Dormant account
Dec 12, 2000
November 14, 2002

Quarterly Report (SEC form 10-Q)
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations of Operations
The following Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties, as described below., Inc.s (the Company,, we, or us) actual results could differ materially from those anticipated in these forward-looking statements. The following discussion should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto included in Part I Item 1 of this Quarterly Report, and the audited consolidated financial statements and notes thereto and Managements Discussion and Analysis of Financial Conditions and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001.


All statements contained in this Quarterly Report on Form 10-Q and the documents incorporated herein by reference, as well as statements made in press releases and oral statements that may be made by us or by officers, directors or employees acting on our behalf, that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. Readers should consider statements that include the terms believe, belief, expect, plan, anticipate, intend or the like to be uncertain and forward-looking. In addition, all statements, trends, analyses and other information contained in this report relative to trends in net sales, gross margin, anticipated expense levels and liquidity and capital resources, constitute forward-looking statements. Potential risks and uncertainties include, among others, those set forth in this Item 2. Particular attention should be paid to the cautionary statements involving the Companys limited operating history, the unpredictability of its future revenues, the Companys need for and the availability of capital resources, the evolving nature of its business model, and the risks associated with systems development, management of growth and business expansion. Except as required by law, the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. In this connection, readers should consider the risks more fully described in the Companys Annual Report on Form 10-K for the year ended December 31, 2001 filed with the Securities and Exchange Commission (the SEC) and should not place undue reliance on any forward-looking statements.

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The Company is in the business of developing and operating a bingo based Web portal designed to provide a variety of free games, and other forms of entertainment, including an online community, chat rooms, contests, sweepstakes, tournaments, and more. The Company envisions becoming the preeminent bingo-based Web portal on the Internet, using its domain name and incorporating a variety of games and content to attract and retain a large number of subscribers. The Companys existing Website has attracted over 800,000 registered users; the Company intends to continue to build on this subscriber base to further develop its online presence.

The Company generates revenue principally from the free Website, which is supported by advertising revenue obtained by displaying advertisements on our Web site and delivering advertisements to our players by email.

The free site provides content to our players in the form of free-to-play, multiplayer theme bingo games, such as Astrology Bingo, Cupid Bingo, and the like, as well as online video poker, sweepstakes and slot machines. We also offer our registered players other forms of entertainment such as fortune telling, chat rooms, and member profiles.

We intend to continue to build on the success of the existing free site by offering a greater depth and variety of content that we expect will hold subscribers and allow us to generate more revenue through advertising. We also intend to add enhanced content available to users for a monthly subscription charge in order to further grow our revenue base. We intend to provide non-North American players with the opportunity to play traditional bingo for cash.

The Company has incurred significant losses since inception, and as of September 30, 2002 had an accumulated deficit of $9,075,000. will continue to incur losses until revenue grows sufficiently to cover ongoing operating costs, including the costs of sales and marketing efforts. There can be no assurances that this will occur. has made a significant investment in the development of the Companys website, purchase of domain name, branding, marketing, and maintaining operations.

As of the date of this report, the Company has utilized substantially all of its available funding. The Companys continuation as a going concern will depend on its ability to generate sufficient cash flow from operations to cover operating costs, or to raise additional capital. No assurance can be given that the Company will be able to generate adequate cash flow to fund ongoing operating costs or to raise additional funds. In the absence of sufficient cash flow, the Company may be required to limit operations.

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SOURCES OF REVENUE AND REVENUE RECOGNITION generates the majority of its revenue from the sale of advertising on its website. Advertising revenue is recognized as the advertising campaign or impressions and clicks are made on the website and the sale of our email address lists.

The Company manages its own sales of advertising; hosts the Companys Website; and serves its own ads.

In fiscal 2000, the Company adopted EITF No. 99-17 Accounting for Advertising Barter Transactions. EITF 99-17 provides that the Company recognize revenue and advertising expenses from barter transactions at the fair value only when it has a historical practice of receiving or paying cash for similar transactions. barters portions of the unsold advertising impressions generated by its website in exchange for advertising in media properties owned by third parties. The Company records revenues and costs for such barter transactions at the market value of the advertising exchanged, with no net income or loss recognized. Barter revenue totaled $2,500 for the nine months ended September 30, 2002 and $372,000 for the nine months ended September 30, 2001.



Revenue declined to $142,000 for the quarter ended September 30, 2002, a decrease of 57% from revenue of $334,000 for the same period in the prior year. The reduction in revenue for the third quarter of 2002 can be explained generally by the downturn in the North American economy and the erosion of the market for Internet advertising. More specifically, the Company had fewer people focused on selling advertising during the quarter ended September 30, 2002, largely because of the restructuring of the business of the Company that took place during the previous year and the cancellation of the outside parties sales contracts effected during the second quarter of 2002. In addition there has been a downturn in Internet advertising by online gaming companies due to certain credit card companies no longer accepting online gaming transactions. Therefore many of these companies have reduced their online advertising expenditures at website. Finally the summer months had a weaker than usual advertising expenditure by online advertisers.

Cost of revenue recorded cost of revenue of $31,000 during the quarter ended September 30, 2002, a drop of $113,000 or 79% compared to costs of $144,000 for the same period in the prior year. The gross margin increased to 78% in the quarter ended September 30, 2002 from 57% in the third quarter of the prior year. Cost of revenue consists primarily of commissions paid on the sale of advertising and the cost of hosting the website. The decrease in cost of revenue is due to fewer people focused on selling advertising therefore less commissions and fewer barter transactions than in the prior year quarter.

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Sales and marketing expenses

Sales and marketing expenses dropped to $28,000 for the quarter ended September 30, 2002, a decrease of $29,000 (51%) over 2001 third quarter expenses of $57,000. Sales and marketing expenses include principally costs for marketing, co-brand advertising and keyword buys for our game site. The balance of marketing and advertising expenses consists of payroll, consultant, and travel costs. All of these amounts decreased in 2002 as a result of changes to the business, particularly as a result of fewer employees being focused on selling. Subsequent to May 2002 the Company has taken over the advertising, Website hosting and ad serving itself.

General and administrative expenses

General and administrative expenses consist primarily of payroll costs for the Companys executive staff, accounting and administrative personnel, premises costs for the Companys office, legal and professional fees, and other general corporate and office expenses. General and administrative expenses decreased to $114,000 for the third quarter of 2002, a reduction of 65% over costs of $326,000 for the same period last year. General and administrative expenses declined from the prior year as a result of changes that took place during the previous year, including moving the Companys offices from California to Vancouver, and lower executive payroll. Company management also made greater efforts to control operating costs in order to reduce administrative and other expenses.

Depreciation and amortization

Depreciation and amortization includes depreciation on the Companys fixed assets, as well as amortization of the domain name. The Company capitalized the cost of the purchase of the domain name and is amortizing the cost over five years from the date of commencement of operations. Fixed assets are depreciated using the declining balance method over the useful lives of the assets, ranging from three to five years. Depreciation and amortization decreased to $130,000 during the quarter ended September 30, 2002, a reduction of 18% over costs of $159,000 during the same quarter in the prior year. The changes in depreciation and amoritzation can be explained due to the average age of the Companys assets being older in fiscal 2002, resulting in a lower depreciation base. Finally the decrease is additionally due to the write-down of capital assets in the second quarter of 2002.

Interest expenses

Interest expense consists of accrued interest on the convertible debentures and other debt instruments, such as leases.Interest expense increased to $52,000 for the three months ended September 30, 2002, an increase of 26% over interest expense of $41,000 for the same period in the prior year. The increase is attributable to the increase in the interest payable under the debenture issued by the Company in 2001. This increase is offset by the reduction in interest on Capital Leases due to outstanding debt on the Capital Leases reaching maturity.

Net loss and loss per share

Net loss for the three months ended September 30, 2002 amounted to $212,000, a loss of $0.02 per share, compared to a loss of $393,000 or $0.04 per share for the same period in 2001.

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The Company does not currently have an adequate source of reliable, long-term revenue to fund operations. As a result, is reliant on outside sources of funding. There can be no assurances that the Company will in the future achieve a consistent and reliable revenue stream adequate to support continued operations. In addition, there are no assurances that the Company will be able to secure adequate sources of new capital, whether it be in the form of share capital, debt, or other financing sources. had cash and cash equivalents of $35,000 and a working capital deficit of $1,162,000 at September 30, 2002. This compares to cash and cash equivalents of $14,000 and a working capital deficit of $1,055,000 at December 31, 2001. The Company continued to incur costs but did not secure adequate new revenue to cover the costs.

During the nine months ended September 30, 2002, used cash of $85,000 in operating activities compared to using cash of $603,000 in the same period in the prior year. The significant improvement in cash flow from operating activities in 2002 demonstrates the effectiveness of the Companys efforts to reduce operating costs in late 2001 and in 2002.

During the quarter ended September 30, 2002, received proceeds of $145,000 from the convertible debenture (Debenture B) issued by the Company in July 2002. The funds will be used to fund working capital requirements. The Debenture B bears interest at a rate of 12% per year and is due in July 2006.


Need for additional capital

The Company has recorded substantial operating losses and, as of September 30, 2002, has an accumulated deficit of approximately $9,075,000. The Company does not currently have adequate cash flow or existing revenue to provide operating capital until December 31, 2002. The Company is currently looking for new sources of revenue that it expects will help fund Bingo.coms business for the remainder of fiscal 2002. There can be no assurances that this will be achieved.

History of large operating losses

Since inception, the Company has not had adequate revenue to support operations, and has recognized substantially half of its revenues from barter transactions. In addition credit card companies are placing pressure on online gaming due to rejecting online gaming transactions. This in turn is reducing the advertising spent by online gaming companies. The Company is therefore investigating other sources of revenue. The Company has significantly reduced ongoing operating expenses. However, there can be no assurance that the Company will achieve positive cash flow and operating profitability.

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Success depends on key personnel; no key man life insurance

Future performance depends on the continued service of key personnel, and the ability to attract, train, and retain technical, marketing, customer support, and management personnel. The loss of one or more key employees especially Mr. T. M. Williams, the companys President and Chief Executive Officer could negatively impact the Company, and there is no key man life insurance in force at this time. Competition for qualified personnel is intense, and there can be no assurance that the Company will retain key employees, or attract and retain other needed personnel.


Volatility in stock price

The stock market and especially the stock prices of Internet related companies have been very volatile. This volatility may not be related to the operating performance of the companies. The broad market volatility and industry volatility may reduce the price of the Companys stock without regard to the Companys operating performance. The market price of the Companys stock could significantly decrease at any time as a result of this volatility. The uncertainty that results from such volatility can itself depress the market price of the Companys stock.

Dependence upon, and risks related to, the Internet

While management believes that acceptance and use of the Internet will continue to increase at rapid rates and that additional hits to the site will be made, there can be no assurances that such increase will continue to develop, or that use of the Internet as a means of communication and entertainment will continue or increase. If growth in the use of the Internet does not continue, there may not be an increase in the number of hits to the Companys Website at the rates or for the purposes management has assumed. This could, in turn, adversely impact the Company and the results of its business operations. Further, even if acceptance and use of the Internet does increase rapidly, but the technology underlying the Internet and other necessary technology and related infrastructure does not effectively support that growth, the Companys future would be negatively impacted.