UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1999
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
Commission file number: 0 - 26597
DOT COM ENTERTAINMENT GROUP, INC.
(Name of Small Business Issuer in its charter)
Florida 58-2466312
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
300 Pearl Street, Suite 200, Buffalo, NY 14202
(Address of principal executive offices) (zip code)
(905) 337 - 8524
Issuer's telephone number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes__X__ No_____
(Registrant has been subject to filing requirements since September 2, 1999)
As of November 10, 1999, the registrant had 10,500,000 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one);
Yes_____ No__X__
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Audited)
September 30, (Note 1)
1999 December 31,
(unaudited) 1998
---------------------------
Cash $ 12,584 $ 3,419
Accounts receivable 166,797 12,267
Other receivables 72,908 --
- --------------------------------------------------------------------------------
Current assets 252,289 15,686
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$ 252,289 $ 15,686
================================================================================
Current liabilities $ 93,557 $ 5,885
- --------------------------------------------------------------------------------
Total liabilities 93,557 5,885
- --------------------------------------------------------------------------------
Stockholders' equity
Common stock, $0.001 par value
authorized 50,000,000 shares
issued and outstanding at
June 30, 1999 - 10,500,000 shares, 1998 - 130 10,500 130
Additional paid in capital 238,050 --
Retained earnings (deficit) (89,818) 9,671
- --------------------------------------------------------------------------------
158,732 9,801
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$ 252,289 $ 15,686
================================================================================
(See accompanying notes)
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONSOLIDATED INCOME STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Note (2) Note (2)
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Revenues
Royalties $ 106,703 $ 27,813 $ 224,224 $ 58,608
Support & Maintenance 50,000 -- 75,000 --
Advertising -- -- 743 --
- --------------------------------------------------------------------------------------------------------------------
156,703 27,813 299,967 58,608
Expenses
Marketing 45,822 -- 131,622 --
Development 52,633 28,671 134,001 36,118
General and administrative 62,403 4,516 133,832 9,479
- --------------------------------------------------------------------------------------------------------------------
160,858 33,187 399,455 45,597
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) before taxes (4,155) (5,374) (99,488) 13,011
- --------------------------------------------------------------------------------------------------------------------
Income taxes -- -- -- 3,000
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (4,155) $ (5,374) $ (99,488) $ 10,011
====================================================================================================================
Weighted average number of shares
outstanding 10,500,000 1,000,000 10,222,222 1,000,000
- --------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $ (0.00) $ (0.01) $ (0.01) $ 0.01
====================================================================================================================
</TABLE>
(See accompanying notes)
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONSOLIDATED CASH FLOW STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Note (2) Note (2)
- ----------------------------------------------------------------============================= ===========================
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) for the period $ (4,155) $ (5,374) $ (99,488) $ 10,011
- --------------------------------------------------------------------------------------------------------------------------------
(4,155) (5,374) (99,488) 10,011
Changes in non-cash working capital related to operations
Accounts receivable (10,251) (2,813) (154,530) (23,297)
Other receivables (72,908) (72,908)
Accounts payable 80,286 (116) 87,671 (204)
Income taxes payable -- -- -- 3,000
- --------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (7,028) (8,303) (239,255) (10,490)
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investment activities -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of common stock, net -- -- 248,420 --
- --------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities -- -- 248,420 --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase(decrease) in cash during the period (7,028) (8,303) 9,165 (10,490)
Cash position, beginning of period 19,612 8,858 3,419 11,045
- --------------------------------------------------------------------------------------------------------------------------------
Cash position, end of period $ 12,584 $ 555 $ 12,584 $ 555
================================================================================================================================
A. Cash position
Cash position is defined as cash on hand and balances with banks
B. Interest and income taxes paid
Interest paid -- -- -- --
Income taxes paid -- -- -- --
</TABLE>
(See accompanying notes)
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. December 31, 1998 Comparative Balance Sheet
The December 31, 1998 comparative balance sheet is the audited balance sheet of
The Precyse Corporation ("Precyse"), which is the most recent annual audited
period. On January 27, 1999, Dot Com Entertainment Group ("DCEG") acquired 100%
of the shares of Precyse. Since substantially all of the previous owners of
Precyse now comprise most of the directors and officers of DCEG, and they have
effective operating control of the combined company, the acquisition of Precyse
by DCEG has been accounted for showing Precyse as the accounting acquirer as per
SAB 2:A:2 of SEC guidance. Until its name change on February 2, 1999, DCEG was
formerly known as Affiliated Adjusters, Inc. ("Affiliated"), a State of Florida
corporation which, since being organized on December 11, 1981, conducted no
business and had only nominal assets and liabilities.
2. Comparatives for the Three and Nine Months ended September 30, 1998.
The comparative income statements and cash flow statements for the three and six
months 1998 present the historical financial statements of Precyse. The Precyse
financial statements are presented since substantially all of the previous
owners of Precyse now comprise most of the directors and officers of DCEG, and
they have effective operating control of the combined company and as a result
the acquisition of Precyse by DCEG has been accounted for showing Precyse as the
accounting acquirer as per SAB 2:A:2 of SEC guidance.
<PAGE>
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
General
Dot Com Entertainment Group, Inc. ("Dot Com" or the "Company") is an Internet
software development company, specializing in the creation and support of
Internet entertainment products and related services. Dot Com derives its
revenues from several sources, including its assessment of license fees and
royalties from the use of its software. Additionally , Dot Com provides
licensees with technical support, maintenance, software upgrades, information
and systems consulting services, and marketing and promotional initiatives and
services geared toward generating goodwill and brand awareness.
Dot Com's existing product is an Internet bingo game, CyberBingo (TM). Dot Com
is not an Internet gaming company, in that it does not directly or indirectly
accept wagers used to play games of chance on the Internet. Rather, it develops
and licenses the use of its commercial software product and trademark to
independent third parties located in jurisdictions that permit Internet gaming
as a legitimate business enterprise.
The Company operated without revenue until May, 1998. Since that time, Dot Com
has experienced continual revenue growth through the assessment of license fees
and support and maintenance. To date the Company has had one licensee, The
CyberBingo Corporation ("TCC"), located in St. John's, Antigua.
The following tables set forth selected information from the statements of
operations for the three and nine months ended September 30, 1999 and 1998 and
the balance sheets as at September 30, 1999 and December 31, 1998.
Selected Statement of Operations Information
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
- ---------------------------- -------------------------- -------------------------- -------------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues 156,703 27,813 299,967 58,608
- ---------------------------- -------------------------- -------------------------- -------------------------- ----------------------
Operating expenses 160,858 33,187 399,455 45,597
- ---------------------------- -------------------------- -------------------------- -------------------------- ----------------------
Net Income (4,155) (5,374) (99,488) 10,011
- ---------------------------- -------------------------- -------------------------- -------------------------- ----------------------
</TABLE>
<PAGE>
Selected Balance Sheet Information
At September 30, 1999 At December 31, 1998
- ----------------------------- -------------------------- ----------------------
Total Assets 252,289 15,686
- ----------------------------- -------------------------- ----------------------
Stockholders' equity 158,732 9,801
- ----------------------------- -------------------------- ----------------------
Three Months Ended September 30, 1999 Compared to September 30, 1998.
Revenues increased to $156,703 for the three months ended September 30, 1999 as
compared to $27,813 for the same period in the prior year. The primary reason
for the increase in revenue is the heightened level of activity of the Company's
licensee, resulting in higher royalty and support revenues in fiscal 1999. In
its efforts to market and improve the Company's products, Dot Com's expenses
also increased significantly over the prior year resulting in a loss of $4,155
for the three months ended September 30, 1999 as compared to a loss of $5,374
for the comparable period in 1998. The increased expenses are primarily related
to staffing, office, overhead, support and maintenance, development and
marketing, and public company regulatory expenses, which are associated with the
Company's increased business activity during fiscal 1999. During fiscal 1998,
the Company had limited operations, resulting in significantly lower expense
levels.
The three and nine months 1998 comparative income statements and cash flow
statements contained in this quarterly report have been prepared presenting only
the operations of The Precyse Corporation ("Precyse"), acquired by Dot Com in
January, 1999. Precyse's operations are presented since the acquisition of
Precyse by Dot Com and have been accounted for by showing Precyse as the
accounting acquiror since substantially all of the previous owners of Precyse
now comprise most of the directors and officers of Dot Com, and they have
effective operating control of the combined company (Also see SAB 2:A:2 of SEC
guidelines).
Nine Months Ended September 30, 1999 Compared to September 30, 1998.
Revenues increased to $299,967 for the nine months ended September 30, 1999 as
compared to $58,608 for the same period in the prior year. The primary reason
for the increase in revenues is the heightened level of activity of the
Company's licensee, resulting in higher royalty and support revenues in fiscal
1999. Further contributing to the increase in revenue is that the fiscal 1998
results only represent five months of revenue since revenue -generating
activities only began in May of 1998. In its efforts to market and improve the
Company's products, Dot Com's expenses increased significantly over the prior
year, resulting in a loss of $99,488 for the nine months ended September 30,
1999 as compared to a profit of $10,011 for the comparable period in 1998. The
increased expenses are primarily related to staffing, office, overhead, support
and maintenance, development and marketing, and public company regulatory
expenses, which are associated with the Company's increased business activity
during fiscal 1999. During fiscal 1998, the Company had limited operations,
resulting in significantly lower expense levels.
The three and nine months 1998 comparative income statements and cash flow
statements contained in this quarterly report have been prepared presenting only
the operations of The Precyse Corporation ("Precyse"), acquired by Dot Com in
January, 1999. Precyse's operations are presented since the acquisition of
Precyse by
<PAGE>
Dot Com and have been accounted for by showing Precyse as the accounting
acquiror since substantially all of the previous owners of Precyse now comprise
most of the directors and officers of Dot Com, and they have effective operating
control of the combined company (Also see SAB 2:A:2 of SEC guidelines).
September 30, 1999 Balance Sheet Compared to December 31, 1998.
At September 30, 1999, total assets increased to $252,289 from $15,686 at
December 31, 1998. The increase is due primarily to higher accounts receivable
of $166,797 and other receivables of $72,908 at September 30, 1999 compared to
$12,267 and nil respectively at December 31, 1998. The increase in accounts
receivable represents the heightened level of activity of the Company's
licensee, resulting from higher royalty and support revenues. The balance in
other receivables represents payments made by Dot Com on behalf of its licensee
and other amounts for which Dot Com will be repaid.
Total liabilities increased to $93,557 at September 30, 1999 from $5,885 at
December 31, 1998. This increase is due to the heightened level of business
activity of Dot Com in the current year compared to that leading to the year-end
December 31, 1998.
Risks and Uncertainties
We have identified that there is uncertainty in North America relating to the
lawfulness of Internet gaming. As such, notwithstanding the fact that the
CyberBingo (TM) game system is licensed by TCC, which operates from Antigua,
where such business is lawful if licensed, governments elsewhere, including the
federal, state or any local governments in the United States may take the
position that Cyber Bingo(TM) is being played unlawfully in their jurisdiction.
Accordingly, the Company may face criminal prosecution in any number of
jurisdictions, either for operating an illegal gaming operation, or as aiding ad
abetting others, such as its licensees, in operating an illegal gaming
operation. The Company has not devoted any of its limited resources to
investigating the legal climate in which it operates. Many of the issues facing
the Company are the same as those facing all other e-commerce providers, as
current laws are not clear as to who, if anyone, has jurisdiction over
Internet-based commerce. A number of proposals have been presented in the United
States congress to expressly ban Internet gaming, although none of these
proposals have yet been enacted. Although the Company intends to do business
worldwide, any enforceable ban on Internet gaming in the United States would
have a material adverse effect on the Company's business and both its short-term
and long-term liquidity and its revenues from operations.
Liquidity and Capital Resources
In February, 1999 Dot Com raised an aggregate of $249,420 in capital through the
sale of shares pursuant to a private placement made in accordance with Rule 504
under the Securities Act. These funds allowed the Company to increase its
marketing and development efforts. The consolidated income statements and
statements of cash flows for the three and nine months ended September 30, 1999
reflect the results of these higher expenditures. Although there has been a
significant use of cash for the three and nine months ended September 30, 1999
resulting from investments in working capital (as reflected in the significantly
higher
<PAGE>
accounts receivable balance) and expenses associated therewith, management
believes that through continued revenue improvements, the collection of accounts
receivable in the ordinairy course of business and by continuing to match
expenses with cash resources, the Company has sufficient cash-flow to meet its
ongoing obligations. The Company's marketing expenditures during the nine months
of fiscal 1999 were made on a discretionary basis, with no ongoing commitments,
based on the cash resources available. These marketing efforts and other
discretionary expenditures will be reduced, if necessary, to reflect the cash
resources on hand from time to time. At September 30, 1999 the Company had
working capital of approximately $159,000 as compared with approximately $10,000
at December 31, 1998.
Management also believes that it must raise additional funds in order to meet
its objectives, which are to release new software products every three months
and successfully market its existing software products on an international
level. Part of Dot Com's business plan is to become a first mover in this
emerging on-line entertainment industry. Management believes that if it can
successfully raise $10,000,000, it will have sufficient resources to initiate an
international marketing infrastructure for its software products, make possible
acquisitions of related businesses, which it has not yet identified, and fund
all development and other expenses. Management is seeking to raise up to
$10,000,000 in equity through a private placement. At the present time, the
Company has held discussions with a number of investment banks and institutional
investors, but has no commitments from anyone to raise funds.
There are presently no material commitments for capital expenditures. Due to the
nature of its business, the Company does not require significant outlays for
capital expenditures and, as a result, is not planning for any material capital
expenditures for the foreseeable future, unless and until additional financing
is realized.
Year 2000 Issues
State of Readiness: Company Internal Computer Systems
All of the software and hardware systems used in the development and operation
of Dot Com's products and services have been certified Y2K compliant by its
hardware and software vendors. All personal computer desktops, servers and
laptops are Y2K compliant. All Company hardware systems are supplied by either
Dell or Compaq and have all been manufactured after June of 1998. All Company
computer stations run Microsoft NT 4.0 and SP4 operating systems and have been
certified compliant by Microsoft Corporation. All development tools and database
management systems have been certified compliant by Imprise Corporation and
Microsoft Corporation. (Delphi 4.0, MS-MDAC MSODBC, MS SQL Server 6.5 SP5)
State of Readiness - TCC Computer Systems:
All hardware and software systems are Y2K ready. Network computer servers and
routers are certified Y2K compliant by the vendors (Compaq Computers and Cisco
Systems) with all computer systems supplied by Compaq and have all been
manufactured after July 1997.
All computer systems are running Microsoft NT 4.0 SP4 operating systems and have
been certified compliant by Microsoft Corporation. TCC's DataBase Management
Platform (back end database services) are implemented on Microsoft SQL Server
Version 6.5 with Service Pack 5. Microsoft Corporation certifies that this
configuration is Y2K compliant.
<PAGE>
Client Applications Developed by Dot Com
All of Dot Com's software applications currently running on TTC systems are Y2K
ready. All date specific code segments have been analysed and the Company has
verified that all date-time variables are using 4-digit date formats and are
therefore Y2K compliant.
Costs to Address the Company's Readiness:
The Company anticipates that there will be no additional costs associated with
the implementation of Y2K hardware or software systems.
The Risks:
The potential exists and we are exposed to a risk that certain of our systems or
those of our licensees will fail or suffer impairment as a result of thee Y2K
issue. Although management believes that all hardware is Y2K compliant, there is
a risk that the Company's reliance on certain hardware systems, software and
related services could result in a complete system failure to its software
and/or hardware systems and/or any related information technology system
including communication systems. Although the Company relies on systems
developed using current technology and on systems designed to be Y2K compliant,
we may have to replace, upgrade or re-engineer or program certain systems to
ensure that all technology will be Y2K compliant when operating together.
Other identified risks include the failure of necessary services such as power
and Internet service access.
Contingency Plans:
The Company does not have a plan to resolve potential service interruptions due
to long-term power or Internet service outages. Short-term power fluctuations
are being addressed through the use of un-interruptable power supplies and
diesel generator backup systems at the location of our licensee in Antigua.
Unanticipated date related issues that originate due to the Y2K event will be
immediately corrected or fixed by our software developers. Y2K related issues,
which originate due to bugs in Microsoft software systems which have not been
identified by Microsoft will be analysed by Dot Com and an attempt will be made
to immediately implement work-around systems to correct problems.
Forward Looking Statements
Dot Com is a development-stage company. Certain of the information contained in
this document constitutes "forward-looking statements", including but not
limited to those with respect to the future revenues and the Company's
development strategy, involve known and unknown risks, uncertainties, and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the continued acceptance of the Internet, number
of visits to the Company's and
<PAGE>
its affiliates' websites, as well as those factors disclosed in the Company's
documents filed from time to time with the United States Securities and Exchange
Commission.
Item 6 - Exhibits and Reports on Form 8-K
There are no reports on Form 8-K that were filed for the quarter.
Exhibit 27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOT COM ENTERTAINMENT GROUP, INC.
(Registrant)
Date: November 11, 1999 /s/ SCOTT WHITE
----------------------------
Scott White
President
Date: November 11, 1999 /s/ PERRY MALONE
----------------------------
Perry Malone
VP Technology
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 12,584 12,584
<SECURITIES> 0 0
<RECEIVABLES> 239,705 239,705
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 252,289 252,289
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 252,289 252,289
<CURRENT-LIABILITIES> 93,557 93,557
<BONDS> 0 0
0 0
0 0
<COMMON> 10,500 10,500
<OTHER-SE> 238,050 238,050
<TOTAL-LIABILITY-AND-EQUITY> 252,289 252,289
<SALES> 156,703 299,967
<TOTAL-REVENUES> 156,703 299,967
<CGS> 0 0
<TOTAL-COSTS> 160,858 399,455
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (4,155) (99,488)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,155) (99,488)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,155) (99,488)
<EPS-BASIC> 0.00 (0.01)
<EPS-DILUTED> 0.00 (0.01)
</TABLE>
