<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File No. 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)
SABANA SUR, DEL COLEGIO DE MEDICOS Y CIRUJANOS 125 METROS ESTE,
SAN JOSE, COSTA RICA
(Address of principal executive offices)
506-290-8923
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the issuer was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [ X ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act subsequent to 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 common
equity, as of August 21, 2000: 27,153,712 shares of common stock.; No shares of
Series B Preferred Stock
Transitional Small Business Format: Yes [ ] No [ X ]
<PAGE>
GO CALL, INC.
INDEX
Page
PART I. Financial Information
Item I. Financial Statements (un-audited) 3
Condensed Consolidated Balance Sheets - June 30, 2000
(un-audited) 4
Condensed Consolidated Statements of Operations (un- audited)
for the Three and Six Months Ended June 30, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flow (un-audited)
for the Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition 10
PART II. Other Information 15
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
(Inapplicable items have been omitted)
2
<PAGE>
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements (un-audited)
In the opinion of management, the accompanying un-audited financial statements
included in this Form 10-QSB reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods presented. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year.
3
<PAGE>
GOCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
2000
---------------
<S> <C>
CURRENT ASSETS
Cash........................................................................................ $ 14,935
Deposits receivable......................................................................... 107,375
Other receivables........................................................................... 9,127
Other assets................................................................................ 87,734
---------------
TOTAL CURRENT ASSETS.................................................................... 219,171
---------------
PROPERTY AND EQUIPMENT
Equipment................................................................................... 358,275
Furniture and Fixtures...................................................................... 41,243
Leasehold Improvements...................................................................... 7,602
---------------
407,120
Less: accumulated depreciation.............................................................. (269,146)
---------------
NET PROPERTY AND EQUIPMENT.............................................................. 137,974
---------------
INVESTMENT IN GLOBAL INDEXUS INC................................................................. 259,112
INVESTMENT IN SEVADA HOLDINGS LTD. AVAILABLE-FOR-SALE (SEE NOTE 6)............................... 1,959,797
LONG-TERM NOTES RECEIVABLE (SEE NOTE 6).......................................................... 1,166,054
---------------
TOTAL ASSETS..................................................................................... $ 3,742,108
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................................................ $ 1,156,142
Player deposits ............................................................................ 30,872
Due to related parties ..................................................................... 257,358
---------------
TOTAL CURRENT LIABILITIES................................................................... 1,444,372
---------------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 6)....................................................... -
STOCKHOLDERS' EQUITY
Preferred stock $0.001 par value; 2,000,000 shares
authorized; issued and outstanding: 10,000 shares: ....................................... 10
Common stock, $.001 par value; 100,000,000 shares
authorized; issued and outstanding 27,044,121 shares: .................................... 27,044
Additional paid-in capital.................................................................. 9,247,347
Fair value of options issued................................................................ 303,160
Subscriptions outstanding................................................................... (356,681)
Accumulated deficit......................................................................... (6,723,571)
Accumulated other comprehensive loss........................................................ (199,573)
---------------
TOTAL STOCKHOLDERS' EQUITY.............................................................. 2,297,736
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................................................... $ 3,742,108
===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
GOCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES ................................................... $ 43,800 $ 309,387 $ 139,612 $ 458,310
COSTS OF REVENUES........................................... 25,838 46,345 67,671 140,847
------------- ------------- ------------- -------------
GROSS PROFIT....................................... 17,962 263,042 71,941 317,463
------------- ------------- ------------- -------------
OPERATING EXPENSES
Depreciation and Amortization.......................... 39,074 130,201 78,841 158,091
General and Administrative............................. 417,079 119,856 917,051 364,410
------------- ------------- ------------- -------------
TOTAL OPERATING EXPENSES........................... 456,153 250,057 995,892 522,501
------------- ------------- ------------- -------------
INTEREST EXPENSE............................................ (1,543) 169 (6,960) (3,362)
------------- ------------- ------------- -------------
NET INCOME (LOSS)........................................... $ (439,734) $ 13,154 $ (930,911) $ (208,400)
============= ============= ============= =============
BASIC AND DILUTED LOSS PER COMMON SHARE..................... $ (0.02) $ 0.00 $ (0.04) $ (0.01)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES USED IN PER SHARE CALCULATION...................... 26,483,404 19,263,337 25,005,284 18,104,292
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE>
GOCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------------
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................................. $ (930,911) $ (208,400)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation depletion and amortization................................. 78,841 158,091
Common Stock issued for services and products........................... 132,906 569,474
Expense related to grant of stock options............................... 65,000 -
Changes in assets and liabilities, net of assets acquired:
Deposit receivable.................................................... 394,889 (483,616)
Other receivables..................................................... 6,215 -
Other assets.......................................................... (58,848) 36,877
Accounts payable...................................................... 191,070 (6,317)
Player deposits....................................................... 15,530 -
------------- -------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES..................... (105,308) 66,109
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................................... (36,674) (315,277)
Advances to related parties............................................... (2,500) -
Advances to Global Indexus, Inc........................................... (70,746) -
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES................................... (109,920) (315,277)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.................................... 216,000 336,839
Principal payments on notes payable to related parties.................... (251,747) (476,878)
Proceeds from issuance of preferred stock................................. 50,000 -
Proceeds from notes payable to related parties............................ 181,038 382,061
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............................... 195,291 242,022
------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS................. (44,552) -
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS.................................... (64,489) (7,146)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD.................................. 79,424 42,962
------------- -------------
CASH AND EQUIVALENTS AT END OF PERIOD........................................ $ 14,935 $ 35,816
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
6
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
CONDENSED FINANCIAL STATEMENTS -- The accompanying unaudited condensed
consolidated financial statements include the accounts of GoCall, Inc. and its
subsidiaries ("GoCall"). These financial statements are condensed and,
therefore, do not include all disclosures normally required by generally
accepted accounting principles. These statements should be read in conjunction
with GoCall's most recent annual financial statements included in the Company's
report on Form 10-K for the year ended December 31, 1999. In particular,
GoCall's significant accounting principles were presented as Note 1 to the
Consolidated Financial Statements in that report. In the opinion of management,
all adjustments necessary for a fair presentation have been included in the
accompanying condensed financial statements and consist of only normal recurring
adjustments. The results of operations presented in the accompanying condensed
financial statements are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2000.
BUSINESS CONDITION-- GoCall has accumulated deficits of $6,723,571 since their
inception through June 30, 2000. They have had losses from operations and
negative cash flows from operating activities during each of the two years in
the period ended December 31, 1999 and during the six month period ended June
30, 2000. These conditions raise substantial doubt regarding the Company's
ability to continue as a going concern. These financial statements do not
include adjustments related to the recoverability and classifications of
recorded asset amounts or the amounts and classifications of liabilities that
might be necessary should the Company be unable to continue in existence.
Management is seeking additional investment capital to support its business
ventures and provide the capital considered necessary to support operations.
NOTE 2 - INVESTMENT IN SEVADA HOLDINGS AVAILABLE-FOR-SALE
During December 1999, the Company entered into an agreement to acquire an 80%
interest in Sevada Holdings Ltd. IV, a limited partnership formed for the
purpose of developing and selling real estate. As consideration for the
investment, the Company contributed assets consisting of a hotel including real
estate and furnishings. The hotel assets contributed to the partnership have
been place in an irrevocable trust with the interest of the beneficiaries
designated to the partners of Sevada Holdings Ltd. IV in direct proportion to
the original interests of the partnership. Subsequent to June 30, 2000, during
October 2000, the Company entered negotiations with the original owners of the
hotel and related assets in order to unwind the original acquisition agreement
and return the properties to the original owners.
NOTE 3 - RELATED PARTY PAYABLES
During the three months ended June 30, 2000 a note payable to an employee due
April 1, 2000 became a non-interest bearing advance without specific terms of
repayment.
Amounts due to related party were reduced during the six months ended June 30,
2000 by approximately $70,746 which primarily consisted of principal payments to
the related parties.
NOTE 4 - STOCKHOLDERS' EQUITY
The Company issued a total of 4,302,212 shares of common stock during the six
month period ended June 30, 2000. The Company issued, pursuant to a stock
purchase agreement and the exercise of options, 1,170,118 shares of common stock
and warrants to purchase 1,120,118 shares of common stock at an exercise price
of $0.148 per share for cash in the amount of $200,000. The warrants expire on
June 20, 2003. Also during the six month period ended June 30, 2000, the Company
issued 234,610 shares for services valued at $132,906 or $0.57 per share and
issued 2,897,484 shares of common stock upon conversion of 185,439 shares of
preferred stock.
The following table summarizes the changes in stock activity during the six
month period ended June 30, 2000:
7
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999 185,439 $ 186 22,741,909 $ 22,741 $ 8,851,468
Stock issued for cash 10,000 10 1,170,118 1,170 264,820
Common stock issued upon conversion
of preferred stock (185,439) (186) 2,897,484 2,898 (2,712)
Options exercised for cash - - - - 1,100
Common stock issued for services - - 234,610 235 132,671
------------- ------------- ------------- ------------- -------------
JUNE 30, 2000 10,000 $ 10 27,044,121 $ 27,044 $ 9,247,347
============= ============= ============= ============= =============
</TABLE>
During the three months ended June 30, 2000, the Company granted options to
purchase 600,000 shares of common stock to directors of the company. The
exercise price of the options ranged from $0.30 to $0.32 per share, expire
between December 31, 2003 and April 1, 2004, and vest when the Company's common
stock is listed on a public exchange. The Company recognized expense in the
amount of $65,000 during the six month period ended June 30, 2000 related to the
grant of the options.
During June 2000, the Company cancelled an option for 680,000 shares of common
stock originally granted during November 1998 due to the holder of the options
non-performance on obligations under the option agreement.
NOTE 5 - COMPREHENSIVE LOSS
At June 30, 2000, the Company had accumulated other comprehensive loss due to
translation adjustments in the amount of $199,573 due to a wholly-owned Canadian
subsidiary.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET INCOME (LOSS)........................................... $ (439,734) $ 13,154 $ (930,911) $ (208,400)
------------- ------------- ------------- -------------
Net change in cumulative foreign
currency translation adjustment......................... (27,907) 0.00 (44,552) (0.00)
------------- ------------- ------------- -------------
COMPREHENSIVE LOSS....................................... $ (467,641) $ 13,154 $ (975,463) $ (208,400)
============= ============= ============= =============
</TABLE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company has recorded in its accounts payable, certain liabilities 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 settlement 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.
The Company has been named in a complaint filed during September 1998 claiming
$75,000 in damages with respect to an alleged breach of contract related to a
8
<PAGE>
commitment for television production services and distribution of a syndicated
television program. During April 2000, the court awarded a judgement in favor of
the plaintiff against the Company. An accrual for the entire $75,000 judgement
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.
LONG-TERM NOTES RECEIVABLE
In December 1999, the Company 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% on 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"), 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
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 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 June 30,
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.
INVESTMENT IN SEVADA HOLDINGS LTD. AVAILABLE-FOR-SALE
As further explained in Note 2 - Investment in Sevada Holdings Ltd.
Available-For-Sale, the Company is in negotiations to unwind an acquisition
agreement related to the Company's beneficial interest in hotel assets place in
Sevada Holdings Ltd. The Company is unable to determine the outcome of the
negotiations and no adjustments have been included in the financial statements
as of June 30, 2000. If the agreement is finalized as negotiated, the Company
will receive back the approximate 1,680,000 (post-split) shares it originally
issued in exchange for the Company's interest in Sevada Holdings Ltd.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENT NOTICE
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27a of the Securities Act of 1933 and Section 21e of the
Securities Exchange Act of 1934 regarding events, conditions, and financial
trends that may affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons reviewing this
report are cautioned that any forward-looking statements are not guarantees of
future performance and are subject to risks and uncertainties and that actual
results may differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are discussed under the
"Management's Discussion and Analysis of Financial Condition or Plan of
Operations," and also include general economic factors and conditions that may
directly or indirectly impact the Company's financial condition or results of
operations.
The Company incurred losses of $930,911 and $208,400 for the six months
ended June 30, 2000 and June 30, 1999 respectively. The auditor's report for the
year ended December 31, 1999 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 in the future, 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 is producing limited revenue because of having shut down
the key revenue producing segments of the business while restructuring and is
not yet fully back to the previous volumes.
Go Call Canada, Inc., is a wholly owned subsidiary of the Company which
is currently dormant and produces no revenues.
Go Cash, Ltd., a Costa Rican corporation ("Go Cash"), is a wholly-owned
subsidiary of the Company which performs all of the functions of the Company's
business of providing turnkey management services to other electronic gaming
companies. These services are performed outside the United States. Go Cash's
services include ongoing marketing of the gaming businesses and performing
10
<PAGE>
calculations, preparing the website graphical interface with the customer,
managing secure electronic transfer of funds, storage of data on individual
players, administration of customer support services, 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.
Currently, this subsidiary has one casino, a scratch ticket site, and six sports
book customers. The Company is beta testing for one potential lottery customer,
and is pursuing several other new client relationships.
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 $438,054 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. The substantial indebtedness of Country Star had not been
disclosed when the information was requested during the investigation before the
purchase. Upon discovering the true indebtedness by taking over the operations
of Country Star, the Company, 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 three principal
shareholder's who originally sold the stock to the Company 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 has 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 the Calendar year end, 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
Restaurants as security for the advances made.
During December 1999, the Company entered into an agreement to acquire
an 80% interest in Sevada Holdings Ltd. IV, a limited partnership formed for the
purpose of developing and selling real estate. As consideration for the
investment, the Company contributed assets consisting of a hotel including real
estate and furnishings. The hotel assets contributed to the partnership have
been place in an irrevocable trust with the interest of the beneficiaries
designated to the partners of Sevada Holdings Ltd. IV in direct proportion to
the original interests of the partnership. Subsequent to June 30, 2000, during
11
<PAGE>
October 2000, the Company entered negotiations with the original owners of the
hotel and related assets in order to unwind the original acquisition agreement
and return the properties to the original owners.
In an attempt to focus the activity of the Company on its core
business, the Internet, the Company has liquidated all of its telecommunication
services and other non-Internet related businesses during 1999 and has been
restructuring and obtaining new contracts to get its entire attention on the
core Internet related segment.
The Company has a 49% interest in Indexus. Indexus is a sophisticated
search engine and seller of English language instruction materials through
e-commerce. The Company estimates that the development and marketing of Indexus
will require approximately six months more work and an expenditure of
approximately $1,225,000. However, the management of the company will not invest
further into this company and is pursuing divesting the interest.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30,1999.
Total revenues for the quarter ended June 30, 2000 decreased
approximately 86% to $43,800 from $309,387 for the quarter ended June 30, 1999.
Total revenues principally include: (i) revenues from management services
related to 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 reduction was primarily
due to the Company liquidating all of its telecommunications and non-internet
related businesses other than the hotel ownership.
Total operating expenses during the quarter ended June 30, 2000
increased 82% to $_456,153 from $250,057 for the quarter ended June 30, 1999.
Total operating expenses principally include: general and administrative
expenses and amortization and depreciation expenses, as follows.
General and administrative expenses during the quarter ended June 30,
2000 increased 248% to $417,079 from $119,856 during the quarter ended June 30,
1999. This increase related to payments to third party investor relations firms,
compliance with the contract terms 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, Ltd.
Amortization and depreciation expenses during the quarter ended June
30, 2000 decreased 70% to $39,074 from $ 130,201 at June 30, 1999. The decrease
related to the depreciation of certain assets sold by the Company in 1999.
Costs of revenues during the quarter ended June 30, 2000 decreased 44%
to $25,838 from $46,345 at June 30, 1999. This 2000 decrease primarily resulted
from management's focusing on its core internet business.
As a result of the foregoing, the Company generated a net loss of $
439,739 during the quarter ended June 30, 2000. The Company generated a net
profit of $13,154 during the quarter ended June 30, 1999.
12
<PAGE>
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30,1999.
Total revenues for the six months ended June 30, 2000 decreased 70% to
$139,612 from $458,310 for the six months ended June 30, 1999. Total revenues
principally include: (i) revenues from management services related to 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 reduction was principally due to
the Company liquidating all of its telecommunications and non-internet related
business, other than its hotel ownership.
Total operating expenses during the six months ended June 30, 2000
increased 91% to $995,892 from $522,501 for the six months ended June 30, 1999.
Total operating expenses principally include: general and administrative
expenses and amortization and depreciation expenses, as follows.
General and administrative expenses during the six months ended June
30, 2000 increased 152% to $917,051 from $364,410 during the six months ended
June 30, 1999. This increase is related to payments to third party investor
relations firms, compliance with the contract terms 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, Ltd.
Amortization and depreciation expenses during the six months ended June
30, 2000 decreased 50% to $ 78,841 from $158,091 at June 30, 1999. The decrease
is related to the depreciation of certain assets sold by the company in 1999.
Cost of revenues during the six months ended June 30, 2000 decreased
52% to $67,671 from $140,847 at June 30, 1999.
As a result of the foregoing, the Company generated a net loss of
$930,911 during the six months ended June 30, 2000. The Company generated a net
loss of $208,400 during the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES.
At December 31, 1999, the ratio of current assets to current
liabilities was .48 to 1, and .15 to 1 at June 30, 2000.
The Company's cash flow needs for the six months ended June 30, 2000
and 1999, were primarily provided from related party loans and financings
related to sales of the Company's securities.
Cash and cash equivalents were $79,424, as of December 31, 1999. Cash
and cash equivalents were $14,935, as of June 30, 2000. The decrease from
December 31, 1999 was primarily attributable to the reduction in the Company's
debt to related parties, advancements to Global Indexus, Inc. and continued
losses.
13
<PAGE>
As of June 30, 2000, the Company's borrowings grew 10% to $1,444,372
from $1,308,476 as of December 31, 1999. The growth of the borrowings was due to
an increase in accounts payable 20% to $1,156,142 from $965,067 and an increase
in player deposits of 101% to $30,872 from $15,342, offset by a 22% decrease in
related party loans to $ 257,358 from $328,067.
The Company had loans payable at June 30, 2000 of $ 257,358 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.
Net cash used in operating activities during the six months ended June
30,2000 primarily consisted of a net cash loss from operations of $930,911, a $
191,070 increase in accounts payable and a $394,889 decrease in deposits
receivable mostly due to the refund of old reserves being held by the credit
card processing company on player deposit.
Net cash provided by financing activities was $195,291 for the six
months ended June 30, 2000. The Company did not make cash advances to Global
Indexus, Inc. In the six months ending June 30, 1999, the Company received
$336,839 for issuing common stock.
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.
14
<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 a loss of $44,552 due to an effect of exchange rate changes on cash for
the six months ended June 30, 2000.
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
The Company currently has a judgment against it in the amount of
$75,000 which is owed to Harvey Productions, Inc. An accrual for the judgment in
the amount of $75,000 has been recorded in the financial statements for the
period ending June 30, 2000.
A default judgment was entered against the Company vs Island Green
Forestry by the Provincial Court of British Columbia, Small Claims, Case #C2877
in the amount of $10,766.68 Canadian. The judgment was against Go Call Canada,
Inc., (the Canadian subsidiary of the Company). The Company is investigating the
default judgment as the Company was never served with a complaint. An accrual
for the judgment in the amount of $10,766.68 has been recorded in the financial
statements for the quarter ended June 30, 2000.
On May 15, 2000, the two casino sites to which the Company had been
providing services stopped using the Company's services. On June 8, 2000, the
Company received a letter from the owner of these casinos stating that the
casino royalties for October through the present were not paid and that the
contract was being terminated for non payment. In a previous letter dated
February 2000, the casino owner alleged that over $400,000 was owed. The Company
disagrees with the amount as no invoices have been received and the Company and
is investigating the matter. Management of the Company is investigating its
various options.
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
SHARES ISSUED
15
<PAGE>
In May 2000, the Company issued 63,610 shares of common stock to a
consultant in exchange for accounting services provided to the Company valued at
$31,006. The shares were issued in a private transaction not involving a public
offering and the Company relied upon Section 4(2) to effect the transaction.
In May 2000, the Company issued 444,444 shares of common stock to
Bianchi International Ltd., as part of a share purchase agreement. The Company
received $100,000 for the shares. The shares were issued in a private
transaction not involving a public offering and the Company relied upon Section
4(2) to effect the transaction.
In June 2000, the Company issued 59,000 shares of common stock to a
group of five consultants in exchange for legal, marketing, accounting and
technical support services provided to the Company valued at $22,580. The shares
were issued in a private transaction not involving a public offering and the
Company relied upon Section 4(2) to effect the transaction.
On June 4, 2000, the Company issued 34,000 shares of common stock to a
group of four consultants for computer consulting and support services provided
to the Company valued at $15,402. The shares were issued in a private
transaction not involving a public offering and the Company relied upon Section
4(2) to effect the transaction.
On June 4 and June 13, 2000, the Company issued a total of 675,674
shares of common stock to Bianchi International Ltd., as part of a share
purchase agreement. The Company received $100,000 for the shares. The shares
were issued in a private transaction not involving a public offering and the
Company relied upon Section 4(2) to effect the transaction.
1.5 million shares of common stock issued to Irving Moon, prior
President of the Company, were canceled on June 30. These shares were
performance based and Mr. Moon was only in this position for three and one half
month.
OPTIONS ISSUED
On May 1, 2000 the Company issued an option for 100,000 shares of
common stock of the Company to a director of the Company in consideration of
services provided which vest immediately. The option is exercisable at $0.32 per
share and expires on December 31, 2003. The option was issued in a private
transaction not involving a public offering and the Company relied upon Section
4(2) to effect the transaction.
On May 10, 2000, the Company issued an option for 1,120,110 shares of
common stock to Bianchi International Ltd. as part of a share purchase
agreement. The option is fully vested is exercisable at $0.148 per share and
expires on June 20, 2003. The option was issued in a private transaction not
involving a public offering and the Company relied upon Section 4(2) to effect
the transaction.
On June 25, 2000, the Company issued an option for 500,000 shares of
common stock to a director of the Company in consideration of services rendered.
16
<PAGE>
The option is fully vested exercisable at $0.30 per share and expires on April
1, 2004. The option was issued in a private transaction not involving a public
offering and the Company relied upon Section 4(2) to effect the transaction.
On June 21, 2000, the Company cancelled an option for 680,000 shares of
common stock that was originally granted on November 13, 1998 to 866621 Ontario
Inc. The options were cancelled due to the holder's non-performance of its
obligations under the option agreement.
ITEM 5. OTHER INFORMATION
As of August 18, 2000 the firm of Collins Barrow was dismissed as the
Company's independent auditors and has been replaced by the firm of Hansen,
Barnett and Maxwell. The Board of Directors approved the change in auditors. The
change was effected in order to consolidate all auditing functions under a
single firm.
The reports of Collins Barrow on the financial statements for either of
the past two years did not contain an adverse opinion or a disclaimer of opinion
or was qualified or modified as to uncertainty, audit scope, or accounting
principles.
Further, there were no disagreements with Collins Barrow on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 2000.
Exhibits: Included only with the electronic filing of this report is the
Financial Data Schedule for the six month period ended June 30, 2000 (Exhibit
ref. No. 27).
17
<PAGE>
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
GO CALL, INC.
Date: October 30, 2000 By: /s/ James Palmer
------------------ --------------------------------
James Palmer
Chief Executive Officer
18
