-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JVyLsaT9eoMPjUOJTVL3T8J6khVtC/wtAINyD1phPKi+PGlL51V6BDv8vLImzIwH lzV4BRI3P5gJOcwqOQt0CA== 0001005477-99-005664.txt : 19991207 0001005477-99-005664.hdr.sgml : 19991207 ACCESSION NUMBER: 0001005477-99-005664 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19991206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GAMECOM INC CENTRAL INDEX KEY: 0001085243 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 931207631 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-28381 FILM NUMBER: 99769154 BUSINESS ADDRESS: STREET 1: 440 NORTH CENTER CITY: ARLINGTON STATE: TX ZIP: 76011 BUSINESS PHONE: 8172650440 MAIL ADDRESS: STREET 1: 440 NORTH CENTER CITY: ARLINGTON STATE: TX ZIP: 76011 10SB12G 1 FORM 10-SB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-SB --------------------------- GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------------- GAMECOM, INC. (Name of Small Business Issuer in Its Charter) NEVADA 93-1207631 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 440 NORTH CENTER ARLINGTON, TEXAS 76011 (Address of Principal Executive Offices) (Zip Code) (817) 265-0440 (Registrant's Telephone Number, Including Area Code) SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: (None) SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, par value $.005 per share (Title of Class) TABLE OF CONTENTS PART I Item 1 Description of Business. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3 Description of Property. Item 4 Security Ownership of Certain Beneficial Owners and Management. Item 5 Directors, Executive Officers, Promoters and Control Persons. Item 6 Executive Compensation. Item 7 Certain Relationships and. Related Transactions. Item 8 Description of Securities. PART II Item 1 Market Price of and Dividends on the Registrant's Common Equity and Other Shareholder Matters. Item 2 Legal Proceedings. Item 3 Changes In and Disagreements With Accountants. Item 4 Recent Sales of Unregistered Securities. Item 5 Indemnification of Directors and officers. PART F/S Financial Statements. PART III Item 1 Index to Exhibits. Item 2 Description of Exhibits, 2 PART I ITEM I DESCRIPTION OF BUSINESS BUSINESS OVERVIEW GameCom, Inc. ("GameCom" or the "Company") was organized in 1996 to operate theme concept microbrewery restaurants. In 1997, the Company acquired First Brewery of Dallas, Inc., which operated the former Hubcap Brewery & Kitchen of Dallas, Texas (later renamed The Schooner Brewery(TM) brewpub). As a result of several factors, including relatively strict laws that apply to craft brewers in Texas, GameCom found it difficult to develop this initial business, and closed down its microbrewery operations in early 1999. In December of 1997, GameCom acquired all rights to 'Net GameLink(TM), an interactive entertainment system designed to allow a number of players to compete with one another in a game via an intranet or the Internet. Since closing its microbrewery operations GameCom has been devoting substantially all of its efforts to implementing the 'Net GameLink(TM) product. The Company maintains its principal office at 440 North Center, Arlington, Texas 76011, and its telephone number is (817) 265-0440. INDUSTRY OVERVIEW The electronic gaming industry has experienced dramatic changes over the last several years. Beginning with games played by a single user on his own computer, electronic games have progressed from (i) play by two or more users on a single computer, to (ii) play by many users over an intranet, to (iii) simultaneous play by even more users from locations spread throughout the world via the Internet. These changes have brought about a rapid increase in the number of interactive electronic gamers. Pogo.com, one of the leading game enabling companies operating in the Internet electronic gaming sector, recently reported adding its 3.5 millionth member. Similar increases are being reported by other participants in that sector. Initial efforts to capitalize on the Internet interactive electronic games market were based on the assumption that players would be willing to pay directly to participate in these games. Pogo.com began with this business model but was unable to generate a sufficiently large group of paying customers to make the model profitable. Recent efforts in this area have instead been based on the media model, in which users do not pay for the service but the site operator sells access to the users to advertisers. Despite the success of Internet gaming companies, an element has been lost in the process of moving from the parlor to the individual user's screen -- the element of direct social interaction. The Company has found that people like to talk to each other while they play, and a computer screen is no substitute for face-to-face communication. Virtually all of the Internet gaming providers have created some means for the players to "chat" as they are playing by typing messages back and forth. But this is an inadequate substitute for the immediate presence of a live human being. Typing simply doesn't convey the excitement or nuances of meaning communicated by the human voice. In response to the desire of players for direct interaction, at least one company has constructed several large electronic gaming centers, and has announced its intention to build many others. Like the 3 arcades frequently seen in suburban malls, these centers are intended to attract the hard-core electronic gamer who is seeking to play in a social environment. The Company's product is targeted at a market similar to that of the large electronic gaming centers, but is designed for smaller-scale and more widespread use in a neighborhood setting. The experience of the large electronic gaming centers has demonstrated that players are willing to pay to access electronic games in the company of others. 'NET GAMELINK(TM) SYSTEM The Company's 'Net GameLink(TM) system is designed for installation at a relatively modest cost in neighborhood arcade-like gaming centers and social bars. It consists of computers, a networking system, and specially-designed networked kiosks that allow the Company's patrons to play interactive 3D games with either other users at the same location or users at a remote location. The gamestations feature X86 compatible 3D-game hardware and software. Customers pay for their use of the system through a plastic debit card. Each card is prepaid and is credited with a certain amount of playing time. Design Goals: In designing kiosks for its system, the Company's objectives were to remove the computer look and feel from the game play experience, use state of the art sound and video systems to further enhance game play, provide for connection to other kiosks at the same location through an intranet and connection to kiosks at other locations through the Internet, and provide a system that would be easy to change and update. In addition, the system had to be able to run most games on the market, permit easy access to the games by the user, and prevent the user from obtaining access to the computer's operating system. Selection of components for the system was based on performance, reliability, and price, in that order. Enclosure: The physical enclosure itself is 3 foot by 3 foot square and over six feet tall with full length windows on each closed side. The kiosk enclosure is open on one side and the windows allow the works of the systems to be seen. To further enhance the open look of the kiosk all enclosures are removed from the power supply and monitor. Each kiosk has three bays which are arranged vertically. All computer equipment is mounted in the upper bay. The mid bay is dedicated to the lighting controller/source and the lower bay holds a sub-woofer speaker, A/C wiring and un-interruptible power source. The kiosk is made from high grade particle board and all corners are machined and rounded. Game controls are mounted on two shelves in the front of the enclosure. The lower shelf is made of the same board has the enclosure and the top is made of clear plastic. Two handles provide support for the upper shelf and act as a light for the lower shelf. Computer: The computer system is based on an AMD K6-III(R)/450 MHz processor. This is mounted on a Epox mother board with 128 megabytes of RAM. It uses the IDE interface and a 4.5-gigabyte hard drive. The network connection is supplied by a 3-Com 905b 100baseT card. A Creative Labs 16-megabyte accelerated video card connected to a 21 inch 27 dot pitch monitor supplies video. A Creative Labs Sound Blaster Alive sound card is used. The speakers are made by Altec Lansing and have two small high and mid range enclosures and a base and sub-base enclosure. 4 Lighting: Lighting is supplied from a 150 watt light generator and distributed through a fiber optic light pipe array. The light generator has an integral dichromatic filter that causes the light color to shift a few times each minute. The mounting plates for the motherboard, magnetic card reader, and joystick are made of a plastic material that allow light to be injected that creates a glow around the edge. Edge light fiber optic cables are used to light the inside of the kiosk and also the motherboard mounting plate. Light pipes are also run to the handles on each side of the lower front shelf. User interface: In its usual configuration, the kiosk provides for input through a keyboard, a mouse, and a joystick. The keyboard is a standard 101 key Keytronic black keyboard that is mounted on the lower shelf. The mouse is also black and is made by Keytronic. The joystick is a force feed back type manufactured by Microsoft. The joystick connections are external to the enclosure. This allows the joystick to be changed out for other types of game input devices. A magnetic card reader authenticates users and deducts the appropriate amount for the user's playing time. All input devices other than the magnetic card reader are not hard mounted for the convenience of the user. System Software: The operating system software is Microsoft Windows 98. The standard TCP/IP stack is used for network connectivity. The interface software is written in Micromedia Director and the user database is written under MySql running under Redhat 6.0 LINUX. The games themselves are stored on an LINUX server running with SAMBA supplying the connectivity to the Windows environment. Operation: Each kiosk is a network client of the LINUX server where all games are stored. When a user swipes his or her card through the card reader the software on the kiosk makes a request of the data base stored on the server. This data base maintains a record of the amount of time the user has bought and how much he or she has used. Once the user has been authenticated and the system has verified his remaining time, the server starts the timing clock for the kiosk and allows the user to select a game. When the user's time expires the kiosk shuts down the game. Each kiosk has a full time connection to the Internet and to the local network. Interactivity: The Company's system provides for interactive play among gamers at a single location via an intranet or at widely dispersed locations via the Internet. Because the Company's system is intended to reach players wishing to play in a social setting, the Company expects that at least initially the system's capability to allow play among gamers at a single physical location through an intranet will be more significant than its ability to enable play on a worldwide basis. However, it seems likely that in the future games will be developed that permit teams of players at one location to compete against teams located elsewhere, and the system's Internet connection will permit such play without any modification to the system. 5 Installed Games: Each location will provide access to the user's choice of approximately 10 games at any time. The games to be offered on the Company's kiosks will not necessarily be different from those that an electronic gamer could purchase at his or her local computer store. Many gaming manufacturers are now offering their games in an interactive format. To a serious gamer, the appeal of the Company's system is likely to be the fact that the hardware components will be faster, bigger, louder, etc. than those he would have available in a home setting. For the novice, the physical attributes of the system, the stylistic kiosks, the fiber optic lighting, and the social atmosphere of playing interactive games on a physically interactive basis through an intranet is expected to be what he or she finds appealing. All locations will be accessible through the Company's computer and its home office, so that a constant evaluation of the popularity of the games available at a particular location can be continuously monitored. The games installed at each location will vary to some extent depending upon the amount of playing each receives as reported by the Company's centralized database. However, there will be a substantial overlap, since this is required in order to allow interactive play between widely dispersed locations. The 10 games for the Company's initial system were selected with the guidance of GT Interactive Software, a leading games manufacturer/distributor. Present arrangements called for payment of an annual royalty of $540 per game. However, the Company believes that as it becomes established in multiple locations it will be in a position to achieve a strategic alliance with one of the leading games manufacturers/distributors under which the Company would receive payment from the manufacturers/distributor in exchange for being in the exclusive supplier of games to the Company. The Company's first 'Net GameLink(TM) entertainment system was made available for public play at Who's on First? in New York City on July 16, 1999. On November 2, 1999, the Company moved this system to J. Gilligan's in Arlington, Texas to bring it closer to the Company's principal offices. Sources of Revenue: The Company intends to provide its interactive electronic gaming service through a combination of Company-owned centers and through third parties such as social bars, which will purchase the system on the basis of a fixed initial fee and a continuing royalty. In addition, the Company expects revenue to be generated through the sale of advertising to companies who wish to reach the Company's demographic market. The Company anticipates that the cost of a system to third parties will be in the range of $6,500 to $7,000 per kiosk, including the server for each location. The Company anticipates a royalty based on the amount spent by patrons to actually play on the system equal to 40% of revenues and a royalty on the advertising generated by the system at each location equal to 50% of the advertising revenue paid to the operator. COMPETITION The Company believes that its primary competition will be the large gaming centers being established by companies such as GameWorks. GameWorks was established by Sega Enterprises, Universal Studios, Inc. and DreamWorks SKG and was designed under the guidance of Steven Spielberg. GameWorks has far greater financial and technical resources than the Company and has 6 created an entire establishment devoted to various forms of gaming, including virtual reality games. The Company intends to compete by providing more but smaller facilities that will be readily accessible in the gamer's immediate neighborhood, with the companionship of the gamer's neighbors, rather than requiring substantial travel to game among strangers. MARKETING Until such time as the Company is in a position to raise significant amounts of additional capital, its capacity for producing 'NetGamelink(TM) systems will be severely limited, and its marketing efforts will be consistent with its production capacity. Initial marketing efforts are expected to consist of follow-ups by the Company's Director of Sales directed toward a limited number of individual and chain casual restaurant/bars, some of which have learned of the Company's system by observing it when it was installed at Who's on First in New York or later at J. Gilligan's Bar & Grill in Arlington, Texas. Longer range plans include production of a promotional video of the system for distribution to potential customers, use of live streaming video on the Company's Web site showing actual real-time use of the Company's system by patrons at J. Gilligan's, and an advertising campaign in leading restaurant/food industry publications. The Company intends to add additional marketing staff as required. EMPLOYEES At September 30, 1999 the Company employed 4 persons. The Company considers relations with its employees to be satisfactory. TRADEMARKS The Company has filed for federal registration of its 'Net GameLink(TM) trademark, and a patent application is pending for its network enabled gaming kiosk. YEAR 2000 DISCLOSURE Until recently, computer programs were generally written using two digits rather than four to define the applicable year. Accordingly, such programs may be unable to distinguish properly between the year 1900 and the year 2000. The Company is entirely dependent upon software provided by others both for operation of its 'Net GameLink(TM) system and for its internal operations. In view of the Company's financial position and the anticipated scope of its operations over the next several months, it intends to limit its efforts in dealing with this problem to seeking assurance from its outside vendors prior to purchasing any additional hardware or software that their products will be Year 2000 compliant. Given the reliance on third-party information as it relates to their compliance programs and the difficulty of determining potential errors on the part of external service suppliers, no assurance can be given that the Company's systems or operations will not be affected by mistakes, if any, of third parties or third-party failures to complete their Year 2000 projects on a timely basis, or that any such failure to convert by another company would not have an adverse effect on the Company's systems. The Company does not have any contingency plans in place to address the failure of timely conversion of third-party systems in respect of the Year 2000 issue. 7 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. However, since the acquisition was accounted for as a pooling of interests, the results of operations of Hubcap Brewery & Kitchen were carried forward into the Company's financial statements and accordingly the 1997 financial statements reflect a full year of operations of that business. 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 GameLink(TM), 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. There can be no assurances that the Company will successfully implement its expansion plans, including the 'Net GameLink(TM) entertainment concept. The Company also faces all of the risks, expenses, and difficulties frequently encountered in connection with the expansion and development of a new business. Furthermore, to the extent that the Company's expansion strategy is successful, it must manage the transition to multiple sites, higher volume operations, control of overhead expenses, and the addition of necessary personnel. Results of Operations. Fiscal year ended December 31, 1998 compared to fiscal year ended December 31, 1997. The Company had no revenues from the date of inception through July 1, 1997, when it began operating the former Hubcap Brewery & Kitchen, through its wholly-owned Texas subsidiary corporation, First Brewery of Dallas, Inc. However, as noted above, results for the year reflect operations of the acquired Company prior to the acquisition. Prior to July 1, 1997, the Company had received $391,351.00 in paid-in capital, and had incurred $237,478.54 in start-up, consulting, and legal expenses associated with the formation of the Company and its development activities. For the 12 months ended December 31, 1998, the Company, through its wholly-owned subsidiary, First Brewery of Dallas, Inc., had a net loss of $681,018, compared to a loss of $576,520 for the 12 months ended December 31, 1997. First Brewery of Dallas, Inc. ceased operations on January 10, 1999. Line by line comparisons of the individual items contributing to the Company's results for these two years is of little or no significance in view of the decision to terminate the Company's brewpub/microbrewery operations. Increases in revenues and the related increases in costs of sales from the 1997 to the 1998 fiscal years generally reflect the Company's moderate degree of success in expanding its restaurant operations. However, as the 1998 fiscal year drew to a close it became clear to the Company's management that Texas's liquor control laws were such that the Company would not be able to obtain approval for the microbrewery operations which it regarded as the key to achieving 8 profitable operations. Probably the most significant items in the Statement of Operations for the two years are the increase in interest expense from $12,776 in fiscal 1997 to $39,026 in fiscal 1998, reflecting an increased level of borrowing, primarily from shareholders., and the $132,545 provision taken in fiscal 1998 for losses from discontinued operations, reflecting the determination to shut down the brewpub/microbrewery activities. Interest expense is expected to be substantially lower for the immediate future as a result of the forgiveness of certain debt in connection with termination of the Company's brewpub/microbrewery operations in January, 1999 as described below, and the one-time issuance of stock in lieu of future interest as described under "Certain Transactions." Nine months ended September 30, 1999 compared to nine months ended September 30, 1998. These two periods are in no way comparable, since the nine months ended September 30, 1998 reflect the Company's unsuccessful efforts to develop its brewpub/microbrewery business, whereas the corresponding nine months of 1999 reflect a redirection of the Company's efforts from the discontinued business to the development of the Company's 'Net GameLink(TM) System. For the first nine months of 1999, the Company had essentially no revenues. Administrative costs of $224,381 for the nine months ended September 30, 1999 compared to $368,757 for the nine months ended September 30, 1998 reflect the $132,545 charge reflecting the decision in January, 1999 to terminate the brewpub/microbrewery operations. The Company recorded a $67,849 gain on the sale of equipment for the nine months ended September 30, 1999. This gain reflects the fact that, as described below, the guarantors of the Company's bank debt secured by that equipment foregave approximately $65,000 in indebtedness when they acquired the bank's security interest in that equipment upon payment of that indebtedness, and later disposed of the equipment to reimburse themselves for a portion of these payments. The reduction in interest charges for the nine months ended September 30, 1999 reflects an agreement by holders of that indebtedness to accept a one-time issuance of common stock in lieu of accrued and future interest. Liquidity and Capital Resources. As of September 30, 1999 the Company's liquidity position was extremely precarious. The Company had current liabilities of $908,780, including $524,111 in trade payables, most of which were overdue, short-term notes payable of $360,500, all of which were either demand indebtedness or were payable at an earlier date and were in default, and related accrued interest on the notes. Current assets available to meet those liabilities were only $4,709. 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. At the time the operations of First Brewery of Dallas, Inc. were terminated, all of that subsidiary's assets were pledged to secure indebtedness to SecurityBank of Arlington, Texas. That indebtedness had been personally guaranteed by the Company's directors and by another individual. Upon termination of the brewpub/microbrewery operations the guarantors were required to repay that indebtedness to the bank, and upon such payment the bank assigned the Company's notes and the related security to the guarantors. The guarantors subsequently foregave the indebtedness and disposed of the assets securing the indebtedness to third parties at a loss. It is anticipated that the Company will in the near future place First Brewery into voluntary liquidation under Chapter 7 on the Bankruptcy Act. Upon the anticipated conclusion of that 9 proceeding, the Company's consolidated balance sheet will be improved by the elimination of $431,111 in trade payables, as those amounts are owed solely by the subsidiary. Even with the expected elimination of the First Brewery indebtedness, the Company will be unable to continue its operations or to complete the development of its 'Net GameLink(TM) hardware in the absence of substantial additional financing. The Company is registering its outstanding common stock under the Securities Exchange Act of 1934 with a view toward making its equity securities more attractive to potential investors, but 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, it should be noted that 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. ITEM 3 - DESCRIPTION OF PROPERTY The Company's executive offices are located in Arlington, Texas, at the offices of Jones & Cannon, P.C. See "Certain Relationships and Related Transactions." Although the Company has not been charged rent for its office space, there is no assurance that these offices will remain sufficient for the Company's use, or that the gratis nature of this relationship will continue. ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of September 30, 1999, certain information with respect to the Company's equity securities believed by the Company to be owned of record or beneficially by (i) each Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company's outstanding equity securities; and (iii) all Directors and Executive Officers as a group. Shareholders' Name and Address Number of Shares Owned Percent L. Kelly Jones 1,766,980 (1) 15.75 440 North Center Arlington, Texas 76011 Jim Poynter 737,260 (2) 6.57 City Center Tower II 301 Commerce Street Suite 1205 Fort Worth, Texas 76102 Kimberly Biggs 42,460 (3) 0.38 2414 Green Willow Court Arlington, Texas 76001 10 John Aleckner 347,400 (4) 3.10 1901 Rockcliff Court Arlington, Texas 76012 All Officers and Directors As a Group (4 Persons) 2,894,100 (1) (2) (3) (4) 25.80 ---------------------------------------------- (1) Excludes incentive conditional options to purchase 833,000 shares of Common Stock for $4,165.00, which are not exercisable within 60 days. The Company is obligated to redeem 591,622 of these shares for a nominal amount, which would reduce Mr. Jones's ownership to 10.48%. (2) Excludes incentive conditional option to purchase 333,000 shares of Common Stock for $1665.00 which is not exercisable within 60 days. The Company is obligated to redeem 287,531 of these shares for a nominal amount, which would reduce Mr. Poynter's ownership to 4.01%. (3) The Company is obligated to redeem 16,559 of these shares for a nominal amount, which would reduce Ms. Biggs's ownership to 0.23%. (4) Excludes incentive conditional option to purchase 333,000 shares of restricted Common Stock for $1665.00 which is not exercisable within 60 days. The Company is obligated to redeem 135,486 of these shares for a nominal amount, which would reduce Mr. Aleckner's ownership to 1.89%. The beneficial owners of securities listed above have sole investment and voting power with respect to such shares. Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Shares of stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person. In addition to the shareholders listed above, Connect Computer Group, Inc., the firm which has been largely responsible for development of the Company's kiosk and computer systems ("Connect Computer"), has performed its development work on the basis of an oral understanding or "gentleman's agreement" with the Company's president that if the Company is successful in marketing the product Connect Computer will be issued a significant equity position in the Company, the amount of which is yet to be determined. 11 ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person, and the date such person became a director or executive officer of the Company. Date became director or Name Age Positions executive officer - ---- --- --------- ----------------- L. Kelly Jones 46 President, Chief Executive Officer and Chairman of the Board of Directors March 26, 1997 W. James Poynter 44 Vice-President and Director March 26, 1997 Kimberly Biggs 33 Secretary and Treasurer March 26, 1997 John F. Aleckner, Jr. 54 Director March 26, 1997 The members of the Company's board of directors are elected annually and hold office until their successors are elected and qualified. The Company's officers are chosen by and serve at the pleasure of its board of directors. Each of the officers and directors has positions of responsibility with businesses other than the Company and will devote only such time as they believe necessary on the business of the Company. There are no family relationships between any of the directors and executive officers. There was no arrangement or understanding between any executive officer and any other person pursuant to which any person was selected as an executive officer. L. Kelly Jones has since 1980 been a member of the law firm Jones & Cannon, a firm which he founded and which provides legal services to the Company. Mr. Jones is certified in the area of commercial real estate law by the Texas Board of Legal Specialization and is the author of an article "Texas Mechanics' and Materialmen's Lien Laws: A Guide Through the Maze," which appeared in the Texas Bar Journal in March of 1985. Mr. Jones' areas of practice include corporate, construction, real estate, municipal law, and commercial litigation. Mr. Jones served from 1985 through 1989 on the Arlington City Council, and on the Stephen F. Austin State University Board of Regents from 1987 through 1993, where he was chairman from 1991 through 1993. He holds a J.D. from the University of Texas and a B.A. in Political Science from Stephen F. Austin State University W. James Poynter has been engaged in the real estate brokerage and construction business since 1979. He is the president of Tenant Realty Advisors, Inc., a subsidiary of the Poynter Scifres Company group. Tenant Realty Advisors, Inc. is a national tenant representation firm, representing office tenants in securing new office locations throughout the United States. He holds a B.A. from the University of Pennsylvania's Wharton School of Business Kimberly Biggs has for the last 10 years been legal administrator of the Arlington law firm of Jones & Cannon (which provides legal services for the Company) as legal administrator, a position which she holds to this date. John F. Aleckner, Jr. is a private investor. From 1983 to 1989 Mr. Aleckner was vice-president and a shareholder of Research Polymers International Corporation, a compounder of specialty plastic materials which was acquired by another Company in 1987. From 1984 to 1998, he 12 was vice-president of marketing and sales and a principal shareholder in UVTEC, Inc., a marketer of specialty plastic compounds which was, prior to the sale of Research Polymers, affiliated through common stock ownership with Research Polymers, and which acted as a broker in connection with purchases by Research Polymers and other companies. From 1971 to 1983 he was employed by Ciba-Geigy Corporation in various sales capacities. He holds a B.S. in chemistry from Case Institute of Technology SIGNIFICANT EMPLOYEES In addition to the officers and directors identified above, the following employees play a significant role in the Company's operations. Rey Cardino, age 39, serves as Director of Sales for the Company. Mr. Cardino was employed by the Hubcap Brewery & Kitchen from prior to its opening until the operation was closed in early 1999, at which time he was the general manager of its restaurant. Prior to that time he was employed by TGI Friday. Jose Olivares, age 32, serves as Director of Technical Support for the Company. Prior to taking the position he was the principal brewer of the Company's microbrewery operations. ITEM 6 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The Summary Compensation Table shows certain compensation information for services rendered in all capacities during each of the prior three (3) fiscal years. No bonuses or stock options were granted and no additional compensation was paid or deferred.
Securities Other Underlying Annual Restricted Options/ Name and Principal Position Year Salary Bonus Compensation Stock Awards SARs - --------------------------- ---- ------ ----- ------------ ------------ ---- L. Kelly Jones, President, Chief 1998 -- -- -- -- 833,000 (1) Executive Officer and Chairman of the Board of Directors 1997 -- -- -- -- -- 1996 -- -- -- -- -- W. James Poynter, Vice-President and 1998 -- -- -- -- 333,000 (2) Director 1997 -- -- -- -- -- 1996 -- -- -- -- -- John F. Aleckner, Jr., Director 1998 333,000 (2) 1997 -- 1996 --
13 Kimberly Biggs, Secretary and Treasurer -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
(1) These options, incentive in nature, provide that Mr. Jones may purchase (i) 111,000 shares at par value subject to the condition precedent that the Company's shares are trading at $1.50 per share, (ii) 361,000 shares at par value subject to the condition precedent that the Company's shares are trading at $3.00 per share, (iii) 111,000 shares at par value subject to the condition precedent that the Company's shares are publicly trading at $4.50 per share, and (iv) the balance of 250,000 shares at par value subject to the condition precedent that the Company's shares are publicly trading at $5.00 per share. These incentive stock options were granted to Mr. Jones by the Company's board of directors (Mr. Jones abstaining) on December 12, 1997 and on December 14, 1998. (2) Messrs. Poynter and Aleckner each holds an option for 333,000 shares of the Company's Common Stock. These options, incentive in nature, provide that Messrs. Poynter and Aleckner may purchase (i) 111,000 shares at par value subject to the condition precedent that the Company's shares are trading at $1.50 per share, (ii) 111,000 shares at par value subject to the condition precedent that the Company's shares are trading at $3.00 per share, and (iii) the balance of 111,000 shares at par value subject to the condition precedent that the Company's shares are publicly trading at $4.50 per share. These incentive stock options were granted to Messrs. Poynter and Aleckner by the Company's board of directors (Each of Messrs. Poynter and Aleckner abstaining on the grant of his stock option) on December 14, 1998. COMPENSATION OF DIRECTORS No Director receives or has received any compensation from the Company for service as a member of the Board of Directors. ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Mr. Jones, the president of the Company, is also president of Jones & Cannon, a Texas professional corporation, which has provided legal services to the Company and which may continue to provide legal services to the Company in the future. During the fiscal year ended December 31, 1998 the Company incurred legal fees of $66,331 to that firm. The Company currently owes Jones & Cannon an amount in excess of $83,550 for legal services rendered. Jones & Cannon has also been providing the limited amount of office space required by the Company and certain clerical and other services required for the Company's operations without charge under an oral agreement with Mr. Jones. In December, 1997, the Company agreed to redeem at par value an aggregate of 1,505,399 shares of the Common Stock held by the ten former shareholders of First Brewery of Dallas, Inc., a company the Company had acquired in April, 1997. The aggregate redemption price was to have been $7,527.02. That redemption was to have occurred no later than March 31, 1998. However, the Company did not have sufficient funds to honor this commitment and is currently in default under the 14 agreement. Messrs. Jones, Poynter, and Aleckner and Ms. Biggs are among those whose shares were to have been redeemed. During the period from July, 1997 through May, 1998 Mr. Jones, the president of the Company, lent the Company an aggregate of $90,000 for use as operating capital. Of this amount, $65,000 was subsequently forgiven, leaving a balance of $25,000. This indebtedness is evidenced by an unsecured demand promissory note at an annual interest rate of 12% per annum. ITEM 8 - DESCRIPTION OF SECURITIES COMMON STOCK The Company's Certificate of Incorporation authorizes the issuance of 50 million shares of Common Stock, of a par value of $.005 per share, of which 11,216,053 shares were issued and outstanding as of September 30, 1999. Holders of shares of Common Stock are entitled to one vote for each share on all matters to be voted on by the shareholders. Holders of Common Stock have no cumulative voting rights. Holders of shares of Common Stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors in its discretion, from funds legally available therefor. In the event of a liquidation, dissolution, or winding up of the Company, the holders of shares of Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders of Common Stock have no preemptive rights to purchase the Company's common stock. There are no conversion rights or redemption or sinking fund provisions with respect to the common stock. All of the outstanding shares of Common Stock are fully paid and non-assessable. Transfer Agent. Continental Stock Transfer, Inc. of New York is the Company's transfer agent. CONVERTIBLE PROMISSORY NOTES/PROMISSORY NOTES The Company has outstanding $100,000 in principal amount of its Convertible Promissory Notes. These notes bear interest at the rate of 12 percent per annum, call for monthly payments of interest, and matured May 10, 1998 (the "Convertible Promissory Notes"). The holder of each Convertible Promissory Note has a non-assignable option to purchase 7,500 shares of Common Stock at par value. Alternatively, each holder has the right to convert his Convertible Promissory Note at the rate of 1.25 shares of Common Stock for each $1.00 in principal amount of notes. The Company has outstanding $25,000 in principal amount of a promissory note due to L. Kelly Jones upon demand. This note bears interest at the rate of 12 percent per annum. The Company has outstanding $235,500 in principal amount of promissory notes payable to other shareholders, all of which are in default. These notes provide for an initial issuance of shares of common stock in lieu of interest, all of which (913,000 shares) have been issued. Accordingly, no additional interest is accruing on these notes. However, $103,500 in principal amount of such promissory notes provide for a per diem issuance of common stock as a penalty for late payment. To date, the per diem issuance would be in excess of 2,000,000 shares of the Company's Common Stock. The Company believes that the penalty provisions are unenforceable as illegal usury under applicable Texas law, and has obtained a written legal opinion to that effect from a third-party law firm. The 15 Company believes that upon full payment of these promissory notes along with non-usurious monetary interest, this matter of additional shares for late payment by the Company will be amicably resolved between the Company and the holder of these promissory notes. However no assurance can be given in that regard. PART II ITEM I - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS MARKET INFORMATTON The Company's Common Stock is quoted under the symbol "GAMZ" on the OTC Electronic Bulletin Board. The following table sets forth the high and low bid prices for shares of the Company Common Stock for the periods noted, as reported by the OTC Electronic Bulletin Board. Quotations are on an as-adjusted basis to reflect a 1 for 5 reverse split effected in 1997 and reflect inter dealer prices, without retail markup, mark down or commission and may not represent actual transactions. BID PRICES YEAR PERIOD HIGH LOW 1997 First Quarter $- $- Second Quarter 0.50 0.50 Third Quarter 0.25 0.25 Fourth Quarter 1.25 0.25 1998 First Quarter 1.25 0.25 Second Quarter 2.25 0.25 Third Quarter 0.50 0.25 Fourth Quarter 0.875 0.375 1999 First Quarter 0.6875 0.09375 Second Quarter 1.0313 0.26 Third Quarter 1.2188 0.09 The Company's common stock was not quoted on the OTC Bulletin Board during the first quarter of 1997. As of December 3, 1999 the reported bid price for the Company's common stock was $0.53 per share. SHAREHOLDERS As of December 3, 1999, the Company had 11,216,053 shares of Common Stock outstanding held by 103 shareholders of record. DIVIDENDS 16 The Company has not paid cash dividends on its Common Stock in the past and does not anticipate doing so in the foreseeable future. ITEM 2 - LEGAL PROCEEDINGS The Company's First Brewery of Dallas, Inc. subsidiary is a defendant in a proceeding commenced June 14, 1999 in the County Court at Law Number Two, Tarrant County, Texas by Ben Strong individually and d/b/a Benco & Associates. This litigation arose out of the construction of a brewpub which First Brewery acquired from its predecessor in interest, and alleges that the transaction in which First Brewery of Dallas, Inc. acquired the assets of the predecessor in interest constituted a fraudulent conveyance. The amount sought is approximately $58,000. The Company believes that this claim is without merit, and anticipates that it will be eliminated in any event through the filing of a bankruptcy proceeding by First Brewery of Dallas, Inc. The Company's First Brewery of Dallas, Inc. subsidiary is a defendant in a proceeding commenced June 30, 1999 in the County Court at Law Number Three, Dallas County, Texas by Alliant Foodservice, Inc. seeking to recover approximately $19,000 allegedly owed for foodstuffs furnished to the subsidiary. The Company anticipates that this claim will be eliminated through the filing on a bankruptcy proceeding by First Brewery of Dallas, Inc. In January, 1999, the Company commenced an action against Robert Elton Bragg, III, the Company's former president, seeking, among other things, (i) a declaratory judgment that the March, 1997 agreement pursuant to which the Company acquired its brewpub/microbrewery operations, is a valid and binding agreement, (ii) an injunction prohibiting Bragg from selling his shares in the Company, and (iii) damages for misappropriation of the Company's funds. In November, 1999, the Company commenced an action against Kelly Hart and Mitch Geller d/b/a Nu-Design. This suit alleges breach of a contract to provide software for the Company's 'Net GameLink(TM) system and conversion for wrongfully withholding assets of the Company, and seeks damages of an as yet unspecified amount. ITEM 3 - CHANGES IN AND DISAGREEMENTS WTTH ACCOUNTANTS Inapplicable ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES Upon its organization in January, 1996, the Company issued 2,100,000 of its Common Stock to its promoters and a limited number of third party investors at a purchase price of $0.02 per share. This sale was made in reliance upon the exemption contained in Section 4(2) of the Securities Act of 1933, as amended (the "Act"). In May of 1996, the Company sold 400,000 units at a price of $0.125 per unit. Each unit consisted of one share of Common Stock and two warrants, each warrant authorizing the holder to buy 17 one share of the Company's Common Stock at the purchase price of $0.50. This sale was made in reliance upon the exemption contained in Rule 504 of Regulation D under the Act. In March of 1997, the Company sold 633,000 shares of the Company's Common Stock at a price of $.50 per share upon exercise of the warrants referred to in the preceding paragraph. This sale was made in reliance on the exemption contained in Rule 504 of Regulation D under the Act . In March of 1997, the Company issued 3,860,000 shares of its Common Stock to 10 shareholders of First Brewery of Dallas, Inc., then operating the Hubcap Brewery & Kitchen of Dallas, Texas, in exchange for all of the outstanding shares of that corporation. The shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. In conjunction with the stock-for-stock swap discussed in the preceding paragraph, the Company redeemed 193,000 shares of its Common Stock from Adams Bragg & Company, Inc. In September of 1997 the Company issued 490,102 shares of its Common Stock upon exercise of the warrants originally issued in 1996. The shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. In December of 1997, the Company issued 425,000 shares of its Common Stock to Adams Bragg & Company, Inc., in exchange for its proprietary rights in the 'Net GameLink(TM) system. The shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. In March of 1998, the Company issued 120,000 shares of its Common Stock to certain of its existing shareholders as additional consideration for a loan in the aggregate amount of $50,000. The shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. Between December, 1997 and February, 1998, the Company issued $100,000 in principal amount of its convertible subordinated notes to certain of its existing shareholders and one additional sophisticated investor. These shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. In May, 1998, the Company issued 300,000 shares of its Common Stock to Net Gameport, Inc., an accredited investor, in payment for financial and public relations consulting services. These shares were issued in reliance upon the private offering exemptions contained in Section 4(2) and the accredited investor exemption contained in Section 4(6) of the Act. In June, 1998, the Company issued 300,000 shares of its Common Stock to Capital & Media Partners, Inc. in payment for financial and public relations consulting services. These shares were issued in reliance upon the private offering exemption contained in Section 4(2) and the accredited investor exemption contained in Section 4(6) of the Act. In September, 1998, the Company issued 493,000 shares of its Common Stock to existing shareholders who held certain of its promissory notes, in lieu of interest otherwise payable on such notes. These shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. In December, 1998, the Company issued 800,000 shares of its Common Stock to an individual accredited investor in payment for shareholder relations and strategic planning services. These shares were issued in reliance upon the private offering exemption contained in Section 4(2) and the accredited 18 investor exemption contained in Section 4(6) of the Act. In January, 1999, the Company issued 300,000 shares of its Common Stock to existing shareholders in lieu of interest otherwise payable on notes held by such shareholders. These shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. In April, 1999, the Company issued in aggregate of 1,000,000 shares of its Common Stock to two investors for an aggregate of $60,000, and an additional 100,000 shares to the law firm handling the transaction and a financial services firm in payment for their services in connection with the transaction. The shares were issued in reliance upon the limited offering exemption of Rule 504 under the Act. In July, 1999, the Company issued 119,048 shares of its Common Stock for an aggregate of $50,000. These shares were issued in reliance upon the private offering exemption contained in Section 4(2) of the Act. In October, 1999, the Company issued 250,000 shares of its Common Stock to an accredited investor for $25,000. These shares were issued in reliance upon the private offering exemption contained in Section 4(2) and the accredited investor exemption contained in Section 4(6) of the Act. ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS The bylaws generally provide that the Company will indemnify its directors and officers to the fullest extent authorized or permitted under Chapter 78 of Nevada Revised Statutes and that the Company will advance expenses at the request of a director or officer. In addition, the articles of incorporation generally limit the personal liability the personal liability of directors for monetary damages for breaches of fiduciary duty, as well as indemnifying its directors to the fullest extent authorized or permitted by Nevada law. PART F/S FINANCIAL STATEMENTS 19 GAMECOM, INC. CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years ended December 31, 1998 and 1997 and the Nine Months ended September 30, 1999 and 1998 (Unaudited) GAMECOM, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors Consolidated Financial Statements of GameCom, Inc. and subsidiary: Consolidated statement of Financial Condition as of December 31, 1998 and December 31, 1997, and September 30, 1999 (Unaudited).........1 Consolidated Statements of Operations for the years ended December 31, 1998 and 1997 and nine months ended September 30, 1999 and 1998 (unaudited)............................................................2 Consolidated Statements of Shareholders' Equity (Deficit) for the years ended December 31, 1998 and 1997 and the nine months ended September 30, 1999 (Unaudited)...................................................3 Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997 and nine months ended September 30, 1999 and 1998 (Unaudited)............................................................4 Notes to Consolidated Financial Statements.................................5 20 INDEPENDENT AUDITORS REPORTS Thomas O. Bailey and Associates, PC Certified Public Accountants Report of Independent Public Accountants To the Shareholders of The Schooner Brewery Incorporated We have audited the accompanying balance sheet of The Schooner Brewery Incorporated as of December 31, 1998 and the related statement of operations, changes in stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Schooner Brewery Incorporated as of December 31, 1998 and the results of their operations and their cash flows in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. During the year ended December 31, 1998 the Company incurred a net loss of $681,018. Future working capital requirements are dependent on the Company's ability to restore and maintain profitable operations, to restructure its financing arrangements, and to continue its present short-term financing, or obtain alternative financing as required. It is not possible to predict the outcome of future operations or whether the necessary alternative financing may be arranged, if needed. Those conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Thomas O. Bailey and Associates, P.C. June 17, 1999 21 Thomas O. Bailey and Associates, PC Certified Public Accountants Report of Independent Public Accountants To the Shareholders of The Schooner Brewery Incorporated We have audited the accompanying balance sheet of The Schooner Brewery Incorporated as of December 31, 1997 and the related statement of operations, changes in stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Schooner Brewery Incorporated as of December 31, 1997 and the results of their operations and their cash flows in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. During the year ended December 31, 1998 the Company incurred a net loss of $576,520. Future working capital requirements are dependent on the Company's ability to restore and maintain profitable operations, to restructure its financing arrangements, and to continue its present short-term financing, or obtain alternative financing as required. It is not possible to predict the outcome of future operations or whether the necessary alternative financing may be arranged, if needed. Those conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Thomas O. Bailey and Associates, P.C. Certified Public Accountants Dallas, Texas September 11, 1998 22 GAMECOM, INC (FORMERLY THE SCHOONER BREWERY INCORPORATED) Consolidated Balance Sheet
December 31, September 30 (Unaudited) 1999 1999 1998 ---- ---- ---- ASSETS Current assets Cash $ 5,666 $ 4,529 $ 16,427 Accounts receivable 1,547.00 180 6,999 Inventories -- -- -- ----------- ----------- ----------- Total current assets 7,213 4,709 23,426 Property and equipment Machinery and equipment 473324 -- 282,479 Furniture and fixtures and other -- 81,150 156,676 Leasehold improvements -- -- 166,713 ----------- ----------- ----------- 473,324 81,150 605,868 Accumulated depreciation (348,526) (2,576) (467,215) ----------- ----------- ----------- Net property and equipment 124,798 78,574 138,653 Other assets Organization cost 38490 28,867 41,697 Other 12033 8,989 12,033 ----------- ----------- ----------- Total other assets 50,523 37,856 53,730 ----------- ----------- ----------- Total assets $ 182,534 $ 121,139 $ 215,809 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade payables $ 385,669 $ 524,111 $ 374,632 Accrued interest 24,439 24,169 18,177 Other accrued payables 2,675 -- -- Short-term notes payable 550,360 430,770 482,209 ----------- ----------- ----------- Total current liabilities 963,143 979,050 875,018 Shareholders' equity Capital stock 30,000,000 shares authorized par value $.005; 8,828,005 and 7,715,102 issued and outstanding respectively 44,140 50,110 39,566 Paid-in capital 473,744 583,774 459,319 Retained earnings (1,298,493) (1,491,795) (1,158,094) ----------- ----------- ----------- Total shareholders' equity (780,609) (857,911) (659,209) ----------- ----------- ----------- Total liabilities and shareholder equity $ 182,534 $ 121,139 $ 215,809 =========== =========== ===========
The accompanying notes are an integral part of this financial statement 23 GAMECOM, INC (FORMERLY THE SCHOONER BREWERY INCORPORATED) Consolidated Statement of Operations
Nine Months Ended Year Ended December 31 Sept. 30 (unaudited) ---------------------- -------------------- 1997 1998 1999 1998 ---- ---- ---- ---- Revenues Restaurant sales $ 361,074 $ 469,357 $ 5,431 $ 357,675 Other 9,500 (7,500) -- -- ----------- ----------- ----------- ----------- Total revenues 370,574 461,857 5,431 357,675 Cost of sales Food, beer, wine and merchandise 126,505 182,334 (2,893) 125,561 Salaries and labor 161,574 268,826 27,365 194,440 ----------- ----------- ----------- ----------- Total cost of sales 288,079 451,160 24,472 320,001 ----------- ----------- ----------- ----------- Gross profit 82,495 10,697 (19,041) 37,674 General and administrative expense Administrative cost 604,579 456,192 224,381 368,757 Interest 12,776 39,026 8,770 30,103 Depreciation and amortization 41,660 63,952 9,622 46,888 Provision for loss from discontinued operations -- 132,545 -- 132,545 Gain on sale of equipment -- -- (67,849) -- ----------- ----------- ----------- ----------- 659,015 691,715 174,924 578,293 ----------- ----------- ----------- ----------- Net loss $ (576,520) $ (681,018) $ (193,965) $ (540,619) =========== =========== =========== =========== Average outstanding shares 5,923,784 8,271,553 9,715,006 7,814,202 Net loss per share $ (0.10) $ (0.08) $ (0.02) $ (0.07) =========== =========== =========== ===========
The accompanying notes are an integral part of this financial statement 24 GAMECOM, INC (FORMERLY THE SCHOONER BREWERY INCORPORATED) Consolidated Statement of Cash Flows
Nine Months Ended Year Ended December 31 Sept. 30 (unaudited) ---------------------- -------------------- 1997 1998 1999 1998 ---- ---- ---- ---- Cash flows from operating activities Net loss $(576,520) $(681,018) $(193,302) $(540,621) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 28,830 183,667 2,576 169,811 (Increase) decrease in: Accounts receivable-trade 2,908 483 1,367 (4,969) Other assets (7,314) 20,146 12,667 16,939 Increase (decrease) in: (2,710) -- -- -- Accounts payable and accrued expense 205,198 122,601 135,497 102,631 --------- --------- --------- --------- Net cash provided by operating activities (349,608) (354,121) (41,195) (256,209) Cash flows from investing activities Sale of capital assets -- -- 43,648 -- Capital expenditures (15,193) (2,081) (2,078) --------- --------- Net cash used by investing activities (15,193) (2,081) 43,648 (2,078) Cash flow from financing activities Short-term notes payable 76,962 311,452 (119,590) 243,302 Increase in capital stock and paid-in capital 308,350 19,001 116,000 -- --------- --------- --------- --------- Net cash provided by financing activities 385,312 330,453 (3,590) 243,302 Net increase in cash and cash equivalents 20,511 (25,749) (1,137) (14,985) Cash and cash equivalents beginning of period 10,904 31,415 5,666 31,415 --------- --------- --------- --------- Cash and cash equivalents end of period $ 31,415 $ 5,666 $ 4,529 $ 16,430 ========= ========= ========= ========= Interest paid during the year $ 7,932 $ 19,701 $ 8,770 $ 11,926 ========= ========= ========= ========= Income taxes paid during the year $ -- $ -- $ -- $ -- ========= ========= ========= =========
The accompanying notes are an integral part of this financial statement 25 GAMECOM, INC. Consolidated Statement of Stockholders' Equity For the Nine Months Ended September 30, 1999 and 1998 (Unaudited)
Shares of Additional Total Common Common Paid-in Accumulated Stockholders' Stock Stock Capital Deficit Equity ----- ----- ------- ------- ------ Balance December 31, 1997 7,715,102 $ 38,576 $ 460,309 $ (617,473) $ (118,588) Stock issued in connection with loans 198,200 1,265 (1,265) -- Net loss for the nine months ended September 30, 1998 -- -- -- (540,620) (540,620) ----------- ----------- ----------- ----------- ----------- Balance September 30, 1998 7,913,302 $ 39,841 $ 459,044 $(1,158,093) $ (659,208) =========== =========== =========== =========== =========== Balance December 31, 1998 8,828,006 $ 44,140 $ 473,744 $(1,298,493) $ (780,609) * Stock issued in connection with loan 25,000 $ 125 $ (125) $ -- $ -- Stock issued in consideration of serivces 50,000 $ 250 $ 5,750 $ -- $ 6,000 Sale of stock 1,119,000 $ 5,595 $ 104,405 $ -- $ 110,000 Net loss for the nine months ended September 30, 1999 -- $ -- $ -- $ (193,302) $ (193,302) ----------- ----------- ----------- ----------- ----------- 10,022,006 $ 50,110 $ 583,774 $(1,491,795) $ (857,911) =========== =========== =========== =========== ===========
The accompanying notes are an integral part of this financial statement 26 THE SCHOONER BREWERY INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 SIGNIFICANT ACCOUNTING POLICIES Principal Business Activity The Schooner Brewery Incorporated operates a restaurant and brewpub through it's wholly owned subsidiary, First Brewery of Dallas, Inc. Principals of Consolidation The accompanying consolidated financial statements include the accounts of the parent company, The Schooner Brewery Incorporated ("Company") and its subsidiary after elimination of significant intercompany accounts and transactions. Concentration of Credit Risk The Company maintains deposits within federally insured limits. Statement of Financial Accounting Standards No. 105 identifies these items as concentration of credit risk requiring disclosure, regardless of the degree of risk. The risk is managed by maintaining all deposits in high quality financial institutions. Use of Estimates in Preparation of Financial Statements The preparation of the accompanying financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Fair Value of Financial Instruments The fair value of all reported assets and liabilities which represent financial instruments (none of which are held for trading purposes) approximate the carrying value of such amounts. Inventories Inventories are stated at the lower of cost or market. Cash Flow Presentation For purposes of the Statement of Cash Flows, cash equivalents include time deposits, certificates of deposits and all liquid debt instruments with original maturates of three months or less. Earnings Per Share Primary earnings per share amounts are computed based upon the weighted average number of shares actually outstanding. The number of shares used in the computation were 5,923,784. Property, Equipment and Depreciation Property and equipment are valued at cost. Maintenance and repair costs are charged to expenses as incurred. Gains and losses on disposition of property and equipment are reflected in income. Depreciation is computed on the straight-line method for financial reporting purposes, based on the estimated useful lives of the assets. Revenue Recognition and Accounts Receivable Sales are made for cash or they are charged to credit cards. The credit card sales are recorded as accounts receivable and collected within the following two-week period. Revenues are recognized at the point sales are made. Intangibles Intangibles consist of cost incurred in the organization of the Company and are amortized over five years. NOTE 2 GOING CONCERN As shown in the accompanying financial statements the Company has incurred losses from operations and has a deficit working capital. The Company's current net operating revenues are not sufficient to provide adequate cash flow required to pay all of the Company's administrative expenses. For this reason the Company must rely on short-term borrowing and equity financing. NOTE 3 ACQUISITION OF SUBSIDIARY In March 1997 the Company acquired all of the outstanding stock of First Brewery of Dallas, Inc. ("First") was acquired by exchanging 19,300,000 shares of the Company's common capital stock for all of the outstanding capital stock of First whereby First became the wholly owned subsidiary of the Company. This transaction was accounted for as a "Pooling of Interest." Prior to the pooling the Company had recorded a net loss for the current year of approximately $175,000. Prior to the acquisition by the Company, First had acquired the interest of all of the partners in First Brewery of Dallas, Ltd., a limited partnership by issuing its capital stock in exchange for all of the partners interest in the partnership. The partnership had operated a restaurant and brewpub in the West End district of Dallas, Texas since June 1994. On July 1, 1997, First acquired all of the assets of the partnership in exchange for 49,500 shares of common stock of First. NOTE 4 NOTES PAYABLE Notes payable at December 31, 1997 consists of the following: Note payable to bank due March 1, 1998 with interest at 9.5% $ 80,368 Note payable to bank due March 19, 1998 with interest at 10% 70,000 Note payable to stockholder due on demand with interest at 8% 15,000 Note payable to stockholder due on demand with interest at 8% 3,541 Notes payable to stockholders due June 1, 1998 with interest at 12% 70,000 -------- Total short-term notes $238,909 ======== NOTE 5 INCOME TAXES The Company follows Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which requires an asset and liability approach for accounting for income taxes. Deferred income taxes arise from temporary differences between financial and tax basis of certain assets and liabilities. A valuation allowance will be established if it is more likely than not that some portion of the deferred tax asset will be realized. The Company's net operating loss carryforward is $617,000. NOTE 6 LEASES The Company leases its restaurant space under a lease agreement, which expires October 1, 1999. During the six months ended December 31, 1997 the Company paid $66,146.84 under the lease agreement. NOTE 7 RELATED PARTY TRANSACTIONS Notes payable includes $88,541 due to stockholders. On December 12, 1997, by unanimous consent, the Board of Directors approved borrowing up to $100,000 from certain stockholders. The promissory notes provide that the notes be secured by the 'Net GameLink(TM) system to be installed at the Company's restaurant. The holders of said notes shall, for each $10,000 of notes, in addition to the payment of principal and interest, be entitled to 7,500 shares of the Company's common stock at par value at maturity. Prior to maturity, the holders of the promissory notes shall have the right to convert their notes to equity in the amount of 12,500 shares of the Company's restricted common stock. NOTE 8 STOCK OPTIONS On December 12, 1997, by unanimous consent of the Board of Directors, restricted options to purchase 50,000 shares of the Company's common stock were issued to certain key personnel of the Company at an exercise price of $.01 per share. The shares are non-transferable and may be redeemed at $.01 per share by the Company in the event the holder shall cease for any reason to be employed by the Company. On December 12, 1997, by unanimous consent of the Board of Directors, options to purchase 750,000 shares of the Company's common stock were granted to an officer of the Company. The option provides that 250,000 shares may be purchased at par value without any condition precedent; the next 250,000 shares may be purchased by the holder at par value provided the Company's stock is currently trading at $3 per share; and the balance of the 250,000 shares may be purchased by the holder at par value, provided the Company's stock is currently trading at $5 per share. NOTE 9 LEGAL PROCEEDINGS On February 27, 1998 a judgment was rendered against First Brewery of Dallas I, Ltd. the partnership all of which interest was acquired by First Brewery of Dallas, Inc. The Company intends to liquidate the judgment, as funds are available. The Company is not aware of other pending or threatened lawsuits. NOTE 10 REVERSE STOCK SPLIT In a Special Meeting of the Board of Directors on June 30, 1997 and pursuant to the action of taken by the shareholders owning a majority of the issued and outstanding shares of the Company's common stock the Company gave effect to a reverse stock split of one share for five shares of the Company's common stock. Before the stock split the Company had 34,965,000 shares of stock outstanding; immediately after the stock split the Company had outstanding 6,993,000 shares of common stock. PART III ITEM I - INDEX TO EXHIBITS EXHIBIT DESCRIPTION NO (3.1) Articles of Incorporation of The Schooner Brewery Incorporated (3.2) Certificate of Amendment of Articles of Incorporation of The Schooner Brewery Incorporated dated February 14, 1997 (3.3) Certificate of Amendment of Articles of Incorporation of The Schooner Brewery Incorporated filed February 10, 1999 (3.4) Bylaws (4.1) Form of Subordinated Notes (4.2) Form of Convertible Subordinated Notes (4.3) Form of Convertible Subordinated Notes providing for penalty payable in shares (21) List of Subsidiaries (27) Financial Data Schedule ITEM 2 - DESCRIPTION OF EXHIBITS Not applicable SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. GAMECOM, INC. By: /s/ L. Kelly Jones ------------------------------------------- L. Kelly Jones Chief Executive Officer and Chief Financial Officer Date: EX-3.1 2 ARTICLES OF INCORPORATION Exhibit 3.1 ARTICLES OF INCORPORATION OF THE SCHOONER BREWERY INCORPORATED KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, have this day voluntarily associated ourselves together for the purpose of forming a Corporation under and pursuant to the laws of the State of Nevada, and we do hereby certify that: ARTICLE I - NAME: The exact name of this Corporation is: The Schooner Brewery Incorporated ARTICLE II - RESIDENT AGENT: The Resident Agent of the Corporation is Max C. Tanner, Esq., The Law offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada 89121. ARTICLE III DURATION: The Corporation shall have perpetual existence. ARTICLE IV PURPOSES: The purpose, object and nature of the business for which this Corporation is organized are: (a) To engage in any lawful activity; (b) To carry on such business as may be necessary, convenient, or desirable to accomplish the above purposes, and to do all other things incidental thereto which are not forbidden by law or by these Articles of Incorporation. ARTICLE V - POWERS: The powers of the Corporation shall be those powers granted by 78.060 and 78.070 of the Nevada Revised Statutes under which this corporation is formed. In addition, the Corporation shall have the following specific powers: (a) To elect or appoint officers and agents of the Corporation and to fix their compensation; (b) To act as an agent for any individual, association, partnership, corporation or other legal entity; (c) To receive, acquire, hold, exercise rights arising out of the ownership or possession thereof, sell, or otherwise dispose of, shares or other interests in, or obligations of, individuals, associations, partnerships, corporations, or governments; (d) To receive, acquire, hold, pledge, transfer, or otherwise dispose of shares of the corporation, but such shares may only be purchased, directly or indirectly, out of earned surplus; (e) To make gifts or contributions for the public welfare or for charitable, scientific or educational purposes, and in time of war, to make donations in aid of war activities. ARTICLE VI - CAPITAL STOCK: Section 1. Authorized Shares. The total number of shares which this Corporation is authorized to issue is 25,000,000 shares of Common Stock at $.001 par value per share. Section 2. Voting Rights of Shareholders. Each holder of the Common Stock shall be entitled to one vote for each share of stock standing in his name on the books of the Corporation. Section 3. Consideration for Shares. The Common Stock shall be issued for such consideration, as shall be fixed from time to time by the Board of Directors. In the absence of fraud, the judgment of the Directors as to the value of any property for shares shall be conclusive. When shares are issued upon payment of the consideration fixed by the Board of Directors, such shares shall be taken to be fully paid stock and shall be non-assessable. The Articles shall not be amended in this particular. Section 4. Pre-emptive Rights. Except as may other-wise be provided by the Board of Directors, no holder of any shares of the stock of the Corporation, shall have any preemptive right to purchase, subscribe for, or otherwise acquire any shares of stock of the Corporation of any class now or hereafter authorized, or any securities exchangeable for or convertible into such shares, or any warrants or other instruments evidencing rights or options to subscribe for, purchase, or otherwise acquire such shares. Section 5. Stock Rights and Options. The Corporation shall have the power to create and issue rights, warrants, or options entitling the holders thereof to purchase from the corporation any shares of its capital stock of any class or classes, upon such terms and conditions and at such times and prices as the Board of Directors may provide, which terms and conditions shall be incorporated in an instrument or instruments evidencing such rights. In the absence of fraud, the judgment of the Directors as to the adequacy of consideration for the issuance of such rights or options and the sufficiency thereof shall be conclusive. ARTICLE VII - ASSESSMENT OF STOCK: The capital stock of this Corporation, after the amount of the subscription price has been fully paid in, shall not be assessable for any purpose, and no stock issued as fully paid up shall ever be assessable or assessed. The holders of such stock shall not be individually responsible for the debts, contracts, or liabilities of the Corporation and shall not be liable for assessments to restore impairments in the capital of the Corporation ARTICLE VIII - DIRECTORS: For the management of the business, and for the conduct of the affairs of the Corporation, and for the future definition, limitation, and regulation of the powers of the Corporation and its directors and shareholders, it is further provided: Section 1. Size of Board. The members of the governing board of the Corporation shall be styled directors. The number of directors of the Corporation, their qualifications, terms of office, manner of election, time and place of meeting, and powers and duties shall be such as are prescribed by statute and in the by-laws of the Corporation. The name and street address of the director constituting the first board of directors, which shall be one (1) in number is: NAME ADDRESS Vickie Bragg 622 Camino Santa Barbara Solano Beach, CA 92075 Section 2. Powers of Board. In furtherance and not in limitation of the powers conferred by the laws of the State of Nevada, the Board of Directors is expressly authorized and empowered: (a) To make, alter, amend, and repeal the By-Laws subject to the power of the shareholders to alter or repeal the By-Laws made by the Board of Directors. (b) Subject to the applicable provisions of the ByLaws then in effect, to determine, from time to time, whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to shareholder inspection. No shareholder shall have any right to inspect any of the accounts, books or documents of the Corporation, except as permitted by law, unless and until authorized to do so by resolution of the Board of Directors or of the Shareholders of the Corporation; (c) To issue stock of the Corporation for money, property, services rendered, labor performed, cash advanced, acquisitions for other corporations or for any other assets of value in accordance with the action of the board of directors without vote or consent of the shareholders and the judgment of the board of directors as to value received and in return therefore shall be conclusive and said stock, when issued, shall be fully-paid and non-assessable. (d) To authorize and issue, without shareholder consent, obligations of the Corporation, secured and unsecured, under such terms and conditions as the Board, in its sole discretion, may determine, and to pledge or mortgage, as security therefore, any real or personal property of the Corporation, including after-acquired property; (e) To determine whether any and, if so, what part, of the earned surplus of the Corporation shall be paid in dividends to the shareholders, and to direct and determine other use and disposition of any such earned surplus; (f) To fix, from time to time, the amount of the pro-Fits of the Corporation to be reserved as working capital or for any other lawful purpose; (g) To establish bonus, profit-sharing, stock option, or other types of incentive compensation plans for the employees, including officers and directors, of the Corporation, and to fix the a-mount of profits to be shared or distributed, and to determine the persons to participate in any such plans and the amount of their respective participations. (h) To designate, by resolution or resolutions passed by a majority of the whole Board, one or more committees, each consisting of two or more directors, which, to the extent permitted by law and authorized by the resolution or the By-Laws, shall have and may exercise the powers of the Board; (i) To provide for the reasonable compensation of its own members by By-Law, and to fix the terms and conditions upon which such compensation will be paid; (j) In addition to the powers and authority herein before, or by statute, expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the corporation, subject, nevertheless, to the provisions of the laws of the State of Nevada, of these Articles of Incorporation, and of the By-Laws of the Corporation. Section 3. Interested Directors. No contract or transaction between this Corporation and any of its directors, or between this Corporation and any other corporation, firm, association, or other legal entity shall be invalidated by reason of the fact that the director of the Corporation has a direct or indirect interest, pecuniary or otherwise, in such corporation, firm, association, or legal entity, or because the interested director was present at the meeting of the Board of Directors which acted upon or in reference to such contract or transaction, or because he participated in such action, provided that: (1) the interest of each such director shall have been disclosed to or known by the Board and a disinterested majority of the Board shall have nonetheless ratified and approved such contract or transaction (such interested director or directors may be counted in determining whether a quorum is present f or the meeting at which such ratification or approval is given) ; or (2) the conditions of N.R.S. 78.140 are met. ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The personal liability of a director or officer of the corporation to the corporation or the Shareholders for damages for breach of fiduciary duty as a director or officer shall be limited to acts or omissions which involve intentional misconduct, fraud or a knowing violation of law. ARTICLE X - INDEMNIFICATION: Each director and each officer of the corporation may be indemnified by the corporation as follows: (a) The corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the f act that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with the action, suit or proceeding, if he acted in good faith and in a manner which he reasonably believed to he in or not opposed to the best interests of the corporation and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suite or proceeding, by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. (b) The corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the corporation, to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit, if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. (c) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Article, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorney's fees, actually and reasonably incurred by him in connection with the defense. (d) Any indemnification under subsections (a) and (b) unless ordered by a court or advanced pursuant to subsection (e), must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (i) By the stockholders; (ii) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding; (iii) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or (iv) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. (e) Expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. (f) The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section: (i) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the certificate or articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or other-wise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection (b) or for the advancement of expenses made pursuant to subsection (e) may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (ii) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person. ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS: Subject to the laws of the State of Nevada, the shareholders and the Directors shall have power to hold their meetings, and the Directors shall have power to have an office or offices and to maintain the books of the Corporation outside the State of Nevada, at such place or places as may from time to time be designated in the By-Laws or by appropriate resolution. ARTICLE XII - AMENDMENT OF ARTICLES: The provisions of these Articles of Incorporation may be amended, altered or repealed from time to time to the extent and in the manner prescribed by the laws of the State of Nevada, and additional provisions authorized by such laws as are then in force may be added. All rights herein conferred on the directors, officers and shareholders are granted subject to this reservation. ARTICLE XIII - INCORPORATOR: The name and address of the sole incorporator signing these Articles of Incorporation is as follows: NAME POST OFFICE ADDRESS 1. Max C. Tanner 2950 East Flamingo Road, Suite G Las Vegas, Nevada 89121 STATE OF NEVADA COUNTY OF CLARK IN WITNESS WHEREOF, the undersigned incorporator has executed these Articles of Incorporation this 13 day of __________1995. Max C. Tanner On 1995, personally appeared before me, a Notary Public, Max C. Tanner, who acknowledged to me that he executed the foregoing Articles of Incorporation of The Schooner Brewery Incorporated, a Nevada corporation. NOTARY PUBLIC RONALD L. DRAKE EX-3.2 3 CERTIFICATE OF AMENDMENT Exhibit 3.2 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF THE SCHOONER BREWERY INCORPORATED Pursuant to a NRS 78.385 and 78.390 of the Nevada Revised Statutes, we, the undersigned officers of The Schooner Brewery Incorporated, (the "Corporation"), do hereby certify the following: 1. That we are the duly elected President and Secretary of the Corporation; 2. That the amendment to the Articles of Incorporation were unanimously approved by the Board of Directors of said Corporation by written consent in lieu of the special meeting of the Board of Directors, dated December 2, 1996 and by a majority of the outstanding shares entitled to vote, there being 12,500,000 shares authorized to vote and 10,000,000 shares having voted in favor of the amended articles; and 3. That the Amendment to the Articles of Incorporation in its entirety is set forth in Exhibit "A" attached hereto. /s/ Robert E. Bragg, III Robert E. Bragg, III, President /s/ Vickie Bragg Vickie Bragg, Secretary ACKNOWLEDGMENT STATE OF CALIFORNIA ss. COUNTY OF San Diego On this 14th day of Feb., 1997, before me, the undersigned Notary Public, personally appeared Robert E. Bragg, III, known to me to be the President of The Schooner Brewery Incorporated, a Nevada Corporation, the Corporation which executed the attached instrument, and two executed the same on behalf of said Corporation, freely and voluntarily and for the uses and purposes therein mentioned. /s/ F. P. Langan Notary Public STATE OF CALIFORNIA ss. COUNTY OF San Diego On this 14th day of Feb., 1997, before me, the undersigned Notary Public, personally appeared Vickie Bragg, known to me to be the Secretary of The Schooner Brewery Incorporated, a Nevada Corporation, the corporation which executed the attached instrument, and two executed the same on behalf of said corporation, freely and voluntarily and for the uses and purposes therein mentioned. EXHIBIT A THE SCHOONER BREWERY INCORPORATED Amendment to the Articles of Incorporation The Articles of Incorporation for The Schooner Brewery Incorporated, a Nevada Corporation, are hereby amended with the change of Article VI to read as follows: The Articles of Incorporated are hereby amended by striking out the existing Article VI in its entirety and substituting therefor a new Article VI, to wit: Article VI - CAPITAL STOCK: Section 1. Authorized Shares. The total number of shares which this Corporation is authorized to issue is 50,000,000 shares of Common Stock at $.001 par value per share. EX-3.3 4 CERTIFICATE OF AMENDMENT Exhibit 3.3 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF THE SCHOONER BREWERY INCORPORATED Pursuant to a NRS 78.385 and 78.390 the undersigned President and Secretary of The Schooner Brewery Incorporated, (the "Corporation"), do hereby certify: That the following amendment to the articles of incorporation was unanimously approved by the Board Directors of said corporation by written consent in lieu of a special meeting of the Board Directors dated February 1, 1999 and by a majority of the outstanding shares entitled to vote. Article I is hereby amended to read as follows: The exact name of this Corporation is GameCom, Inc. This Certificate of Amendment to the Articles the of Incorporation may be signed in two or more counterparts. /s/ L. Kelly Jones L. Kelly Jones, President /s/ Kimberly Biggs Kimberly Biggs, Secretary ACKNOWLEDGMENT STATE OF TEXAS ss. COUNTY OF TARRANT On the 9th day of February, 1999, personally appeared before me, a Notary Public, L. Kelly Jones, President of The Schooner Brewery Incorporated, who acknowledged that he executed the above instrument. /s/ Julie Murphy Notary Public STATE OF TEXAS ss. COUNTY OF TARRANT On the 9th day of February, 1999, personally appeared before me, a Notary Public, Kimberly Biggs, Secretary of The Schooner Brewery Incorporated, who acknowledged that he executed the above instrument. /s/ Julie Murphy Notary Public EX-3.4 5 BYLAWS Exhibit 3.4 BY-LAWS OF THE SCHOONER BREWERY INCORPORATED ARTICLE I SHAREHOLDERS Section 1.01 Annual Meeting. The annual meeting of the shareholders shall be held at such date and time as shall be designated by the board of directors and stated in the notice of the meeting or in a duly-executed waiver of notice thereof. If the corporation shall fail to provide notice of the annual meeting of the shareholders as set forth above, the annual meeting of the shareholders of the corporation shall be held during the month of November or December of each year as determined by the Board of Directors, for the purpose of electing directors of the corporation to serve during the ensuing year and for the transaction of such other business as may properly come before the meeting. If the election of the directors is not held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the president shall cause the election to be held at a special meeting of the shareholders as soon thereafter as is convenient. Section 1.02 Special Meetings. Special meetings of the shareholders may be called by the president or the Board of Directors and shall be called by the president at the written request of the holders of not less than 51% of the issued and outstanding shares of capital stock of the corporation. All business lawfully to be transacted by the shareholders may be transacted at any special meeting at any adjournment thereof. However, no business shall be acted upon at a special meeting, except that referred to in the notice calling the meeting, unless all of the outstanding capital stock of the corporation is represented either in person or by proxy. Where all of the capital stock is represented, any lawful business may be transacted and the meeting shall be valid for all purposes. Section 1.03 Place of Meetings. Any meeting of the shareholders of the corporation may be held at its principal office in the State of Nevada or such other place in or out of the United States as the Board of Directors may designate. A waiver of notice signed by the shareholders entitled to vote may designate any place for the holding of such meeting. Section 1.04 Notice of Meetings. (a) The secretary shall sign and deliver to all shareholders of record written or printed notice of any meeting at least ten (10) days, but not more than sixty (60) days, before the date of such meeting; which notice shall state the place, date and time of the meeting, the general nature of the business to be transacted, and, in the case of any meeting at which directors are to be elected, the names of nominees, if any, to be presented for election. (b) In the case of any meeting, any proper business may be presented for action, except that the following items shall be valid only if the general nature of the proposal is stated in the notice or written waiver of notice: (1) Action with respect to any contract or transaction between the corporation and one or more of its directors or another firm, association, or corporation in which one or more of its directors has a material financial interest; (2) Adoption of amendments to the Articles of Incorporation or; (3) Action with respect to the merger, consolidation, reorganization, partial or complete liquidation, or dissolution of the corporation. (c) The notice shall be personally delivered or mailed by first class mail to each shareholder of record at the last known address thereof, as the same appears on the books of the corporation, and the giving of such notice shall be deemed delivered the date the same is deposited in the United States mail, postage prepaid. If the address of any shareholder does not appear upon the books of the corporation, it will be sufficient to address any notice to such shareholder at the principal office of the corporation. (d) The written certificate of the person calling any meeting, duly sworn, setting forth the substance of the notice, the time and place the notice was mailed or personally delivered to the several shareholders, and the addresses to which the notice was mailed shall be prima facie evidence of the manner and fact of giving such notice. Section 1.05 Waiver of Notice. If all of the shareholders of the corporation shall waive notice of a meeting, no notice shall be required, and, whenever all of the shareholders shall meet in person or by proxy, such meeting shall be valid for all purposes without call or notice, and at such meeting any corporate action may be taken. Section 1.06 Determination of Shareholders of Record. (a) The Board of Directors may at any time fix a future date as a record date for the determination of the shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other lawful action. The record date so fixed shall not be more than sixty (60) days prior to the date of such meeting nor more than sixty (60) days prior to any other action. When a record date is so fixed, only shareholders of record on that date are entitled to notice of and to vote at the meeting or to receive the dividend distribution or allotment of rights, or to exercise their rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date. (b) If no record date is fixed by the Board of Directors, then (1) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which written consent is given; and (3) the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later. Section 1.07 Quorum: Adjourned Meetings. (a) At any meeting of the shareholders, a majority of the issued and outstanding shares of the corporation represented in person or by proxy, shall constitute a quorum. (b) If less than a majority of the issued and outstanding shares are represented, a majority of shares so represented may adjourn from time to time at the meeting, until holders of the amount of stock required to constitute a quorum shall be in attendance. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted as originally called. When a shareholders' meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than ten (10) days in which event notice thereof shall be given. Section 1.08 Voting. (a) Each shareholder of record, such shareholder's duly authorized proxy or attorney-in-fact shall be entitled to one (1) vote for each share of stock standing registered in such shareholder's name on the books of the corporation on the record date. (b) Except as otherwise provided herein, all votes with respect to shares standing in the name of an individual on the record date (included pledged shares) shall be cast only by that individual or such individual's duly authorized proxy or attorney-in-fact. With respect to shares held by a representative of the estate of a deceased shareholder, guardian, conservator, custodian or trustee, votes may be cast by such holder upon proof of capacity, even though the shares do not stand in the name of such holder. In the case of shares under the control of a receiver, the receiver may cast votes carried by such shares even though the shares do not stand in the name of the receiver provided that the order of the court of competent jurisdiction which appoints the receiver contains the authority to cast votes carried by such shares. If shares stand in the name of a minor, votes may be cast only by the duly-appointed guardian of the estate of such minor if such guardian has provided the corporation with written notice and proof of such appointment. (c) With respect to shares standing in the name of a corporation on the record date, votes may be cast by such officer or agents as the by-laws of such corporation prescribe or, in the absence of an applicable by-law provision, by such person as may be appointed by resolution of the Board of Directors of such corporation. In the event no person is so appointed, such votes of the corporation may be cast by any person (including the officer making the authorization) authorized to do so by the Chairman of the Board of Directors, President or any Vice President of such corporation. (d) Notwithstanding anything to the contrary herein contained, no votes may be cast by shares owned by this corporation or its subsidiaries, if any. If shares are held by this corporation or its subsidiaries, if any, in a fiduciary capacity, no votes shall be cast with respect thereto on any matter except to the extent that the beneficial owner thereof possesses and exercises either a right to vote or to give the corporation holding the same binding instructions on how to vote. (e) With respect to shares standing in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise and shares held by two or more persons (including proxy holders) having the same fiduciary relationship respect in the same shares, votes may be cast in the following manner: (1) If only one such person votes, the votes of such person binds all. (2) If more than one person casts votes, the majority so voting binds all. (3) If more than one person casts votes, but the vote is evenly split on a particular matter, shall be deemed cast proportionately as split. (f) Any holder of shares entitled to vote on any matter may cast a portion of the votes in favor of such matter and refrain from casting the remaining votes or cast the same against the proposal, except in the case of elections of directors. If such holder entitled to vote fails to specify the number of affirmative votes, it will be conclusively presumed that the holder is casting affirmative votes with respect to all shares held. (g) If a quorum is present, the affirmative vote of holders of a majority of the shares represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless a vote of greater number or voting by classes is required by the laws of the State of Nevada, the Articles of Incorporation and these By-Laws. Section 1.09 Proxies. At any meeting of shareholders, any holder of shares entitled to vote may authorize another person or persons to vote by proxy with respect to the shares held by an instrument in writing and subscribed to by the holder of such shares entitled to vote. No proxy shall be valid after - the expiration of six (6) months from the date of execution thereof, unless coupled with an interest or unless otherwise specified in the proxy. In no event shall the term of a proxy exceed seven (7) years from the date of its execution. Every proxy shall continue in full force and effect until its expiration or revocation. Revocation may be effected by filing an instrument revoking the same or a duly-executed proxy bearing a later date with the secretary of the corporation. Section 1.10 Order of Business. At the annual shareholders meeting, the regular order of business shall be as follows: (1) Determination of shareholders present and existence of quorum; (2) Reading and approval of the minutes of the previous meeting or meetings; (3) Reports of the Board of Directors, the president, treasurer and secretary of the corporation, in the order named; (4) Reports of committee; (5) Election of directors; (6) Unfinished business; (7) New business; (8) Adjournment. Section 1.11 Absentees Consent to Meetings. Transactions of any meeting of the shareholders are as valid as though had at a meeting duly-held after regular call and notice if a quorum is present, either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy (and those who, although present, either object at the beginning of the meeting to the transaction of any business because the meeting has not been lawfully called or convened or expressly object at the meeting to the consideration of matters not included in the notice which are legally required to be included therein), signs a written waiver of notice and/or consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents, and approvals shall be filed with the corporate records and made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice if such objection is expressly made at the beginning. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, except as otherwise provided in Section 1.04 (b) of these By-Laws. Section 1.12 Action Without Meeting. Any action which may be taken by the vote of the shareholders at a meeting may be taken without a meeting if consented to by the holders of a majority of the shares entitled to vote or such greater proportion as may be required by the laws of the State of Nevada, the Articles of Incorporation, or these Bylaws. Whenever action is taken by written consent, a meeting of shareholders needs not be called or noticed. ARTICLE II DIRECTORS Section 2.01 Number, Tenure and Qualification. Except as otherwise provided herein, the Board of Directors of the corporation shall consist of at least one (1) but no more than nine (9) persons, who shall be elected at the annual meeting of the shareholders of the corporation and who shall hold office for one (1) year or until their successors are elected and qualify. Section 2.02 Resignation. Any director may resign effective upon giving written notice to the chairman of the Board of Directors, the president, or the secretary of the corporation, unless the notice specifies a later time for effectiveness of such resignation. If the Board of Directors accepts the resignation of a director tendered to take effect at a future date, the Board or the shareholders may elect a successor to take office when the resignation becomes effective. Section 2.03 Reduction in Number. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his term of office. Section 2.04 Removal. (a) The Board of Directors or the shareholders of the corporation, by a majority vote, may declare vacant the office of a director who has been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. Section 2.05 Vacancies. (a) A vacancy in the Board of Directors because of death, resignation, removal, change in number of directors, or otherwise may be filled by the shareholders at any regular or special meeting or any adjourned meeting thereof or the remaining directors by the affirmative vote of a majority thereof. A Board of Directors consisting of less than the maximum number authorized in Section 2.01 of ARTICLE II constitutes vacancies on the Board of Directors for purposes of this paragraph and may be filled as set forth above including by the election of a majority of the remaining directors. Each successor so elected shall hold office until the next annual meeting of shareholders or until a successor shall have been duly-elected and qualified. (b) If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the shareholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of "five percent (5%) or more of the total number of shares entitled to vote may call a special meeting of shareholders to be held to elect the entire Board of Directors. The term of office of any director shall terminate upon such election of a successor. Section 2.06 Regular Meetings. Immediately following the adjournment of, and at the same place as, the annual meeting of the shareholders, the Board of Directors, including directors newly elected, shall hold its annual meeting without notice, other than this provision, to elect officers of the corporation and to transact such further business as may be necessary or appropriate. The Board of Directors may provide by resolution the place, date and hour for holding additional regular meetings. Section 2.07 Special Meetings. Special meetings of the Board of Directors may be called by the chairman and shall be called by the chairman upon the request of any two (2) directors or the president of the corporation. Section 2.08 Place of Meetings. Any meeting of the directors of the corporation may be held at its principal office in the State of Nevada, or at such other place in or out of the United States as the Board of Directors may designate. A waiver or notice signed by the directors may designate any place for the holding of such meeting. Section 2.09 Notice of Meetings. Except as otherwise provided in Section 2.06, the chairman shall deliver to all directors written or printed notice of any special meeting, at least three (3) days before the date of such meeting, by delivery of such notice personally or mailing such notice first class mail, or by telegram. If mailed, the notice shall be deemed delivered two (2) business days following the date the same is deposited in the United States mail, postage prepaid. Any director may waive notice of any meeting, and the attendance of a director at a meeting shall constitute a waiver of notice of such meeting, unless such attendance is for the express purpose of objecting to the transaction of business threat because the meeting is not properly called or convened. Section 2.10 Quorum: Adjourned Meetings. (a) A majority of the Board of Directors in office shall constitute a quorum. (b) At any meeting of the Board of Directors where a quorum is not present, a majority of those present may adjourn, from time to time, until a quorum is present, and no notice of such adjournment shall be required. At any adjourned meeting where a quorum is present, any business may be transacted which could have been transacted at the meeting originally called. Section 2.11 Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if a written consent thereto is signed by all of the members of the Board of Directors or of such committee. Such written consent or consents shall be filed with the minutes of the proceedings of the- Board of Directors or committee. Such action by written consent shall have the same force and effect as the unanimous vote of the Board of Directors or committee. Section 2.12 Telephonic Meetings. Meetings of the Board of Directors may be held through the use of a conference telephone or similar communications equipment so long as all members participating in such meeting can hear one another at the time of such meeting. Participation in such a meeting constitutes presence in person at such meeting. Section 2.13 Board Decisions. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 2.14 Powers and Duties. (a) Except as otherwise provided in the Articles of Incorporation or the laws of the State of Nevada, the Board of Directors is invested with the complete and unrestrained authority to manage the affairs of the corporation, and is authorized to exercise for such purpose as the general agent of the corporation, its entire corporate authority in such manner as it sees fit. The Board of Directors may delegate any of its authority to manage, control or conduct the current business of the corporation to any standing or special committee or to any officer or agent and to appoint any persons to be agents of the corporation with such powers, including the power to sub-delegate, and upon such terms as may be deemed fit. (b) The Board of Directors shall present to the shareholders at annual meetings of the shareholders, and when called for by a majority vote of the shareholders at a special meeting of the shareholders, a full and clear statement of the condition of the corporation, and shall, at request, furnish each of the Shareholders with a true copy thereof. (c) The Board of Directors, in its discretion, may submit any contract or act for approval or ratification at any annual meeting of the shareholders or any special meeting properly called for the purpose of considering any such contract or act, provided a quorum is present. The contract or act shall be valid and binding upon the corporation and upon all the shareholders thereof, if approved and ratified by the affirmative vote of a majority of the shareholders at such meeting. (d) In furtherance and not in limitation of the powers conferred by the laws of the State of Nevada, the Board of Directors is expressly authorized and empowered to issue stock of the Corporation for money, property, services rendered, labor performed, cash advanced, acquisitions for other corporations or for any other assets of value in accordance with the action of the Board of Directors without vote or consent of the shareholders and the judgment of the Board of Directors as to the value received and in return therefore shall be conclusive and said stock, when issued, shall be fully-paid and non-assessable. Section 2.15 Compensation. The directors shall be allowed and paid all necessary expenses incurred in attending any meetings of the Board, but shall not receive any compensation for their services as directors until such time as the corporation is able to declare and pay dividends on its capital stock. Section 2.16 Board officers. (a) At its annual meeting, the Board of Directors shall elect, from among its members, a chairman to preside at the meetings of the Board of Directors. The Board of Directors may also elect such other board officers and for such term as it may, from time to time, determine advisable. (b) Any vacancy in any board office because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. Section 2.17 Order of Business. The order of business at meeting of the Board of Directors shall be as follows: (1) Determination of members present and existence of quorum; (2) Reading and approval of the minutes of any previous meeting or meetings; (3) Reports of officers and committeemen; (4) Election of officers; (5) Unfinished business; (6) New business; (7) Adjournment. ARTICLE III OFFICERS Section 3.01 Election. The Board of Directors, at its first meeting following the annual meeting of shareholders, shall elect a president, a secretary and a treasurer to hold office for one (1) year next coming and until their successors are elected and qualify. Any person may hold two or more offices. The Board of Directors may, from time to time, by resolution, appoint one or more vice presidents, assistant secretaries, assistant treasurers and transfer agents of the corporation as it may deem advisable; prescribe their duties; and fix their compensation. Section 3.02 Removal; Resignation. Any officer or agent elected or appointed by the Board of Directors may be removed by it whenever, in its judgment, the best interest of the corporation would be served thereby. Any officer may resign at any time upon written notice to the corporation without prejudice to the rights, if any, of the corporation under any contract to which the resigning officer is a party. Section 3.03 Vacancies. Any vacancy in any office because of death, resignation, removal, or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. Section 3.04 President. The president shall be the general manager and executive officer of the corporation, subject to the supervision and control of the Board of Directors, and shall direct the corporate affairs, with full power to execute all resolutions and orders of the Board of directors not especially entrusted to some other officer of the corporation. The president shall preside at all meetings of the shareholders and shall sign the certificates of stock issued by the corporation, and shall perform such other duties as shall be prescribed by the Board of Directors. Unless otherwise ordered by the Board of Directors, the president shall have full power and authority on behalf of the corporation to attend and to act and to vote at any meetings of the shareholders of any corporation in which the corporation may hold stock and, at any such meeting, shall possess and may exercise any and all rights and powers incident to the ownership of such stock. The Board of Directors, by resolution from time to time, may confer like powers on any person or persons in place of the president to represent the corporation for these purposes. Section 3.05 Vice President. The Board of Directors may elect one or more vice presidents who shall be vested with all the powers and perform all the duties of the president whenever the president is absent or unable to act, including the signing of the certificates of stock issued by the corporation, and the vice president shall perform such other duties as shall be prescribed by the Board of Directors. Section 3.06 Secretary. The secretary shall keep the minutes of all meetings of the shareholders and the Board of directors in books provided for that purpose. The secretary shall attend to the giving and service of all notices of the corporation, may sign with the president in the name of the corporation all contracts authorized by the Board of Directors or appropriate committee, shall have the custody of the corporate seal, shall affix the corporate seal to all certificates of stock duly issued by the corporation, shall have charge of stock certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors or appropriate committee may direct, and shall, in general perform all duties incident to the office of the secretary. All corporate books kept by the secretary shall be open for examination by any director at any reasonable time. Section 3.07 Assistant Secretary. The Board of Directors may appoint an assistant secretary who shall have such powers and perform such duties as may be prescribed for him by the secretary of the corporation or by the board of Directors. Section 3.08 Treasurer. The treasurer shall be the chief financial officer of the corporation, subject to the supervision and control of the Board of Directors, and shall have custody of all the funds and securities of the corporation. When necessary or proper, the treasurer shall endorse on behalf of the corporation for collection checks, notes and other obligation, and shall deposit all monies to the credit of the corporation in such bank or banks or other depository as the Board of Directors may designate, and shall sign all receipts and vouchers for payments made by the corporation. Unless otherwise specified by the Board of Directors, the treasurer shall sign with the president all bills of exchanged and promissory notes of the corporation, shall also have the care and custody of the stocks, bonds, certificates, vouchers, evidence of debts, securities and such other property belonging to the corporation as the Board of Directors shall designate, and shall sign all papers required by law, by these By-laws or by the Board of Directors to be signed by the treasurer. The treasurer shall enter regularly in the books of the corporation, to be kept for that purpose, full and accurate accounts of all monies received and paid on account of the corporation and whenever required by the Board of Directors. The treasurer shall, if required by the Board of Directors, give a bond to the corporation in such sum and with such security as shall be approved by the Board of Directors for the faithful performance of all the duties of the treasurer and for restoration to the corporation in the event of the treasurer's death, resignation, retirement, or removal from office, of all books, records, papers, voucher, money and other property belonging to the corporation. The expense of such bond shall be borne by the corporation. Section 3.09 Assistant Treasurer. The Board of Directors may appoint an assistant treasurer who shall have such powers and perform such duties as may be prescribed by the treasurer of the corporation or by the Board of Directors, and the Board of Directors may require the assistant treasurer to give a bond to the corporation in such sum and with such security as it may approve, for the faithful performance of the duties of assistant treasurer, and for the restoration to the corporation, in the event of the assistant treasurer's death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other such property belonging to the corporation, The expense of such bond shall be borne by the corporation. ARTICLE IV CAPITAL STOCK Section 4.01 Issuance. Shares of capital stock of the corporation shall be issued in such manner and at such times and upon such conditions as shall be prescribed by the Board of Directors. Section 4.02 Certificates. Ownership in the corporation shall be evidenced by certificates for shares of stock in such form as shall be prescribed by the Board of Directors, shall be under the seal of the corporation and shall be signed by the president or the vice president and also by the secretary or an assistant secretary. Each certificate shall contain the name of the record holder, the number, designation, if any, class or series of shares represented, a statement of summary of any applicable rights, preferences, privileges, or restrictions thereon, and a statement that the shares are assessable, if applicable. All certificates shall be consecutively numbered. The name and address of the shareholder, the number of shares, and the date of issue shall be entered on the stock transfer books of the corporation. Section 4.03 Surrender: Lost or Destroyed Certificates. All certificates surrendered to the corporation, except those representing shares of treasury stock, shall be canceled and no new certificates shall be issued until the former certificate for a like number of shares shall have been canceled, except that in case of a lost, stolen, destroyed or mutilated certificate, a new one may be issued therefore. However, any shareholder applying for the issuance of a stock certificate in lieu of one alleged to have been lost, stolen, destroyed or mutilated shall, prior to the issuance of a replacement, provide the corporation with his, her or its affidavit of the facts surrounding the loss, theft, destruction or mutilation and an indemnity bond in an amount and upon such terms as the treasurer, or the Board of Directors, shall require. In no case shall the bond be in amount less than twice the current market value of the stock and it shall indemnify the corporation against any loss, damage, cost or inconvenience arising as a consequence of the issuance of a replacement certificate. Section 4.04 Replacement Certificate. When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares of capital stock of the corporation or it becomes desirable for any reason, including, without limitation, the merger or consolidation of the corporation with another corporation or the reorganization of the corporation, to cancel any outstanding certificate for shares and issue a new certificate therefore conforming to the rights of the holder, the Board of directors may order any holders of outstanding certificates for shares to surrender and exchange the same for new certificates within a reasonable time to be fixed by the Board of Directors, The order may provide that a holder of any certificate(s) ordered to be surrendered shall not be entitled to vote, receive dividends or exercise any other rights of shareholder until the holder has complied with the order provided that such order operates to suspend such rights only after notice and until compliance. Section 4.05 Transfer of Shares. No transfer of stock shall be valid as against the corporation except on surrender and cancellation by the certificate therefore, accompanied by an assignment or transfer by the registered owner made either in person or under assignment. Whenever any transfer shall be expressly made for collateral security and not absolutely, the collateral nature of the transfer shall be reflected in the entry of transfer on the books of the corporation. Section 4.06 Transfer Agent. The Board of Directors may appoint one or more transfer agents and registrars of transfer and may require all certificates for shares of stock to bear the signature of such transfer agent and such registrar of transfer. Section 4.07 Stock Transfer Books. The stock transfer books shall be closed for a period of ten (10) days prior to all meetings of the shareholders and shall be closed for the payment of dividends as provided in Article V hereof and during such periods as, from time to time, may be fixed by the Board of Directors, and, during such periods, no stock shall be transferable. Section 4.08 Miscellaneous. The Board of Directors shall have the power and authority to make such rules and regulation not inconsistent herewith as it many deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. ARTICLE V DIVIDENDS Section 5.01 Dividends may be declared, subject to the provisions of the laws of the State of Nevada and the Articles of Incorporation, by the Board of directors at any regular or special meeting and may be paid in cash, property, shares of corporate stock, or any other medium. The Board of Directors may fix in advance a record date, as provided in Section 1.06 of these By-laws, prior to the dividend payment for the purpose of determining shareholders entitled to receive payment of any dividend. The Board of Directors may close the stock transfer books for such purpose for a period of not more than ten (10) days prior to the payment date of such dividend. ARTICLE VI OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS Section 6.01 Principal Office. The principal office of the corporation in the State of Nevada shall be the Law Offices of Max C. Tanner, 2950 East Flamingo road, Suite G, Las Vegas, Nevada 89121, and the corporation may have an office in any other state or territory as the Board of Directors may designate. Section 6.02 Records. The stock transfer books and a certified copy of the By-laws, Articles of Incorporation, any amendments thereto, and the minutes of the proceedings of the shareholder, the Board of Directors, and committees of the Board of Directors shall be kept at the principal office of the corporation for the inspection of all who have the right to see the same and for the transfer of stock. All other books of the corporation shall be kept at such places as may be prescribed by the Board of Directors. Section 6.03 Financial Report on Request. Any shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock may make a written request for an income statement of the corporation for the three (3) month, six (6) month, or nine (9) month period of the current fiscal year ended more than thirty (30) days prior to the date of the request and a balance sheet of the corporation as of the end of such period. In addition, if no annual report for the last fiscal year has been sent to shareholder, such shareholder or shareholders may make a request for a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year. The statement shall be delivered or mailed to the person making the request within thirty (30) days thereafter. A copy of the statements shall be kept on file in the principal office of the corporation for twelve (12) months, and such copies shall be exhibited at all reasonable times to any shareholder demanding an examination of them or a copy shall be mailed to each shareholder. Upon request by any shareholder, there shall be mailed to the shareholder a copy of the last annual, semiannual or quarterly income statement which it has prepared and a balance sheet as of the end of the period. The financial statements referred to in this Section 6.03 shall be accompanied by the report thereon, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that such financial statements were prepared without audit from the books and records of the corporation. Section 6.04 Right of Inspection. (a) The accounting books and records and minutes of proceedings of the shareholder and the Board of Directors and committees of the Board of Directors shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours for a purpose reasonably related to such holder's interest as a shareholder or as the holder of such voting trust certificate. This right of inspection shall extend to the records of the subsidiaries, if any, of the corporation. Such inspection may be making in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. (b) Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation and/or its subsidiary corporations. Agent or attorney may make in person or such inspection, and the right of inspection includes the right to copy and make extracts. Section 6.05 Corporate Seal. The Board of Directors may, by resolution, authorize a seal, and the seal may be used by causing it, or a facsimile, to be impressed or affixed or reproduced or otherwise. Except when otherwise specifically provided herein, any officer of the corporation shall have the authority to affix the seal to any document requiring it. Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall be the calendar year or such other term as may be fixed by resolution of the Board of Directors. Section 6.07 Reserves. The Board of Directors may create, by resolution, out of the earned surplus of the corporation such reserves as the directors may, from time to time, in their discretion, think proper to provide for contingencies, or to equalize dividends or to repair or maintain any property of the corporation, or for such other purpose as the Board of directors may deem beneficial to the corporation, and the directors may modify or abolish any such reserves in the manner in which they were created. ARTICLE VII INDEMNIFICATION Section 7.01 Indemnification. The corporation shall, unless prohibited by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be so involved in any threatened, pending or completed action suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, including without limitation, any action, suit or proceeding brought by or in the right of the corporation to procure a judgment in its favor (collectively, a "Proceeding") by reason of the fact that he is or was a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise, against all Expenses and Liabilities actually and reasonably incurred by him in connection with such Proceeding. The right to indemnification conferred in the Article shall be presumed to have been relied upon by the directors, officers, employees and agents of the corporation and shall be enforceable as a contract right and inure to the benefit of heirs, executors and administrators of such individuals. Section 7.02 Indemnification Contracts. The Board of Directors is authorized on behalf of the corporation, to enter into, deliver and perform agreements or other arrangements to provide any Indemnitee with specific rights of indemnification in addition to the rights provided hereunder to the fullest extent permitted by Nevada Law. Such agreements or arrangements may provide (i) that the Expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding, must be paid by the corporation as they are incurred and in advance of the final disposition of any such action, suit or proceeding provided that, if required by Nevada Law at the time of such advance, the officer or director provides an undertaking to repay such amounts of it is ultimately determined by a court of competent jurisdiction that such individual is not entitled to be indemnified against such expenses, (ii) that the Indemnitee shall be presumed to be entitled to indemnification under this Article or such agreement or arrangement and the corporation shall have the burden of proof to overcome that presumption, (iii) for procedures to be followed by the corporation and the Indemnitee in making any determination of entitlement to indemnification or for appeals therefrom and (iv) for insurance or such other Financial Arrangements described in Paragraph 7.02 of this Article, all as may be deemed appropriate by the Board of Directors at the time of execution of such agreement or arrangement. Section 7.03 Insurance and Financial Arrangements. The corporation may, unless prohibited by Nevada Law, purchase and maintain insurance or make other financial arrangements ("Financial Arrangements") on behalf of any Indemnitee for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. Such other Financial Arrangements may include (i) the creation of a trust fund, (ii) the establishment of a program of self-insurance, (iii) the securing of the corporation's obligation of indemnification by granting a security interest or other lien on any assets of the corporation, or (iv) the establishment of a letter of credit, guaranty or surety. Section 7.04 Definitions. For purposes of this Article: Expenses. The word "Expenses" shall be broadly construed and, without limitation, means (i) all direct and indirect costs incurred, paid or accrued, (ii) all attorney's fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, food and lodging expenses while traveling, duplicating costs, printing and binding costs, telephone charges, postage, delivery service, freight or other transportation fees and expenses, (iii) all other disbursements and out-of-pocket expenses, (iv) amounts paid in settlement, to the extent permitted by Nevada Law, and (v) reasonable compensation for time spent by the Indemnitee for which he is otherwise not compensated by the corporation or any third party, actually and reasonable incurred in connection with either the appearance at or investigation, defense, settlement or appeal of a Proceeding or establishing or enforcing a right to indemnification under any agreement or arrangement, this Article, the Nevada Law or otherwise; provided, however, that "Expenses" shall not include any judgments or fines or excise taxes or penalties imposed under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or other excise taxes or penalties. Liabilities. "Liabilities" means liabilities of any type whatsoever, including, but not limited to, judgments or fines, ERISA or other excise taxes and penalties, and amounts paid in settlement. Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised Statues as amended and in effect from time to time or any successor or other statutes of Nevada having similar import and effect. This Article. "This Article" means Paragraphs 7.01 through 7.04 of these bylaws or any portion of them. Power of Stockholders. Paragraphs 7.01 through 7.04, including this Paragraph, of these Bylaws may be amended by the stockholders only by vote of the holders of sixty-six and two-thirds percent (66 2/3%) of the entire number of shares of each class, voting separately, of the outstanding capital stock of the corporation (even though the right of any class to vote is otherwise restricted or denied); provided, however, no amendment or repeal of this Article shall adversely affect any right of any Indemnitee existing at the time such amendment or repeal becomes effective. Power of Directors. Paragraphs 7.01 through 7.04 and this Paragraph of these Bylaws may be amended or repealed by the Board of Directors only by vote of eighty percent (80%) of the total number of Directors and the holders of sixty-six and two-thirds percent (66 2/3%) of the entire number of shares of each class, voting separately, of the outstanding capital stock of the corporation (even though the right of any class to vote is otherwise restricted or denied); provided, however, no amendment or repeal of this Article shall adversely affect any right of any Indemnitee existing at the time such amendment or repeal becomes effective. ARTICLE VIII BY-LAWS Section 8.01 Amendment. Amendments and changes of these By-Laws may be made at any regular or special meeting of the Board of directors by a vote of not less than all of the entire Board, or may be made by a vote of, or a consent in writing signed by the holders of a majority of the issued and outstanding capital stock. Section 8.02 Additional By-Laws. Additional by-laws not inconsistent herewith may be adopted by the Board of Directors at any meeting of the Board of Directors at which a quorum is present by an affirmative vote of a majority of the directors present or by the unanimous consent of the Board of Directors in accordance with Section 2.11 of these By-laws. CERTIFICATION I, the undersigned, being the duly elected secretary of the Corporation, do hereby certify that the foregoing By-laws were adopted by the Board of Directors on the 3rd day of January, 1996. _______________________________ Max C. Tanner, Secretary EX-4.1 6 FORM OF SUBORDINATED NOTES Exhibit 4.1 THE SCHOONER BREWERY INCORPORATED PROMISSORY NOTE (SINGLE PAYMENT) Maker: The Schooner Brewery Incorporated Date: ______________________ Maturity Date: [used three months] ---------------------------------- Interest Calculation Basis: 360 days Amount of Note: $________________ Annual Rate of Interest (Interest Rate): none For value received, Maker promises to pay to the order of bold ("Lender") at Maker's place of business at 440 North Center, Arlington, Tarrant County, Texas, or its present place of business if different, the Amount of Note (_____________________ dollars) plus interest on unpaid Amount of Note from Date to Maturity Date at the Interest Rate, calculated on the Interest Calculation Basis. At the election of the holder of this note, the Interest Calculation Basis may be the actual number of days in the applicable calendar year in which interest on this note accrues. The Interest Rate provided in this note, however, shall be limited to the maximum rate allowed from time to time by applicable state or federal law (the "Highest Lawful Rate"). Regardless of any provision contained in this note, or in any other document executed in connection with this note, the holder of this note shall never be entitled to receive, collect, or apply, as interest on this note, any amount in excess of the Highest Lawful Rate, and in the event the holder of this note ever receives, collects, or applies, as interest, any such excess, such amount shall be deemed a partial prepayment of principal, and, if the principal of this note is paid in full, any remaining excess shall immediately be refunded to the payor. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Highest Lawful Rate, Maker and the holder of this note shall, to the maximum extent permitted by law, (a) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest; (b) exclude voluntary prepayment and the effects of such; and (c) amortize, prorate, allocate, and spread, in equal parts, the total amount of interest throughout the entire contemplated term of this note so that the Interest Rate is uniform throughout the entire term of this note. Past due principal and interest shall bear interest at the Highest Lawful Rate. At all such times, if any, as Texas law shall establish the Highest Lawful Rate, the Highest Lawful Rate shall be the "indicated ceiling" (as defined in TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended) from time to time in effect; but payee may from time to time, as to current and future balances, implement any other ceiling under such chapter and/or revise the index, formula, or provision of law used to compute the rate on this note by notice to Maker, if and to the extent permitted by, and in the manner provided in such chapter. All unpaid Amount of Note shall be payable on [used maturity date] . It is expressly understood and agreed that failure to pay this note when due shall constitute default under this note. Upon any such default, and without waiving any other rights under this note or any other instrument executed in connection with this note, Lender or other holder may, at its option, exercise any or all rights, powers, and remedies afforded under all security instruments securing this note and by law, including the right to declare the unpaid balance of principal and accrued interest on this note immediately due and payable. Each Maker agrees that his, her, or its liability on or with respect to this note shall not be affected by any release of or change in any security at any time existing or by any failure to perfect or maintain perfection of any lien on or security interest in such security. Each Maker, guarantor, surety, and endorser waives certain otherwise applicable legal requirements relating to the collection of notes, such as grace, demand, presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of intent to accelerate, notice of acceleration, and diligence in collection and the bringing of suit against any party to this note; agrees to application of any bank balance to payment of this note; agrees that extensions and renewals without limit as to number, acceptance of any number of partial payments, and releases or substitutions of collateral, with or without notice, before or after maturity, shall not release or discharge his, her, or its obligations under this note; agrees that waiver of any default shall not constitute waiver of any prior or subsequent default; and agrees to pay in addition to all other sums due under this note a reasonable sum of at least ten percent of the unpaid Amount of Note as reasonable attorneys' fees if this note is placed in the hands of an attorney for collection or if it is collected through probate, bankruptcy, or other judicial proceeding. The holder may, at its option, without notice to any Maker or any other person, accelerate the Maturity Date at any time it shall deem itself insecure or if Maker shall fail to make any payment when due. [Maker(s) to initial this space, if the following paragraph is applicable to this note]:_________ Maker warrants and represents to payee, and to all other owners and/or holders of any indebtedness evidenced pursuant to this note, that (a) all loans evidenced by this note are and shall be "business loans" as such term is used in the Depository Institutions Deregulation and Monetary Control Act of 1980, as amended, and (b) such loans are for a business, commercial, investment or similar purpose and not primarily personal, family, household, or agricultural use, as such terms are used in TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended. This note is one of a series of Maker's non-interest bearing promissory notes (the "Notes"), issued pursuant to the terms provided below. Maker represents and warrants that it has not, either directly or through any agent, offered any of the Notes to any person other than 1) existing shareholders of Maker, and only those existing shareholders who are very familiar with Maker's current business plans, including that contained within Maker's business plan dated November, 1997 (the "Business Plan") and Maker's draft private placement memorandum dated May 8, 1998 (the "Private Placement Memorandum"), or 2) individuals who are personally very familiar with the business acumen of Maker's management. Lender represents to Maker, in accepting one of the Notes, that Lender is acquiring this Note for Lender's own account, for the purpose of investment, and not with a view to the distribution or resale of the Note, and that, to the best of Lender's knowledge, Lender qualifies as a "well-informed investor" pursuant to applicable state securities laws. Lender further represents to Maker that Lender has received, thoroughly reviewed, and understands the Business Plan and the Private Placement Memorandum, specifically including, but not limited to, Maker's most recent 15c2-11 filing dated May 13, 1997, a photocopy of which is contained within the Business Plan. In lieu of interest, Maker will cause to be issued to Lender [$ X 4] shares of Maker's restricted common stock. The parties agree, however, that Maker shall have the right, exercisable prior to [used one year in advance of note date], to redeem all of such shares at the price of $.20 per share. This note, and all of the Notes, may not be transferred without an opinion of counsel selected by Lender and reasonably satisfactory to Maker as to the nonnecessity for registration under the Securities Act of 1933, or if an exemption from registration is otherwise available. Terms used in this note shall have the meanings indicated above. As used in this note, where appropriate, the masculine gender includes the feminine and the neuter, and the singular number includes the plural number. This note shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America. MAKER: THE SCHOONER BREWERY INCORPORATED by: ____________________________ Kimberly Biggs, secretary THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. MAKER: THE SCHOONER BREWERY INCORPORATED by: ____________________________ Kimberly Biggs, secretary LENDER: ________________________________ all caps ------------- EX-4.2 7 FORM OF CONVERTIBLE SUBORDINATED NOTES Exhibit 4.2 THE SCHOONER BREWERY INCORPORATED CONVERTIBLE PROMISSORY NOTE (SINGLE PAYMENT) Maker: The Schooner Brewery Incorporated Date: Maturity Date: Interest Calculation Basis: 360 days Amount of Note: $_________________ Annual Rate of Interest (Interest Rate): 12 percent For value received, Maker promises to pay to the order of ______________ ("Lender") at Maker's place of business at 440 North Center, Arlington, Tarrant County, Texas, or its present place of business if different, the Amount of Note (__________ thousand dollars) plus interest on unpaid Amount of Note from Date to Maturity Date at the Interest Rate, calculated on the Interest Calculation Basis. At the election of the holder of this note, the Interest Calculation Basis may be the actual number of days in the applicable calendar year in which interest on this note accrues. The Interest Rate provided in this note, however, shall be limited to the maximum rate allowed from time to time by applicable state or federal law (the "Highest Lawful Rate"). Regardless of any provision contained in this note, or in any other document executed in connection with this note, the holder of this note shall never be entitled to receive, collect, or apply, as interest on this note, any amount in excess of the Highest Lawful Rate, and in the event the holder of this note ever receives, collects, or applies, as interest, any such excess, such amount shall be deemed a partial prepayment of principal, and, if the principal of this note is paid in full, any remaining excess shall immediately be refunded to the payor. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Highest Lawful Rate, Maker and the holder of this note shall, to the maximum extent permitted by law, (a) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest; (b) exclude voluntary prepayment and the effects of such; and (c) amortize, prorate, allocate, and spread, in equal parts, the total amount of interest throughout the entire contemplated term of this note so that the Interest Rate is uniform throughout the entire term of this note. Past due principal and interest shall bear interest at the Highest Lawful Rate. At all such times, if any, as Texas law shall establish the Highest Lawful Rate, the Highest Lawful Rate shall be the "indicated ceiling" (as defined in TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended) from time to time in effect; but payee may from time to time, as to current and future balances, implement any other ceiling under such chapter and/or revise the index, formula, or provision of law used to compute the rate on this note by notice to Maker, if and to the extent permitted by, and in the manner provided in such chapter. All unpaid Amount of Note shall be payable on ______________. Accrued interest shall be due and payable on _____________, and on the 10th day of each succeeding month, and/or at Maturity Date, whichever first occurs. All payments shall be applied first to accrued interest, with any balance applied to Amount of Note. It is expressly understood and agreed that failure to pay this note when due shall constitute default under this note. Upon any such default, and without waiving any other rights under this note or any other instrument executed in connection with this note, Lender or other holder may, at its option, exercise any or all rights, powers, and remedies afforded under all security instruments securing this note and by law, including the right to declare the unpaid balance of principal and accrued interest on this note immediately due and payable. Each Maker agrees that his, her, or its liability on or with respect to this note shall not be affected by any release of or change in any security at any time existing or by any failure to perfect or maintain perfection of any lien on or security interest in such security. Each Maker, guarantor, surety, and endorser waives certain otherwise applicable legal requirements relating to the collection of notes, such as grace, demand, presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of intent to accelerate, notice of acceleration, and diligence in collection and the bringing of suit against any party to this note; agrees to application of any bank balance to payment of this note; agrees that extensions and renewals without limit as to number, acceptance of any number of partial payments, and releases or substitutions of collateral, with or without notice, before or after maturity, shall not release or discharge his, her, or its obligations under this note; agrees that waiver of any default shall not constitute waiver of any prior or subsequent default; and agrees to pay in addition to all other sums due under this note a reasonable sum of at least ten percent of the unpaid Amount of Note as reasonable attorneys' fees if this note is placed in the hands of an attorney for collection or if it is collected through probate, bankruptcy, or other judicial proceeding. The holder may, at its option, without notice to any Maker or any other person, accelerate the Maturity Date at any time it shall deem itself insecure or if Maker shall fail to make any payment when due. [Maker(s) to initial this space, if the following paragraph is applicable to this note]:_________ Maker warrants and represents to payee, and to all other owners and/or holders of any indebtedness evidenced pursuant to this note, that (a) all loans evidenced by this note are and shall be "business loans" as such term is used in the Depository Institutions Deregulation and Monetary Control Act of 1980, as amended, and (b) such loans are for a business, commercial, investment or similar purpose and not primarily personal, family, household, or agricultural use, as such terms are used in TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended. This note is one of a series of Maker's 12 percent convertible promissory notes, limited in aggregate to the original principal sum of $100,000.00 (the "Convertible Notes"), issued pursuant to the terms of this note as provided below. This note provides the holder the option to purchase _______ shares of Maker's restricted stock at par value, and also contains a redemption provision in favor of Maker, as well as a conversion feature in favor of this note's holder, all as provided below. Maker represents and warrants that it has not, either directly or through any agent, offered any of the Convertible Notes to any person other than 1) existing shareholders of Maker, and only those existing shareholders who are very familiar with Maker's current business plans, including that contained within Maker's business plan dated November, 1997 (the "Business Plan"), or 2) individuals who are personally very familiar with the business acumen of Maker's management. Lender represents to Maker, in accepting one of the Convertible Notes, that Lender is acquiring this Convertible Note for Lender's own account, for the purpose of investment, and not with a view to the distribution or resale of the Convertible Note, and that, to the best of Lender's knowledge, Lender qualifies as a "well-informed investor" pursuant to applicable state securities laws. Lender further represents to Maker that Lender has received, thoroughly reviewed, and understands the Business Plan, specifically including, but not limited to, Maker's most recent 15c2-11 filing dated May 13, 1997, a photocopy of which is contained within the Business Plan. Maker, by the execution of this note payable to Lender, hereby grants Lender a non-assignable (except as provided below) option to purchase _______ shares of Maker's restricted common stock, at par value, exercisable at Maturity Date (___________________) and for a period of 30 days following Maturity Date, which option shall be deemed fully exercised by Lender at Maturity Date unless Lender expressly sends written notice to Maker to the contrary. The Convertible Notes shall be subject to early redemption, at Maker's option, at any time prior to ___________________, by payment to Lender of all Amount of Note, plus accrued interest. In the case of such redemption, Maker shall give written notice to Lender of Maker's intent to redeem not less than 15 days prior to the date fixed for such redemption (the "Redemption Date"). In the event of redemption by Maker, and Maker's payment of all Amount of Note and accrued interest to the Redemption Date, the stock option referred to above shall automatically and without further action of either Maker or Lender be reduced to ___________ shares of Maker's restricted common stock, and, unless written notice to the contrary is received by Maker, such stock option in favor of Lender shall be deemed fully exercised by Lender as of the Redemption Date. Lender, and the other holders of the Convertible Notes, shall have the right, at any time (unless Maker has given notice of redemption) until ten days prior to Maturity Date (_______________), to convert the note into _________ shares of Maker's restricted common stock. In order to convert this note, the holder shall surrender the note to Maker at Maker's principal office, accompanied by a written statement designating Lender's desire to convert the principal and accrued interest represented by the note to ___________ restricted shares of Maker's common stock. Upon any of the events contemplated by the Convertible Notes involving issuance of Maker's restricted common stock (i.e., exercise of option at Maturity Date or Redemption Date, or conversion), Maker shall issue and deliver to Lender, registered in Lender's name, a certificate or certificates for the number of shares of restricted common stock issuable upon the exercise of the option, redemption, or conversion, as applicable, in each case within 20 days of the applicable purchase price (par value times number of shares or surrender of note) being received by Maker. Maker covenants and represents to Lender that all shares of Maker's restricted common stock issued upon exercise of option rights, redemption, or conversion of all Convertible Notes will, upon issuance, be duly and validly issued and fully paid and nonassessable, and free from all taxes, liens, and charges with respect to said shares' issuance. Maker further covenants and agrees that it will at all times have authorized, and reserved and kept available solely for the purpose of issue upon the maturity, redemption, or conversion of the Convertible Notes, a sufficient number of shares of its common stock as are then issuable upon any of said occurrences. This note, and all of the Convertible Notes, and any shares acquired upon the maturity, redemption, or conversion of this note, may not be transferred without an opinion of counsel selected by Lender and reasonably satisfactory to Maker as to the nonnecessity for registration under the Securities Act of 1933, or if an exemption from registration is otherwise available. Terms used in this note shall have the meanings indicated above. As used in this note, where appropriate, the masculine gender includes the feminine and the neuter, and the singular number includes the plural number. This note shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America. Secured by: The Convertible Notes are secured by the `Net GameLink system to be installed at the Dallas Schooner Brewery. MAKER: THE SCHOONER BREWERY INCORPORATED by: ____________________________ L. Kelly Jones, president THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. MAKER: THE SCHOONER BREWERY INCORPORATED by: ____________________________ L. Kelly Jones, president LENDER: ________________________________ _______________ EX-4.3 8 FORM OF CONVERTIBLE SUBORDINATED NOTES Exhibit 4.3 THE SCHOONER BREWERY INCORPORATED PROMISSORY NOTE (SINGLE PAYMENT) Maker: The Schooner Brewery Incorporated Date: Maturity Date: Interest Calculation Basis: 360 days Amount of Note: $________________ Annual Rate of Interest (Interest Rate): none For value received, Maker promises to pay to the order of _______________________ ("Lender") at Maker's place of business at 440 North Center, Arlington, Tarrant County, Texas, or its present place of business if different, the Amount of Note (___________________ dollars) plus interest on unpaid Amount of Note from Date to Maturity Date at the Interest Rate, calculated on the Interest Calculation Basis. At the election of the holder of this note, the Interest Calculation Basis may be the actual number of days in the applicable calendar year in which interest on this note accrues. The Interest Rate provided in this note, however, shall be limited to the maximum rate allowed from time to time by applicable state or federal law (the "Highest Lawful Rate"). Regardless of any provision contained in this note, or in any other document executed in connection with this note, the holder of this note shall never be entitled to receive, collect, or apply, as interest on this note, any amount in excess of the Highest Lawful Rate, and in the event the holder of this note ever receives, collects, or applies, as interest, any such excess, such amount shall be deemed a partial prepayment of principal, and, if the principal of this note is paid in full, any remaining excess shall immediately be refunded to the payor. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Highest Lawful Rate, Maker and the holder of this note shall, to the maximum extent permitted by law, (a) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest; (b) exclude voluntary prepayment and the effects of such; and (c) amortize, prorate, allocate, and spread, in equal parts, the total amount of interest throughout the entire contemplated term of this note so that the Interest Rate is uniform throughout the entire term of this note. Past due principal and interest shall bear interest at the Highest Lawful Rate. At all such times, if any, as Texas law shall establish the Highest Lawful Rate, the Highest Lawful Rate shall be the "indicated ceiling" (as defined in TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended) from time to time in effect; but payee may from time to time, as to current and future balances, implement any other ceiling under such chapter and/or revise the index, formula, or provision of law used to compute the rate on this note by notice to Maker, if and to the extent permitted by, and in the manner provided in such chapter. All unpaid Amount of Note shall be payable on _________________. Maker shall pay the Amount of Note by Fed Ex delivery. In addition, the Fed Ex delivery date will establish the date of payment and will be the basis for computing the number of days beyond the Maturity Date in the event Maker is in default under this note, and to determine the number of additional shares assessed as additional interest below. It is expressly understood and agreed that failure to pay this note when due shall constitute default under this note. Upon any such default, and without waiving any other rights under this note or any other instrument executed in connection with this note, Lender or other holder may, at its option, exercise any or all rights, powers, and remedies afforded under all security instruments securing this note and by law, including the right to declare the unpaid balance of principal and accrued interest on this note immediately due and payable. Each Maker agrees that his, her, or its liability on or with respect to this note shall not be affected by any release of or change in any security at any time existing or by any failure to perfect or maintain perfection of any lien on or security interest in such security. Each Maker, guarantor, surety, and endorser waives certain otherwise applicable legal requirements relating to the collection of notes, such as grace, demand, presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of intent to accelerate, notice of acceleration, and diligence in collection and the bringing of suit against any party to this note; agrees to application of any bank balance to payment of this note; agrees that extensions and renewals without limit as to number, acceptance of any number of partial payments, and releases or substitutions of collateral, with or without notice, before or after maturity, shall not release or discharge his, her, or its obligations under this note; agrees that waiver of any default shall not constitute waiver of any prior or subsequent default; and agrees to pay in addition to all other sums due under this note a reasonable sum of at least ten percent of the unpaid Amount of Note as reasonable attorneys' fees if this note is placed in the hands of an attorney for collection or if it is collected through probate, bankruptcy, or other judicial proceeding. The holder may, at its option, without notice to any Maker or any other person, accelerate the Maturity Date at any time it shall deem itself insecure or if Maker shall fail to make any payment when due. [Maker(s) to initial this space, if the following paragraph is applicable to this note]:_________ Maker warrants and represents to payee, and to all other owners and/or holders of any indebtedness evidenced pursuant to this note, that (a) all loans evidenced by this note are and shall be "business loans" as such term is used in the Depository Institutions Deregulation and Monetary Control Act of 1980, as amended, and (b) such loans are for a business, commercial, investment or similar purpose and not primarily personal, family, household, or agricultural use, as such terms are used in TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended. This note is one of a series of Maker's non-interest bearing promissory notes (the "Notes"), issued pursuant to the terms provided below. Maker represents and warrants that it has not, either directly or through any agent, offered any of the Notes to any person other than 1) existing shareholders of Maker, and only those existing shareholders who are very familiar with Maker's current business plans, including that contained within Maker's business plan dated November, 1997 (the "Business Plan") and Maker's draft private placement memorandum dated May 8, 1998 (the "Private Placement Memorandum"), or 2) individuals who are personally very familiar with the business acumen of Maker's management. Lender represents to Maker, in accepting one of the Notes, that Lender is acquiring this Note for Lender's own account, for the purpose of investment, and not with a view to the distribution or resale of the Note, and that, to the best of Lender's knowledge, Lender qualifies as a "well-informed investor" pursuant to applicable state securities laws. Lender further represents to Maker that Lender has received, thoroughly reviewed, and understands the Business Plan and the Private Placement Memorandum, specifically including, but not limited to, Maker's most recent 15c2-11 filing dated May 13, 1997, a photocopy of which is contained within the Business Plan. In lieu of interest, Maker will cause to be issued to Lender _________ shares of Maker's restricted common stock. The parties agree, however, that Maker shall have the right, exercisable prior to __________________, to redeem _________ such shares at the price of $_____ per share. Maker's failure to pay this note on or before the Maturity Date shall constitute default under this note. In addition to the _________ shares indicated above, ___________ shares of Maker's restricted common stock shall be issued by Maker for each day that the Amount of Note is not paid beyond the Maturity Date, and said additional shares in event of default shall be issued to Lender on a monthly basis until the Amount of Note and all accrued interest and any default penalties have been paid in full. In no event, however, shall the issuance of share penalty upon default contained within this paragraph exceed __________ shares per any 30-day period that the note is in default. In the event that Maker defaults in an amount less than the entire Amount of Note, the stock issuance penalty contained within this paragraph shall be made on a pro-rata basis. Maker will cause to be issued to Lender all of any accrued shares in lieu of past due interest by the end of each calendar month during which this note is in default. Maker shall have the right to redeem one-half of said default shares at a price of $______ per share at any time within six months of said shares' issuance. Maker shall be required to pay in full all amounts owing under Maker's notes to Lender dated _____________, ______________, _____________, _________________, _______________, and ______________ prior to making payments on Amount of Note due under the terms of the note. This note, and all of the Notes, may not be transferred without an opinion of counsel selected by Lender and reasonably satisfactory to Maker as to the nonnecessity for registration under the Securities Act of 1933, or if an exemption from registration is otherwise available. Terms used in this note shall have the meanings indicated above. As used in this note, where appropriate, the masculine gender includes the feminine and the neuter, and the singular number includes the plural number. This note shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America. MAKER: THE SCHOONER BREWERY INCORPORATED by: ____________________________ Kimberly Biggs, secretary THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. MAKER: THE SCHOONER BREWERY INCORPORATED by: ____________________________ Kimberly Biggs, secretary LENDER: ________________________________ EX-21 9 LIST OF SUBSIDIARIES Exhibit 21 Subsidiaries of the Company First Brewery of Dallas, Inc., a Texas corporation formerly doing business as "Hubcap Brewery & Kitchen" and "The Schooner Brewery" EX-27 10 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 4,529 0 180 0 0 4,709 81,150 2,576 121,139 979,050 0 0 0 50,110 (908,021) 121,139 5,431 5,431 (2,893) 27,365 0 0 8,770 (193,365) 0 (193,965) 0 0 0 (193,965) (.02) (.02)
-----END PRIVACY-ENHANCED MESSAGE-----