<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-QSB
---------------
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 0-27509
GO CALL, INC.
-------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0794980
-------- ----------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
OFICENTRO EJECUTIVO LA SABANA, TORRE 6, PISA 2 (OFICINA LOBONEGRO)
SAN JOSE, COSTA RICA
--------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (506) 290-7587
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes [X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
equity, as of the latest practical date:
OUTSTANDING AT
CLASS May 19, 2000
----- ----------------
Common Stock 25,865,003
Series B Preferred Stock 10,000
Transitional Small Business Disclosure Format (Check one)Yes ( ) No(X)
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS.
GO CALL INC.
REVIEW ENGAGEMENT REPORT
AND FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
<PAGE>
REVIEW ENGAGEMENT REPORT
To the Shareholders of
Go Call Inc.
We have reviewed the consolidated balance sheet of Go Call Inc. as at March 31,
2000 and the statements of operations, changes in shareholders' equity and cash
flows for the three months then ended. These financial statements are the
responsibility of the company's management. Our review was made in accordance
with generally accepted standards for review engagements and accordingly
consisted primarily of enquiry, analytical procedures and discussion related to
information supplied to us by the company.
A review is substantially less in scope than an audit, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole, and accordingly, we do not express an audit opinion on these financial
statements.
Based on our review, nothing has come to our attention that causes us to believe
that these consolidated financial statements are not, in all material respects,
in accordance with generally accepted accounting principles in the United
States.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 2 to the
financial statements, the company has suffered recurring losses from operations
that raises substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might result from the outcome of these uncertainties.
/s/ Collins Barrow
Chatham, Ontario, Canada
May 17, 2000 CHARTERED ACCOUNTANTS
<PAGE>
GO CALL INC.
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
Consolidated balance sheet 1
Consolidated statement of operations 2
Consolidated statement of changes in shareholders' equity 3
Consolidated statement of cash flows 4
Notes to consolidated financial statements 5 - 12
<PAGE>
GO CALL INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
MARCH 31 DECEMBER 31
2000 1999
ASSETS
CURRENT ASSETS
Cash $ 11,334 $ 79,424
Deposits receivable 334,735 502,264
Other receivables 14,089 15,342
Due from related parties (note 3) 11,615 nil
Other assets 37,284 28,886
------------ ------------
409,057 625,916
LONG-TERM ASSETS
Notes receivable (note 6) 1,166,054 1,163,554
Investment in Global Indexus Inc. (note 4) 259,112 188,366
Fixed assets at cost, net (note 5) 2,100,170 2,139,938
------------ ------------
$ 3,934,393 $ 4,117,774
============ ============
LIABILITIES
CURRENT LIABILITIES
Player deposits (note 6) $ 27,431 $ 15,342
Accounts payable and accrued charges 1,206,281 965,067
Due to related parties (note 3) 253,885 328,067
------------ ------------
1,487,597 1,308,476
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock (note 7) 8,902,294 8,756,974
Accumulated deficit 6,283,832 5,792,655
Accumulated other comprehensive loss (171,666) (155,021)
------------ ------------
2,446,796 2,809,298
------------ ------------
$ 3,934,393 $ 4,117,774
============ ============
1
<PAGE>
GO CALL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31
2000 1999
REVENUE
Wagering revenues, net of payouts (note 6) $ 81,369 $ 29,700
Other revenue 14,443 119,223
------------- -------------
95,812 148,923
DIRECT EXPENSES 41,833 94,502
------------- -------------
GROSS PROFIT 53,979 54,421
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EXPENSES
Amortization and depreciation 39,767 27,890
Bank charges and interest 5,417 3,531
General and administrative 499,972 244,553
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545,156 275,974
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NET LOSS $ 491,177 $ 221,553
============= =============
Net loss per common share $ (0.02) $ (0.02)
============= =============
Weighted average number of shares outstanding 23,285,156 14,250,152
------------- -------------
2
<PAGE>
<TABLE>
GO CALL INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
Subscriptions
Additional received for
Preferred Stock Common Stock Paid-in Common
Shares Amount Shares Amount Capital Stock
------ ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999 185,439 $ 186 22,741,909 $ 22,741 $9,090,728 $ (356,681)
Prior period adjustment (note 9) ---------------------------------------------------------------------------------
December 31, 1999 restated 185,439 186 22,741,909 22,74 9,090,728 (356,681)
Comprehensive income:
Net loss
Foreign currency translation
adjustment
Issuance of stock for cash 10,000 10 50,000 50 65,940
Issuance of stock for
products or services 112,000 112 79,208
Conversion of preferred stock
to common stock (185,439) (186) 2,897,484 2,897 (2,711)
---------------------------------------------------------------------------------
10,000 $ 10 25,801,393 $ 25,800 $9,233,165 $ (356,681)
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated Comprehensive Shareholders'
Deficit Income (loss) Equity
------- ------------- ------
<S> <C> <C> <C>
December 31, 1999 $ (5,717,655) $ (155,021) $ 2,884,298
Prior period adjustment (note 9) (75,000) (75,000)
--------------------------------------------------------
December 31, 1999 restated (5,792,655) (155,021) 2,809,298
Comprehensive income:
Net loss (491,177) (491,177)
Foreign currency translation
adjustment (16,645) (16,645)
Issuance of stock for cash 66,000
Issuance of stock for
products or services 79,320
Conversion of preferred stock
to common stock nil
--------------------------------------------------------
$ (6,283,832) $ (171,666) $2,446,796
--------------------------------------------------------
</TABLE>
Authorized Capital Stock
100,000,000 common shares, par value $0.001
2,000,000 preferred shares, par value $0.001
3
<PAGE>
GO CALL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED MARCH 31
2000 1999
CASH PROVIDED BY (USED IN)
OPERATIONS
Net loss $(491,177) $(221,553)
Items not requiring cash:
Amortization and depreciation 39,767 27,890
Services paid with common shares 79,320 336,151
---------- ----------
(372,090) 142,488
Net change in non-cash working
capital items affecting operations 413,688 (175,874)
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41,598 (33,386)
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INVESTING
Advances to Global Indexus Inc. (50,000) nil
Purchase of capital assets nil (36,625)
---------- ----------
(50,000) (36,625)
---------- ----------
FINANCING
Advances repaid to related parties (251,727) (4,915)
Advances received from related parties 165,930 nil
Advances made to investments (23,246) nil
Issue of common shares for cash 16,000 117,854
Issue of preferred shares for cash 50,000 nil
---------- ----------
(43,043) 112,939
---------- ----------
Effect of exchange rate changes (16,645) (15,980)
---------- ----------
INCREASE (DECREASE) IN CASH POSITION (68,090) 26,948
CASH, BEGINNING 79,424 42,962
---------- ----------
CASH, ENDING $ 11,334 $ 69,910
========== ==========
4
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICES
- --------------------------------------------------------------------------------
NATURE OF ACTIVITIES
The Company was incorporated in the State of Louisiana on March 1, 1994, as Omni
Advantage Inc. Effective February 12, 1998, the Company formed a subsidiary
company, Go Call Inc, in the State of Delaware. Pursuant to a Certificate of
Merger, February 17, 1998 the Company has merged with the subsidiary company and
continues operations as Go Call Inc.
Effective July 3, 1999, the Company formed Go Cash Inc., a 100% owned subsidiary
located in Costa Rica to process all e-commerce activity related to the
company's gaming business. The Company holds a 100% interest in a Canadian
subsidiary corporation which is virtually dormant.
In an attempt to focus the activity of the company on its core business,
Internet, the Company has liquidated all of its telecommunication services and
other non-Internet related businesses during the prior year and has begun
investment into Go Indexus, a sophisticated search engine.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements are presented in United States dollars and
are presented on the basis of accounting principles that are generally accepted
in the United States.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the company and
its 100% owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Net revenues from e-commerce activities is extrapolated from player losses based
on revenue sharing formulas in the agreements with licensors (note 6).
USE OF ESTIMATES
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and as such, include estimates and
assumptions of management that affect the amounts reported in the consolidated
financial statements. Actual results could differ from these estimates.
5
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICES (continued)
- --------------------------------------------------------------------------------
INCOME (LOSS) PER SHARE
The computation of income (loss) per share of common stock is based on the
weighted average number of shares and common share equivalents outstanding
during the periods presented.
All stock options, warrants and convertible preferred stock have been excluded
from the computation of diluted loss per share as their effect would be
antidilutive and accordingly, there is no reconciliation between basic and
diluted loss per share for each of the periods presented.
- --------------------------------------------------------------------------------
2. GOING CONCERN
- --------------------------------------------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As noted in the Company's
audited consolidated financial statements for the years ended December 31, 1999
and December 31, 1998, the company has incurred significant net losses. This
factor, among others, raises substantial doubt as to the company's ability to
obtain long-term debt or equity financing and achieve profitable operations. The
company's ability to continue as a going concern is dependent upon its ability
to generate positive cash flows from operations. These financial statements do
not include any adjustments related to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the company be unable to continue in existence. In the
interim period, management is still seeking additional investment capital to
support its business ventures and provide the capital considered necessary to
support operations.
6
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
3. RELATED PARTIES BALANCES March 31 December 31
2000 1999
- --------------------------------------------------------------------------------
DUE FROM RELATED PARTIES
Non-interest bearing advances made to
employees, without specific terms of repayment $ 11,615 $ nil
========== ==========
DUE TO RELATED PARTIES Payable to an employee,
bearing interest at an effective rate of 22.7%
per annum payable in monthly installments of $60,000
principal and interest, due in full April 1, 2000 $ 88,660 $ 233,611
Non-interest bearing advances received from
employees, without specific terms of repayment nil 94,456
Non-interest bearing advances received from
shareholders, without specific terms of repayment 165,225 nil
--------- ----------
$ 253,885 $ 328,067
========= ==========
In December 1999, shareholder advances totaling $931,070 were extinguished in
full by the issuance of 185,439 shares of Series B Convertible Preferred Stock.
Subsequent to the quarter end, the amount payable to an employee due April 1,
2000 has become a non-interest bearing advances without specific terms of
repayment.
7
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
4. INVESTMENT IN GLOBAL INDEXUS INC. March 31 December 31
2000 1999
- --------------------------------------------------------------------------------
Proceeds of share sales allocated to Investment:
Common shares $ 188,366 $ 188,366
Preferred shares 50,000 nil
---------- ---------
238,366 188,366
Additional advances made to Investment 20,746 nil
---------- ---------
$ 259,112 $ 188,366
========== ==========
Pursuant to an agreement signed April 17, 1999, the Company has agreed to
acquire a 49% interest in Global Indexus Inc., a joint venture company between
Go Call Inc. and Irving Moon, a director of the company. In exchange for its 49%
interest in Indexus, the Company is obligated to issue to Global Indexus Inc. or
sell on behalf of Global Indexus Inc., $1,225,000 worth of common shares of Go
Call Inc.
- --------------------------------------------------------------------------------
5. FIXED ASSETS at cost, net
- --------------------------------------------------------------------------------
Included in the fixed assets of the company are hotel real estate and
furnishings, with at net book value of $1,944,922, that has been contributed to
the company's investment in Sevada Holdings, Ltd. IV.
- --------------------------------------------------------------------------------
6. MEASUREMENT UNCERTAINTY AND ECONOMIC DEPENDENCE
- --------------------------------------------------------------------------------
FAIR MARKET VALUE OF CERTAIN LIABILITIES
The company has recorded in its accounts payable certain accounts which are in
dispute but for which the company is being pursued for payment in the courts.
These liabilities have been recorded in the books for the full amount of the
claims. The company may be able to successfully negotiate settlements for an
amount less than the full claim. Any changes in the conditions and circumstances
resulting in a change in the settlement amount of the liabilities, which could
be material, will be booked in the period of change.
8
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
6. MEASUREMENT UNCERTAINTY AND ECONOMIC DEPENDENCE (continued)
- --------------------------------------------------------------------------------
NOTES RECEIVABLE
In December 1999, the company has sold its investment in Country Star
Restaurants, Inc. ("CSR") and took back a note receivable in the amount of
$728,000 due in full with accumulated interest at an annual rate of 5%, December
23, 2004. Prior to the sale, cash advances were made to CSR by the Company
totaling $435,554 which are to be repaid to the Company as Star operations
permit.
During the quarter ended March 31, 2000, the purchaser of CSR, Star Liquidation
Company LLC ("Star"), has filed a petition for bankruptcy of CSR. The note
receivable from Star bears prepayment rights that allow the company an amount
equal to 50% of the net proceeds of any asset sale involving any Star assets,
subject to Star's bankruptcy proceedings and/or the rights of creditors. There
is no direct security for the principal amount of the note. Prior to the sale of
CSR to Star, the company registered a general security agreement against all of
the monetary and non-monetary assets of CSR as security for the advances made to
the CSR.
It is unclear at the date of issue of these financial statements how Star's
petition for bankruptcy of CSR, will affect the company's ability to realize on
the full value of the note and advances related to CSR. The company has not
recognized any allowance for doubtful collection of these amounts as of March
31, 2000. Any changes which would result in the company not being able to
collect the full value of these amounts will be booked in the period of change.
WAGERING REVENUES AND PLAYER DEPOSITS LIABILITY
The Company derives substantially all of its revenue from its gaming activities
(85% for the quarter ended March 31, 2000 - 91% for the year ended December 31,
1999). As at the date of the financial statements, the Company is economically
dependent on one vendor for the processing of substantially all of the gaming
revenues.
The Company stopped receiving reports of gaming activity from the owner of the
gaming license in October 1999, which calculate the amount of player losses. As
a result, the company has estimated the amount of player deposit liability and
net wagering revenue earned by the Company for the quarter ended March 31, 2000.
Any changes in these amounts, which may result when the actual invoices are
received, which could be material, will be booked in the period of change.
9
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
7. CAPITAL STOCK March 31 December 31
2000 1999
- --------------------------------------------------------------------------------
AUTHORIZED
2,000,000 preferred shares, par value $0.001
100,000,000 common shares, par value $0.001
ISSUED
10,000 (185,439 - December) Series B Convertible
Preferred shares, at par $ 10 $ 186
25,801,393 (22,741,909 - December) Common
shares, at par 25,800 22,741
Additional paid-in capital 8,995,005 8,851,468
Fair value of options issued 238,160 239,260
Subscriptions outstanding (356,681) (356,681)
------------ ------------
$ 8,902,294 $ 8,756,974
============ ============
ISSUANCE
During the quarter, 50,000 common shares were issued out of treasury pursuant to
an option to purchase shares at a specified price of $0.32 per share. The
options were valued in the prior period at $1,100.
During the quarter, 185,439 Series B Convertible Preferred shares were converted
into 2,897,484 common shares.
During the quarter, 10,000 Series B Convertible Preferred shares were issued out
of treasury in exchange for $50,000 cash.
No options or warrants were issued during the quarter.
- --------------------------------------------------------------------------------
8. ISSUANCE OF PREFERRED STOCK
- --------------------------------------------------------------------------------
On December 23, 1999, the company entered into an agreement with Hartcourt
Companies Inc., to issue 1,000,000 shares of its Series A Preferred stock,
convertible into 10 common shares for each preferred share, in exchange for
specified share certificates and the right to appoint 3 of the 5 members of the
board of directors.
As of the date of the financial statements, Hartcourt has been unable to fulfill
their portion of the contract and as a result, management is unable to
reasonably determine the value of the transaction. Management is currently
negotiating an equitable settlement with Hartcourt. As a result of the uncertain
nature of the outcome of the negotiations or the nature or amount to be settled
upon, the company has not recorded the issuance of the preferred stock or the
acquisition of any related assets as of March 31, 2000. Any change to the
financial statements as a result of these negotiations will be recorded in the
period of settlement.
10
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
9. PRIOR PERIOD ADJUSTMENT
- --------------------------------------------------------------------------------
The company and/or its subsidiaries and/or former officers, had been named as a
defendant in a lawsuit seeking damages for breach of contract. In April 2000,
the court awarded a judgment in favor of the plaintiff. An accrual for the
judgment in the amount of $75,000 has been recorded in the financial statements
for the quarter ended March 31, 2000 and adjusted in the prior year's
accumulated deficit and prior year's accrued charges
- --------------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS AND CREDIT RISK
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, deposits receivable, other
receivables, notes receivable, player deposits, accounts payable and amounts due
to related parties. Unless otherwise noted, it is management's opinion that the
company is not exposed to significant interest, currency or credit risks arising
from these financial instruments. The fair values of these financial instruments
approximate their carrying values, unless otherwise noted.
FOREIGN EXCHANGE RISK MANAGEMENT
The company does not use forward exchange contracts or other hedging instruments
to manage exposures, resulting from foreign exchange fluctuations in the
ordinary course of business. Unless otherwise disclosed in the notes to the
financial statements, the estimated fair value of foreign denominated assets and
liabilities approximates carrying value, translated at the prevailing exchange
rates at period end.
CONCENTRATION OF CREDIT RISK
Of the deposits receivable outstanding at March 31, 2000, $334,713 relates to
player deposits and gaming reserve related to internet gaming activities, held
by the management organization contracted to process client bids and pay outs.
The company monitors the activity of the gaming operations and deposits from the
management organization on a regular basis.
11
<PAGE>
GO CALL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
- --------------------------------------------------------------------------------
11. INDUSTRY SEGMENT AND GEOGRAPHIC
INFORMATION
- --------------------------------------------------------------------------------
In accordance with statutory requirements, the Board of Directors has determined
that the company and its subsidiary are engaged in one principal industry
segment, as a provider of Internet gaming and other telecommunication and
Internet products and services as follows: Three months ended March 31
2000 1999
Revenue:
Internet gaming $ 81,369 $ 29,700
Other telecommunication products and services 14,443 119,223
----------- -----------
$ 95,812 $ 148,923
=========== ===========
Loss from operations:
Internet gaming $ 186,244$ 17,861
Other telecommunication products and services 304,933 203,692
----------- -----------
$ 491,177 $ 221,553
=========== ===========
March 31 December 31
2000 1999
Identifiable assets are located in as follows:
Canada $ 409,752 $ 361,000
United States 1,166,054 1,163,554
Cost Rica 413,665 614,247
Dominion Republic 1,944,922 1,978,973
----------- -----------
$3,934,393 $4,117,774
=========== ===========
- --------------------------------------------------------------------------------
12. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
The presentation of certain accounts of the previous period, has been changed to
conform with the presentation adopted for the current period.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This quarterly report for the period ended March 31, 2000 on Form
10-QSB, including the disclosures below, contains certain forward-looking
statements that involve substantial risks and uncertainties. When used herein,
the terms "anticipates," "expects," "estimates," "believes" and similar
expressions, as they relate to the Company or its management, are intended to
identify such forward-looking statements. The Company's actual results,
performance or achievements may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause or
contribute to such material differences include the factors disclosed in the
"Risk Factors" section of the Annual Report for the period ended December 31,
2000 on Form 10-KSB, which readers of this Quarterly Report should consider
carefully.
The Company incurred losses of $491,177 and $221,553 for the quarters
ended March 31, 2000 and March 31, 1999, respectively. The auditor's report for
the year ended December 31, 1999 and the quarter ended March 31, 2000, states
that, "the company has suffered recurring losses from operations that raises
substantial doubt about its ability to continue as a going concern." The Company
expects to continue to incur operating losses over at least the next nine
months, and no assurance can be given that the Company will be able to continue.
In 1999 and 2000, the Company has been financing its cash flow needs through the
sale of its Common Stock and related party loans. In order to achieve
profitability, the Company will have to identify and exploit E-commerce ventures
which are accepted on a commercial basis, and no assurance can be given that the
Company will be able to accomplish this goal or, even if it does, that the
Company will operate profitably in the future.
OVERVIEW OF PRESENTATION.
The Company was incorporated in the State of Louisiana on March 1, 1994,
as Omni Advantage Inc. Effective February 12, 1998, the Company formed a
subsidiary company, Go Call, Inc., in the State of Delaware. Pursuant to a
Certificate of Merger, February 17, 1998, the Company has merged with the
subsidiary company and continues operations as Go Call, Inc.
The Company entered into an Agreement with Go Phone Inc., an Ontario
(Canada) corporation ("Go Phone"), dated as of February 23, 1998 (the
"Reorganization Agreement"), pursuant to which the Company issued 5,906,175
shares of Common Stock to the former stockholders of Go Phone in exchange for
100% of the issued and outstanding capital stock of Go Phone. In connection with
the Reorganization Agreement, Go Phone merged into a wholly-owned subsidiary of
the Company, known as Omni Advantage Canada Limited, an Ontario (Canada)
corporation, which subsequently changed its name to Go Call Canada, Inc. ("Go
Call Canada"). The Company holds a 100% interest in this Canadian subsidiary
corporation which is now virtually dormant.
13
<PAGE>
Effective July 3, 1999, the Company formed Go Cash Inc., a 100% owned
subsidiary located in Costa Rica which performs all of the functions of the
Company's business of providing turnkey management services to electronic gaming
companies. These services are performed outside the United States. Go Cash's
services include ongoing marketing of the gaming businesses and performing
calculations, preparing the website graphical interface with the customer,
managing secure electronic transfer of funds, administration of customer support
service, continuous update of website and addition of new games. Certain
specific services, such as processing of credit card transactions, are
outsourced to unrelated third parties.
Country Star Restaurants, Inc., a Delaware corporation ("Country Star")
operated a country music theme restaurant in Southern California. Pursuant to a
Stock Acquisition Agreement dated as of March 11, 1999, the Company acquired
approximately 92% of the issued and outstanding common stock of Country Star
from the three principal shareholders of Country Star in exchange for 4,552,751
shares of the Company's Common Stock, which represented twenty-three percent
(23%) of all of the Company's issued and outstanding Common Stock. After the
Company assumed control of Country Star's operations, the Company advanced
approximately $435,554 to Country Star in exchange for a promissory note secured
by all of Country Star's assets. Management of the Company subsequently
determined that the Company had not received complete disclosure of Country
Star's operations and, pursuant to a Repurchase Agreement, dated as of August 5,
1999, redeemed the 4,552,751 shares of its Common Stock for a cash payment of
$728,440. The value of $728,440 or 16 cents per share was the payment negotiated
between two non-arm's length parties. The Country Star Shareholders who sold
their shares to Go Call, Inc. offered the price of $728,440 and the Company
agreed. The Company paid the agreed amount and certificate number 3100/2 for
4,552,751 shares of the Company common stock was returned to the transfer agent,
Interwest Transfer, and cancelled. As of August 19, 1999, Country Star and the
Company agreed to terminate plans to merge the two companies and the Company
announced its intention to dispose of its interest in Country Star. On December
23, 1999, the Company sold their 92% interest in Country Star Restaurants to
Star Liquidation Company LLC, and received in return a note of $728,000, bearing
interest at the rate of 5% per annum due in full in December, 2004.
Subsequent to December 31,1999, the purchaser of Country Star
Restaurants, Inc., Star Liquidation Company LLC filed a petition for bankruptcy
of Country Star Restaurants, Inc. The note receivable from Star Liquidations
bears prepayment rights that allows the Company an amount equal to 50% of the
net proceeds of any asset sale involving any Star Liquidation asset, subject to
Country Star Restaurant bankruptcy proceedings and/or the rights of creditors.
There is no direct security for the principal amount of the note. Prior to the
sale of Country Star Restaurant, Inc., the Company registered a general security
agreement against all of the monetary and non-monetary assets of Country Star as
security for the advances made.
In an attempt to focus the activity of the company on its core business,
Internet, the Company has liquidated all of its telecommunication services and
other non-Internet related businesses during the prior year and has begun
investment into Go Indexus, a sophisticated search engine.
The consolidated financial statements of the Company, included elsewhere
in this Quarterly Report on Form 10-Q, have been presented, for accounting
purposes, as a recapitalization of Go Call Canada, with Go Call Canada as the
acquirer of Omni Advantage Inc. Further, the consolidated financial statements
reflect the operations of Go Cash, commencing from its inception on July 3,
1999. For purposes of clarity in this section, the term "Company" reflects the
financial condition and results of operations of Go Call Canada , and the
combined operations of the parent holding company, Go Call Inc., a Delaware
corporation, and Go Call Canada following the completion of the Reorganization
Agreement, and of Go Cash following July 1, 1999.
14
<PAGE>
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2000 AND MARCH 31,1999.
-----------------------------------------------------------------------------
Total revenues for the quarter ended March 31, 2000 decreased
approximately 36% to $95,812 from $148,923 for the quarter ended March 31, 1999.
Total revenues principally include: (i) revenues generated from wagers
processed, net of payouts, from the Company's E-commerce gaming processing
business operations, and (ii) revenues related to the Company's
telecommunications products and services.
The revenues from other revenue sources than e-commerce gaming
processing during the quarter ended March 31, 2000 decreased 88% to $14,433 from
$119,223 for the quarter ended March 31, 1999 due to the Company liquidating all
of its telecommunications and non- internet related business, other than its
hotel ownership. E-commerce gaming processing revenues during the quarter ended
March 31, 2000 increased 174% to $81,369 from $29,700 from the quarter ended
March 31, 1999. This increase is primarily related to the continued development
and marketing of the Company's E-commerce gaming processing business.
Total operating expenses during the quarter ended March 31, 2000
increased 58% to $586,989 from $370,476 for the quarter ended March 31, 1999.
Total operating expenses principally include: (i) direct expenses, (ii) bank
charges and interest expenses, (iii) general and administrative expenses, and
(iv) amortization and depreciation expenses, as follows:
General and administrative expenses during the quarter ended March 31,
2000 increased 104% to $499,972 from $244,553 during the quarter ended March 31,
1999. This increase related to $80,000 spent on third party investor relations
firms, $65,000 spent to comply with the contract for the sale of Country Star
Restaurants, Inc. , additional legal and accounting costs due to becoming a
fully reporting company, as well as additional costs including higher consulting
fees related to the running of a new subsidiary, Go Cash, Inc.
Direct expenses during the quarter ended March 31, 2000 decreased 1% to
$53,979 from $54,421 at March 31, 1999. This 2000 decrease primarily resulted
from management's focusing on its core internet business.
Bank charges and interest expenses during the quarter ended March 31,
2000 increased a negligible amount to $5,417 from $3,531 for the quarter ended
March 31, 1999. This increase primarily relates to increased interest on the
related party loan transactions. See "Liquidity and Capital Resources."
In addition, amortization and depreciation expenses during the quarter
ended March 31, 2000 increased 43% to $39,767 from $27,890 at March 31, 1999.
The increase related to the depreciation of certain computer software and
hardware acquired by the company in 1999 and 2000.
As a result of the foregoing, the Company generated a net loss of
$491,177 during the quarter ended March 31, 2000. The Company generated a net
loss of $221,553 during the quarter ended March 31, 1999. See "Liquidity and
Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES. At December 31, 1999, the ratio of
current assets to current liabilities was .48 to 1, and .27 to 1 at March 31,
2000.
The Company's cash flow needs for the quarter ended March 31, 2000 and
the year ended December 31, 1999, were primarily provided from operations,
related party loans and financings related to sales of the Company's securities.
During the twelve (12) months ended December 31, 1999, the Company
received gross proceeds of $1,514,634 from the sale of an aggregate of 2,993,953
shares of Common Stock. During the quarter ended March 31,2000, the Company
received gross proceeds of $66,000 for the issuance of Preferred and Common
Stock.
Cash and cash equivalents were $79,424, as of December 31, 1999. Cash
and cash equivalents were $11,334, as of March 31, 2000. The decrease from
December 31, 1999 was primarily attributable to the reduction in the Company's
capital raising activity and continued losses.
15
<PAGE>
As of March 31, 2000, the Company's borrowings grew 14% to $1,487,597
from $1,308,476 as of December 31, 1999. The growth of the borrowings was due to
an increase in accounts payable and accrued expenses of 25% to $1,206,281 from
$965,067 and an increase in player deposits of 79% to $27,431 from $15,342,
offset by a 23% decrease in related party loans to $253,885 from $328,067. The
increase in accounts payable and accrued expenses was due to the repayment of
$240,112 in related party loans plus interest and the lack of available cash.
The decrease in related party loans is due to the $240,112 repayment noted above
and less money being borrowed from such parties.
The Company had loans payable at March 31,2000 of $253,885 that are made
up of non-interest bearing advances received from employees and stockholders,
without specific terms of repayment. $88,660 of these loans was originally due
April, 2000, but was renegotiated to a demand loan after the quarter ended March
31, 2000. As of March 31, 2000, the Company was owed $11,615 in advances made to
employees.
Net cash used in operating activities was $41,598 and ($33,386) for the
quarters ended March 31, 2000 and 1999, respectively. Net Cash used in
operations during the quarter ended March 31, 2000 primarily consisted of a net
cash loss from operations of $372,090, a $241,214 increase in accounts payable
that was discussed above and a $167,529 decrease in deposits receivable mostly
due to the refund of old reserves being held by the credit card processing
company on player deposits. Net Cash used in operations during the quarter ended
March 31, 1999 primarily consisted of net cash profit from operations of
$142,488, a $115,000 increase in accounts receivable mostly due to reserves
being held by the credit card processing company on player deposits, a $33,000
decrease in accounts payable and accrued expenses, and a $27,000 increase in
other assets.
Net cash used in investing activities was $50,000 and $36,625 for the
quarters ended March 31, 2000, and 1999, respectively. In the quarter ended
March 31, 2000, the Company utilized $50,000 to purchase an additional stock
ownership position in Global Indexus, Inc, while during the quarter ended March
31,1999, the company utilized $36,625 to buy fixed assets.
Net cash provided by financing activities was $(43,043) and $112,939 for
the quarters ended March 31, 2000 and 1999, respectively. In the quarter ended
March 31, 2000, the Company repaid $251,727 in related party loans and made
$20,746 in cash advances to Global Indexus, Inc.; these amounts paid were
partially offset by $165,930 received in related party loans and $66,000
obtained from the issuance of Series B Preferred Stock and Common Stock. In the
quarter ending March 31,1999, the Company received $117,854 for issuing Common
Stock; this new financing was partially offset by repayment of $4,915 in related
party loans.
THE COMPANY HAS HISTORICALLY FINANCED ITS OPERATIONS THROUGH WORKING
CAPITAL PROVIDED BY OPERATIONS, RELATED PARTY LOANS AND THE PRIVATE PLACEMENT OF
EQUITY AND DEBT SECURITIES. THE COMPANY'S ABILITY TO CONTINUE ITS OPERATIONS IS
CURRENTLY DEPENDENT ON FINANCING FROM EXTERNAL SOURCES. THERE CAN BE NO
ASSURANCES THAT ADDITIONAL CAPITAL WILL BE AVAILABLE ON TERMS FAVORABLE TO THE
COMPANY OR AT ALL, OR THAT THE COMPANY WILL BE ABLE TO GENERATE SUFFICIENT CASH
FLOW IN ORDER TO SUSTAIN OPERATIONS. TO THE EXTENT THAT ADDITIONAL CAPITAL IS
RAISED THROUGH THE SALE OF ADDITIONAL EQUITY OR DEBT SECURITIES, THE ISSUANCE OF
SUCH SECURITIES COULD RESULT IN ADDITIONAL DILUTION TO THE COMPANY'S
STOCKHOLDERS. IN THE EVENT THAT THE COMPANY EXPERIENCES THE NEED FOR ADDITIONAL
CAPITAL, AND IS NOT ABLE TO GENERATE CAPITAL FROM FINANCING SOURCES OR FROM
FUTURE OPERATIONS, MANAGEMENT MAY BE REQUIRED TO MODIFY, SUSPEND OR DISCONTINUE
THE OPERATIONS OF THE COMPANY.
THE COMPANY'S ACCOMPANYING FINANCIAL STATEMENTS HAVE BEEN PRESENTED ON
THE BASIS THAT IT IS A GOING CONCERN, WHICH CONTEMPLATES THE REALIZATION OF
ASSETS AND THE SATISFACTION OF LIABILITIES IN THE NORMAL COURSE OF BUSINESS. AS
NOTED IN THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998, THE COMPANY HAS INCURRED
SIGNIFICANT NET LOSSES. THIS FACTOR, AMONG OTHERS, RAISES SUBSTANTIAL DOUBT AS
TO THE COMPANY'S ABILITY TO OBTAIN LONG-TERM DEBT OR EQUITY FINANCING AND
ACHIEVE PROFITABLE OPERATIONS. THE COMPANY'S ABILITY TO CONTINUE AS A GOING
CONCERN IS DEPENDENT UPON ITS ABILITY TO GENERATE POSITIVE CASH FLOWS FROM
OPERATIONS. THESE ACCOMPANYING FINANCIAL STATEMENTS DO NOT INCLUDE ANY
ADJUSTMENTS RELATED TO THE RECOVERABILITY AND CLASSIFICATION OF RECORDED ASSET
AMOUNTS OR THE AMOUNTS AND CLASSIFICATION OF LIABILITIES THAT MIGHT BE NECESSARY
SHOULD THE COMPANY BE UNABLE TO CONTINUE IN EXISTENCE. IN THE INTERIM PERIOD,
MANAGEMENT IS STILL SEEKING ADDITIONAL INVESTMENT CAPITAL TO SUPPORT ITS
BUSINESS AND PROVIDE THE CAPITAL CONSIDERED NECESSARY TO SUPPORT OPERATIONS.
16
<PAGE>
FOREIGN CURRENCY TRANSLATION
Foreign currency assets and liabilities of the Company have been
translated in the Company's financial statements from Canadian dollar values
into United States dollar values, at the rate of exchange prevailing at the
balance sheet date. Foreign currency revenues and expenses are translated at
average exchange rates for the period reported.
The statement of cash flows in the Company's financial statements
reflect an effect of exchange rate changes on cash in the following amounts for
the following periods: ($16,645) and ($15,980) during the quarters ended March
31, 2000 and 1999, respectively.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is not currently exposed to market risks due to changes in
interest rates and foreign currency rates, and therefore, the Company does not
use derivative financial instruments to address risk management issues in
connection with changes in interest rates and foreign currency rates.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Harvey Productions, Inc. vs. Michael Ruge and Go Call, Inc., Los Angeles
County Superior Court Case No. Sc 054315. Harvey Productions approached GoCall,
Inc. regarding Harvey producing a video for GoCall to be shown on cable
television to promote awareness of the Company. A Complaint was filed against
the Company and Michael Ruge, a past Chief Executive Officer of the Company on
or about September 23, 1998, claiming $75,000 in damages with respect to an
alleged contract for television production services and distribution of a
syndicated television program. The Complaint alleged breach of contract, fraud
and deceit, common count, open book account and account stated. The Complaint
included a prayer for special damages according to proof, general damages
according to proof, attorney's fees according to proof, costs of suit, punitive
damages and interest. The Complaint also alleged that the Company is the alter
ego of Mr. Ruge. In April 2000, the court found in favor of Mr Ruge, but awarded
a judgment in favor of the plaintiff against Go Call, Inc. An accrual for the
judgment in the amount of $75,000 has been recorded in the financial statements
for the quarter ended March 31, 2000 and adjusted in the prior year's
accumulated deficit and prior year's accrued charges. Additional costs relating
to interest and court costs will be accrued in the quarter ended June 30, 2000.
Except as set forth above, the Company knows of no material legal
actions, pending or threatened, or judgment entered against the Company or any
executive officer or director of the Company, in his capacity as such.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
ISSUANCE OF PREFERRED STOCK
On December 23, 1999, the Company entered into an agreement with
Hartcourt Companies Inc., to issue 1,000,000 shares of its Series A Preferred
stock, convertible into 10 common shares for each preferred share, in exchange
for specified share certificates and the right to appoint 3 of the 5 members of
the board of directors.
As of the date of the financial statements, Hartcourt has been unable to
fulfill their portion of the contract and as a result, management is unable to
reasonably determine the value of the transaction. Management is currently
negotiating an equitable settlement with Hartcourt. As a result of the uncertain
nature of the outcome of the negotiations or the nature or amount to be settled
upon, the company has not recorded the issuance of the preferred stock or the
acquisition of any related assets as of March 31, 2000. Any change to the
financial statements as a result of these negotiations will be recorded in the
period of settlement.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS-None.
(b) REPORTS ON FORM 8-K
None
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GO CALL, INC.
(Registrant)
Date: May 22, 2000 /s/ JAMES PALMER
-----------------------------
James Palmer
Chief Executive Officer
18
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