SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2000 or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-28381
Texas 93-1207631
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
440 North Center, Arlington, TX 76011
(Address of principal executive offices) (Zip Code)
(817) 265-0440
(Registrant's telephone number, including area code)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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 |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 12,570,110 shares of the
Company's Common Stock, no par value, were outstanding as of November 6, 2000.
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ITEM I - FINANCIAL STATEMENTS
GAMECOM, INC.
(Formerly The Schooner Brewery Incorporated)
Consolidated Balance Sheet
September 30, 2000 (Unaudited) and December 31, 1999
September 30,
2000 December 31,
ASSETS (Unaudited) 1999
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Current assets
Cash $ 5,736 15,564
Accounts receivable -- 180
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Total current assets 5,736 15,744
Property and equipment
Equipment, furniture and fixtures 103,464 94,485
Accumulated depreciation (27,369) (7,932)
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Net property and equipment 76,095 86,553
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Other assets -- 8,989
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Total assets $ 81,831 $ 111,286
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade payables $ 422,223 728,849
Accrued interest 52,606 49,839
Notes payable to shareholders 352,166 360,500
Short-term notes payable to bank 135,000 20,000
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Total current liabilities 956,995 1,159,188
Redeemable common stock
Common stock to redeem, 778,291 shares
at par $.005 3,891 7,527
Shareholders' equity
Capital stock 50,000,000 shares authorized
par value $.005; 11,772,997 and 10,316,600
issued and outstanding respectively 58,865 51,583
Paid-in capital 1,325,674 1,230,459
Retained earnings (2,268,594) (2,337,471)
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Total shareholders'equity (884,055) (1,055,429)
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Total liabilities and shareholder equity $ 81,831 $ 111,286
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GAMECOM, INC.
(Formerly The Schooner Brewery Incorporated)
Consolidated Statement of Operations
For the Nine Months and Quarters Ended September 30, 2000
and September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months Ended
September 30, September 30,
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2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Restaurant sales -- $ 5,431 -- --
Game royalties 193 -- 193 --
------------ ------------ ------------ ------------
Total revenues 193 5,431 193 --
Cost of sales
Salaries and labor -- 24,472 -- --
------------ ------------ ------------ ------------
Total cost of sales -- 24,472 -- --
------------ ------------ ------------ ------------
Gross profit 193 (19,041) 193 --
General and administrative expense
Administrative cost 269,965 372,130 106,114 319,078
Interest 14,868 8,770 5,200 (5,675)
Financing charges 82,195 55,200 58,695 --
Depreciation and amortization 19,437 3,038 5,383 --
Gain on sale of assets -- (143,781) -- (107,150)
------------ ------------ ------------ ------------
386,272 295,357 175,199 206,253
------------ ------------ ------------ ------------
Loss before extraordinary item (385,272) (314,398) (174,199) (206,253)
------------ ------------ ------------ ------------
Extraordinary item:
Gain from extinguishment of debt 455,149 -- 51,548 --
------------ ------------ ------------ ------------
Net gain/(loss) $ 68,877 $ (314,398) $ (123,651) $ (206,253)
============ ============ ============ ============
Per share amounts:
Net income per share $ 0.006 $ (0.029) $ (0.010) $ (0.018)
============ ============ ============ ============
Average outstanding shares 11,850,069 10,838,550 11,899,872 11,344,976
============ ============ ============ ============
</TABLE>
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GAMECOM, INC.
(Formerly The Schooner Brewery Incorporated)
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Cash flows from operating activities
Net gain (loss) $ 69,877 $(314,399)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 19,437 3,038
Gain on sale of assets -- (143,781)
Services and fees paid with stock -- 21,250
Financing fees 82,195 55,200
Stock options issued as compensation -- --
(Increase) decrease in:
Accounts receivable-trade 180 1,367
Prepaid and other assets 8,989 3,044
Increase (decrease) in:
Accounts payable and accrued expense (303,859) 235,499
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Net cash provided by operating activities (124,181) (138,782)
Cash flows from investing activities
Capital expenditures (8,979) (37,902)
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Net cash used by investing activities (8,979) (37,902)
Cash flow from financing activities
Increase in paid-in capital 16,666 110,000
Short-term notes payable 106,666 65,547
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Net cash provided by financing activities 123,332 175,547
Net increase in cash and cash equivalents (9,828) (1,137)
Cash and cash equivalents beginning of period 15,564 5,666
--------- ---------
Cash and cash equivalents end of period $ 5,736 $ 4,529
========= =========
Interest paid during the period $ 3,955 $ 9,040
========= =========
Income taxes paid during the quarter $ -- $ --
========= =========
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GAMECOM, INC.
Notes to Financial Statements
For the Quarters Ended September 30, 2000 and 1999
Note 1 Reference to Notes to Financial Statements dated December 31, 1999
The notes to the Financial Statements dated December 31, 1999 should be read in
conjunction with these financial statements. These financial statements include
all adjustments that are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods.
Note 2 Bankruptcy of First Brewery of Dallas, Inc. subsidiary
The Company placed First Brewery of Dallas, Inc. into voluntary liquidation
under Chapter 7 of the Bankruptcy Act on June 15, 2000. No creditor appeared at
the creditor's meeting held on July 17, 2000. Elimination of indebtedness for
most trade payables of this subsidiary was shown as an extraordinary item on the
statement of operations for the quarter ended June 30, 2000. The Company
subsequently determined that it had understated the amount of such indebtedness
which had been eliminated in the bankruptcy by $51,546. The amount is shown as
an extraordinary item for the quarter ended September 30, 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion contains certain forward-looking statements that are
subject to business and economic risks and uncertainties, and the Company's
actual results could differ materially from those forward-looking statements.
The following discussion regarding the financial statements of the Company
should be read in conjunction with the financial statements and notes thereto.
Overview. The Company was capitalized in 1996 to develop, own, and operate theme
brewpub/microbrewery restaurants. Until March of 1997 when the Company acquired,
and July 1, 1997, when the Company began operating, the former Hubcap Brewery &
Kitchen in Dallas, Texas, the Company had no operations or revenues and its
activities were devoted solely to development.
In January, 1999, the Company terminated its brewpub/microbrewery restaurant
operations. Future revenues and profits will depend upon various factors,
including market acceptance of `Net GameLinkTM, and general economic conditions.
The Company's present sole source of revenue is the sale of 'Net GameLink(TM)
systems and from associated royalties. The Company began receiving revenue from
its permanent beta-test site at J. Gilligan's at Arlington, Texas on July 28,
2000. It announced its first sale of the 'Net GameLink(TM) system to a third
party during the third quarter of 2000, and expects to receive the first revenue
from that sale during the fourth quarter of 2000.
On June 5, 2000, the Company announced that it had entered into a subscription
agreement for up to a $15,000,000.00 sale of common stock and warrants under a
private equity line contract with Swartz Private Equity, L.L.C. ("Swartz"), an
institutional private equity fund. This financing allows the Company to issue
common stock and warrants at the Company's discretion as often as monthly as
funds are needed in amounts based upon certain market conditions. The pricing of
each common stock sale is based upon current market prices at the time of each
draw, and the Company may set a floor price for the shares each month at the
Company's discretion. The Company's SB-2 registration statement for the Swartz
private equity line was filed on July 12, 2000, and became effective with the
Securities and Exchange Commission on August 10, 2000. The Company made its
first draw on the Swartz equity line during the month of October, 2000.
There can be no assurances that the Company will successfully implement its
expansion plans, including the 'Net GameLinkTM entertainment concept. The
Company faces all of the risks, expenses, and difficulties frequently
encountered in connection with the expansion and development of a new business.
These include limited working capital pending being able to draw upon the Swartz
private equity line, difficulties in maintaining delivery schedules if and when
volume increases, the need to develop support arrangements for systems at widely
dispersed physical locations, the need to control operating and general and
administrative expenses, and the need to spend substantial amounts on initial
advertising to develop an awareness of the Company and its products. In
addition, the Company's Chief Executive
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Officer is a practicing attorney with no training or prior experience in
managing or overseeing a public company.
Results of Operations.
Quarter ended September 30, 2000 compared to quarter ended September 30, 1999.
These two periods are in no way comparable, since the quarter ended September
30, 1999 reflects the Company's unsuccessful efforts to develop its
brewpub/microbrewery business, whereas the quarter ended September 30, 2000
reflects a redirection of the Company's efforts from the discontinued business
to the development of the Company's 'Net GameLinkTM system. For the quarter
ended September 30, 2000, the Company had revenues of only $193, all from
royalties on its beta-test system. Administrative costs of $106,114 for the
quarter ended September 30, 2000 compared to $319,078 for the quarter ended
September 30, 1999 reflect expenses incurred in registering its securities under
the Securities Exchange Act of 1934 . The increase in interest charges from a
negative $5,675 for the quarter ended September 30, 1999 to $5,200 for the
quarter ended September 30, 2000 reflects elimination of accrued interest when
directors paid corporate debt they had guaranteed and an inrease in borrowing
during the current fiscal year. The finance charges of $58,695 in the quarter
ended September 30, 2000 represents shares issued to directors in connection
with additional borrowings by the Company.
The Company placed First Brewery of Dallas, Inc. into voluntary liquidation
under Chapter 7 of the Bankruptcy Act on June 15, 2000. No creditor appeared at
the creditor's meeting held on July 17, 2000. The elimination of most of the
indebtedness for trade payables of this subsidiary was shown as an extraordinary
item on the statement of operations for the quarter ended June 30, 2000. The
Company subsequently determined that it had understated the amount of
indebtedness eliminated in the bankruptcy. As a result, an additional $51,548 is
shown as an extraordinary item for the quarter ended September 30, 2000.
Liquidity and Capital Resources. As of September 30, 2000 the Company's
liquidity position was extremely precarious. The Company had current liabilities
of $956,995, including $422,223 in trade payables, some of which were overdue,
short-term notes payable to shareholders of $352,166, most of which were either
demand indebtedness or were payable at an earlier date and were in default, bank
debt of $135,000 and related accrued interest on the notes. Current assets
available to meet those liabilities were only $5,736 .
To date the Company has met its capital requirements through capital
contributions, loans from principal shareholders and officers, bank borrowings,
and certain private placement offerings. For nine months ended September 30,
2000, the net gain was $68,877. However, that gain was represented entirely by
the elimination of accounts payable and accrued expenses as a result of the
bankruptcy described above. Actual cash requirements for the nine months,
including capital expenditures of $8,979 were approximately $133,000. To cover
most of these cash requirements, the Company received $16,667 in stock
subscriptions and $16,667 for a note issued to the same investor, increased its
bank borrowing
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by $90,000, drew down its cash by approximately $10,000 and allowed accounts
payable and accrued expense to increase to cover the balance.
The Company's consolidated balance sheet was improved by the elimination of
$455,149 in trade payables with the bankruptcy of First Brewery of Dallas, Inc.,
as those amounts were owed solely by the subsidiary. The bankruptcy does not
affect the Company's debt service requirements, as all interest-bearing debt is
owed by the parent company, and not the subsidiary.
Based on the interest-bearing indebtedness presently outstanding, the Company's
annual debt service requirements without taking into account any payments of
principal are approximately $16,700. Based on the effectiveness of the SB-2
registration statement for the Swartz private equity line as discussed above,
the Company began to draw upon the private equity line during the early portion
of the fourth quarter of 2000. The amount which the Company can draw down under
this line is based upon the volume of trading in the Company's common stock. As
a result, the amount which the Company can draw down may be limited so long as
trading volume remains low. The Company presently intends to pay one-half of its
interest-bearing debt during the first quarter of 2001, and the remainder of its
interest-bearing debt during the second quarter of 2001, based on its sales
projections and the availability of the Swartz private equity line.
Notwithstanding the existence of the equity line of credit, holders of the
Company's debt (most of whom are stockholders) are in a position to shut down
the Company's operations should they determine to do so.
Plan of Operations
The opinions of the Company's independent auditor for each of the last two
fiscal years expressed substantial doubt as to the Company's ability to continue
as a going concern. Based upon its announcement of the $15,000,000.00 Swartz
private equity line, an investor agreed to purchase 71,429 shares of common
stock at $.70 per share for a total of $50,000, and to lend the Company an
additional $50,000. In addition, the Company has borrowed $90,000 in lieu of
drawing upon the Swartz Private Equity line, and has used those funds to hire
key management staff, who are implementing the Company's business plan for the
development of 1) corporate organization, 2) strategic alliances within the
computer gaming industry, 3) advertising and promotional materials, 4) an
up-graded website, 5) distribution agreements, 6) the Company's industry and
trade show presence, and 7) further development and improvement of the Company's
`Net GameLinkTM product. Due to limited financing until being able to fully draw
upon the Swartz private equity line, the Company's marketing efforts were
focused on two major trade shows in September, the Amusement and Music Operators
Association convention in Las Vegas and the Cyberathlete Professional League
FRAG4 tournament in Dallas, as well as on orders for high-profile strategic
sales to industry leaders such as Malibu SpeedZone and Main Event.
The Company began to receive limited revenues from operation of its present
beta-test system at J. Gilligan's during the early portion of the third quarter
of 2000. However, these revenues are not expected to be sufficient to carry out
any substantial advertising and marketing. Based upon the interim capital
obtained in June of 2000, and additional corporate borrowings of $90,000, the
Company has
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moved forward with implementation of its marketing plan as discussed in the
preceding paragraph; however, the Company will be unable to carry out
substantial advertising and marketing until the Swartz private equity line
becomes fully available to the Company during the fourth quarter of 2000, and
until the Company begins to receive significant revenue from the sale of its
'Net GameLink(TM) systems, which revenue is expected to begin in material
amounts during the first quarter of 2001.
The Company will in the future need to hire a qualified chief operating officer,
and there is no assurance that it will be able to obtain one. During the second
and third quarters of 2000, the Company retained a director of sales, a director
of marketing, a director of production, and a gaming technical adviser. The
Company is currently negotiating commissioned sales agreements and distribution
agreements. The Company does not presently intend to hire other salaried key
management personnel during the next 12 months, although additional employees
may become necessary. All of the employees mentioned above, along with the
Company's director of technical services, are presently being compensated at
market rates. However, the Company's senior management (CEO, president, vice
president, and secretary) are serving without compensation, and the Company
expects this will continue to be the case indefinitely until the Company's
interest-bearing debt has been substantially reduced.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
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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.
GAMECOM, INC.
(Registrant)
Date: November 14, 2000
/s/ L. Kelly Jones
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L. Kelly Jones
Chief Executive Officer and Chief Financial
Officer
