UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB/A
(Mark One)
[X] AMENDEDMENT NO. 1 TO QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 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 39564-2842
-------------------------------------
(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 February 11, 2002, 12,452,871 Shares of Common Stock, $0.01 par value, 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
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS December 31, September 30,
2001 2001
------------ ------------
(Unaudited) (Audited)
(As Restated) (As Restated)
Current assets:
Cash and cash equivalents ..................................................... $ 1,421,093 $ 1,863,359
Accounts receivable - net ..................................................... 56,350 90,463
Inventory ..................................................................... 60,368 57,047
Prepaid expenses .............................................................. 44,464 95,818
------------ ------------
Total current assets ................................................ 1,582,275 2,106,687
Deferred income taxes .............................................................. 1,710,311 1,510,311
Property and equipment - net ....................................................... 957,860 996,931
Goodwill, net ...................................................................... - 22,900
Other receivable ................................................................... 600,000 600,000
Notes receivable - related parties, net ............................................ 65,013 149,948
Deferred Charges ................................................................... 93,750 -
Other assets ....................................................................... 30,287 30,287
------------ ------------
Total assets .............................................. $ 5,039,496 $ 5,417,064
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................................. $ 299,729 $ 337,765
Current maturities of long-term debt .......................................... 106,248 76,841
Accrued gaming tax ............................................................ 1,104,608 1,074,499
Accrued expenses and other liabilities ........................................ 672,024 447,913
Deferred income taxes ......................................................... 10,311 10,311
------------ ------------
Total current liabilities ........................................... 2,192,920 1,947,329
Long-term debt, less current maturities ............................................ 15,096 -
Advance deposit .................................................................... 2,000,000 2,000,000
Minority interest .................................................................. - -
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; 12,452,871
issued and outstanding as of December 31 and September 30, 2001........... 113,529 113,879
Additional paid-in capital .................................................... 23,163,093 23,165,749
Retained earnings ............................................................. (22,444,691) (21,809,893)
Accumulated comprehensive income .............................................. (451) -
------------ ------------
Total stockholders' equity .......................................... 831,480 1,469,735
------------ ------------
Total liabilities and stockholders' equity................. $ 5,039,496 $ 5,417,064
============ ============
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
------------------------------------
December 31, December 31,
2001 2000
------------ ------------
Operating Revenues:
Gaming segment ........................................ $ 540,208 $ 450,690
Technology sales ...................................... 8,557 92,952
Management fees ....................................... - -
------------ ------------
Total revenue .................................... 548,765 543,642
Operating Expenses:
Gaming cost of sales .................................. 97,950 71,268
Gaming selling, general and administrative expenses ... 672,742 471,698
Technology cost of sales .............................. 6,677 56,855
Technology selling, general and administrative expenses 33,017 147,609
Corporate selling, general and administrative expenses 586,244 476,330
------------ ------------
Total operating expenses ......................... 1,396,630 1,223,760
------------ ------------
Operating loss ............................................. (847,865) (680,118)
Other Income and Expenses:
Other income .......................................... (173) 3,735
Interest income ....................................... 12,126 18,669
Interest expense ...................................... (29,052) -
------------ ------------
Total other income and expenses .................. (17,099) 22,404
------------ ------------
Loss before minority interest .............................. (864,964) (657,714)
Minority interest ..................................... - 22,302
------------ ------------
Loss before income taxes ................................... (864,964) (635,412)
Income tax benefit .................................... 200,000 -
------------ ------------
Net loss - Operating ....................................... (664,964) (635,412)
------------ ------------
Discontinued Operations:
Income from entertainment segment ..................... - 760,727
------------ ------------
Net income - Discontinued Operations ....................... - 760,727
------------ ------------
Net income (loss) .......................................... $ (664,964) $ 125,315
============ ============
Net income (loss) per Share - Basic and Diluted
Operating loss ........................................ $ (0.05) $ (0.05)
Discontinued operations ............................... $ - $ 0.06
------------ ------------
Net Income (Loss) Per Share ................................ $ (0.05) $ 0.01
============ ============
Weighted average common shares outstanding ............ 12,474,830 12,359,726
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
BOUNCEBACKTECHNOLOGIES.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
---------------------------------
December 31, December 31,
2001 2000
----------- -----------
Operating Activities:
Net income (loss) .............................................................. $ (664,964) $ 125,315
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................. 119,954 146,450
Deferred income taxes benefit ............................................. (200,000) -
Provisions for doubtful accounts .......................................... 1,088 7,862
Amortization of discount upon conversion of convertible debentures ........ - 17,885
Minority interest ......................................................... - (22,302)
Net change in working capital accounts .................................... 263,335 (28,122)
----------- -----------
Net cash provided by (used in) operating activities ............................ (480,587) 247,088
Investing activities:
Purchase of property and equipment ............................................. - (3,240)
Decrease (increase) in due to related party .................................... 41,326 41,327
----------- -----------
Net cash provided by investing activities ...................................... 41,326 38,087
Financing Activities:
Repayment of short-term borrowings ............................................. - (210,163)
Capital stock repurchase ....................................................... (3,006) -
----------- -----------
Net cash used in financing activities .......................................... (3,006) (210,163)
Cash flows used in operations .................................................. (442,267) 75,012
----------- -----------
Cash flows from discontinued operations:
Entertainment segment .......................................................... - 122,297
----------- -----------
Net cash provided by discontinued operations ................................... - 122,297
----------- -----------
Net increase (decrease) in cash ................................................ (442,267) 197,309
Cash at beginning of period .................................................... 1,863,359 509,374
----------- -----------
Cash at end of period ................................................ $ 1,421,092 $ 706,683
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest expense ............................................... $ 2,286 $ 4,065
Cash paid for income taxes ................................................... $ - $ -
Disclosure of non-cash financing and investing activities:
Common stock issued on conversion of debentures .............................. $ - $ 629,378
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 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 exchange rate
fluctuations in 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.
Note 1 - Restatement
As more fully described below, the restatement relates to the following
items: 1. To reclassify an advance payment received on a management contract as
an advance payment and not deferred revenue. 2. To correct the accounting
treatment of deferred costs related to the management contract. 3. To remove a
contingent liability and related goodwill from the balance sheet related to the
acquisition of the assets of Raw Data, Inc. 4. To provide a reconciliation of
assets and income of the business segments of the Company. 5. To include
outstanding shares of common stock held in escrow as collateral as part of
Stockholders' Equity. 6. To supplement related party disclosures for deferred
charges and note receivable. 7. To add a subsequent event footnote regarding
Harrah's litigation occurring on March 22, 2002 and the litigation affecting the
opening of the Michigan casino occurring on March 29, 2002.
1. 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 in
southwestern Michigan and northern Indiana. A subsequent agreement
terminating the joint venture called for the payment by Lakes Gaming, Inc.
to the Company of fees equating to $12.4 million over five years once the
Michigan casino opens and an advance payment of $2 million of those fees
was received by the Company on August 31, 1999. This subsequent agreement
requires the Company to return the advance payment after five years if the
casino has not opened. The Company classified this advance payment as
deferred revenue on its originally filed financial statements. Although no
timetable for the opening of the casino is currently determinable, certain
facts and circumstances indicate to the Company that the casino will open
6
before August 2004 and the advance payment may not need to be returned.
Consequently, the Company has reclassified the receipt of these fees as an
advance payment in these restated financial statements on its balance sheet
in lieu of the previous classification as deferred revenue to clarify that
this advance payment may need to be returned if the casino does not open by
August 2004.
2. When certain facts and circumstances indicated to the Company that the
Michigan casino would open, the Company restored development costs related
to its ventures with the Pokagon Indians and the building of their Michigan
casino previously reserved for on its balance sheet. Having further
reviewed these costs, the Company now believes that the subsequent reversal
of a previously recognized impairment reserve is prohibited under Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets". Consequently, the impairment reserve of these development costs
has not been restored in these restated financial statements.
3. On December 31, 1999, the Company purchased all the assets of Raw Data
Corp. for $85,000 cash at closing and a non-interest bearing note for
$65,000 due when and if the New Company, BounceBackMedia.com, Inc., reached
$8,000,000 in revenue on a cumulative basis within a two year period. The
Company recorded the contingent liability of $65,000 and $146,500 in
goodwill on its balance sheet at the time of purchase. Having further
reviewed the original projections of this purchase, the Company now
believes that the recognition of this contingent liability did not meet the
conditions to accrue a contingent liability as defined in Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies".
Consequently, the contingent liability and the related goodwill have been
removed from the Company's balance sheet in these restated financial
statements.
4. On its originally filed financial statements, the Company provided business
segment information on the face of its income statement and in footnote
disclosures. After further review, the Company now believes that additional
reconciliations of revenues, income and assets of its business segments to
the Company's consolidated revenues, income and assets are required under
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information". Consequently, the
Company is providing these reconciliations in footnote disclosures to the
financial statements in these restated financial statements.
5. On its originally filed financial statements, the Company included
outstanding shares of common stock held in escrow as collateral for
outstanding debt in its earnings per share calculation, however, the
Company did not include these same shares in its Statement of Stockholders'
Equity since the shares would subsequently be canceled upon payoff of the
outstanding debt. The Company now believes this treatment was inconsistent.
Consequently, the Company has now included these shares in its Statement of
Stockholders' Equity in these restated financial statements.
6. The Company has supplemented its disclosures regarding related-party
transactions. Please see Notes 6 and 7, Note Receivable - Related Party and
Deferred Charges - Related Party.
7. Since the Company's original filing of its financial statements on February
14, 2002, there has been a significant development in the Harrah's and
TOMAC litigation. The Company has detailed these events in a subsequent
event footnote in these restated financial statements.
As a result, the Company's condensed consolidated financial statements as
of December 31, 2001 have been restated from amounts previously reported. A
summary of the principle effects of the restatement is as follows: (Please note:
those line items for which no change in amounts are shown were not affected by
the restatement.)
7
December 31,
December 31, 2001
2001 As Previously
As Restated Reported
---------------- ----------------
Current assets ................................................................. $ 1,582,275 $ 1,582,275
Other assets ................................................................... 3,457,221 4,513,712
------------ ------------
Total assets ................................................................. $ 5,039,496 $ 6,095,987
============ ============
Current liabilities ............................................................ $ 2,192,920 $ 2,192,920
Other liabilities .............................................................. 2,015,096 2,015,096
Stockholder's equity ........................................................... 831,480 1,887,971
------------ ------------
Total liabilities and Stockholder's equity ................................... $ 5,039,496 $ 6,095,987
============ ============
September 30,
September 30, 2001
2001 As Previously
As Restated Reported
---------------- ----------------
Current assets ................................................................. $ 2,106,687 $ 2,106,687
Other assets ................................................................... 3,310,377 4,431,868
------------ ------------
Total assets ................................................................. $ 5,417,064 $ 6,538,555
============ ============
Current liabilities ............................................................ $ 1,947,329 $ 2,012,329
Other liabilities .............................................................. 2,000,000 2,000,000
Stockholder's equity ........................................................... 1,469,735 2,526,226
------------ ------------
Total liabilities and Stockholder's equity ................................... $ 5,417,064 $ 6,538,555
============ ============
September 30,
September 30, 2001
2001 As Previously
As Restated Reported
---------------- ----------------
Operating revenues ............................................................. $ 3,360,095 $ 3,360,095
Operating expenses ............................................................. 6,098,637 5,042,146
------------ ------------
Operating profit ............................................................... (2,738,542) (1,682,051)
Other income and expenses ...................................................... 6,881 6,881
------------ ------------
Loss before minority interest .............................................. (2,731,661) (1,675,170)
Minority interest .............................................................. - -
------------ ------------
Loss before income taxes ................................................... (2,731,661) (1,675,170)
Provision for income taxes ..................................................... 2,794,641 2,794,641
------------ ------------
Net loss - Operating .................................................... $ 62,980 $ 1,119,471
Net income - Discontinued ................................................. 2,354,924 2,354,924
------------ ------------
Net income (loss) .................................................... $ 2,417,904 $ 3,474,395
============ ============
Net income (loss) per Share - Basic and Diluted
Operating income (loss) ................................................... $ 0.01 $ 0.09
Discontinued operations ................................................... 0.19 0.19
------------ ------------
Net Income (Loss) Per Share .................................................... $ 0.20 $ 0.28
============ ============
Weighted average common shares outstanding ..................................... 12,474,830 12,296,720
Note 2 - Business
BounceBackTechnologies.com, Inc. (the "Company") is a Minnesota
corporation organized in 1969. The Company and subsidiaries is engaged in the
e-commerce industry focusing on marketing, sales and business solutions to the
Internet and e-commerce industries. While the Company's gaming segment operates
a casino through its 85%-owned subsidiary, CRC of Tunisia, S.A., in Sousse,
Tunisia, North Africa. The Company's ticker symbol for its Common Stock is
"BBTC" and the Common Stock is traded on the NASD OTCBB.
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.
8
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 Raw Data 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, was headquartered in Fresno,
California until June 18, 2001. On this date, BBM moved its headquarters to
Ocean Springs, Mississippi to reduce the general and administrative overhead
expense and take advantage of a highly competitive business resource
marketplace.
The Company, through its 85%-owned subsidiary, CRC of Tunisia, 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.
9
Note 3 - Earning Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
Three Months Ended
------------------------------------
December 31, December 31,
2001 2000
---------- ------------
(Unaudited) (Unaudited)
Numerator:
Operating loss .............................................. $ (664,964) $ (635,412)
Discontinued operations ..................................... - 760,727
---------- ------------
Net income (loss) ........................................... (664,964) 125,315
Numerator for basic earnings (loss) per share - income (loss)
available to common stockholders ....................... $ (664,964) $ 125,315
Effect of diluted securities ................................ - -
---------- ------------
Numerator for diluted earnings (loss) per share-
income (loss) available to common stockholders after
assumed conversions ............................... $ (664,964) $ 125,315
========== ============
Denominator:
Denominator for basic earnings per share -
weighted - average shares .............................. 12,452,871 12,359,726
Effect of dilutive securities
Employee stock options ................................. - -
---------- ------------
Dilutive potential common shares ............................ - -
---------- ------------
Denominator for diluted earnings per share -
adjusted weighted - average shares and
assumed conversions ............................... 12,452,871 12,359,726
========== ============
Net income (loss) per Share - Basic and Diluted
Operating income (loss) ................................ $ (0.05) $ (0.05)
Discontinued operations ................................ - 0.06
---------- ------------
Net income (loss) ...................................... $ (0.05) $ 0.01
========== ============
Note 4 - Segment Information
Gaming Segment
The Company, through its 85%-owned subsidiary, CRC of Tunisia, 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.
Note 4 - Segment Information (Continued)
Technology Segment
Through its 80%-owned subsidiary, BounceBack Media.com, Inc., the
Company acquired all of the assets of Raw Data 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.
BounceBackMedia.com, Inc., commenced operations on December 31, 1999 when it
purchased all the assets of Raw Data Corp. for $85,000 cash, a non-interest
bearing note for $65,000 due when and if BounceBackMedia.com, Inc., reached
10
$8,000,000 in revenue on a cumulative basis within its first two years and 20%
of BounceBackMedia.com, Inc., common stock. The Company recognized $81,500 in
goodwill. The $65,000 note payable was not recorded since BounceBackMedia.com,
Inc., achieving $8,000,000 in revenue on a cumulative basis within its first two
years was not probable.
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 order increments ranging from 1,000 to 10,000 units.
In order to attempt to stimulate BBM's business operations, management
is expanding BBM's product line - services to include website development and
web hosting. BBM's strategy is geared to offering a comprehensive array of media
services, which the Company hopes will attract a broad mainstream customer base
of business clients. To that end, BBM is test marketing several integrated
communication packages at competitive rates.
Summary
Three Months Ended
December 31, 2001 Gaming Technology Corp. & Other Total
- ------------------------------------------------------------------------------------------------------------------
Total Revenue .................... 540,208 8,557 - 548,765
Cost of sales .................... 97,950 6,677 - 104,627
Selling, general and ............. -
administrative expenses ........ 672,742 33,017 - 705,759
Corporate unallocated costs ...... - - 586,244 586,244
----------- ----------- ----------- -----------
Total Expenses ................... 770,692 39,694 586,244 1,396,630
Operating income (loss) .......... (230,484) (31,137) (586,244) (847,865)
Other income and expenses ........ - (11,274) (5,825) (17,099)
----------- ----------- ----------- -----------
Loss before income taxes ......... (230,484) (42,411) (592,069) (864,964)
Income tax benefit ............... - - 200,000 200,000
----------- ----------- ----------- -----------
Net loss - operating...... $ (230,484) $ (42,411) $ (392,069) $ (664,964)
=========== =========== =========== ===========
As of December 31, 2001
Total assets ..................... $ 1,187,597 $ 166,567 $ 3,685,332 $ 5,039,496
Total liabilities * .............. 8,357,958 981,347 (5,131,289) 4,208,016
Total equity ..................... (7,170,361) (814,780) 8,816,621 831,480
* Includes intercompany payables and receivables which are eliminated in consolidation.
Note 4 - Segment Information (Continued)
Summary (Continued)
11
As of September 30, 2001
Total assets .................................................. $ 1,317,776 $ 208,559 $ 3,890,729 $ 5,417,064
Total liabilities * ........................................... 8,167,603 980,910 (5,201,184) 3,947,329
Total equity .................................................. (6,849,827) (772,351) 9,091,913 1,469,735
Three Months Ended
December 31, 2000 Gaming Technology Corp. & Other Total
----------- ----------- ----------- -----------
Total Revenue ................................................. 450,690 92,952 - 543,642
Cost of sales ................................................. 71,268 56,855 - 128,123
Selling, general and .......................................... -
administrative expenses ..................................... 471,698 147,609 - 619,307
Corporate unallocated costs ................................... - - 476,330 476,330
----------- ----------- ----------- -----------
Total Expenses ................................................ 542,966 204,464 476,330 1,223,760
Operating income (loss) ....................................... (92,276) (111,512) (476,330) (680,118)
Other income and expenses ..................................... - - 22,404 22,404
----------- ----------- ----------- -----------
Loss before minority interest ................................. (92,276) (111,512) (453,926) (657,714)
Minority interest ............................................. - - 22,302 22,302
----------- ----------- ----------- -----------
Loss before income taxes ...................................... (92,276) (111,512) (431,624) (635,412)
Income tax benefit ............................................ - - - 0
----------- ----------- ----------- -----------
Net loss - operating .................................. $ (92,276) $ (111,512) $ (431,624) $ (635,412)
=========== =========== =========== ===========
Note 5 - Other Receivable
The Company incurred approximately $600,000 in expenses in pursuit of a
Cherokee Indian gaming venture with Harrah's (NYSE: HET) in Cherokee, North
Carolina and ultimately, Harrah's was awarded a casino management agreement with
the Eastern Band of Cherokee Indians. Concurrent with the pursuit of this North
Carolina venture, the Company and Harrah's entered into a partnership agreement
to build and manage the future Michigan casino with the Pokagon Indians. (The
Company subsequently sought a new venture partner in Lakes Gaming and that new
agreement with Lakes Gaming is fully described in Note 9.) In return for the
Company to originally pursue the Michigan venture with Harrah's, Harrah's agreed
to reimburse the $600,000 related to the North Carolina venture.
During 1998, Harrah's terminated its agreement with the Pokagon tribe,
and the Company pursued legal remedies to recover the $600,000 in expenses from
Harrah's. This receivable was fully reserved for in fiscal year ending September
30, 1998.
A Minnesota trial court dismissed the Company's civil suit against
Harrah's on May 24, 1999 for lack of jurisdiction. The Company appealed this
decision to the Eighth Circuit U.S. Court of Appeals and on March 13, 2001, the
Appeals Court reversed the decision and remanded the Company's suit against
Harrah's back to District Court. The original facts and circumstances again
exist for the Company to expect to recover this receivable, thus, the Company
has reversed its allowance for doubtful accounts of $600,000. Please see also,
Note 12 - Subsequent Events, for additional information regarding this
receivable.
Note 6 - Note Receivable - Related Party
On January 12, 1999, John J. Pilger, the Company's CEO, was indebted to
the Company in the approximate amount of $500,000 and the Company agreed to
forgive this loan, including interest, in three installments over a three-year
period, contingent upon the CEO honoring his three-year employment contract with
the Company. During December 2001, the Company and the CEO agreed to delay the
forgiveness of the second and third installments of the Loan and amended the
"Existing Agreement". The Company has agreed to forgive the loan, including any
interest accrued thereon, in one payment of $165,306 forgiven on January 1,
12
2000, one payment of $177,647 forgiven on January 1, 2002 and one payment of
$177,647 to be forgiven on January 1, 2003, contingent on the CEO honoring his
employment contract, the "Existing Agreement".
Note 7 - Deferred Charges - Related Party
On April 3, 1998, the Company and its CEO, John J. Pilger, entered into
a "Supplementary Employment Agreement" to have its foreign subsidiary, CRC
Tunisia, S.A., pay to Mr. Pilger the sum of $125,000 per year, payable in
advance, for the services he provides to the foreign subsidiary. Payments for
years 1998, 1999 and 2000 were paid to Mr. Pilger when due. The Company and Mr.
Pilger entered into a "Memorandum of Understanding" during December 2001
regarding the 2001 and 2002 payments not made to him.
In that "Memorandum of Understanding", Mr. Pilger and the Company
agreed to the following: The obligation of the Company to Mr. Pilger as of
December 31, 2001 was $265,200 which includes interest of $15,200, a rate of 8%
per annum on the unpaid amounts of $250,000. Mr. Pilger was indebted to the
Company at December 31, 2001 in the amount of $44,535, which includes interest
of $926, a rate of 8% per annum on the unpaid amounts of $43,609. The net
obligation between the Company and Mr. Pilger as of December 31, 2001 was
$220,665 in favor of Mr. Pilger. As part of the "Memorandum of Understanding",
the following payment schedule was agreed upon: Mr. Pilger agreed to accept and
was paid a payment of $80,665 on January 31, 2002 and the balance of $140,000,
plus interest at a rate of 8% per annum, is payable monthly commencing February
1, 2002, in payments of $5,000 principal per month, plus interest on the unpaid
balance. (Such payments are evidenced by a Promissory Note made by the Company
to Mr. Pilger with certain acceleration clauses for payment by the Company). The
Company recorded a Deferred Charge of $93,750 regarding this transaction at
December 31, 2001.
Note 8 - Long-Term Debt
December 31, September 30,
2001 2001
-------- --------
Mortgage payable, 11.5%............ $ 79,534 $ 76,841
Note due minority interest,
zero, no discount................ - -
Equipment lease, 12% .............. 41,810 -
-------- --------
Total debt ...................... 121,344 76,841
Less current obligation............ 106,248 76,841
-------- --------
Total long-term debt ............ $ 15,096 $ -
======== ========
Mortgage payable, 11.5%. Note payable, interest at 11.5%, collateralized by real
estate, payable in monthly installments of $1,245 with a final payment of
$72,842 due in June 2002.
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 December
31, 2001 and 2000 there were no advances under the line-of-credit.
Equipment lease, 12.5%. As of December 31, 2001, the Company reclassified an
operating lease to a capital lease. This lease is for the CD cutting machine
used by BounceBackMedia. The equipment lease is a three-year lease ending in May
of 2003. There is a $1 purchase option at the end of the lease.
13
Note 9 - Advance Deposit
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 a Conditional Termination Agreement ("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 and on August 31, 1999, the
Pokagon Tribe ratified the Management and Development Agreement solely with
Lakes Gaming to build a Michigan casino. The "Condition" terminating the
"Agreement" was met and became effective. The terms of the "Agreement" call for
the payment by Lakes Gaming, Inc. to the Company of fees equating to $12.4
million over five years once the casino opens and the advance payment of $2
million of these fees received by the Company on August 31, 1999. The
"Agreement" requires the Company to return the advance after five years if the
casino has not opened.
The Agreement with Lakes Gaming, Inc. contains additional fees the
Company can earn in the aggregate of $3.7 million contingent on certain events
that may occur, such as the Tribe building an additional casino in Indiana and
selecting Lakes Gaming as the manager, the location of the Indiana casino, and
other events. However, at this time, there is no plan by the Pokagon Indians to
pursue this additional casino.
The Company is not scheduled to receive any further payments from Lakes
Gaming until the casino opens. Lakes Gaming commenced site development of the
Michigan casino in 2001, but there can be no assurances provided with respect to
timing of completion of the casino.
No timetable for the opening of the casino is determinable. The compact
has been signed by the Governor, approved by the Michigan senate and House of
Representatives, and recognized as valid by the Secretary of the Interior. The
land for the casino has been purchased and site improvements initiated. The
contractor has been selected to build the casino. The Bureau of Indian Affairs
has indicated that they are prepared to accept the land in trust and approve the
casino agreements between Lakes Gaming and the Pokagon Band of Potawatomis upon
a favorable outcome in the legal action between Taxpayers of Michigan Against
Casinos (T.O.M.A.C.) versus the Bureau of Indian Affairs. Until there is a
favorable outcome to this legal action, no timetable for the opening of the
casino can be determined. The Company expects an eventual favorable outcome and
opening of a casino in New Buffalo, Michigan.
Note 10 - Contingent Liability
As part of the consideration given for the assets purchased from Raw
Data, Inc., BounceBackMedia.com, Inc., issued a non-interest bearing note for
$65,000 due when and if BounceBackMedia.com, Inc., reached $8,000,000 in revenue
on a cumulative basis within its first two years. The $65,000 note payable was
not recorded since BounceBackMedia.com, Inc., achieving $8,000,000 in revenue on
a cumulative basis within its first two years was not probable. BBM's cumulative
revenues through December 31, 2001 were approximately $770,000. On December 31,
2001 this contingent liability expired, as BBM did not meet contractually
defined revenue targets.
Note 11 - Stock Repurchase
In April 1998, the Company's Board of Directors approved a stock
repurchase program allowing for the purchase of up to $1.5 million shares of the
Company's outstanding Common Stock. On October 5, 2001, the Company purchased
35,000 shares of BBTC outstanding stock. It is the Company's intent to retire
these shares. Prior to October 5, 2001, 191,050 shares had been purchased and
subsequently retired.
14
Note 12 - Subsequent Event
On January 24, 2002 and January 31, 2002 draws were made on the line of
credit totaling $200,000. These draws make the line of credit fully drawn.
On February 7, 2002 the Company and Mr. Pilger amended Mr. Pilger's
employment agreement with the Company to restructure the terms of an arrangement
between Mr. Pilger and the Company so as to extend the period during which a
previous loan by the Company to Mr. Pilger was forgiven.
On March 22, 2002, the United States District Court, District of
Minnesota, rejected all but one of the motions made by Harrah's (NYSE-HET) to
dismiss various counts in a complaint filed by the Company against Harrah's and
certain of its officers. The complaint concerns the 1995 and 1996 agreements
between the Company and Harrah's to jointly develop and manage gaming facilities
for the Pokagon band of Potawatomi Indians in Michigan and Indiana. Judge Ann
Montgomery left standing the Company's claims for breach of contract, breach of
fiduciary duty and accounting under partnership law and claims against certain
officers of Harrah's for aiding and abetting the alleged inappropriate
activities by Harrah's. The court dismissed the Company's claim for tortuous
interference with contract. The court specifically found that "the relationship
between [the Company] and Harrah's constitutes a partnership or joint venture."
On Friday, March 29, 2002, Washington D.C. Federal District Court Judge
James Robertson dismissed the majority of claims in a lawsuit against the U.S.
Department of the Interior, which was brought by Taxpayers of Michigan Against
Casinos ("TOMAC"). The lawsuit alleged that the Pokagon Band of Potawatomi
Indians of Michigan did not fit the established criteria of a tribe entitled to
operate a casino. It also alleged that the Department of Interior did not act
properly when it took 675 acres of land in southwestern Michigan, located in New
Buffalo Township, into trust for the tribe. The single issue Judge Robertsons'
opinion did not resolve concerns TOMAC's allegation that the Department of
Interior took the Pokagon's land into trust before a proper environmental impact
study was completed. Judge Robertson has scheduled oral argument regarding this
issue for May 2. If it is permitted to move forward, the tribe intends to build
a $160 million casino on 51 of the 675 acres taken into trust. The tribe also
plans to include a hotel and restaurant in addition to its 150,000 square feet
of gaming space.
15
ITEM 2. 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. All references to dollar amounts are in U.S. dollar.
CONTINUING OPERATIONS
The Company's revenues from continuing operations were $548,765 and
$543,642 during the three-months ended December 31, 2001 and 2000.
The Company is in a transitional business phase whereby the Company is
shifting its business focus from solely E-commerce. As such, the Company does
not have any significant domestic revenue stream and its foreign subsidiary
contributes up to a maximum of $40,000 per month. Thus, management continues to
work toward reducing its overhead expenses during this period.
BOUNCEBACKMEDIA.COM, INC.
BounceBackMedia.com, Inc., a newly formed subsidiary of the Company,
commenced operations on December 31, 1999 when it purchased all the assets of
Raw Data Corp. for $85,000 cash, non-interest bearing note for $65,000 due when
and if BounceBackMedia.com, Inc., reached $8,000,000 in revenue on a cumulative
basis within its first two years, and 20% of BounceBackMedia.com, Inc., common
stock. The Company recognized $81,500 in goodwill. The $65,000 note payable was
not recorded since BounceBackMedia.com, Inc., achieving $8,000,000 in revenue on
a cumulative basis within its first two years, was not probable. On December 31,
2001 this contingent liability expired, as BBM did not meet contractually
defined revenue targets.
Revenues for the three months ended December 31, 2001 were $8,557.
Operating expenses for the same period, including cost of goods sold, wages,
marketing, promotional expense and office expenses were $39,694. This compares
to revenues of $92,952 and operating expenses of $204,464 for the three months
ended December 31, 2000. Operating revenues for 2001 were impacted by the
relocation to Ocean Springs, Mississippi as well as a change in personnel among
other factors. The decrease in operating expenses from 2000 to 2001 is directly
related to the reduction in overhead expenses related to the relocation.
BBM executed a contract with SG Partnership in January 2002 to provide
professional services for multimedia work. It is the intent of the Company to
attempt to reduce its variable overhead expenses and correct its overall cost of
goods as a percent of revenue. In executing this contract for labor, it is the
Company's desire to maintain a qualified multimedia staff that are incentivised
and rewarded through BBM's revenue growth.
GAMING, TUNISIA
Revenue for the three months ended December 31, 2001 was $540,208
compared to $450,690 for the same period in 2000, an increase of $89,518, or
20.0%, which was primarily due to increases in net win from gaming activities,
which is the difference between gaming wins and losses. This increase generally
offset the decrease in patron count. Operating expenses including project,
general and administrative costs, depreciation and cost of sales for the
three-month period ending December 31, 2001 increased $227,726 from $542,966 in
2000 to $770,692 in 2001. This increase was primarily due to an increase in
legal expenses. The operating loss was ($230,485) for the three months ended
December 31, 2001 compared to a loss of ($92,276) for the same period in 2000.
16
GENERAL AND ADMINISTRATIVE
The Company's general and administrative expenses aggregated $586,237
compared to $476,330, an increase of $109,907 for the three-month period ending
December 31, 2001 and 2000. The increase was primarily due to recognition of
foreign director fees of $156,250 due to Mr. Pilger per his employment contract.
This charge includes $125,000 for fiscal year 2001 and $31,250 for the three
months ended December 31, 2001. This charge was offset by the reduction of
overhead with the sale of the entertainment segment and a reduction in legal
expenses.
INTEREST EXPENSE AND INCOME
Interest expense totaled $29,052 for the three-month period ended
December 31, 2001 compared to $0 for the same period in 2000. The increase of
$29,052 was primarily due to the amortization of discounts in prior periods of
bonds paid off in August 2001. Interest income for the three-month period ended
December 31, 2001 was $12,126 compared to $18,669 for the same period in fiscal
2000, a decrease of $6,543. This decrease is due to a combination of a reduction
in interest rates applied to a lower daily average corporate cash balance.
MINORITY INTEREST
All amounts due from the 20% minority interest of BounceBackMedia.com,
Inc. were eliminated in September of 2001 due to continued losses of
BounceBackMedia.com, Inc. in this segment.
INCOME TAXES
The Company recognized a tax benefit of $200,000 for the three-month
period ended December 31, 2001 due principally from current net operating loss.
The Company's effective tax rates vary from statutory tax rates primarily as a
result of net losses of its foreign subsidiary for which there are no tax
benefits.
DISCONTINUED OPERATIONS
No discontinued operations existed during the current three-month
period since it was sold January 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, the Company had cash available domestically of
$881,579 compared to $1,313,125 as of September 30, 2001. For the three-month
period ending December 31, 2001, the Company received no management fees from
CRC of Tunisia, S.A. Although contracted to earn $40,000 per month (a total of
$480,000 per year), the management fee is paid on a monthly basis based on
sufficient available cash flow from operations. Cash and cash equivalents
reflected on the Balance Sheet include cash from the foreign subsidiary of
$539,514 and $550,234 at December 31, 2001 and September 30, 2001. Total cash on
the Balance Sheet , including domestic and foreign, totals $1,421,093 and
$1,863,359 for December 31, 2001 and September 30, 2001.
The Company expects cash on hand and from continuing operations to be
sufficient to meet capital expenditures, debt service and working capital
requirements in fiscal 2002. The Company also has a line-of-credit arrangement
with a regional bank, which provides for borrowing up to $200,000 at prime plus
1% interest rates. 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
December 31, 2001, there were no advances under the line-of-credit. As of
January 31, 2002, the line of credit was drawn in full.
17
The management fee, when available to be paid, is currently the only
cash able to be transferred to the Company from its foreign subsidiary.
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 advance deposit in 2001 and 2000. As the
Company cannot make any assurances that sufficient cash will be on hand as of
August 2004 to make repayment if necessary to Lakes Gaming, the Company will be
required to look to an outside source for these funds. The Company would be more
likely than not be required to renegotiate the terms of repayment with Lakes
Gaming. Payment of the remaining $14.1 million is contingent upon opening of the
casino and other events occurring in the future. Site development of a Michigan
casino by Lakes Gaming commenced in 2001. Lakes has the right under the terms of
the Company's Revised Conditional Release and Termination agreement to retire
its debt obligation to the Company of approximately $11.0 million by making a
one-time discounted 10% present value payment of approximately $8.0 million.
However, there can be no assurances as to the timing of completion of the casino
or its opening. No timetable for the opening of the casino is determinable. The
compact has been signed by the Governor, approved by the Michigan senate and
House of Representatives, and recognized as valid by the Secretary of the
Interior. The land for the casino has been purchased and site improvements
initiated. The contractor has been selected to build the casino. The Bureau of
Indian Affairs has indicated that they are prepared to accept the land in trust
and approve the casino agreements between Lakes Gaming and the Pokagon Band of
Potawatomi upon a favorable outcome in the legal action between Taxpayers of
Michigan Against Casinos (T.O.M.A.C.) versus the Bureau of Indian Affairs. Until
there is a favorable outcome to this legal action, no timetable for the opening
of the casino can be determined. The Company expects an eventual favorable
outcome and opening of a casino in New Buffalo, Michigan.
On June 21, 2001, the Company received notice of an assessment from the
Tunisian Department of Finance for an amount totaling 4.6 million dinars ($3.13
million U.S. equivalent, based on exchange rate on February 4, 2002). This is
related to unpaid gaming tax, a slot tax assessment, and an adjusted income tax
assessment. The Company has retained the services of a Tunisian tax attorney,
who is in the process of appealing this assessment. Based on the tax attorney's
review, approximately $3.1 million dinars ($2.11 million U.S. equivalent, based
on exchange rate on February 4, 2002) of this assessment relates to Tunisian
statutory regulations, which require businesses to maintain original transaction
documents for Tunisian tax purposes. Samara confiscated the majority of Casino
Caraibe's financial operating and reporting records last December 2000, which
records tracked both loans from the Company to its 85%-owned subsidiary, CRC of
Tunisia as well as purchases made by the Company of equipment, furniture and
fixtures for the sole benefit of CRC of Tunisia, beginning in 1997. Thus, our
tax attorney has recommended CRC of Tunisia operation reserve 1.5 million dinars
($1.02 million U.S. equivalent, based on exchange rate on February 4, 2002) to
satisfy this assessment. $1,074,499 has been accrued for Tunisian slot taxes.
Based on the advice of former counsel, the Company's position was that it was
not subject to a tax on slot revenue under Tunisian gaming law.
During the three months ended December 31, 2001 there were no capital
expenditures.
SEASONALITY
The casino in Tunisia is 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 and financial condition.
18
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.
RESTATEMENT
For purposes of this Form 10-QSB/A, and in accordance with Rule 12b-15
under the Securities Exchange Act of 1934, as amended, each item of the December
31, 2001 Form 10-QSB as originally filed on February 14, 2002 that was affected
by the restatement has been amended and restated in its entirety. No attempt has
been made in this Form 10-QSB/A to modify or update other disclosures as
presented in the original Form 10-QSB except as required to reflect the effects
of the restatement.
19
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 various agreements with the Company 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 dismissing the Company's suit against
Harrah's and the suit against Harrah's was remanded 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. On October 3, 2001 Harrah's filed a
motion to dismiss with the US District Court District of Minnesota claiming that
the contract between Harrah's and the Company by its terms precludes the Company
from asserting a claim and further that the Company's claims are speculative.
The Company and its attorneys plan on vigorously disputing this motion. Pending
a favorable ruling by the court relative to such motion, a tentative trial date
is set for November, 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. 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
responded to this petition. A trial date is scheduled for April 2002. The
Company and Mr. Pilger each plan to vigorously defend themselves.
On May 13, 2001, Roger Birks, the former CEO of BBM, an 80%-owned
subsidiary of the Company, commenced an action in Clark County District Court,
Nevada, against BBM, a Nevada company, and John J. Pilger, President of BBM and
CEO of the Company, alleging: breach of BBM Purchase Agreement by the Company
for failure to use its best efforts to capitalize BBM; 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 BBM Purchase Agreement and Plaintiff's Employment Agreement.
20
Plaintiff seeks compensatory and punitive damages and has not claimed a specific
amount of damages, but claims such damages exceed $40,000. The Plaintiff also
seeks reimbursement of attorney fees. Mr. Pilger has filed counterclaims against
Mr. Birks alleging that Birks has willfully caused these legal proceedings to
coerce a settlement and Mr. Birks is guilty of abuse of process. Mr. Pilger
further alleges Birks has acted in bad faith with malice; and is entitled to an
award for punitive and exemplary damages in excess of $10,000. The Company
denies these allegations and plans to vigorously defend itself in this matter.
CRC of Tunisia, S.A., the 85%-owned subsidiary of the Company,
initiated arbitration proceedings against the casino lessor, Samara Casino Inc.
and the Mahdoui family. The Company's position is that lessor took unauthorized
advances totaling $227,229, duplicated rent payments of $210,294 and to date has
been unwilling to treat these advances as prepaid rent. A three-panel Tunisian
arbitration hearing is tentatively scheduled to begin as early as March 2002.
On December 11, 2001 the Company issued a press release and a Form 8-K
with respect to a civil complaint "Kevin M. Kean pltf vs. John J. Pilger; et al,
including BounceBack Technologies.com dfts", filed by Kevin M Kean in Jackson
County, Mississippi Circuit Court, against the Company and each of the members
of its Board of Directors on November 21, 2001. Additionally, the Company
received on November 28, 2001 and December 26, 2001 from Kevin M. Kean, a
shareholder, a notice of demands that the Board of Directors of the Company
initiate actions to rectify alleged wrong doing committed by certain officers
and directors of the Company. The Company is currently interviewing qualified
independent individuals to investigate the claims. The Company hopes to appoint
one or more independent investigators in the near future.
Item 2. Exhibits and Reports on Form 8-K
a) During the quarter ended December 31, 2001, the Company filed the
following reports on Form 8-K:
Current Report on Form 8-K filed on December 13, 2001,
regarding Item 5, which announced receipt of a Civil Action
against the Board of Directors, as well as a demand letter to
the Board of Directors.
b) Amendment dated February 7, 2002, to existing Employment
Agreement between John J Pilger, CEO, and Company.
21
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.
February 14, 2002
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
February 14, 2002 s/John J. Pilger
----------------
John J. Pilger, Chief Executive Officer, President
and Chairman of the Board of Directors ("principal
executive officer")
February 14, 2002 s/John J. Pilger
----------------
John J. Pilger, Chief Financial Officer and Chief
Accounting Officer ("principal financial and
accounting officer")
22