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 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. - -------------------------------------------------------------------------------- (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. ITEM I - FINANCIAL STATEMENTS GAMECOM, INC. (Formerly The Schooner Brewery Incorporated) Consolidated Balance Sheet 31-Mar-00 ASSETS - ------ 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 ----------- 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 ----------- 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. 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 ------------ ----------- Total revenues -- 8,324 Cost of sales Salaries and labor -- 27,365 ------------ ----------- Total cost of sales -- 27,365 ------------ ----------- 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) ------------ ----------- 94,435 87,152 ------------ ----------- 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. (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 --------- ---------- Net cash provided by operating activities (11,626) (16,834) Cash flows from investing activities Capital expenditures (1,512) (4,000) --------- ---------- Net cash used by investing activities (1,512) (4,000) Cash flow from financing activities Short-term notes payable -- 18,668 --------- ---------- 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 --------- ---------- 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. 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. 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 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 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. - ----------- 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: May 15, 2000 /s/ L. Kelly Jones -------------------------------------- L. Kelly Jones Chief Executive Officer and Chief Financial Officer