Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2002
[   ]		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from ____________ to ____________

Commission File Number: 000-27339

BINGO.COM, INC.

Suite 1405, 1166 Alberni Street,
Vancouver, British Columbia,
Canada, V6E 3Z3
(Address of Principal Executive Offices)

(604) 694-0300
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]        No [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of outstanding shares of the Registrant’s Common Stock, par value $0.001 per share, was 11,104,608 on August 14, 2002.

Table of Contents

BINGO.COM, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2002

TABLE OF CONTENTS

-2-

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements.

BINGO.COM, INC.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)

Commitments (note 5)
Subsequent events (note 6)

See accompanying notes to consolidated financial statements.

-3-

Table of Contents

BINGO.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
SIX MONTHS ENDED JUNE 30, 2002 AND 2001

(UNAUDITED)

See accompanying notes to consolidated financial statements.

-4-

Table of Contents

BINGO.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(EXPRESSED IN U.S. DOLLARS)
SIX MONTHS ENDED JUNE 30, 2002

(UNAUDITED)

See accompanying notes to consolidated financial statements.

-5-

Table of Contents

BINGO.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
SIX MONTHS ENDED JUNE 30, 2002 AND 2001

(UNAUDITED)

See accompanying notes to consolidated financial statements.

-6-

Table of Contents

BINGO.COM, INC.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Six months ended June 30, 2002 and 2001
(Unaudited)

1. Basis of Presentation:

The accompanying unaudited interim financial statements have been prepared in conformity with generally accepted accounting principles applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. In the opinion of management, the unaudited interim financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. These financial statements should be read in conjunction with Bingo.com, Inc.’s (the “Company”) audited consolidated financial statements and notes thereto for the year ended December 31, 2001, included in the Company’s Annual Report on Form 10-K, filed April 1, 2002 with the Securities and Exchange Commission. The results of operations for the interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

Certain comparative figures have been reclassified to conform to the presentation adopted in the current period.

2. Going Concern:

These unaudited interim consolidated financial statements have been prepared on the going concern basis, which presumes the realization of assets and the settlement of liabilities and commitments in the normal course of operations. The application of the going concern basis is dependent upon the Company achieving profitable operations to generate sufficient cash flows to fund continued operations, or, in the absence of adequate cash flows from operations, obtaining additional financing.

The Company has reported losses in the last three fiscal years, and has an accumulated deficit of $8,863,000 at June 30, 2002, and, until the year ended December 31, 2001, recurring negative cash flows from operations. The Company has had positive cash flow of $24,000 from operations for the six months ended June 30, 2002. Management continues to review operations in order to identify additional strategies designed to generate cash flow, improve the Company’s financial position, and enable the timely discharge of the Company’s obligations. If management is unable to identify sources of additional cash flow in the short term, it may be required to reduce or limit operations.

-7-

Table of Contents

BINGO.COM, INC.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Six months ended June 30, 2002 and 2001
(Unaudited)

3. Debenture Payable:

On April 16, 2001, the Company received a loan from and issued a secured convertible debenture to Redruth Ventures Inc., a British Virgin Islands corporation, for $750,000, and to Bingo, Inc., an Anguilla corporation, for $500,000 (collectively, “the Lenders”). Bingo, Inc. was not a related party when the debenture agreement was signed; however, a current director and officer of the Company is the potential beneficiary of several discretionary trusts that hold approximately 80% of Bingo, Inc.

Under the terms of the debenture, interest shall accrue on the principal amount from time to time outstanding under the debenture at a fixed rate of 12% per annum through April 16, 2003, at which time the interest will become payable. Thereafter, interest shall accrue and be payable on the first business day of each succeeding quarter through and including April 16, 2006. All principal, accrued but unpaid interest and any other amounts due are due and payable at maturity on April 16, 2006. The accrued interest on the debenture as at June 30, 2002 is $131,000 (June 30, 2001 — $10,000). This is included under Accrued Liabilities.

The Company has the option to pay all accrued interest in cash, common stock of the Company, or a combination of both cash and common stock. Any amounts remaining unpaid on the debenture on the maturity date, whether principal, interest or other amounts due, shall be paid in full in cash on such date. Any common stock of the Company delivered to the Lenders in payment of the debenture will be valued at $0.25 per share.

The Lenders received a total of 12,000,000 common stock purchase warrants with an exercise price of $0.25 per share exercisable for a period of three years from the date of the debenture. The Lenders have the right, but not the obligation, to elect to convert all of the outstanding principal amount of the debenture into shares of the Company’s common stock at a conversion price of $0.125 per share until the third anniversary date of the debenture. The common stock that would be issued upon conversion of the debenture will be subject to certain resale restrictions, as prescribed in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). The debenture is secured by all assets of the Company.

On May 21, 2002, Bingo, Inc. purchased from Redruth Ventures Inc., in a transaction outside the United States pursuant to an exemption from registration under Regulation S of the Securities Act, the portion of the debenture issued to Redruth Ventures Inc. Non-U.S. persons located outside the United States purchased the portion of the debenture from Redruth Ventures Inc. As a result of this transaction, Bingo, Inc. has the potential to become the largest single shareholder and a majority shareholder in the Company should Bingo, Inc. elect to convert any or all of the principal amount of the debenture into shares of the Company’s common stock on or before April 16, 2004, or if the Company elects to repay the principal amount outstanding, and any accrued interest, in shares of the Company’s common stock pursuant to the terms of the debenture.

-8-

Table of Contents

BINGO.COM, INC.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Six months ended June 30, 2002 and 2001
(Unaudited)

3. Debenture Payable (continued):

In addition, on May 21, 2002, Redruth Ventures Inc. agreed to surrender for cancellation all the warrants issued to them in connection with the debenture, which the warrants entitled them to purchase up to 7,200,000 shares of common stock at a purchase price of $0.25 per share in exchange for eighteen (18) months of unused advertising inventory on the bingo.com website.

As at June 30, 2002, the Company had drawn down a total of $1,250,000 in accordance with the terms of the debenture.

4. Share Capital:

No additional share capital was issued during the six months ended June 30, 2002. 250,000 shares of common stock were issued during August 2002 to the former Chief Executive Officer of the Company. The agreed value of $42,500 for these shares was recorded in accrued liabilities at June 30, 2002.

5. Commitments:

During the quarter ended June 30, 2002, the Company, directly or through its subsidiaries, completed or amended the following agreements:

(a)		Agreement with CYOP Systems Inc. (“CYOP”) granting the Company a license for a software program known as CrediPlay.
		The original agreement signed in fiscal 2001 was amended by verbal agreement during the quarter ended March 31, 2002. Pursuant to the terms of the original agreement, the

-9-

Table of Contents

BINGO.COM, INC.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Six months ended June 30, 2002 and 2001
(Unaudited)

5. Commitments (continued):

		license fee payable to CYOP was 25% of the revenue derived from the Skill-Bingo game (as defined in the agreement) received by the Company, with a minimum monthly fee of $60,000. The minimum monthly license fee payable of $60,000 was removed under the terms of the verbal amendment. The service fee payable to CYOP under the terms of the agreement is 5% of the revenue derived by the Company from the Skill-Bingo game (as defined in the agreement), with a minimum monthly service fee of $18,000. The minimum monthly service fee payable of $18,000 was removed pursuant to the terms of the verbal amendment.
		The Company and CYOP were unable to negotiate an extension or revision of the previously signed agreements. Therefore during the quarter ended June 30, 2002 the Company agreed to assign to CYOP all the rights, titles, liabilities and interest in Skill-Bingo. This includes all the following:

	•		The agreement between FYRC Inc. and Bingo dated September 18, 2001 concerning the patents of Skill-Bingo and Skill-Bingo Inventions;
	•		The Skill-Bingo game software;
	•		The Bingo.com-owned website located at http:www.bigrbingo.com;
	•		The trademark “BiGr Bingo”; and
	•		The BiGr bingo customer deposits.

In exchange CYOP has agreed to release and indemnify the Company and its subsidiaries from all obligations and liabilities relating to the Skill-Bingo game and the BiG’rBingo.com website. CYOP also guarantees the Company an irrevocable, worldwide, perpetual lice