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 March 31, 2000 or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-28381
GAMECOM, INC.
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(Name of Small Business Issuer in Its Charter)
Texas 93-1207631
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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: 12,011,118 shares of the
Company's Common Stock, no par value, were outstanding as of May 12, 2000.
<PAGE>
ITEM I - FINANCIAL STATEMENTS
GAMECOM, INC.
(Formerly The Schooner Brewery Incorporated)
Consolidated Balance Sheet
31-Mar-00
ASSETS
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Current assets
Cash $ 2,426
Accounts receivable 180
-----------
Total current assets 2,606
Property and equipment
Equipment, furniture and fixtures 95,997
Accumulated depreciation (14,959)
-----------
Net property and equipment 81,038
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Total assets $ 83,644
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Trade payables $ 773,778
Accrued interest 54,203
Notes payable to shareholders 360,500
Short-term notes payable to bank 20,000
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Total current liabilities 1,208,481
Redeemable common stock
Common stock to redeem, 778,291 shares
at par $.005 3,891
Shareholders' equity
Capital stock 50,000,000 shares authorized
par value $.005; 11,143,859 issued and
outstanding 55,719
Paid-in capital 1,247,459
Retained earnings (2,431,906)
-----------
Total shareholders' equity (1,128,728)
-----------
Total liabilities and shareholder equity $ 83,644
===========
The accomanying notes are an integral part of this financial statement.
<PAGE>
GAMECOM, INC.
(Formerly The Schooner Brewery Incorporated)
Consolidated Statement of Operations
For the Quarters Ended March 31, 2000 and 1999
2000 1999
---- ----
Revenues
Restaurant sales -- $ 5,305
Other -- 3,019
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Total revenues -- 8,324
Cost of sales
Salaries and labor -- 27,365
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Total cost of sales -- 27,365
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Gross profit -- (19,041)
General and administrative expense
Administrative cost 65,113 26,836
Interest 4,795 6,775
Financing charges 17,500 55,200
Depreciation and amortization 7,027 24,399
Gain on sale of assets -- (26,058)
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94,435 87,152
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Net loss $ (94,435) $ (106,193)
============ ===========
Per share amounts:
Net loss per share $ (0.008) $ (0.012)
============ ===========
Average outstanding shares 11,922,150 8,522,703
============ ===========
The accomanying notes are an integral part of this financial statement.
<PAGE>
(Formerly The Schooner Brewery Incorporated)
Consolidated Statements of Cash Flows
For the Quarters Ended March 31, 2000 and 1999
2000 1999
---- ----
Cash flows from operating activities
Net loss $ (94,435) $ (106,193)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 7,027 24,399
Financing fees 17,500 55,200
Stock options issued as compensation -- --
(Increase) decrease in:
Accounts receivable-trade -- 1,366
Prepaid and other assets 8,989 896
Increase (decrease) in:
Accounts payable and accrued expense 49,293 7,498
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Net cash provided by operating activities (11,626) (16,834)
Cash flows from investing activities
Capital expenditures (1,512) (4,000)
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Net cash used by investing activities (1,512) (4,000)
Cash flow from financing activities
Short-term notes payable -- 18,668
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Net cash provided by financing activities -- 18,668
Net increase in cash and cash equivalents (13,138) (2,166)
Cash and cash equivalents beginning of period 15,564 5,666
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Cash and cash equivalents end of period $ 2,426 $ 3,500
========= ==========
Interest paid during the quarter $ 431 $ 3,648
========= ==========
Income taxes paid during the quarter $ -- $ --
========= ==========
The accomanying notes are an integral part of this financial statement.
<PAGE>
GAMECOM, INC.
Notes to Financial Statements
For the Quarters Ended March 31, 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.
<PAGE>
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 future sale of 'Net
GameLink(TM) systems and from associated royalties. The Company has not received
any revenue to date from either royalties from operations of systems it owns or
the sale of its systems to others. It expects to receive the first revenue from
operations of its own system during the second quarter of 2000, and to receive
the first revenue from a sale of the system to a third party during the middle
of the second quarter of 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 and the need to devote a substantial
amount of management's time to raising capital rather than development of the
business, 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 Officer is a practicing attorney with no
training or prior experience in managing or overseeing a public company.
Results of Operations.
Quarter ended March 31, 2000 compared to quarter ended March 31, 1999.
These two periods are in no way comparable, since the quarter ended March 31,
1999 reflects the Company's unsuccessful efforts to develop its
brewpub/microbrewery business, whereas quarter the quarter ended March 31, 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 March 31, 2000 the Company had no revenues. Administrative costs of
$65,113 for the quarter ended March 31, 2000 compared to $28,836 for the quarter
ended March 31, 1999 reflect professional fees incurred in connection with
registration of the Company's common stock under the Securities Exchange Act of
1934 and forfeiture of a security deposit under a lease as the result of the
decision in January, 1999 to terminate the brewpub/microbrewery operations. The
reduction in interest charges from $55,200 for the quarter ended March 31, 1999
to $17,500 for the quarter ended March 31, 2000 reflects the elimination of bank
debt, an agreement by holders of other indebtedness to accept a one-time
<PAGE>
issuance of common stock in lieu of accrued and future interest and the issuance
of shares of Common Stock to the Company's Chief Executive Officer in 2000 as
consideration for a guarantee of bank borrowing of $20,000.
Liquidity and Capital Resources. As of March 31, 2000 the Company's liquidity
position was extremely precarious. The Company had current liabilities of
$1,208,481, including $773,776 in trade payables, most of which were overdue,
short-term notes payable to shareholders of $360,500, most of which were either
demand indebtedness or were payable at an earlier date and were in default, bank
debt of $20,000 and related accrued interest on the notes. Current assets
available to meet those liabilities were only $2,606.
To date the Company and First Brewery of Dallas I, Ltd., the predecessor to
First Brewery of Dallas, Inc., the Company's wholly-owned Texas subsidiary
corporation, met their capital requirements through capital contributions, loans
from principal shareholders and officers, bank borrowings, and certain private
placement offerings. For the quarter ended March 31, 2000, the net loss was
$94,435, of which only $33,516 was accounted for by non-cash charges. In
addition, the Company made capital expenditures of $1,512 resulting in total
cash requirements for the quarter of approximately $62,431. To cover most of
these cash requirements, the Company allowed accounts payable and accrued
expenses to increase by $49,293, and drew down its cash by $13,138.
It is anticipated that the Company will place First Brewery of Dallas, Inc. into
voluntary liquidation under Chapter 7 of the Bankruptcy Act. Upon the
anticipated conclusion of that proceeding, the Company's consolidated balance
sheet will be improved by the elimination of $524,111 in trade payables, as
those amounts are owed solely by the subsidiary. It would not affect the
Company's debt service requirements, as all interest-bearing debt is owed by the
parent company, and not the subsidiary.
Even with the expected elimination of the First Brewery of Dallas, Inc.
indebtedness, the Company will be unable to continue its operations or to
commercially exploit its `Net GameLinkTM product in the absence of substantial
additional financing. 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. The Company has
registered its outstanding common stock under the Securities Exchange Act of
1934 with a view toward making its equity securities more attractive to
potential investors, and present plans call for the Company to seek additional
financing through a private offering in the second quarter of 2000. The Company
intends to pay approximately one-half of its interest-bearing debt pro rata in
mid-summer. This would reduce the Company's annual debt service requirements by
one-half. Although the Company has recently executed a letter of intent and
currently is in a due diligence period with an investment banking firm, at the
present time it has not completed any arrangements to obtain additional
financing and there can be no assurance that it will be able to raise the
<PAGE>
necessary funds. In that connection, the Company intends to place its First
Brewery of Dallas, Inc. subsidiary into voluntary bankruptcy. The Company is
unable to predict the effect of the anticipated bankruptcy on its ability to
raise additional funds to develop its gaming operations, but efforts to raise
these funds could be adversely affected by the bankruptcy. If the Company is
unable to raise additional funds, holders of its debt (most of whom are
stockholders) would be in a position to shut down the Company's operations.
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. Until such time as the Company is able to obtain additional
financing, it plans to limit its operations by conducting marketing efforts
primarily on the basis of person-to-person contact with those who have
previously expressed an interest in its system and limiting expansion of its
operations to delivery of systems as permitted by internally-generated cash
flow. This may require that the Company accept orders for new systems only on
the basis of a down payment sufficient to cover the costs of manufacture of the
system, which may in turn make it difficult to market additional systems.
Further, the expression of uncertainty as to the Company's ability to continue
as a going concern may itself adversely affect the Company's liquidity and cash
flow, since vendors who might otherwise have been willing to extend credit may
instead insist upon pre-payment or payment on a C.O.D basis.
The Company expects to begin receiving revenues from operation of its present
system at J. Gilligan's during the second quarter of 2000. However, these
revenues are not expected to be sufficient to carry out any substantial
advertising and marketing. The Company intends to seek financing through a
private offering and if it is successful to apply a substantial portion of the
proceeds toward marketing its systems. The Company has recently executed a
letter of intent and currently is in a due diligence period with an investment
banking firm concerning the proposed financing. Management is optimistic that
the required financing can be obtained, but cannot offer any assurance that this
will be the case.
The Company will need to hire a qualified chief operating officer, and there is
no assurance that it will be able to obtain one. The Company is also currently
holding discussions with potential candidates for the positions of Director of
Sales and Director of Gaming. It does not intend to hire any other employees
during the next 12 months. At the present time, all officers and employees of
the Company are serving without compensation except for Mr. Olivares, and the
Company expects that this will continue to be the case until it has raised
additional financing. If the Company is not able to raise the necessary funds to
expand sales beyond those that may be generated by person-to-person contact, it
will be forced to terminate its operations entirely.
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.
<PAGE>
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: May 15, 2000
/s/ L. Kelly Jones
--------------------------------------
L. Kelly Jones
Chief Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
GAMECOM, INC. FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,426
<SECURITIES> 0
<RECEIVABLES> 180
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,606
<PP&E> 95,997
<DEPRECIATION> 14,959
<TOTAL-ASSETS> 83,644
<CURRENT-LIABILITIES> 1,208,481
<BONDS> 0
0
0
<COMMON> 55,719
<OTHER-SE> (1,184,447)
<TOTAL-LIABILITY-AND-EQUITY> 83,644
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 94,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,295
<INCOME-PRETAX> (94,435)
<INCOME-TAX> (94,435)
<INCOME-CONTINUING> (94,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,435)
<EPS-BASIC> (0.008)
<EPS-DILUTED> (0.008)
</TABLE>
