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 June 30, 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 August 14, 2001, 12,487,934 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
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS June 30, September 30,
------ 2001 2000
------------ ------------
(Unaudited)
Current assets:
Cash and cash equivalents ................................................... $ 182,030 $ 98,208
Accounts receivable - net ................................................... 87,101 121,132
Inventory ................................................................... 34,375 12,149
Prepaid expenses ............................................................ 99,380 174,123
Deferred income taxes ....................................................... 567,581 --
Net assets for sale - entertainment ......................................... -- 505,274
Net assets for sale - gaming ................................................ 525,544 698,475
Note receivable ............................................................. 2,800,000 --
------------ ------------
Total current assets .............................................. 4,296,011 1,609,361
Deferred income taxes, net of current portion .................................... -- --
Property and equipment - net ..................................................... 306,117 368,873
Goodwill, net .................................................................... 95,225 523,300
Notes receivable - related parties, net .......................................... 147,666 244,145
Other assets ..................................................................... 19,451 24,201
------------ ------------
Total assets ...................................................... $ 4,864,470 $ 2,769,880
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable ............................................................ $ 417,443 $ 335,820
Current maturities of long-term debt ........................................ 1,093,561 390,342
Accrued expenses and other liabilities ...................................... 220,880 269,906
------------ ------------
Total current liabilities ......................................... 1,731,884 996,068
Long-term debt, less current maturities .......................................... -- 815,351
Deferred revenue ................................................................. 2,000,000 2,000,000
Minority interest ................................................................ (142,009) (82,602)
Stockholders' equity:
Preferred stock, 8% cumulative, $.01 par value; 5,000,000 shares authorized;
none issued and outstanding ............................................ -- --
Common stock, $.01 par value; 30,000,000 shares authorized; 12,487,934 shares
issued and outstanding ................................................. 113,613 113,613
Additional paid-in capital .................................................. 23,155,247 23,155,247
Retained earnings ........................................................... (21,994,265) (24,227,797)
Accumulated comprehensive income ............................................ -- --
------------ ------------
Total stockholders' equity ........................................ 1,274,595 (958,937)
------------ ------------
Total liabilities and stockholders' equity ........................ $ 4,864,470 $ 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
(UNAUDITED)
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Operating Revenues:
Management fees ......................................... $ -- $ -- $ -- $ --
Technology sales ........................................ 57,876 58,000 264,766 95,000
------------ ------------ ------------ ------------
Total revenue ...................................... 57,876 58,000 264,766 95,000
Operating Expenses:
Technology cost of sales ................................ 55,374 29,832 155,031 62,000
Technology selling, general and administrative expenses . 126,860 244,168 406,766 365,000
Corporate selling, general and administrative expenses .. 585,000 742,000 1,634,621 1,985,000
------------ ------------ ------------ ------------
Total operating expenses ........................... 767,234 1,016,000 2,196,418 2,412,000
------------ ------------ ------------ ------------
Operating loss ............................................... (709,358) (958,000) (1,931,652) (2,317,000)
Other Income and Expenses:
Other income ............................................ 3,735 -- 11,205 --
Interest income ......................................... 2,938 19,000 11,652 26,000
Interest expense ........................................ (14,840) (26,000) (18,025) (58,000)
------------ ------------ ------------ ------------
Total other income and expenses .................... (8,167) (7,000) 4,832 (32,000)
------------ ------------ ------------ ------------
Loss before minority interest ................................ (717,525) (965,000) (1,926,820) (2,349,000)
Minority interest ....................................... 24,871 -- 59,406 --
------------ ------------ ------------ ------------
Loss before income taxes ..................................... (692,654) (965,000) (1,867,414) (2,349,000)
Income tax benefit ...................................... -- -- 1,862,222 --
------------ ------------ ------------ ------------
Net Loss - Operating ......................................... (692,654) (965,000) (5,192) (2,349,000)
------------ ------------ ------------ ------------
Discontinued Operations:
Income from entertainment segment, net of taxes of
$246,504 and $0 in 2001 and 2000, respectively ...... 53,455 1,748,000 419,523 2,294,000
Gain on sale of entertainment segment, net of taxes of
$1,048,137 and $0 in 2001 and 2000, respectively .... -- -- 1,900,493 --
Income (loss) from gaming segment ....................... 4,110 (6,000) (52,610) (75,000)
------------ ------------ ------------ ------------
Net income - Discontinued Operations ......................... 57,565 1,742,000 2,267,406 2,219,000
Extraordinary item - Gain on early extinguishment of debt .... -- -- -- 391,000
------------ ------------ ------------ ------------
Net income (loss) ............................................ $ (635,089) $ 777,000 $ 2,262,214 $ 261,000
============ ============ ============ ============
Net income (loss) per Share - Basic and Diluted
Operating loss .......................................... $ (0.055) $ (0.089) -- $ (0.218)
Discontinued operations ................................. 0.005 0.161 0.182 0.205
Extraordinary item - gain on early extinguishment of debt -- -- -- 0.036
------------ ------------ ------------ ------------
Net Income (Loss) Per Share .................................. $ (0.050) $ 0.072 $ 0.182 $ 0.024
============ ============ ============ ============
Weighted average common shares outstanding .............. 12,487,871 10,799,639 12,470,129 10,799,639
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
----------- ----------- ----------- -----------
Operating Activities:
Net income (loss) ........................................ $ (692,654) $ (965,000) $ (5,192) $(2,349,000)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ....................... 19,763 17,000 59,288 34,000
Deferred income taxes benefit ....................... -- -- (567,581) --
Gain on early extinguishment of debt ................ -- -- -- 21,000
Provisions for doubtful accounts .................... 606 -- 606 --
Amortization of discount upon conversion
of convertible debentures ...................... 21,711 -- 32,933 370,000
Minority interest ................................... (24,871) -- (59,406) --
Net change in working capital accounts .............. 482,409 (199,000) 19,145 (242,000)
----------- ----------- ----------- -----------
Net cash provided by operating activities ................ (193,036) (1,147,000) (520,207) (2,166,000)
Investing activities:
Purchase of property and equipment ....................... -- (65,000) (3,240) (119,000)
Decrease (increase) in due to related party .............. 86,326 43,000 96,479 125,000
----------- ----------- ----------- -----------
Net cash used in investing activities .................... 86,326 (22,000) 93,239 6,000
Financing Activities:
Short-term borrowings .................................... 200,000 -- 400,000 --
Repayment of short-term borrowings ....................... -- -- (200,000) --
Repayments of long term debt ............................. (89,241) (157,000) (91,978) (986,000)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities ...... 110,759 (157,000) 108,022 (986,000)
Cash flows provided by operations ........................ 4,049 (1,326,000) (318,946) (3,146,000)
----------- ----------- ----------- -----------
Cash flows from discontinued operations:
Entertainment segment .................................... 103,165 1,493,000 457,447 2,388,000
Gaming segment ........................................... (111,399) 38,000 (54,679) 45,000
----------- ----------- ----------- -----------
Net cash provided by discontinued operations ............. (8,234) 1,531,000 402,768 2,433,000
----------- ----------- ----------- -----------
Net increase (decrease) in cash .......................... (4,185) 205,000 83,822 (713,000)
Cash at beginning of period .............................. 186,215 39,000 98,208 957,000
----------- ----------- ----------- -----------
Cash at end of period .................................... $ 182,030 $ 244,000 $ 182,030 $ 244,000
=========== =========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest expense ......................... $ 31,433 $ 12,948 $ 34,618 $ 43,605
Cash paid for income taxes ............................. $ 8,972 $ -- $ 8,972 $ --
Disclosure of non-cash financing and investing activities:
Common stock issued on conversion of debentures ........ $ -- $ 34,860 $ -- $ 150,780
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
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
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. Concurrent with the acquisition the Company renamed Raw Data, Inc.,
BounceBackMedia, Inc. ("BBM"). BBM's business strategy includes development of
interactive promotional messages delivered digitally through various storage
media, including CD-Rom and the Internet. 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 1,000 to 10,000 units. On June 18, 2001, BBM moved its headquarters from
Fresno, California to Ocean Springs, Mississippi to reduce the general and
administrative overhead expense and take advantage of a highly competitive
business resource marketplace.
Through its 85%-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 holds for sale its casino operation in Tunisia, and reports its activity
as a discontinued operation.
6
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 was secured with a 10% interest-bearing promissory note due July 31,
2001, which was paid in full. (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 ......................... 222,939
----------
Gain on Sale of Entertainment Segment ......... $2,948,630
==========
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 carry forward (net operating losses were previously
unrecognized due to uncertainty of future income). The tax benefits recognized
on this transaction are $1,862,222. At June 30, 2001, the Company has remaining
unrecognized net operating loss carry forwards of approximately $9,728,066 for
federal and state tax purposes that begin to expire in 2009.
Under the terms of the December 31, 1999 Amended and Restated Roy Anderson
Holding Corp. Debenture Agreement, the Company is required to make a mandatory
early payoff upon significant sale of assets. With the receipt of $2.8 million
dollars from On Stage on July 31, 2001, the Company will pay off the Second
Debenture, which includes an outstanding balance of $750,272, including
interest, as of June 30, 2001. On August 2, 2001, the Company satisfied this
obligation. (See Note 10, Subsequent Event).
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. 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 in the quarter ended
March 31, 2001.
7
NOTE 3 Net Assets Held for Sale
Gaming
Through its 85%-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 holds for sale its casino operation in Tunisia, and continues to report
its activity as a discontinued operation.
Nine Months Ended at
-------------------------------
June 30, June 30,
2001 2000
----------- -----------
Revenues .................. $ 2,167,973 $ 2,214,833
Expenses .................. 2,220,583 2,289,833
----------- -----------
Income (Loss) ... $ (52,610) $ (75,000)
=========== ===========
June 30, September 30,
2001 2000
----------- -----------
Assets
Current assets ....... $ 793,351 $ 882,693
Property and equipment 720,342 1,291,604
----------- -----------
Total assets .... $ 1,513,693 $ 2,174,297
=========== ===========
Liabilities
Current liabilities .. $ 984,886 $ 1,496,780
Currency translation . 3,263 (20,958)
----------- -----------
Total liabilities $ 988,149 $ 1,475,822
----------- -----------
Net assets for sale ....... $ 525,544 $ 698,475
=========== ===========
NOTE 4 Long-Term Liabilities
June 30, September 30,
2001 2000
---------- ----------
Debenture, 6% ............................... $ -- $ 128,099
Debenture, zero, discounted at 6% ........... 750,272 710,268
Note payable, zero, discounted at 9.5% ...... -- 219,869
Mortgage payable, 11.5% ..................... 78,289 82,457
Line of credit, 9.75% ....................... 200,000 --
Note due minority interest, zero, no discount 65,000 65,000
---------- ----------
1,093,561 1,205,693
Less: current obligation .................... 1,093,561 390,342
---------- ----------
Long-term debt .............................. $ -- $ 815,351
========== ==========
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 was satisfied in full November 2000. The second debenture of $685,898
is payable in one lump sum at 6% fixed interest on December 31, 2001. 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. See Subsequent Event Note 7 describing payoff of the second
debenture.
8
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 a gain on the extinguishment of debt in the amount of
$374,642 which was recognized in the year ended September 30, 2000. This note
was paid off during this quarter ended June 30, 2001.
Mortgage payable, 11.5%. Note payable, interest at 11.5%, collateralized by real
estate, payable in monthly installments of $1,139 through May 2000 with a final
payment of $83,506 due in June 2002. The Company is currently refinancing the
final payment due on this note.
Line of credit, 9.75%. 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 June 30,
2001 and September 30, 2000 advances were $200,000 and $0.
Note Due Minority Interest, zero, no discount. As part of the consideration
given for the acquisition of Raw Data, Inc., the Company issued a $65,000
noninterest-bearing note to the former majority shareholders which is payable
only upon BounceBackMedia.com, Inc. achieving cumulative revenues of $8 million
on or before December 31, 2001. BounceBackMedia's cumulative revenues through
June 30, 2001 were approximately $800,000.
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 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. The balance of $14.1
million is contingent on certain events occurring relative to, among other
things, the location of the Tribe's casino, the opening of the casino and Lakes
Gaming managing the casino. 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 6 Relocation Costs
In June 2001, the Company relocated BounceBackMedia.com, Inc.'s operations to
Ocean Springs, Mississippi. The Company incurred relocation costs of $8,835,
which are recorded as an operating expense for the quarter ended June 30, 2001.
9
NOTE 7 Subsequent Event
As fully described in Note 2, the Company holds a $2.8 million note from On
Stage Entertainment, Inc. which was due on or before July 31, 2001. On August 1,
2001, On Stage satisfied its obligation to the Company with the payment of $2.8
million plus interest. In turn, as fully described in Note 2, the Company
satisfied its obligation under the Second Debenture with Roy Anderson
Corporation with the payment of $752,748 on August 2, 2001. Upon receipt of this
payment, Roy Anderson Corporation agreed to release from escrow 1.1 million
shares of common stock held as collateral which will be promptly canceled by the
Company. This cancellation will reduce the total company shares outstanding 9.1%
from 12,487,934 to 11,387,934.
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 and investment in other business
opportunities. As a result, the entertainment and gaming segments are reported
as discontinued operations. Consequently, only BounceBackMedia's reported
revenues of $57,876 from continuing operations are reported for the three months
ended June 30, 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. The remaining
balance of $2.8 million was secured under a 10% interest-bearing note payable to
the Company on or before July 31, 2001, which was paid in full.
The Company's general and administrative expenses totaled $585,000 and
$1,634,621 for the three and nine months ended June 30, 2001. These compare to
$742,000 and $1,985,000 for the same periods in 2000. These decreases reflect
the reduction of overhead with the sale of discontinued operations and
management's continued efforts to decrease general and administrative expenses.
Operating results of the entertainment segment which was sold January 31, 2001,
exclusive of corporate charges, for the respective three month periods ended
June 30, 2001 and 2000 and the nine month periods ended June 30, 2001 and 2000
were as follows:
June 30, June 30,
Three months ended 2001 2000
------------------ ----------- -----------
Revenues ........ $ 5,000 $ 2,961,767
Net Income (Loss) $ (318,959) $ 1,748,000
=========== ===========
Nine months ended
-----------------
Revenues ........ $ 1,959,103 $ 5,956,767
Net Income (Loss) $ (666,027) $ 2,294,000
=========== ===========
10
Operating results of the gaming segment being held for sale, exclusive of
corporate charges, for the three- and nine-month periods ended June 30, 2001 and
2000 were as follows:
June 30, June 30,
Three months ended 2001 2000
------------------ ----------- -----------
Revenues ........ $ 839,336 $ 712,833
Net Income (Loss) $ 4,110 $ (6,000)
=========== ===========
Nine months ended
-----------------
Revenues ........ $ 2,167,973 $ 2,214,833
Net Income (Loss) $ (52,610) $ (75,000)
=========== ===========
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $98,208 as of September 30, 2000 to
$182,030 as of June 30, 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 and investment in other business
opportunities as they arise. 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
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 June 30, 2001, $200,000 is due to SouthTrust under the
line of credit. The Company is currently renegotiating this line of credit.
Additionally, the Company, under the terms of the December 31, 1999 Amended and
Restated Roy Anderson Holding Corp. Debenture Agreement, was required to make a
mandatory prepayment in full of all monies due under the Second Debenture, which
outstanding balance, interest included, totals $750,272 as of June 30, 2001.
With the sale of the entertainment segment, the Second Debenture due Roy
Anderson Holding Corp. was paid in full ($752,748) by the Company concurrent
with the Company's receipt of $2.8 million from On Stage on 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 is not scheduled to receive any further
payments under the agreement with Lakes until a Michigan or Indiana casino
opens.
Capital expenditures by the Company were $3,240 for the nine months ended June
30, 2001, compared to $119,000 for the same period in 2000. The 2001
expenditures were for the purchase of computer equipment for
BounceBackMedia.com.
11
FOREIGN CURRENCY TRANSACTIONS
The Company's transactions with respect to its discontinued gaming segment in
Tunisia are in dinars. As such, there are risks that pertain to fluctuations in
foreign exchange rates and potential restrictions or costs associated with the
transfer of funds to the United States.
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.
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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 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 asserted that it had 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. On May 16, 2001, the U.S. District Court
of Minnesota set a retrial scheduling order which allows the Company's legal
representatives to initiate discovery. A tentative trial date is set for
November 2, 2002.
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
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 counterclaim 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." The Jackson County Circuit Court has not
yet responded to this petition. A trial date has been set for October 2001.
On May 13, 2001, Roger Birks, the former CEO of BounceBackMedia, an 80%-owned
subsidiary of the Company, commenced an action in Clark County District Court,
Nevada, against BounceBackMedia, a Nevada company, and John J. Pilger, President
of BounceBackMedia and CEO of the Company, alleging: breach of BounceBackMedia
Purchase Agreement by the Company for failure to use its best efforts to
capitalize BounceBackMedia; breach of Birks' Employment Agreement; and lastly,
alleging that the Company and its alter ego, John Pilger, made false
representations to Plaintiff which Plaintiff acted upon with respect to the
BounceBackMedia purchase agreement and Plaintiff's Employment Agreement.
Plaintiff seeks compensatory and punitive damages and has not claimed a specific
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amount of damages, but claims such damages exceed $40,000. The Plaintiff also
seeks reimbursement of attorney fees. The Company denies these allegations and
plans to vigorously defend itself in this matter.
Item 2. Exhibits and Reports on Form 8-K
a) During the quarter ended June 30, 2001, the Company filed the
following reports on Form 8-K:
Current Report on Form 8-K filed on June 22, 2001, regarding Item 5
which announced the relocation of BounceBackMedia.com, Inc., a
80%-owned subsidiary of the Company.
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SIGNATURES
In accordance with requirements of the Exchange Act, the registrant
caused this report to be signed on behalf by the undersigned, hereunto duly
authorized.
BOUNCBACKTECHNOLOGIES.COM, INC.
Date: August 14, 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: August 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: August 14, 2001 By:s/John J. Pilger
----------------
John J. Pilger,
Chief Financial Officer and Chief
Accounting Officer ("principal
financial and accounting officer")
15