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Bingo Anguilla common stock into which such non dissenting shares of Bingo Florida were converted in the merger and the holder of those shares is not required to surrender its certificates for a certificate issued by Bingo Anguilla. After the effective date of the merger, any holder of an outstanding certificate representing non dissenting shares of Bingo Florida may at the stockholder's option, surrender those certificates to the Company's transfer agent, Interwest Transfer Co. Inc., 1981 East, 4800 South, Suite 100, Salt Lake City, Utah 84117. Upon surrender, each stockholder will be entitled to receive in exchange for its certificates, new certificates representing the number of shares of Bingo Anguilla into which the rendered shares were converted by the merger. All registered owners of Bingo Florida common shares remain entitled to exercise any voting or other rights with respect to their shares and to receive dividends and other distributions upon the shares of the surviving corporation Bingo Anguilla until such time as the stockholder surrenders his or her certificates of Bingo Florida for replacement by Bingo Anguilla certificates.
Each certificate representing stock of the surviving corporation, Bingo Anguilla, issued in the merger will bear the same legends, if any, with respect to restrictions on transferability as the certificates of Bingo Florida which were given in exchange therefore.
Effective Time
The merger will be effected no sooner than 20 days following the effective date of this information statement/prospectus and mailing of this information statement/prospectus to stockholders of Bingo Florida. No material uncertainty exists as to any of the conditions to closing of the merger.
Accounting Treatment
The merger is expected to be accounted for as a reverse merger transaction, with Bingo Anguilla being the surviving company for financial reporting purposes. As a result, the consolidated financial statements will be issued under the name of Bingo Anguilla but are considered a continuation of the consolidated financial statements of Bingo Florida and therefore the assets and liabilities are recorded in Bingo Anguilla financial statements at their historical value.
U.S. Federal Income Tax Consequences
Tax Consequences for Bingo Florida
The transfer would be treated for U.S. federal tax purposes as though we had transferred our assets from a U.S. corporation to an Anguilla B.W.I. corporation. We would be subject to U.S. federal tax upon our transfer to the extent that the fair market value of our property exceeds the
historic basis, for U.S. tax purposes, in the property. After we become an Anguilla B.W.I. corporation, we will be subject to U.S. withholding tax on any dividends paid to us by a U.S. corporation, as well as a 10% withholding tax on interest we get from our investments in U.S. debt securities.
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Tax consequences for Bingo Florida shareholders.
Tax matters are often complicated and the tax consequences to you from the transfer will depend in part on the facts of your own situation. You should consult your tax advisors, as you think appropriate, for a full understanding of the tax consequences to you from the transfer. If you are a U.S. resident shareholder, the transfer of shares will generally result in no recognized gain for U.S. federal income tax purposes.
For a further discussion of the U.S. federal income tax consequences of these transactions, see "The Merger - United States Income Tax Consequences of the Transfer to Anguilla, B.W.I.". Refer to Exhibit 8.1 for the opinion on the taxation effects for Bingo Florida shareholders. Different tax consequences may apply to you because of your individual circumstances or because special tax rules apply to you.
You should consult your tax advisor for a full explanation of the tax consequences of the merger to you.
Material Differences Between the Rights of Bingo Florida Stockholders and Bingo Anguilla Stockholders
For a discussion of the material differences between the rights of Bingo Florida and Bingo Anguilla stockholders see "Comparison of Stockholder Rights" on page 48.
PRO FORMA FINANCIAL INFORMATION
Due to the fact that Bingo.com Ltd. was incorporated solely for the purpose of facilitating a merger with our company, Bingo Florida, there will be no difference in the presentation of the pro forma financial statements or the unaudited financial statements for the period ended September 30, 2004.
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September 30, 2004
December 31, 2003
(Unaudited)
(Audited)
Assets
Current assets:
Cash
$
55,993
$
34,046
Accounts receivable, less allowance for
doubtful accounts of $nil (2003 - $nil)
43,975
67,574
Inventory
1,127
663
Prepaid expenses
22,911
14,229
Deferred tax asset, less valuation allowance of
$3,104,499 (2003 - $2,905,525)
-
-
Total Current Assets
124,006
116,512
Equipment, net
42,417
45,247
Other assets
7,523
10,797
Domain name rights and intangible assets
1,297,202
1,304,617
Total Assets
$
1,471,148
$
1,477,173
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable
$
464,979
$
617,903
Accounts payable - related party
157,342
192,068
Accrued liabilities
50,201
86,777
Accrued liabilities - related party
7,342
372,397
Unearned revenue
76,163
24,511
Loan payable - related party
162,309
190,858
Total Current Liabilities
918,336
1,484,514
Debenture payable
-
1,395,000
Less warrants - debenture discount
-
(259,823)
Net Debenture Payable
-
1,135,177
Total Liabilities
918,336
2,619,691
Commitments and contingencies
Stockholders' equity (deficit) :
Common stock, $0.001 par value, authorized 50,000,000
shares; issued and outstanding 24,249,086 shares
(December 31, 2003 - 11,104,608 shares)
24,249
11,105
Additional paid-in capital
10,048,949
8,231,531
Accumulated deficit
(9,544,966)
(9,409,734)
Accumulated other comprehensive income:
Foreign currency translation adjustment
24,580
24,580
Total Stockholders' Equity (Deficit)
552,812
(1,142,518)
Total Liabilities and Stockholders' Equity (Deficit)
$
1,471,148
$
1,477,173
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MATERIAL CONTRACTS WITH THE COMPANY BEING ACQUIRED
Other than the agreement and plan of merger discussed in this prospectus/information statement and attached as Exhibit 2.1, there are no past, present or proposed material contracts, arrangements, understandings or relationships between Bingo Florida and Bingo Anguilla.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No named expert or counsel for either Bingo Florida or Bingo Anguilla has or will receive a substantial interest, direct or indirect, in our company or its subsidiaries.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
THE COMPANIES WHICH ARE MERGING
B. INFORMATION ABOUT BINGO FLORIDA
BUSINESS
Introduction
Bingo Florida (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 bingo.com domain name and incorporating a variety of games and content to attract and retain a large number of subscribers. The Company's existing website has attracted over 1,000,000 registered users and served over 3,000,000,000 bingo cards since its inception. As there are a fixed number of bingo cards (3) per player per game, the total number of cards served provides a direct correlation to the number of games played (over 1,000,000,000) and a general indication of the levels of Internet traffic generated by the Company's website. The levels of Internet traffic have a direct impact on the Company's revenues as, generally, the greater the Internet traffic, the greater the numbers of advertisements served. 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, Secret Garden Bingo, and the like, as well as
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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.
References in this prospectus/information statement to "the Company," "we," "us," and "our" refer to Bingo Florida and its subsidiaries, which are described below.
Our executive offices are located at 1166 Alberni Street, Suite 1405, Vancouver, British Columbia, Canada, V6E 3Z3. Our telephone number is (604) 694-0300.
History and Corporate Structure
The Company was originally incorporated in the State of Florida on January 12, 1987, under the name Progressive General Lumber Corp. ("PGLC') with an authorized share capital of 7,500 shares of common stock with a $1.00 par value per share. PGLC was for the most part inactive until January 1999.
On July 17, 1998, PGLC filed Articles of Amendment and increased its authorized share capital to 50,000,000 common shares with a $0.001 par value per share. The shares were also subject to a forward stock split by way of a stock dividend to increase the number of then issued and outstanding shares on a 200 shares for 1 share basis.
In January 1999, management of PGLC changed and the new management filed Articles of Amendment to the Articles of Incorporation of PGLC to amend the Articles of Incorporation and change the name of PGLC to Bingo Florida effective January 22, 1999. Concurrent with the name change the Company acquired the use of the second level domain name bingo.com and embarked on its business strategy to become a leading online provider of bingo based games and entertainment.
In 1999, we raised an aggregate of $7,057,457 in capital, through the issuance of 8,916,668 shares through private placements.
On April 16, 2004, the debenture holders of Debenture "A" converted the principal into 10,000,000 shares of the Company at a rate of $0.125 per share. Also on April 16, 2004, the debenture holders of Debenture "A" converted the accrued interest of $400,667 (December 31, 2003, $356,694) into 2,003,334 shares of the Company at a rate of $0.20 per share.
On July 2, 2004, the debenture holders of Debenture "B" converted the principal into 966,667 shares of the Company at a rate of $0.15 per share. Also on July 2, 2004, the debenture holders of Debenture "B" converted the accrued interest of $34,895 (December 31, 2003, $26,124) into 174,477 shares of the Company at a rate of $0.20 per share.
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The Company conducts its business through the Florida incorporated entity and through its wholly owned subsidiary English Bay Office Management Limited (previously Bingo.com (Canada) Enterprises Inc. ("English Bay"). English Bay was incorporated under the laws of British Columbia, Canada, on February 10, 1998 as 559262 B.C. Ltd. and changed its name to Bingo.com (Canada) Enterprises Inc. on February 11, 1999. It subsequently changed it name to English Bay Office Management Limited on September 8, 2003.
On August 15, 2002, the Company acquired 99% of the share capital of Bingo.com (UK) plc ("Bingo UK"). Bingo UK was incorporated under the laws of England and Wales on August 18, 2000, as CellStop plc. and changed its name to Bingo.com (UK) plc. on August 5, 2002.
On September 30, 2004, Bingo.com Ltd. was incorporated in Anguilla, British West Indies for the purpose of moving the jurisdiction of our Company to Anguilla, B.W.I.
The Company also maintains a number of inactive wholly-owned subsidiaries. These include:
- Bingo.com (Antigua), Inc., ("Bingo.com (Antigua") incorporated as an Antigua International Business Corporation on April 7, 1999 as Star Communications Ltd. and changed its name to Bingo.com. (Antigua), Inc. on April 21, 1999;
- Bingo.com (Wyoming), Inc., incorporated in the State of Wyoming on July 14, 1999;
- Bingo.com Acquisition Corp., incorporated in the State of Delaware on January 9, 2001.
- Bingo.com N.V. incorporated in Curacao, the Netherlands Antilles islands on October 29, 2004.
All four of the inactive subsidiaries were incorporated to facilitate the implementation of business plans that the Company has since modified and refocused and consequently, there is currently no activity in these entities.
The Company's common shares are currently quoted on the National Association of Securities Dealers' Over-The-Counter Bulletin Board ("OTCBB") under the symbol "BIGR". We have not been subject to any bankruptcy, receivership or other similar proceedings.
Bingo.com Domain Name
On January 18, 1999, Bingo Florida purchased the exclusive right to use the domain name bingo.com from a then unrelated company Bingo, Inc., an Anguilla corporation, for (i) a $200,000 cash payment, (ii) 500,000 shares of our common stock (at a value of $2.00 per share) and (iii) an agreement to pay, on an ongoing basis, the Domain Name Purchase price amounting to 4% of our annual gross revenues, with a total minimum guaranteed Domain Name Purchase payment of $1,100,000 in the first three years of the 99 year period ended December 31, 2098. During the year ended December 31, 2002, the agreement was amended so that the remaining Domain Name Purchase payments to the vendor are made monthly, based on 4% of the preceding month's gross revenue. The value of the bingo.com domain name was based on factors such as the relationship of the name to our business, the ability for us to create a brand for our Website and portal based on the name, the ease of internet browser search ability of the domain name and the ability of visitors to our website to remember and associate the name with
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our website and portal. We negotiated the terms of the domain name acquisition at arms' length, and we believe the consideration we paid for the name was reasonable.
During the year ended December 31, 2003, Bingo Florida made payments totaling $35,556 (2002 -$12,023) and $30,746 during the nine month period ended September 30, 2004. These payments related to payments based on 4% of the preceding months gross revenue as defined in the amended agreement. T. M. Williams, the President and Chief Executive Officer of the Company is the potential beneficiary of several discretionary trusts that hold approximately 80% of the shares of Bingo, Inc.
In January 1999, when the Company purchased the exclusive right to use the domain name "Bingo.com", Mr. T.M. Williams was not associated with the Company as an officer or a director of the Company or in any other capacity. Mr. T.M. Williams was at arm's length to the Company for the purposes of this transaction. In April 2001, following the Company's acquisition of the right to use the domain name "Bingo.com", Mr. T.M. Williams joined the Company as a Director and in September 2001, became the President, Chief Executive Officer and Chairman and has provided the primary managerial guidance for the Company since that time. Mr. T.M. Williams is actively involved on a daily basis with the Company's operations.
Business Overview
The Company aims to become the leading online provider of bingo based games and entertainment. The Company intends to leverage the worldwide popularity of bingo with the growth of the Internet to become the premier bingo portal.
We are in the business of developing and operating an entertainment and service based website designed to provide a variety of free bingo games, and other forms of entertainment, initially focused on the game bingo and including chat rooms, sweepstakes, communities, and other forms of enhanced content. We are attempting to create a value-based website, complete with online services and an extensive database of registered players.
The entertainment and other content provided on the bingo.com portal do not include adult content or gambling for cash. The Company, however, intends to offer traditional bingo for cash to non-North American players.
Free Bingo Business
Our free bingo Website is built around a variety of free bingo games, offered to registered players who compete against other users for the chance to win prizes. Our primary objective is to provide Internet users a website offering a variety of free bingo based games and entertainment, as well as free online video poker and free slot machines. The Company intends to continue to provide prize-based, play-for-free games emphasizing entertainment.
The Company uses the appeal of the bingo.com domain name to sell advertising on the free site, which is currently the Company's primary revenue source. Advertising revenue from the bingo.com website accounted for approximately 99% of our revenue for the year ended December 31, 2003. During the year ended December 31, 2003, over 75 million player sessions, and the nine months ended September 30, 2004, over 65 million player sessions, were offered to the
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Company's registered players. The average visitor session length was 55 minutes per user which means that the Company's website continues to be one of the stickiest sites on the Internet. A "sticky website" is an industry term referring to a website that holds users for more than a few minutes per visit and has many repeat visitors. As a result of this appeal to web users, the Company served over 1.2 billion ads on the bingo.com website during the year ended December 31, 2003 and over 1,090,000,000 ads during nine months ended September 30, 2004.
Although the games are free to play, players are required to register to receive prizes and to access certain features on the site. All registration information is stored in online databases. We intend to continue to build awareness of, and drive traffic to, bingo.com through a marketing program consisting of various elements such as strategic alliances and online and off-line advertising. In addition, the Company will continue to establish promotional agreements with prominent websites and media content providers that have reciprocal links to bingo.com, or to display advertising.
The Company has attempted to build relationships with online merchants with a view to directing the traffic of our membership base and their buying power, to these third parties in exchange for commissions payable to the Company. An example of this relationship is that with the website Growers Flowers. Details of this relationship are discussed under "Revenue Streams". To date, however this strategy has not proven successful and revenue earned by the Company through these initiatives has been insignificant relative to its total revenue. The Company will continue to sell advertising space on the bingo.com website. The Company believes that its growing user base and stickiness will provide advertisers with an attractive platform to reach their target audience.
The Niche
The Company continues to work towards positioning itself as the leading bingo focused entertainment portal on the Internet. We believe the size of the worldwide bingo community, the domain name bingo.com, and the attractive nature of the Company's product offering provides us an opportunity to build a large loyal base of daily visitors.
The Company believes it's website, www.bingo.com has broad appeal in the Internet marketplace. We also believe that bingo is well suited for online entertainment content, and that online games are a compelling entertainment medium for a mass user audience. The Company believes that players will value an opportunity to win prizes and cash while being allowed to access bingo focused content according to their own schedule and from their own location.
The Company believes that its future success will be dependent on a number of factors. These include focusing on online bingo games and related entertainment. We also believe that the continued development of a personalized community atmosphere on the website will continue to encourage lengthy site visits by users. We believe the nature of the Company's website content and our player base will allow the Company to establish a large detailed database of registered players, which is a critical factor in attracting online advertisers.
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Business Strategy
Our objective is to become the premier online destination for web-based bingo entertainment and a leading entertainment destination on the Internet. The Company is pursuing this objective through the following strategies:
Continue to enhance content
Registered players are provided with a variety of free games, and other forms of entertainment such as chat, sweepstakes, fortune telling, and more. The free bingo games can be played for points, which are redeemable for prizes. We are able to create low-cost content through creative face-changes of the standard bingo games. These 'skins' can reflect themes, corporate interests or other targeted messages.
Revenue streams
We currently generate 99% of our revenue from selling advertising on the free bingo site, Other, relatively minor and through other initiatives such as co-branding and affiliates generate the balance. An example of this is the online store Growers Flowers, where bingo.com users can receive discounts or bonus products (depending upon current promotions) on purchases made at the Growers Flowers site. A typical transaction with Growers Flowers would proceed as follows:
A bingo.com user decides that they would like to send flowers to a friend;
They have accumulated sufficient points (Bingo Bucks) by playing on bingo.com to purchase a coupon on the bingo.com website which is cashable at the Growers Flowers website - in this case, they require 50 Bingo Bucks;
Having purchased the coupon, they click on the "Redeem" button and are immediately transported to the Growers Flowers website - along with the computer code contained in that coupon;
They then decide to purchase a particular flower selection and proceed through the usual shopping cart/checkout procedure on the Growers Flowers website;
Bingo.com will receive a commission based on the sale of flowers to all individuals who arrive with a bingo.com coupon/code.
Currently, there are only 3 relationships involving this kind of arrangement as we are constantly evaluating their worth to the Company. We expect to continue to explore and offer similar sorts of arrangements with the goal of building a diversified revenue base. There are also other methods of broadening our revenue base that we intend to pursue. Some of these include offering a premium service, via subscription, on our free site and providing traditional bingo for cash to non-North American players. The Company currently earns revenues from its portal through a variety of ways, such as the following:
- Banner and button advertisements on our bingo.com site;
- Pop-ups, which are interstitial ads that appear as a separate window on top of content;
- Superstitials; which are interstitial commercials that seamlessly load while a visitor is surfing the site;
- Sponsorships of email newsletters or parts of our site;
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- Commissions on purchases made on Partner sites. e.g. Grower Flowers;
- Third-Party referral arrangements such as that with Lavalife, where the Company receives a fee whenever a bingo.com player becomes a registered user of their online personals service. With Lavalife, the Company is paid a set fee when a bingo.com user signs up on the dating service and then is paid additional fees (based upon a percentage) calculated against further amounts paid by that user to Lavalife while accessing their dating service. At the moment, the Lavalife arrangement is the only such agreement in place.
Advertising revenue calculations are based on click-throughs, percentage of sales transactions, or other methods depending on the details of the agreements. The majority of the Company's current revenue is calculated on a Cost Per Thousand ("CPM") basis.
Expand registered user database
We have demonstrated the ability to attract and keep a large subscriber base. It is our intention to continue the growth of our database through expansion of our co-branding strategy and through strategic partnerships with affinity groups and penetration of traditional bingo venues by use of targeted promotions with suppliers of goods and services to such venues.
Entertainment and game sites have become increasingly popular and are showing strong growth rates. The Company's Website traffic reports indicate that between 800 and 1200 new players a day are registering with www.bingo.com. There has been in excess of 35,000 unique visitors per day, with an average visitor session length of more than 55 minutes. It is the Company's belief that, if current growth rates can be maintained, it will become a becoming the premier online destination for Web-based bingo entertainment and a leading entertainment destination on the Internet.
Leverage licensed users and alliances
We are confident that the variety of games and entertainment available on our website will encourage many visitors to come, stay, play and revisit often. In the process of providing a one-stop entertainment arena for bingo lovers, we are creating a value based website which is backed by an extensive database of registered players and their buying preferences. We believe the value of this demographic data has enabled the Company to generate premium CPM and Cost Per Click ("CPC") rates for the sale of its advertising inventory.
Extend and enhance the value of the brand name
We believe that establishing a readily recognizable brand name is critical to attracting a larger player base and deriving additional revenue. We believe that bingo.com website has inherent value as a brand name and we intend to aggressively expand our player base by promoting that name. We intend to pursue online and offline marketing strategies, promotional opportunities, and strategic alliances to make bingo.com website the leading entertainment destination for bingo on the Internet. Amongst the initiatives being considered are the exploration of co-branding opportunities with land-based bingo halls in North America where the Company's brand may be displayed in such land-based bingo halls in exchange for promotion of those halls on the Company's website. To date, the Company has not agreed with any land-based bingo halls to a co-branding agreement. Additionally, depending upon whether the regulatory framework in a particular jurisdiction permits its residents to play cash bingo, the Company
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would like to enter into strategic alliances with members of the non-profit sector to drive traffic from their websites to the Company's website in exchange for a share of the profits generated by those players. To date, the Company has not entered any strategic alliances agreement.
Marketing Strategy
Our goal is for the bingo.com website to become the most recognized bingo and entertainment destination site on the Internet. We intend to build an Internet community consisting of a dedicated and loyal user base that we believe will support our ability to generate advertising revenues, and e-commerce sales for the Company.
Advertising focused on promoting the bingo.com website within North America and in targeted international markets through strategic partnerships, co-branding and other promotional activities with a variety of companies is contemplated. This strategy is intended to further develop the growing database of registered players.
We also use our database of registered users to send targeted emails and other advertisements in order to encourage our subscribers to play. We offer special promotions and other offerings that bring additional users to our site such as the use of our email list to promote special events.
Employees
As of December 31, 2003 and September 30, 2004, the Company had six full-time employees, not including temporary personnel, consultants, and independent contractors. The Company retains consultants to provide special expertise in developing strategy, marketing, software and technologies and outsources its development resources. We outsource our web-design and development as the need for changes to site architecture and graphics is sporadic and it is more cost effective to hire contractors on an ad-hoc basis. None of our employees is represented by a labor union, and we believe that our relationship with our employees is good.
We are substantially dependent upon the continued services and performance of T. M. Williams, our President, Chief Executive Officer and Chairman of our Board. The loss of the services of this key individual would have a material adverse effect on our business, financial condition and results of operations.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
We are in the business of developing and operating a bingo based web portal designed to provide a variety of free games and intend to provide traditional bingo for cash games for residents outside of North America, and other forms of entertainment on the Internet. At the end of fiscal 2003 and the nine months ended September 30, 2004, the majority of the Company's equipment was located in Canada.
Seasonality
The Company does not believe that seasonality has an effect on its traffic volumes or its revenue realization.
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Competition
The Company faces competition primarily from other companies that target the entertainment segment of the market. Lycos, Inc., through its site Gamesville, Electronic Arts Inc., through its site Pogo, and Vivendi Universal, through its site Flipside, are large online entertainment destinations, offering games, game shows and other interactive experiences to users. We will continue to compete with these large sites as well as many other smaller offerings, and there can be no assurances that we will be successful in attracting users from these sites.
Trademarks and Intellectual Property Protection
The Company will continue to consider the need to apply for trademark registration and protection for its games, logo and various phrases in Canada and the United States. The Company has not submitted any other applications for trademark registration. In the event that we determine that we have created an asset whose value can be protected, we will attempt to protect our proprietary asset by applying for patents, copyrights or trademarks. In addition, we intend to rely on trade secret laws and non-disclosure and confidentiality agreements with our employees and consultants, who have access to its proprietary technology, to protect our technologies.
DESCRIPTION OF PROPERTY
Our primary administrative, sales and marketing facility is located in leased space in Vancouver, British Columbia. This facility occupies approximately 2,000 square feet. We entered into a sublease arrangement on March 1, 2002, with a term of 43 months and ending September 29, 2005. The monthly rental is approximately $2,900 per month. We believe that these facilities will be adequate to meet our requirements for the foreseeable future and that suitable additional space will be available if needed. Other than described above, neither we, nor any of our subsidiaries presently own or lease any other property or real estate.
LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceeding, and was not a party to any other legal proceeding during the nine months ended September 30, 2004. Management of the Company is currently not aware of any other legal proceedings proposed to be initiated against the Company. However, from time to time, the Company may become subject to claims and litigation generally associated with any business venture.
Bingo Anguilla common stock into which such non dissenting shares of Bingo Florida were converted in the merger and the holder of those shares is not required to surrender its certificates for a certificate issued by Bingo Anguilla. After the effective date of the merger, any holder of an outstanding certificate representing non dissenting shares of Bingo Florida may at the stockholder's option, surrender those certificates to the Company's transfer agent, Interwest Transfer Co. Inc., 1981 East, 4800 South, Suite 100, Salt Lake City, Utah 84117. Upon surrender, each stockholder will be entitled to receive in exchange for its certificates, new certificates representing the number of shares of Bingo Anguilla into which the rendered shares were converted by the merger. All registered owners of Bingo Florida common shares remain entitled to exercise any voting or other rights with respect to their shares and to receive dividends and other distributions upon the shares of the surviving corporation Bingo Anguilla until such time as the stockholder surrenders his or her certificates of Bingo Florida for replacement by Bingo Anguilla certificates.
Each certificate representing stock of the surviving corporation, Bingo Anguilla, issued in the merger will bear the same legends, if any, with respect to restrictions on transferability as the certificates of Bingo Florida which were given in exchange therefore.
Effective Time
The merger will be effected no sooner than 20 days following the effective date of this information statement/prospectus and mailing of this information statement/prospectus to stockholders of Bingo Florida. No material uncertainty exists as to any of the conditions to closing of the merger.
Accounting Treatment
The merger is expected to be accounted for as a reverse merger transaction, with Bingo Anguilla being the surviving company for financial reporting purposes. As a result, the consolidated financial statements will be issued under the name of Bingo Anguilla but are considered a continuation of the consolidated financial statements of Bingo Florida and therefore the assets and liabilities are recorded in Bingo Anguilla financial statements at their historical value.
U.S. Federal Income Tax Consequences
Tax Consequences for Bingo Florida
The transfer would be treated for U.S. federal tax purposes as though we had transferred our assets from a U.S. corporation to an Anguilla B.W.I. corporation. We would be subject to U.S. federal tax upon our transfer to the extent that the fair market value of our property exceeds the
historic basis, for U.S. tax purposes, in the property. After we become an Anguilla B.W.I. corporation, we will be subject to U.S. withholding tax on any dividends paid to us by a U.S. corporation, as well as a 10% withholding tax on interest we get from our investments in U.S. debt securities.
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Tax consequences for Bingo Florida shareholders.
Tax matters are often complicated and the tax consequences to you from the transfer will depend in part on the facts of your own situation. You should consult your tax advisors, as you think appropriate, for a full understanding of the tax consequences to you from the transfer. If you are a U.S. resident shareholder, the transfer of shares will generally result in no recognized gain for U.S. federal income tax purposes.
For a further discussion of the U.S. federal income tax consequences of these transactions, see "The Merger - United States Income Tax Consequences of the Transfer to Anguilla, B.W.I.". Refer to Exhibit 8.1 for the opinion on the taxation effects for Bingo Florida shareholders. Different tax consequences may apply to you because of your individual circumstances or because special tax rules apply to you.
You should consult your tax advisor for a full explanation of the tax consequences of the merger to you.
Material Differences Between the Rights of Bingo Florida Stockholders and Bingo Anguilla Stockholders
For a discussion of the material differences between the rights of Bingo Florida and Bingo Anguilla stockholders see "Comparison of Stockholder Rights" on page 48.
PRO FORMA FINANCIAL INFORMATION
Due to the fact that Bingo.com Ltd. was incorporated solely for the purpose of facilitating a merger with our company, Bingo Florida, there will be no difference in the presentation of the pro forma financial statements or the unaudited financial statements for the period ended September 30, 2004.
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September 30, 2004
December 31, 2003
(Unaudited)
(Audited)
Assets
Current assets:
Cash
$
55,993
$
34,046
Accounts receivable, less allowance for
doubtful accounts of $nil (2003 - $nil)
43,975
67,574
Inventory
1,127
663
Prepaid expenses
22,911
14,229
Deferred tax asset, less valuation allowance of
$3,104,499 (2003 - $2,905,525)
-
-
Total Current Assets
124,006
116,512
Equipment, net
42,417
45,247
Other assets
7,523
10,797
Domain name rights and intangible assets
1,297,202
1,304,617
Total Assets
$
1,471,148
$
1,477,173
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable
$
464,979
$
617,903
Accounts payable - related party
157,342
192,068
Accrued liabilities
50,201
86,777
Accrued liabilities - related party
7,342
372,397
Unearned revenue
76,163
24,511
Loan payable - related party
162,309
190,858
Total Current Liabilities
918,336
1,484,514
Debenture payable
-
1,395,000
Less warrants - debenture discount
-
(259,823)
Net Debenture Payable
-
1,135,177
Total Liabilities
918,336
2,619,691
Commitments and contingencies
Stockholders' equity (deficit) :
Common stock, $0.001 par value, authorized 50,000,000
shares; issued and outstanding 24,249,086 shares
(December 31, 2003 - 11,104,608 shares)
24,249
11,105
Additional paid-in capital
10,048,949
8,231,531
Accumulated deficit
(9,544,966)
(9,409,734)
Accumulated other comprehensive income:
Foreign currency translation adjustment
24,580
24,580
Total Stockholders' Equity (Deficit)
552,812
(1,142,518)
Total Liabilities and Stockholders' Equity (Deficit)
$
1,471,148
$
1,477,173
Page 27
MATERIAL CONTRACTS WITH THE COMPANY BEING ACQUIRED
Other than the agreement and plan of merger discussed in this prospectus/information statement and attached as Exhibit 2.1, there are no past, present or proposed material contracts, arrangements, understandings or relationships between Bingo Florida and Bingo Anguilla.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No named expert or counsel for either Bingo Florida or Bingo Anguilla has or will receive a substantial interest, direct or indirect, in our company or its subsidiaries.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
THE COMPANIES WHICH ARE MERGING
B. INFORMATION ABOUT BINGO FLORIDA
BUSINESS
Introduction
Bingo Florida (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 bingo.com domain name and incorporating a variety of games and content to attract and retain a large number of subscribers. The Company's existing website has attracted over 1,000,000 registered users and served over 3,000,000,000 bingo cards since its inception. As there are a fixed number of bingo cards (3) per player per game, the total number of cards served provides a direct correlation to the number of games played (over 1,000,000,000) and a general indication of the levels of Internet traffic generated by the Company's website. The levels of Internet traffic have a direct impact on the Company's revenues as, generally, the greater the Internet traffic, the greater the numbers of advertisements served. 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, Secret Garden Bingo, and the like, as well as
Page 28
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.
References in this prospectus/information statement to "the Company," "we," "us," and "our" refer to Bingo Florida and its subsidiaries, which are described below.
Our executive offices are located at 1166 Alberni Street, Suite 1405, Vancouver, British Columbia, Canada, V6E 3Z3. Our telephone number is (604) 694-0300.
History and Corporate Structure
The Company was originally incorporated in the State of Florida on January 12, 1987, under the name Progressive General Lumber Corp. ("PGLC') with an authorized share capital of 7,500 shares of common stock with a $1.00 par value per share. PGLC was for the most part inactive until January 1999.
On July 17, 1998, PGLC filed Articles of Amendment and increased its authorized share capital to 50,000,000 common shares with a $0.001 par value per share. The shares were also subject to a forward stock split by way of a stock dividend to increase the number of then issued and outstanding shares on a 200 shares for 1 share basis.
In January 1999, management of PGLC changed and the new management filed Articles of Amendment to the Articles of Incorporation of PGLC to amend the Articles of Incorporation and change the name of PGLC to Bingo Florida effective January 22, 1999. Concurrent with the name change the Company acquired the use of the second level domain name bingo.com and embarked on its business strategy to become a leading online provider of bingo based games and entertainment.
In 1999, we raised an aggregate of $7,057,457 in capital, through the issuance of 8,916,668 shares through private placements.
On April 16, 2004, the debenture holders of Debenture "A" converted the principal into 10,000,000 shares of the Company at a rate of $0.125 per share. Also on April 16, 2004, the debenture holders of Debenture "A" converted the accrued interest of $400,667 (December 31, 2003, $356,694) into 2,003,334 shares of the Company at a rate of $0.20 per share.
On July 2, 2004, the debenture holders of Debenture "B" converted the principal into 966,667 shares of the Company at a rate of $0.15 per share. Also on July 2, 2004, the debenture holders of Debenture "B" converted the accrued interest of $34,895 (December 31, 2003, $26,124) into 174,477 shares of the Company at a rate of $0.20 per share.
Page 29
The Company conducts its business through the Florida incorporated entity and through its wholly owned subsidiary English Bay Office Management Limited (previously Bingo.com (Canada) Enterprises Inc. ("English Bay"). English Bay was incorporated under the laws of British Columbia, Canada, on February 10, 1998 as 559262 B.C. Ltd. and changed its name to Bingo.com (Canada) Enterprises Inc. on February 11, 1999. It subsequently changed it name to English Bay Office Management Limited on September 8, 2003.
On August 15, 2002, the Company acquired 99% of the share capital of Bingo.com (UK) plc ("Bingo UK"). Bingo UK was incorporated under the laws of England and Wales on August 18, 2000, as CellStop plc. and changed its name to Bingo.com (UK) plc. on August 5, 2002.
On September 30, 2004, Bingo.com Ltd. was incorporated in Anguilla, British West Indies for the purpose of moving the jurisdiction of our Company to Anguilla, B.W.I.
The Company also maintains a number of inactive wholly-owned subsidiaries. These include:
- Bingo.com (Antigua), Inc., ("Bingo.com (Antigua") incorporated as an Antigua International Business Corporation on April 7, 1999 as Star Communications Ltd. and changed its name to Bingo.com. (Antigua), Inc. on April 21, 1999;
- Bingo.com (Wyoming), Inc., incorporated in the State of Wyoming on July 14, 1999;
- Bingo.com Acquisition Corp., incorporated in the State of Delaware on January 9, 2001.
- Bingo.com N.V. incorporated in Curacao, the Netherlands Antilles islands on October 29, 2004.
All four of the inactive subsidiaries were incorporated to facilitate the implementation of business plans that the Company has since modified and refocused and consequently, there is currently no activity in these entities.
The Company's common shares are currently quoted on the National Association of Securities Dealers' Over-The-Counter Bulletin Board ("OTCBB") under the symbol "BIGR". We have not been subject to any bankruptcy, receivership or other similar proceedings.
Bingo.com Domain Name
On January 18, 1999, Bingo Florida purchased the exclusive right to use the domain name bingo.com from a then unrelated company Bingo, Inc., an Anguilla corporation, for (i) a $200,000 cash payment, (ii) 500,000 shares of our common stock (at a value of $2.00 per share) and (iii) an agreement to pay, on an ongoing basis, the Domain Name Purchase price amounting to 4% of our annual gross revenues, with a total minimum guaranteed Domain Name Purchase payment of $1,100,000 in the first three years of the 99 year period ended December 31, 2098. During the year ended December 31, 2002, the agreement was amended so that the remaining Domain Name Purchase payments to the vendor are made monthly, based on 4% of the preceding month's gross revenue. The value of the bingo.com domain name was based on factors such as the relationship of the name to our business, the ability for us to create a brand for our Website and portal based on the name, the ease of internet browser search ability of the domain name and the ability of visitors to our website to remember and associate the name with
Page 30
our website and portal. We negotiated the terms of the domain name acquisition at arms' length, and we believe the consideration we paid for the name was reasonable.
During the year ended December 31, 2003, Bingo Florida made payments totaling $35,556 (2002 -$12,023) and $30,746 during the nine month period ended September 30, 2004. These payments related to payments based on 4% of the preceding months gross revenue as defined in the amended agreement. T. M. Williams, the President and Chief Executive Officer of the Company is the potential beneficiary of several discretionary trusts that hold approximately 80% of the shares of Bingo, Inc.
In January 1999, when the Company purchased the exclusive right to use the domain name "Bingo.com", Mr. T.M. Williams was not associated with the Company as an officer or a director of the Company or in any other capacity. Mr. T.M. Williams was at arm's length to the Company for the purposes of this transaction. In April 2001, following the Company's acquisition of the right to use the domain name "Bingo.com", Mr. T.M. Williams joined the Company as a Director and in September 2001, became the President, Chief Executive Officer and Chairman and has provided the primary managerial guidance for the Company since that time. Mr. T.M. Williams is actively involved on a daily basis with the Company's operations.
Business Overview
The Company aims to become the leading online provider of bingo based games and entertainment. The Company intends to leverage the worldwide popularity of bingo with the growth of the Internet to become the premier bingo portal.
We are in the business of developing and operating an entertainment and service based website designed to provide a variety of free bingo games, and other forms of entertainment, initially focused on the game bingo and including chat rooms, sweepstakes, communities, and other forms of enhanced content. We are attempting to create a value-based website, complete with online services and an extensive database of registered players.
The entertainment and other content provided on the bingo.com portal do not include adult content or gambling for cash. The Company, however, intends to offer traditional bingo for cash to non-North American players.
Free Bingo Business
Our free bingo Website is built around a variety of free bingo games, offered to registered players who compete against other users for the chance to win prizes. Our primary objective is to provide Internet users a website offering a variety of free bingo based games and entertainment, as well as free online video poker and free slot machines. The Company intends to continue to provide prize-based, play-for-free games emphasizing entertainment.
The Company uses the appeal of the bingo.com domain name to sell advertising on the free site, which is currently the Company's primary revenue source. Advertising revenue from the bingo.com website accounted for approximately 99% of our revenue for the year ended December 31, 2003. During the year ended December 31, 2003, over 75 million player sessions, and the nine months ended September 30, 2004, over 65 million player sessions, were offered to the
Page 31
Company's registered players. The average visitor session length was 55 minutes per user which means that the Company's website continues to be one of the stickiest sites on the Internet. A "sticky website" is an industry term referring to a website that holds users for more than a few minutes per visit and has many repeat visitors. As a result of this appeal to web users, the Company served over 1.2 billion ads on the bingo.com website during the year ended December 31, 2003 and over 1,090,000,000 ads during nine months ended September 30, 2004.
Although the games are free to play, players are required to register to receive prizes and to access certain features on the site. All registration information is stored in online databases. We intend to continue to build awareness of, and drive traffic to, bingo.com through a marketing program consisting of various elements such as strategic alliances and online and off-line advertising. In addition, the Company will continue to establish promotional agreements with prominent websites and media content providers that have reciprocal links to bingo.com, or to display advertising.
The Company has attempted to build relationships with online merchants with a view to directing the traffic of our membership base and their buying power, to these third parties in exchange for commissions payable to the Company. An example of this relationship is that with the website Growers Flowers. Details of this relationship are discussed under "Revenue Streams". To date, however this strategy has not proven successful and revenue earned by the Company through these initiatives has been insignificant relative to its total revenue. The Company will continue to sell advertising space on the bingo.com website. The Company believes that its growing user base and stickiness will provide advertisers with an attractive platform to reach their target audience.
The Niche
The Company continues to work towards positioning itself as the leading bingo focused entertainment portal on the Internet. We believe the size of the worldwide bingo community, the domain name bingo.com, and the attractive nature of the Company's product offering provides us an opportunity to build a large loyal base of daily visitors.
The Company believes it's website, www.bingo.com has broad appeal in the Internet marketplace. We also believe that bingo is well suited for online entertainment content, and that online games are a compelling entertainment medium for a mass user audience. The Company believes that players will value an opportunity to win prizes and cash while being allowed to access bingo focused content according to their own schedule and from their own location.
The Company believes that its future success will be dependent on a number of factors. These include focusing on online bingo games and related entertainment. We also believe that the continued development of a personalized community atmosphere on the website will continue to encourage lengthy site visits by users. We believe the nature of the Company's website content and our player base will allow the Company to establish a large detailed database of registered players, which is a critical factor in attracting online advertisers.
Page 32
Business Strategy
Our objective is to become the premier online destination for web-based bingo entertainment and a leading entertainment destination on the Internet. The Company is pursuing this objective through the following strategies:
Continue to enhance content
Registered players are provided with a variety of free games, and other forms of entertainment such as chat, sweepstakes, fortune telling, and more. The free bingo games can be played for points, which are redeemable for prizes. We are able to create low-cost content through creative face-changes of the standard bingo games. These 'skins' can reflect themes, corporate interests or other targeted messages.
Revenue streams
We currently generate 99% of our revenue from selling advertising on the free bingo site, Other, relatively minor and through other initiatives such as co-branding and affiliates generate the balance. An example of this is the online store Growers Flowers, where bingo.com users can receive discounts or bonus products (depending upon current promotions) on purchases made at the Growers Flowers site. A typical transaction with Growers Flowers would proceed as follows:
A bingo.com user decides that they would like to send flowers to a friend;
They have accumulated sufficient points (Bingo Bucks) by playing on bingo.com to purchase a coupon on the bingo.com website which is cashable at the Growers Flowers website - in this case, they require 50 Bingo Bucks;
Having purchased the coupon, they click on the "Redeem" button and are immediately transported to the Growers Flowers website - along with the computer code contained in that coupon;
They then decide to purchase a particular flower selection and proceed through the usual shopping cart/checkout procedure on the Growers Flowers website;
Bingo.com will receive a commission based on the sale of flowers to all individuals who arrive with a bingo.com coupon/code.
Currently, there are only 3 relationships involving this kind of arrangement as we are constantly evaluating their worth to the Company. We expect to continue to explore and offer similar sorts of arrangements with the goal of building a diversified revenue base. There are also other methods of broadening our revenue base that we intend to pursue. Some of these include offering a premium service, via subscription, on our free site and providing traditional bingo for cash to non-North American players. The Company currently earns revenues from its portal through a variety of ways, such as the following:
- Banner and button advertisements on our bingo.com site;
- Pop-ups, which are interstitial ads that appear as a separate window on top of content;
- Superstitials; which are interstitial commercials that seamlessly load while a visitor is surfing the site;
- Sponsorships of email newsletters or parts of our site;
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- Commissions on purchases made on Partner sites. e.g. Grower Flowers;
- Third-Party referral arrangements such as that with Lavalife, where the Company receives a fee whenever a bingo.com player becomes a registered user of their online personals service. With Lavalife, the Company is paid a set fee when a bingo.com user signs up on the dating service and then is paid additional fees (based upon a percentage) calculated against further amounts paid by that user to Lavalife while accessing their dating service. At the moment, the Lavalife arrangement is the only such agreement in place.
Advertising revenue calculations are based on click-throughs, percentage of sales transactions, or other methods depending on the details of the agreements. The majority of the Company's current revenue is calculated on a Cost Per Thousand ("CPM") basis.
Expand registered user database
We have demonstrated the ability to attract and keep a large subscriber base. It is our intention to continue the growth of our database through expansion of our co-branding strategy and through strategic partnerships with affinity groups and penetration of traditional bingo venues by use of targeted promotions with suppliers of goods and services to such venues.
Entertainment and game sites have become increasingly popular and are showing strong growth rates. The Company's Website traffic reports indicate that between 800 and 1200 new players a day are registering with www.bingo.com. There has been in excess of 35,000 unique visitors per day, with an average visitor session length of more than 55 minutes. It is the Company's belief that, if current growth rates can be maintained, it will become a becoming the premier online destination for Web-based bingo entertainment and a leading entertainment destination on the Internet.
Leverage licensed users and alliances
We are confident that the variety of games and entertainment available on our website will encourage many visitors to come, stay, play and revisit often. In the process of providing a one-stop entertainment arena for bingo lovers, we are creating a value based website which is backed by an extensive database of registered players and their buying preferences. We believe the value of this demographic data has enabled the Company to generate premium CPM and Cost Per Click ("CPC") rates for the sale of its advertising inventory.
Extend and enhance the value of the brand name
We believe that establishing a readily recognizable brand name is critical to attracting a larger player base and deriving additional revenue. We believe that bingo.com website has inherent value as a brand name and we intend to aggressively expand our player base by promoting that name. We intend to pursue online and offline marketing strategies, promotional opportunities, and strategic alliances to make bingo.com website the leading entertainment destination for bingo on the Internet. Amongst the initiatives being considered are the exploration of co-branding opportunities with land-based bingo halls in North America where the Company's brand may be displayed in such land-based bingo halls in exchange for promotion of those halls on the Company's website. To date, the Company has not agreed with any land-based bingo halls to a co-branding agreement. Additionally, depending upon whether the regulatory framework in a particular jurisdiction permits its residents to play cash bingo, the Company
Page 34
would like to enter into strategic alliances with members of the non-profit sector to drive traffic from their websites to the Company's website in exchange for a share of the profits generated by those players. To date, the Company has not entered any strategic alliances agreement.
Marketing Strategy
Our goal is for the bingo.com website to become the most recognized bingo and entertainment destination site on the Internet. We intend to build an Internet community consisting of a dedicated and loyal user base that we believe will support our ability to generate advertising revenues, and e-commerce sales for the Company.
Advertising focused on promoting the bingo.com website within North America and in targeted international markets through strategic partnerships, co-branding and other promotional activities with a variety of companies is contemplated. This strategy is intended to further develop the growing database of registered players.
We also use our database of registered users to send targeted emails and other advertisements in order to encourage our subscribers to play. We offer special promotions and other offerings that bring additional users to our site such as the use of our email list to promote special events.
Employees
As of December 31, 2003 and September 30, 2004, the Company had six full-time employees, not including temporary personnel, consultants, and independent contractors. The Company retains consultants to provide special expertise in developing strategy, marketing, software and technologies and outsources its development resources. We outsource our web-design and development as the need for changes to site architecture and graphics is sporadic and it is more cost effective to hire contractors on an ad-hoc basis. None of our employees is represented by a labor union, and we believe that our relationship with our employees is good.
We are substantially dependent upon the continued services and performance of T. M. Williams, our President, Chief Executive Officer and Chairman of our Board. The loss of the services of this key individual would have a material adverse effect on our business, financial condition and results of operations.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
We are in the business of developing and operating a bingo based web portal designed to provide a variety of free games and intend to provide traditional bingo for cash games for residents outside of North America, and other forms of entertainment on the Internet. At the end of fiscal 2003 and the nine months ended September 30, 2004, the majority of the Company's equipment was located in Canada.
Seasonality
The Company does not believe that seasonality has an effect on its traffic volumes or its revenue realization.
Page 35
Competition
The Company faces competition primarily from other companies that target the entertainment segment of the market. Lycos, Inc., through its site Gamesville, Electronic Arts Inc., through its site Pogo, and Vivendi Universal, through its site Flipside, are large online entertainment destinations, offering games, game shows and other interactive experiences to users. We will continue to compete with these large sites as well as many other smaller offerings, and there can be no assurances that we will be successful in attracting users from these sites.
Trademarks and Intellectual Property Protection
The Company will continue to consider the need to apply for trademark registration and protection for its games, logo and various phrases in Canada and the United States. The Company has not submitted any other applications for trademark registration. In the event that we determine that we have created an asset whose value can be protected, we will attempt to protect our proprietary asset by applying for patents, copyrights or trademarks. In addition, we intend to rely on trade secret laws and non-disclosure and confidentiality agreements with our employees and consultants, who have access to its proprietary technology, to protect our technologies.
DESCRIPTION OF PROPERTY
Our primary administrative, sales and marketing facility is located in leased space in Vancouver, British Columbia. This facility occupies approximately 2,000 square feet. We entered into a sublease arrangement on March 1, 2002, with a term of 43 months and ending September 29, 2005. The monthly rental is approximately $2,900 per month. We believe that these facilities will be adequate to meet our requirements for the foreseeable future and that suitable additional space will be available if needed. Other than described above, neither we, nor any of our subsidiaries presently own or lease any other property or real estate.
LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceeding, and was not a party to any other legal proceeding during the nine months ended September 30, 2004. Management of the Company is currently not aware of any other legal proceedings proposed to be initiated against the Company. However, from time to time, the Company may become subject to claims and litigation generally associated with any business venture.
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