 1%. This
line-of-credit is secured by the accounts receivable of the Company and
personally guaranteed by the Company's CEO, John Pilger. At September 30, 2000
and 1999, there were no advances under the line-of-credit.
Note 11 - Long Term Debt
Long term debt consists of the following:
2000 1999
---------- ----------
Debenture, 6% $ 127,894 $1,195,729
Debenture, zero, discounted at 6% 710,268 --
Note payable, zero, discounted at 9.5% 219,869 1,000,000
Mortgage payable, 9.5% 82,457 87,204
Equipment notes, 9.95% to 10.9% 65,205 56,680
---------- ----------
1,205,693 2,339,613
Less current obligation 390,342 1,541,734
---------- ----------
$ 815,351 $ 797,879
========== ==========
Debenture, 6% and Debenture, zero, discounted at 6%. On December 31, 1999, the
Company and Roy Anderson Corporation agreed to amend and restate the debenture
agreement. The restated debenture agreement separated the remaining balance
outstanding of $1,028,553 as of December 31, 1999 into two debentures. The first
debenture of $342,655 is payable at 6% fixed interest in monthly installments of
$44,326 beginning April 2000 with the last payment due November 2000. The second
debenture of $685,898 is payable in one lump sum at 6% fixed interest on
December 31, 2002. Mandatory prepayment conditions exist for the second
debenture should the Company complete its sale of discontinued operations, the
sale or disposition of other existing business assets or operations, the
collection of any proceeds from litigation or the collection of any payments
from the Lakes Gaming agreement. In addition, the Company granted Mr. Anderson
an option to purchase 300,000 shares of common stock to modify the original
debenture. (These options were exercised in May 2000.) The Company also posted
1,100,000 shares of common stock in escrow as collateral.
Note payable, zero, discounted at 9.5%. In October 1999, the Company
renegotiated an agreement to restructure this debt in consideration for a cash
payment of $150,000 paid in November 1999 and a noninterest-bearing note of
$512,500 payable in monthly installments of $28,472 beginning December 1, 1999.
This note will be discounted to an effective interest rate of 9.5%. This
restructuring resulted in an gain on the extinguishment of debt in the amount of
$374,642. Please see Note 4.
Mortgage payable, 9.5%. Note payable, interest at 9.5%, collateralized by real
estate, payable in monthly installments of $1,139 through May 2000 with a final
payment of $83,506 due in June 2000.
Equipment notes, 9.95% to 10.9%. Other notes payable, interest ranging from
9.95% to 10.9%, collateralized by equipment, payable in monthly principal and
interest installments ranging from $634 to $1,191 through June 2004.
F-16
47
<PAGE>
Note 11 - Long Term Debt (continued)
Annual maturities. As of September 30, 2000, annual maturities of long term debt
are as follows:
Year ending
2001 $ 390,342
2002 49,677
2003 759,554
2004 3,060
2005 3,060
Thereafter --
----------
$1,205,693
==========
Note 12 - Deferred Revenue
In December 1998, the Company entered into a Memorandum of Understanding to form
a joint venture with Lakes Gaming, Inc. (NASDAQ: LACO) for the purpose of
pursuing a management and development agreement to develop one or more casinos
on behalf of the Pokagon Band of Potawatomi Indians (the "Pokagon Tribe") in
southwestern Michigan and northern Indiana. In May 1999, the Company and Lakes
Gaming entered into an agreement to terminate the Memorandum of Understanding,
in the event that the Pokagon Tribe chose to enter into management and
development agreements solely with Lakes Gaming. In June 1999, Lakes Gaming was
selected by the Pokagon Tribe to negotiate a management and development
agreement. On August 31, 1999, the newly elected tribal council of the Pokagon
Tribe ratified the Management and Development Agreement with Lakes Gaming and
the Company's Revised Conditional Release and Termination Agreement with Lakes
Gaming became effective. The terms of the Revised Conditional Release and
Termination Agreement call for the payment by Lakes Gaming, Inc. to the Company
of an aggregate maximum sum of $16.1 million, which includes a $2 million cash
down payment. The balance of $14.1 million is payable if certain events occur
relative to the location of the Tribe's casino, the opening of the casino and
Lakes Gaming manages the casino. The Company received the $2 million down
payment on August 31, 1999. The agreement calls for the Company to repay the $2
million if after five years the casino has not opened. Further, $2.5 million of
the $16.1 million payment is due only if the Tribe builds a casino in Indiana
and Lakes Gaming is the manager.
The Company is not scheduled to receive any further payments until a Michigan or
Indiana casino opens. Lakes Gaming anticipates the commencement of construction
on a Michigan casino in 2001. However, there can be no assurances provided with
respect to timing of completion of the casino as the proposed gaming site must
be accepted into trust by the U.S. government before construction can begin.
Note 13 - Lease Commitments
The Company and its subsidiaries lease buildings and equipment under
non-cancelable operating lease agreements which expire at various times through
the year 2005. These leases generally provide that the Company pay taxes,
insurance and maintenance related to leased assets.
Total rent expense under operating leases was $70,989 and $411,986 in 2000 and
1999.
At September 30, 2000, the Company was obligated non-cancelable operating leases
to make future minimum lease payments as follows:
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48
<PAGE>
Note 13 - Lease Commitments (continued)
Year ending
2001 $ 168,628
2002 129,299
2003 40,355
2004 18,516
2005 5,056
Thereafter --
---------
$ 361,854
=========
In September 1999, the Company exchanged its theater in Branson,
Missouri, for the discharge of its mortgage payable of $7,009,000. The Company
recognized a loss of $536,351 in 1999 and is reported in discontinued operations
of its entertainment segment as an adjustment to expenses. Please see Note 3.
The Company has leased back the theater from the mortgagee for an initial period
of two years at an annual rental fee of $840,000. Thereafter, the Company has
five one-year options to renew the lease at that rent plus a cost-of-living
increase not to exceed 3% per annum. This operating lease is also accounted for
in discontinued operations.
Note 14 - Income Taxes
Income tax expense consists of the following:
2000 1999
---- ----
Currently payable - Federal $ -- $ --
- State -- --
---------- -----------
-- --
---------- -----------
Deferred - Federal -- 2,000,000
- State -- --
---------- -----------
$ -- $ 2,000,000
========== ===========
Deferred tax assets and liabilities consist of the following:
2000 1999
---- ----
Net operating losses $5,776,000 $5,626,000
Valuation allowance (5,776,000) (5,626,000)
---------- -----------
$ -- $ --
========== ===========
F-18
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<PAGE>
Note 14 - Income Taxes (continued)
A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not, will be realized. The netting of deferred assets
and liabilities reflects management's estimate of the amount which will be
realized from future taxable income which can be predicted with reasonable
certainty.
The Corporation has net operating losses carryforward of approximately
$9,400,000 for Federal and state tax purposes that begin to expire in 2019.
Note 15 - Warrants
In connection with the 13% convertible debentures issued in September 1997, the
Company issued 25,000 warrants to the broker. The warrants were exercisable
through September 2000 at an exercise price of 120% of the September 1997
closing price as defined by the agreement. The warrants were not exercised.
During 1999, warrants originally issued in connection with the Company's initial
public offering expired. These warrants were for the purchase of 2,400,000
common shares at exercise prices ranging from $6.75 to $8.25 per share. None of
these warrants were exercised prior to expiration.
Note 16 - Options and Awards
Certain financial consultants to the Company received options in December 1992
and January 1993 to acquire 87,500 shares of common stock as consideration for
services rendered. These options are fully vested and are exercisable at $2.375
per share for 17,500 shares and at $0.75 per share for 70,000 shares. None of
these options have been exercised to date.
A former Company executive was granted options in September 1995, as part of an
employment termination arrangement, to acquire 50,000 shares of common stock at
an exercise price of $2.50 for 25,000 shares and $6.80 each for 25,000 shares.
The aggregate options expire in September 2003 and none of the options have been
exercised to date.
During 1997, certain individuals received 30,500 options as a condition of
employment and a consultant received 20,000 options.
The Company has two active stock incentive plans. In July 1993, the Company
adopted a stock option plan (the "1993 Plan"), which was amended in 1995, and in
April 1997, the Company's stockholders approved a separate stock option plan
(the "1997 Plan"). Both plans provide for the issuance of incentive stock
options at a purchase price approximating the fair market value of the Company's
common shares at the date of the grant (or 110% of such fair market value in the
case of substantial stockholders). The 1993 and 1997 Plans also authorize the
Company to grant nonqualified options, stock appreciation rights, restricted
stock and deferred stock awards. A total of 1,000,000 shares of the Company's
common stock has been reserved pursuant to the 1993 and 1997 Plans. As of
September 30, 2000, there were 344,300 options outstanding under the 1993 Plan
and 0 shares available for grant under such plan and there were 566,333 options
outstanding under the 1997 Plan and 50,367 shares available for grant under such
plan.
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<PAGE>
Note 16 - Options and Awards (continued)
The following table summarizes information related to shares under option and
shares available for grant under the Company's 1993 and 1997 Plans:
<TABLE>
<CAPTION>
Number of Weighted Avg.
Shares Exercise Price
--------- --------------
<S> <C> <C>
Options outstanding at September 30, 1998 874,133 $ 1.48
Granted 558,000 0.41
Exercised, expired or forfeited (493,000) 1.92
-------- --------
Options outstanding at September 30, 1999 938,633 1.48
Granted 20,000 0.30
Exercised, expired or forfeited (48,000) 2.51
-------- --------
Options outstanding at September 30, 2000 910,633 $ 1.07
======== ========
</TABLE>
The following table summarizes information about stock options under the
Company's 1993 and 1997 Plans outstanding at September 30, 2000:
<TABLE>
<CAPTION>
Outstanding Exercisable
Number Weighted Avg. Number of Weighted Avg.
Range of Exercise Price of Shares Exercise Price Shares Exercise Price
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$0.31 - $0.62 475,000 $0.42 447,500 $0.41
1.00 - 1.94 284,333 1.62 284,333 1.62
2.00 - 2.375 127,000 2.03 127,000 2.03
3.13 - 3.75 24,300 3.13 24,300 3.13
------ ---- ------ ----
910,633 $7.04 883,133 $1.12
======= ==== ======= ====
</TABLE>
The Company applies APB No. 25, "Accounting for Stock Issued to Employees", and
related interpretations, in accounting for options. Under APB Opinion 25,
because the exercise price of the options equals the market price of the
underlying stock on the measurement date, no compensation expense is recognized.
Had the Company accounted for these plans under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), the Company's net income and earnings per share would have been reduced
to the following pro forma amounts:
2000 1999
------------- -------------
Net loss - operating
As reported $ (2,905,196) $ (5,412,731)
Pro forma $ (3,055,196) $ (5,569,891)
Net operating loss per share -
basic and diluted
As reported $ (0.26) $ (0.55)
Pro forma $ (0.27) $ (0.57)
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<PAGE>
Note 17 - Defined Contribution Plan
Effective July 1, 1997, the Company adopted a defined contribution 401(k) plan
(the "Plan") covering substantially all of its U.S. employees. Eligible
employees may contribute up to 15% of compensation, as defined in the Plan. The
Company has an optional matching program (approved annually by the Board of
Directors) where the Company matches a percentage of the employee's contribution
(currently 50% of the first 6% of contribution). In May 1999, the Company
elected to discontinue this matching program. Company-matched contributions vest
in full after seven years of an employee's credited service to the Company. The
Company also has an option to make additional profit sharing plan contributions
(none in fiscal 1997). Defined contribution expense totaled $10,895 and $14,168
in 2000 and 1999, respectively. Due to lack of participation and the cost per
participant to administration, the 401K plan was terminated September 30, 2000.
Employees were given the option of rolling their contributions over to self
directed IRA's or receiving a cash settlement.
Note 18- Commitments and Contingencies
(a) James Barnes and Prudence Barnes, two former officers of a
subsidiary of the Company, have 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. No specific amount
of damages has been claimed. On May 31, 2000, the Clark County
Nevada court dismissed the Barnes' claims of intentional
misrepresentation and breach of contract, but found in favor of
the plaintiffs with respect to their employment contracts,
awarding them $185,000 including interest and attorney's fees.
The judgment was paid and all claims asserted with respect to the
matter are fully resolved.
F-21
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<PAGE>
Note 18 - Commitments and Contingencies (continued)
(b) On December 31, 1997, the Company's former chairman, Kevin Kean,
defaulted on repaying the $1,232,000 principal of notes
receivable due the Company. The Company held 150,000 shares of
the Company's stock as collateral. On January 15, 1998, the
Company signed a subsequent agreement with Mr. Kean. Under this
agreement, 220,000 additional shares of the Company's stock owned
by Mr. Kean were canceled along with the 150,000 collateral
shares held (valued at the market price of $1.19 per share).
Additionally, the Company and Mr. Kean entered into a new note
agreement. The 7% interest bearing note of $1,196,885, including
approximately $143,000 of previously reserved interest was to
mature on January 15, 2001. The note is collateralized by the
individual's 5% interest in the Company's Pokagon management fee.
Solely at the Company's discretion, at any time prior to
maturity, the Company can take the collateral as payment in full
for the note. Under the terms of the Loan and Settlement
Agreement, ". . .In the event that CRC 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 CRC 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 advance,
which is subject to repayment if certain future events do not
occur. The Company has marked Kean's Renewal Note "Paid" after
offsetting any fee due Mr. Kean under the Pokagon Management
Agreement and returned it to Kean with the understanding that the
obligations thereunder are now discharged.
(c) The Company initiated a civil suit against Harrah's on September
4, 1998, in Federal District court for the 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. Harrah's
has filed a motion to dismiss based on denial that Harrah's is a
property party to the lawsuit and that the Technical Assistance
and Consulting Agreements do not create a partnership or Joint
Venture relationship with the Company. The Company filed its
response to Harrah's Motion for Summary Judgment in late December
1998. The Federal Minnesota District Court granted Harrah's
Motion for Dismissal for Summary Judgment and the Company's
complaint was dismissed with prejudice on May 24, 1999. The
Company filed an appeal in the Eight Circuit US 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
included a claim for an accounting and damages under the Uniform
Partnership Act. The Company plans to vigorously pursue its
claims and seeks a judgement against Harrah's plus interest and
legal fees.
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<PAGE>
Note 18 - Commitments and Contingencies (continued)
(d) The Company initiated a civil suit against Willard Smith and
Monarch Casino, Inc., ("Monarch") on December 19, 1998, in the
Circuit Court of Jackson, Mississippi. The Company alleges that
Mr. Smith and 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 the repayment of loans from
the Company in excess of $300,000. The Company seeks a judgment
of and against Monarch Casino, Inc. and Willard Smith; plus
interest and attorneys fees for notes due and material breach of
agreements; removal of Mr. 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
fail dealing; tortuous interference with prospective business
advantage; specific performance of contract to purchase real
property and fraud. Additionally, Mr. Smith filed a suit on July
10, 2000, against the Company's CEO, J. Pilger alleging that he
is the alter ego of the Company and liable for the actions of the
Company including breach of contract, tortuous interference,
breach of duty of good faith and fair dealing, breach of contract
to purchase real property and fraudulent inducement. The Company
and Mr. Pilger each plan to vigorously defend themselves in this
counterclaim and are asking the court to dismiss the matter. A
trial date is set for April, 2001.
(e) The Company initiated suit again Mark McKinney, personally, 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 has been reserved.
Mark McKinney and Mana Corporation filed a counter claim April 5,
1999, alleging Mana Corporation incurred additional expenses
associated with the due diligence with the Company and is asking
for a judgment against the Company for $51,997 in addition to
prejudgment and post judgment interest and attorney's fees. 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 Mr. McKinney personally in
the amount of $165,000. On April 10, 2000, Mr. McKinney
personally petitioned the Arkansas Court for protection under
Chapter 13 of the Bankruptcy Code.
Note 19-Subsequent Events
On October 12, 2000, Mr. Birks tendered an unexpected resignation
with respect to his employment contract Mr. Birks has indicated a
willingness to nullify his employment agreement, and enter into
negotiation with the Company for the purchase of the minority
partner 20% interest in BounceBackMedia.com, Inc.
Amendment to the Letter of Intent between On Stage Entertainment,
Inc. was executed on January 11, 2001. Per the terms of the
Amendment, On Stage released $100,000 from escrow to the Company,
and will deposit an additional $250,000 into escrow on or before
January 26, 2001 for the Company's consideration in delaying
$650,000 of the $1 million down payment due on the date of close,
January 31, 2001, to February 15, 2001.
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