UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarter ended March 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
Commission file number: 0-22242
BOUNCEBACKTECHNOLOGIES.COM, Inc.
(Name of the Small Business Issuer in its Charter)
Minnesota 41-0950482
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
707 Bienville Boulevard
Ocean Springs, Mississippi 39564
(Address of principal executive office)
Issuer's telephone number: (228) 872-5558
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
As of May 14, 2001, 12,461,321 Shares of Common Stock of the Company were
outstanding.
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Exhibits and Reports on Form 8-K
SIGNATURES
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 (unaudited) AND SEPTEMBER 30, 2000
ASSETS at at
March 31, 2001 September 30, 2000
CURRENT ASSETS
Cash $ 186,215 $ 98,208
Accounts receivable, net 367,703 121,132
Inventory 7,382 12,149
Prepaid expenses 97,759 174,123
Deferred income taxes 567,581 --
Net assets for sale - entertainment -- 505,274
Net assets for sale - gaming 611,688 698,475
Note receivable 2,800,000 --
------------ ------------
TOTAL CURRENT ASSETS 4,638,328 1,609,361
DEFERRED INCOME TAXES, net of current portion -- --
PROPERTY AND EQUIPMENT, net 318,555 368,873
GOODWILL, net 102,550 523,300
NOTES RECEIVABLE - related parties, net 233,992 244,145
OTHER ASSETS 24,201 24,201
------------ ------------
$ 5,317,626 $ 2,769,880
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 408,468 $ 335,820
Current obligations - long term debt 860,422 390,342
Accrued expenses and other liabilities 147,787 269,906
------------ ------------
TOTAL CURRENT LIABILITIES 1,416,677 996,068
LONG TERM DEBT, net of current portion 79,720 815,351
DEFERRED REVENUE 2,000,000 2,000,000
MINORITY INTEREST (117,137) (82,602)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock - 8% cumulative, $0.01
par value; 5,000,000 shares authorized, none
issued and outstanding -- --
Common Stock - $0.01 par value;
30,000,000 shares authorized,
12,461,321 shares issued and
outstanding 113,613 113,613
Additional paid-in capital 23,155,247 23,155,247
Retained earnings (21,330,494) (24,227,797)
Accumulated comprehensive income -- --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,938,366 (958,937)
------------ ------------
$ 5,317,626 $ 2,769,880
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 and 2000
(unaudited)
March 31, 2001 March 31, 2000
OPERATING REVENUES:
Management fees $ -- $ --
Technology sales 113,938 37,000
------------ ------------
113,938 37,000
------------ ------------
OPERATING EXPENSES:
Technology cost of sales 42,802 32,168
Technology selling, general and administrative expenses 132,297 120,832
Corporate selling, general and administrative expenses 573,291 665,000
------------ ------------
748,390 818,000
------------ ------------
OPERATING PROFIT (634,452) (781,000)
OTHER INCOME AND EXPENSES:
Other income 3,734 --
Interest income (9,955) 7,000
Interest expense (3,185) (16,000)
------------ ------------
(9,406) (9,000)
------------ ------------
LOSS BEFORE MINORITY INTEREST (643,858) (790,000)
Minority Interest 12,233 --
------------ ------------
LOSS BEFORE INCOME TAXES (631,625) (790,000)
Income tax benefit 1,862,222 --
------------ ------------
NET INCOME (LOSS) - OPERATING 1,230,597 (790,000)
------------ ------------
DISCONTINUED OPERATIONS:
Income from entertainment segment, net of taxes of $246,504 (413,659) (384,000)
and 0 in 2001 and 2000
Gain on sale of entertainment segment, net of taxes of 1,919,493 --
$1,048,137 and 0 in 2001 and 2000
Income from gaming segment 35,556 91,000
------------ ------------
NET INCOME (LOSS) - DISCONTINUED OPERATIONS 1,541,390 (293,000)
------------ ------------
NET INCOME (LOSS) $ 2,771,987 $ (1,083,000)
============ ============
NET INCOME (LOSS) PER SHARE - Basic and Diluted
Operating loss $ 0.099 $ (0.075)
Discontinued operations 0.123 (0.028)
------------ ------------
NET INCOME (LOSS) PER SHARE $ 0.222 $ (0.103)
============ ============
Weighted average common shares outstanding 12,461,321 10,506,261
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2001 and 2000
(unaudited)
March 31, 2001 March 31, 2000
OPERATING REVENUES:
Management fees $ -- $ --
Technology sales 206,890 37,000
------------ ------------
206,890 37,000
------------ ------------
OPERATING EXPENSES:
Technology cost of sales 99,657 32,168
Technology selling, general and administrative expenses 279,906 120,832
Corporate selling, general and administrative expenses 1,049,621 1,243,000
------------ ------------
1,429,184 1,396,000
------------ ------------
OPERATING LOSS (1,222,294) (1,359,000)
OTHER INCOME AND EXPENSES:
Other income 7,470 --
Interest income 8,714 7,000
Interest expense (3,185) (32,000)
------------ ------------
12,999 (25,000)
------------ ------------
LOSS BEFORE MINORITY INTEREST (1,209,295) (1,384,000)
Minority Interest 34,535 --
------------ ------------
LOSS BEFORE INCOME TAXES (1,174,760) (1,384,000)
Income tax benefit 1,862,222 --
------------ ------------
NET INCOME (LOSS) - OPERATING 687,462 (1,384,000)
------------ ------------
DISCONTINUED OPERATIONS:
Income from entertainment segment, net of taxes of $246,504 347,068 546,000
and 0 in 2001 and 2000
Gain on sale of entertainment segment, net of taxes of 1,919,493 --
$1,048,137 and 0 in 2001 and 2000
Loss from discontinued operations - gaming (56,720) (69,000)
------------ ------------
NET INCOME - DISCONTINUED OPERATIONS 2,209,841 477,000
------------ ------------
EXTRAORDINARY ITEM - Gain on early extinguishment of debt -- 391,000
------------ ------------
NET INCOME (LOSS) $ 2,897,303 $ (516,000)
============ ============
NET INCOME (LOSS) PER SHARE - Basic and Diluted
Operating income (loss) $ 0.055 $ (0.132)
Discontinued operations 0.177 0.045
Extraordinary item - gain on early extinguishments of debt -- 0.038
------------ ------------
NET INCOME (LOSS) PER SHARE $ 0.232 $ (0.049)
============ ============
Weighted average common shares outstanding 12,461,321 10,506,261
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 and 2000
(unaudited)
March 31, 2001 March 31, 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,230,597 $ (790,000)
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes benefit (567,581) --
Gain on early extinguishment of debt -- --
Depreciation and amortization 19,709 12,000
Provisions for doubtful accounts -- --
Minority interests (12,233) --
Amortization of discount of convertible debentures 11,222 --
Net change in working capital accounts (460,491) (175,000)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 221,223 (953,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,240) (37,000)
Decrease (Increase) in due to related party (31,174) 41,000
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES (34,414) 4,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings 200,000 --
Repayment of short-term borrowings (200,000) --
Repayments of long term debt (2,737) (7,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (2,737) (7,000)
----------- -----------
CASH FLOWS PROVIDED BY OPERATIONS 184,072 (956,000)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Entertainment segment (414,337) (217,000)
Gaming segment 140,207 (42,000)
----------- -----------
NET CASH PROVIDED BY DISCONTINUED OPERATIONS (274,130) (259,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH (90,058) (1,215,000)
CASH AT BEGINNING OF PERIOD 276,273 1,254,000
----------- -----------
CASH AT END OF PERIOD $ 186,215 $ 39,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the three months for interest expense $ 3,185 $ 40,340
Cash paid during the three months for income taxes $ -- $ --
DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES
Common stock issued on conversion of debentures $ -- $ --
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2001 and 2000
(unaudited)
March 31, 2001 March 31, 2000
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 687,462 $(1,384,000)
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes benefit (567,581) --
Gain on early extinguishment of debt -- 21,000
Depreciation and amortization 39,525 17,000
Provisions for doubtful accounts -- --
Minority interests (34,535) --
Amortization of discount upon conversion of convertible debentures 11,222 370,000
Net change in working capital accounts (463,264) (43,000)
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES (327,171) (1,019,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,240) (54,000)
Decrease (increase) in due to related party 10,153 82,000
------ ------
NET CASH PROVIDED BY INVESTING ACTIVITIES 6,913 28,000
----- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings 200,000 --
Repayment of short-term borrowings (200,000) --
Repayments of long term debt (2,737) (829,000)
------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES (2,737) (829,000)
------- ---------
CASH FLOWS PROVIDED BY OPERATIONS (322,995) (1,820,000)
--------- -----------
CASH FLOWS FROM DISCONTINUED OPERATIONS
Entertainment segment 354,282 895,000
Gaming segment 56,720 7,000
------ -----
NET CASH PROVIDED BY DISCONTINUED OPERATIONS 411,002 902,000
------- -------
NET INCREASE (DECREASE) IN CASH 88,007 (918,000)
CASH AT BEGINNING OF PERIOD 98,208 957,000
------ -------
CASH AT END OF PERIOD $ 186,215 $ 39,000
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the three months for interest expense $ 3,185 $ 68,206
Cash paid during the three months for income taxes $ -- $ --
DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES
Commonstock issued on conversion of debentures $ -- $115,920
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
BOUNCEBACKTECHNOLOGIES.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements of the Company are unaudited. In the
opinion of management, all adjustments (which include only normal recurring
accruals) necessary for a fair presentation of such financial statements have
been included. Interim results are not necessarily indicative of results for a
full year.
The financial statements and notes are presented in accordance with the rules
and regulations of the Securities and Exchange Commission and do not contain
certain information included in the Company's annual report. Therefore, the
interim statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's annual report.
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 by the Company with the Securities and Exchange
Commission and in reports to the Company's stockholders. Management believes
that all statements regarding 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 exchange rate
fluctuations in foreign currencies), changes in federal or state tax laws or the
administration of such laws, changes in laws or regulations (including gaming
laws or regulations) 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.
NOTE 1 Business
Recent Developments:
On January 31, 2001, the Company sold its assets relating to the Country Tonite
Show in Branson, Missouri and its Country Tonite Production rights to Onstage
Entertainment, Inc. for $3.8 million. (See Note 2: Gain on Sale of Entertainment
Segment)
On March 28, 2001, the Company signed a letter of intent which proposed a
financing arrangement between the Company and bingo.com (OTCBB: BIGRE). Under
the proposed plan, bingo.com was to issue a convertible debenture to the Company
in the amount of $1.25 million. Additionally, the Company was to receive certain
other consideration. After an exhaustive business and legal due diligence
process, the Company announced April 17, 2001 that it terminated its letter of
intent with bingo.com.
8
Continued Operations:
BounceBackTechnologies.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
advertising 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 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 websites and e-commerce
centers. The newly acquired business was named BounceBack Media.com, Inc.
("BBM") and is headquartered in Fresno, California.
BBM's business strategy includes development of interactive promotional messages
delivered digitally through various storage media, with emphases on CD-Rom and
the internet. BBM's new media production talent and their understanding of
CD-Rom storage media provides the Company a platform upon which to capitalize on
internet-centric market communications.
The thrust of BBM's business to date has been derived from U. S. companies who
are desirous of testing mini CD-Rom products under various application formats
in smaller order increments ranging from 1000 to 10,000 units.
BBM continues to focus its efforts on specific business applications of the mini
CD products by utilizing in-house templates and customized use of available
software technology.
The Company has also implemented a strategy to divest itself of its gaming
segment, Casino Caraibe, which is reported as a discontinued operation.
NOTE 2 Gain on Sale of Entertainment Segment
On January 25, 2001, the Company entered into an asset purchase agreement 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. On January 31, 2001, the Company closed the
sale transaction with On Stage and received $380,000 in cash, a secured short
term 10% interest bearing note for $650,000, of which $150,000 was paid February
15, 2001 and $500,000 which was paid on March 15, 2001. The balance of
$2,800,000 is secured with a 10% interest bearing promissory note due July 31,
2001. (The sale does not include the licensing agreement with Country Tonite
Theatre Pigeon Forge, Tennessee. See last paragraph below.)
Gross Proceeds $3,800,000
Less:
Basis of Assets and Production
Rights Sold $628,431
Expenses of Sale $13,939
Commissions Paid $190,000
========
Gain on Sale of Entertainment Segment $2,967,630
==========
9
Because the Company realized a gain on its sale of the entertainment segment,
the Company will recognize the tax benefit of previous unrecognized net
operating losses carryforward (Net operating losses were previously unrecognized
due to uncertainty of future income). The tax benefits recognized for the three
and six month periods are $1,862,222. At March 31, 2001, the Company has
remaining unrecognized net operating loss carryforwards of approximately
$8,200,000 for federal and state tax purposes that begin to expire in 2009.
The Company, under the terms of the December 31, 1999 Amended Restated Roy
Anderson Holding Corp. Debenture Agreement, is required to make a mandatory
prepayment in full of all monies due under the Second Debenture, which
outstanding balance, interest included, totals $739,130 as of March 31, 2001.
With the sale of the entertainment segment, the Second Debenture is due Roy
Anderson Holding Corp. which will be paid by the Company concurrent with the
Company's receipt of $2.8 million from Onstage which is due on or before July
31, 2001.
Assets and Liabilities of the entertainment segment at March 31, 2001 and
September 30, 2000 and the statement of operations for the six month period
ending March 31, 2001 and 2000 (2001 operating results reflect a four month
period ending January 31, 2001 due to sale of the entertainment segment to
Onstage January 31, 2001) are as follows:
Six months ended Mar. 31 2001 2000
----------- -----------
Revenues
CRC of Branson $ 1,899,603 $ 2,038,289
CTE 110,303 411,000
----------- -----------
2,009,906 2,449,289
Expenses
CRC of Branson 1,302,018 1,189,078
CTE 114,316 336,445
----------- -----------
1,416,334 1,519,523
----------- -----------
Income $ 593,572 $ 929,766
=========== ===========
MAR. 31, 2001 SEP. 30, 2000
Assets
Current assets $ 3,044,079 $ 664,415
Property and equipment -- 220,070
Other assets -- --
----------- -----------
Total assets $ 3,044,079 884,485
=========== -----------
Liabilities
Current liabilities $ 56,612 $ 379,211
Long term debt -- --
Other liabilities (5,431,183) --
----------- -----------
Total liabilities (5,374,571) 379,211
----------- -----------
Equity in subsidiaries 8,418,650
-----------
Total liabilities and equity $ 3,044,079 $ 505,274
=========== ===========
10
On April 20, 2000, the Company granted a license to the owner-operator of the
Pigeon Forge, Tennessee Theatre venue ("CTTPF") to promote, produce and direct
the Country Tonite Show for a 150 mile radius surrounding Pigeon Forge, for a
40-year term for $1.3 million. CTTPF paid the Company in April, 2000, $900,000
in cash and the balance of $400,000 was to be paid at a rate of $50,000 each
December 31, which began December 31, 2000. By agreement between CTTPF and the
Company, CTTPF satisfied the balances due the Company of $249,607 in full by
making the negotiated payment of $200,000 on April 6, 2001. The Company
recognized a loss of $28,607.
NOTE 3 Net Assets Held for Sale
Gaming
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 continues to report
its activity as a discontinued operation.
Six months ended March 31 2001 2000
----------- -----------
Revenues $ 1,328,637 $ 1,355,463
Expenses 1,385,357 1,424,463
----------- -----------
Income (Loss) $ (56,720) $ (69,000)
=========== ===========
Assets
Current assets $ 1,191,697 $ 882,693
Property and equipment 795,092 1,291,604
Total assets 1,986,789 2,174,297
----------- -----------
Liabilities
Current liabilities 1,367,376 1,496,780
Currency translation 7,725 (20,958)
----------- -----------
Total liabilities 1,375,101 1,475,822
----------- -----------
Net assets for sale $ 611,688 $ 698,475
=========== ===========
NOTE 4 Long-Term Liabilities
MAR. 31, 2001 SEP. 30, 2000
---------- ----------
Debenture, 6% $ -- $ 128,099
Debenture, zero, discounted at 6% 739,130 710,268
Note payable, zero, discounted at 9.5% 56,292 219,869
Mortgage payable, 11.5% 79,720 82,457
Note due minority interest, zero, no discount 65,000 65,000
---------- ----------
940,142 1,205,693
Less current obligation 860,422 390,342
---------- ----------
$ 79,720 $ 815,351
========== ==========
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 was payable at 6% fixed interest in
11
monthly installments of $44,326 beginning April 2000 with the last payment
complete November 2000. This debenture is satisfied in full. 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. The sale of the entertainment segment requires
the Company to make full payment totaling approximately $740,000 to Roy Anderson
Holding Corp. which will occur upon the Company's receipt of $2.8 million due it
from Onstage on or about July 31, 2001. Lastly, 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.)
In October 1999, the Company renegotiated an agreement to restructure a
discounted note payable 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 which began December 1, 1999, with the last payment due
May 1, 2001. This note has been discounted to an effective interest rate of
9.5%. The restructuring resulted in an gain on the extinguishment of debt in the
amount of $374,642.
A mortgage payable with interest at 11.5%, collateralized by real estate, is
payable in monthly installments of $1,245 through May 2002 with a final payment
of $83,529 due in June 2002. It is the Company's intent to refinance this debt.
Effective December 31, 1999, the Company purchased all of the assets of Raw
Data, Inc. for a purchase price of $150,000; paying $85,000 in cash and
executing a $65,000 non-interest bearing note which is contingent on the new
subsidiary BounceBack Media.com, Inc. achieving $8 million in revenue on a
cumulative basis on or before December 31, 2001. To date, BounceBack Media's
cumulative revenues through March 31, 2001 are approximately $700,000.
NOTE 5 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. The balance of $14.1 million is
payable if certain events occur relative to, among other things, the location of
the Tribe's casino, the opening of the casino and Lakes Gaming manages the
casino. The Company received a $2 million 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.
12
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
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is management's discussion and analysis of certain factors which
have affected the Company's financial position and operating results during the
period included in the accompanying condensed consolidated financial statements.
The Company sold its entertainment segment and is holding its gaming segment for
sale in order to focus the Company's resources on promotional and marketing
opportunities in the e-commerce industry. As a result, the entertainment and
gaming segments are reported as discontinued operations. Consequently, only
BounceBackMedia reported revenues of $113,938 from continuing operations are
reported for the three months ended March 31, 2001.
As of January 25, 2001 the Company entered into an asset purchase agreement with
On Stage Entertainment, Inc. for $3.8 million. The company closed the sale with
On Stage on January 31, 2001 and received cash totaling $380,000. The sum of
$650,000 plus interest was paid to the Company by March 15, 2001, and the
remaining balance of $2.8 million is secured under a 10% interest bearing note
which is payable to the Company on or before July 31, 2001.
The Company's general and administrative expenses aggregated $573,291 in the
three months ended March 31, 2001. This was a decrease of $91,709 or 14%, from
the same period in 2000. The decrease was due primarily to a reduction in travel
expenses ($27,000) and payroll ($60,000).
Operating results of the entertainment segment which was sold January 31, 2001,
exclusive of corporate charges, for the three month period ended March 31, 2001
and 2000 and the six month period ended March 31, 2001 and 2000 were as follows:
3 months 2001 2000
- -------------------------- ----------- -----------
Revenues $ 56,537 $ 546,000
Net Income (Loss) $ (413,659) $ (384,000)
=========== ===========
6 months 2001 2000
- -------------------------- ----------- -----------
Revenues $ 1,954,103 $ 2,995,000
Net Income (Loss) $ (347,068) $ 546,000
=========== ===========
Operating results of the gaming segment being held for sale, exclusive of
corporate charges, for the three month period ended March 31, 2001 and 2000 and
the six month period ended March 31, 2001 and 2000 were as follows:
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3 months 2001 2000
- -------------------------- ----------- -----------
Revenues $ 877,947 $ 839,000
Net Income(Loss) $ (35,556) $ 91,000
=========== ===========
6 months 2001 2000
- -------------------------- ----------- -----------
Revenues $ 1,328,637 $ 1,502,000
Net Income (Loss) $ (56,720) $ (69,000)
=========== ===========
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $98,208 as of September 30, 2000 to
$186,215 as of March 31, 2001. Cash and cash equivalents do not reflect any cash
balances from the entertainment or gaming segments being held for sale. Nor do
these balances reflect any funds from the anticipated sale from either
discontinued business segment.
The Company will use the proceeds from the sale of its entertainment segment to
provide, among other things, capital for its marketing and sales applications
relative to its mini-CD technology. Until such time the gaming segment is sold,
the Company anticipates that cash on hand from sale of the entertainment segment
and cash from future operations will be sufficient to meet the working capital
and debt service requirements of its existing business for the next fiscal year.
The Company has a revolving six-month line of credit with SouthTrust Bank for
$200,000. The 9.75% line of credit matures August 2, 2001. The line is
collateralized by certain equipment and personally guaranteed by the Company's
CEO, John Pilger. As of March 31, 2001, zero balance was due under the line. The
Company intends to renew this revolving line of credit, August, 2001.
Additionally, the Company, under the terms of the December 31, 1999 Amended
Restated Roy Anderson Holding Corp. Debenture Agreement, is required to make a
mandatory prepayment in full of all monies due under the Second Debenture, which
outstanding balance, interest included, totals $739,130 as of March 31, 2001.
With the sale of the entertainment segment, the Second Debenture is due Roy
Anderson Holding Corp. which will be paid by the Company concurrent with the
Company's receipt of $2.8 million from Onstage which is due on or before July
31, 2001.
Under the Revised Conditional Release and Termination Agreement with Lakes
Gaming, the Company could receive up to $16.1 million over the life of the
management contract Lakes Gaming has with the Pokagon Band of Potawatomi
Indians. A $2 million payment was received in fiscal 1999. The agreement also
calls for the Company to repay the $2 million payment if after 5 years a Pokagon
casino is not opened. The Company will not receive any further payments under
the agreement until a Michigan or Indiana casino opens.
Capital Expenditures by the Company were $3,240 for the six months ended March
31, 2001, compared to $54,000 for the same period in 2000. This expenditure was
for the purchase of computer equipment for BounceBackMedia.com.
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SEASONALITY
The casino operations of the discontinued gaming segment is subject to seasonal
factors. Primarily the slow tourist season occurs from October through April
each year.
FOREIGN CURRENCY TRANSACTIONS
The Company's transactions with respect to its discontinued gaming segment in
Tunisia is in dinars. As such, there are risks that pertain to fluctuations in
foreign exchange rates and potential restrictions or costs associated with the
transfer of funds to the United States.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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 Copany'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 jurisdication 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 Eighth Circuit U.S. Court of
Appeals filed its decision March 13, 2001, agreeing with the Company that the
Federal District Court of Minnesota erred in granting Harrah's Motion for
Summary Judgment and dismissing the Company's suit against Harrah's. The Court
of Appeals has remanded the suit against Harrah's to the Federal District Court
of Minnesota for further proceedings.
The Company initiated a civil suit against Willard Smith and Monarch Casinos,
Inc. on December 19, 1998 in the Circuit Court of Jackson County, 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
15
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. On April 9, 2001, the Company and John Pilger petitioned the Jackson
County Circuit Court for a partial Summary Judgment on all the counterclaims
filed by Smith and Monarch Casinos, Inc., with the exception of "breach of
contract to purchase real property." Smith and Monarch Casinos, Inc. have until
May 18, 2001 to file a reply. A trial date has been set for October, 2001.
Item 2. Exhibits and Reports on Form 8-K
a) Asset Purchase Agreement made by and between the Company, CRC of
Branson, Inc., Country Tonite Enterprises, Inc., and On Stage
Entertainment, Inc. dated January 25, 2001.
b) Secured Promissory Note made by and between the Company, CRC of
Branson, Inc., Country Tonite Enterprises, Inc., and On Stage
Entertainment, Inc., dated January 31, 2001.
c) Closing Agreement made by and between the Company, CRC of
Branson, Inc., Country Tonite Enterprises, Inc., and On Stage
Entertainment, Inc., dated January 31, 2001.
d) Security Agreement made by and between the Company, CRC of
Branson, Inc., Country Tonite Enterprises, Inc., and On Stage
Entertainment, Inc., dated January 31, 2001.
e) Secured Short Term Note made by and between the Company, CRC of
Branson, Inc., Country Tonite Enterprises, Inc., and On Stage
Entertainment, Inc., dated January 31, 2001.
The Company filed no current reports on form 8K for the period
ending March 31, 2001.
16
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant
caused this report to be signed on behalf by the undersigned, hereunto duly
authorized.
BOUNCBACKTECHNOLOGIES.COM, INC.
Date: May 14, 2001 By: /s/ John J. Pilger
-------------------------------
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
Date: May 14, 2001 By: /s/John J. Pilger
-------------------------------
John J. Pilger, Chief Executive
Officer, President and Chairman of the
Board of Directors ("principal
executive officer")
Date: May 14, 2001 By: /s/John J. Pilger
-------------------------------
John J. Pilger, Chief Financial Officer
and Chief Accounting Officer
("principal financial and accounting
officer")
17