UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-28184
BRANDMAKERS, INC.
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(Exact name of small business issuer as specified in its charter)
Utah 37-1099747
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1325 Capital Circle, NW Lawrenceville, Georgia 30043
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(Address of principal executive offices)
(770) 338-1958
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(Issuer's telephone number)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Not Applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 123,135,787 shares common
stock, $.001 par value, were outstanding as of November 6, 2000.
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BRANDMAKERS, INC.
FORM 10-QSB
For the Quarter Ended September 30, 2000
<TABLE>
INDEX
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION PAGE
Item 1 -
Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2000
and September 30, 2000 . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statement of Operations for
the three Months ended September 1999 and 2000 . . . . . 4
Condensed Consolidated Statements of Cash Flows for
the three months ended September 1999 and 2000 . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . 6
Item 2 -
Management's Discussion and Analysis . . . . . . . . . . . . . . 7
PART II: OTHER INFORMATION
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 8
Item 2 Changes in Securities and Use of Proceeds . . . . . . . . . 8
Item 3 Default Upon Senior Securities . . . . . . . . . . . . . . 8
Item 4 Submission of Matters to a Vote of Security Holders . . . . 8
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . . 8
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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Brandmakers, Inc.
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30,
June 30, 2000
2000 (unaudited)
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 82,587 $ 69,374
Accounts receivable, trade
(less allowance of $25,000) 828,607 521,310
Inventory 448,071 543,623
Other current assets 18,839 16,115
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Total current assets 1,378,104 1,150,422
PROPERTY AND EQUIPMENT - AT COST
Furniture, fixtures and equipment 1,258,822 1,256,902
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1,258,822 1,256,902
Less accumulated depreciation 164,521 220,308
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1,094,301 1,036,594
OTHER ASSETS
Pledged certificates of deposit 357,980 357,980
Deferred stock options 395,214 395,214
Goodwill 480,755 488,644
Deposits 55,243 69,785
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1,289,192 1,311,623
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$ 3,761,597 $ 3,498,638
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 888,336 $ 1,089,066
Accounts payable 452,697 751,076
Accrued expenses 250,514 138,538
Current maturities of capital leases 291,531 284,285
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Total current liabilities 1,883,078 2,262,965
CAPITAL LEASES, less current maturities 422,362 376,949
STOCKHOLDERS' EQUITY
Common stock- authorized 200,000,000 shares
of no par value; issued 121,140,504 shares
at September and June 2000 121,141 121,141
Additional paid-in capital 3,255,961 3,255,961
Retained earnings (deficit) (1,920,945) (2,518,377)
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1,456,157 858,725
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$ 3,761,597 $ 3,498,638
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Brandmakers, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
September 30,
1999 2000
(unaudited) (unaudited)
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<S> <C> <C>
Revenues $ 371,605 $ 1,172,604
Cost of goods sold 206,649 744,753
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Gross profit 164,956 427,851
Operating Expenses
Salaries and wages 161,244 396,882
Rent 14,322 76,676
Advertising and promotion 449 14,871
Depreciation and amortization 6,500 64,694
Research and development 0 62,037
Other operating expenses 33,494 346,426
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216,009 961,587
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Operating loss (51,053) (533,736)
Other income (expense)
Interest expense (1,772) (63,696)
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(1,772) (63,696)
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Loss before taxes (52,825) (597,432)
Income taxes (benefit)
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NET LOSS $ (52,825) $ (597,432)
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Per share information:
Basic $ (0.00) $ (0.00)
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Diluted $ (0.00) $ (0.00)
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Average number of shares outstanding:
Basic 104,490,504 121,140,504
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Diluted 104,490,504 121,768,218
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Brandmakers, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
September 30,
1999 2000
(unaudited) (unaudited)
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<S> <C> <C>
Net loss $ (52,825) $ (597,432)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 6,500 64,694
(Increase) decrease in assets and
increase (decrease) in liabilities
Accounts receivable 17,319 307,297
Inventories 25,901 (95,552)
Other current assets 4,169 2,724
Accounts payable (56,995) 298,379
Accrued expenses (68,447) (111,976)
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Net cash used in operating activities (124,378) (131,865)
Cash flows used in investing activities
Capital expenditures (13,237) 0
(Increase) decrease in Deposits 985 (14,542)
Other changes in long term assets 0 (14,877)
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(12,252) (29,419)
Cash flows provided by financing activities
Reductions in long-term debt and capital leases (288) (52,659)
Proceeds from sale of stock 109,000 0
Advances on notes payable 0 200,730
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108,712 148,071
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Net decrease in cash and
cash equivalents (27,918) (13,213)
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Cash and cash equivalents at beginning
of the period 56,318 82,587
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Cash and cash equivalents at end
of the period $ 28,400 $ 69,374
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<FN>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES AND CERTAIN
CASH FLOW INFORMATION:
The Company's noncash investing and financing activities for the three
month period ended September 30, 2000 are as follows:
There were no significant noncash investing and financing activities for the three month period ended September 30, 2000.
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Brandmakers, Inc.
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The summary of Brandmakers Inc.'s (the "Company") significant accounting
policies are incorporated by reference to the Company's annual report on Form
10-KSB dated June 30, 2000.
The accompanying unaudited consolidated financial statements reflect all
adjustments, which in the opinion of management, are necessary for a fair
presentation of results of operations, financial position and cash flows. The
results of the interim period are not necessarily indicative of the results for
the full year.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has and
continues to suffer from significant losses and has a negative working capital.
These factors raise substantial doubt about the Company's ability to continue
as a going concern. Management's plan in regard to these matters is described
in the management discussion and analysis. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed forward-looking statements. Without limiting the
foregoing, the words "believe," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, changes in the regulation of the
wireless communication and internet industry at either the federal and state
levels, competitive pressures in the wireless communication and internet
industry and the Company's response thereto, the Company's ability to obtain
and retain favorable arrangements with third-party payers, the Company's
ability to obtain capital in favorable terms and conditions, and general
conditions in this economy.
The following discussion of the Company's results of operations and
financial conditions should be read in conjunction with the Company's condensed
consolidated unaudited Financial Statements listed in Part I, Item I and the
Notes thereto appearing elsewhere in this Form 10-QSB.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER, 2000 AND 1999
Revenue increased 317% to $1,172,604 for the three months ended
September 30, 2000 from $371,605 for the comparable 1999 period. This increase
in revenues was largely achieved through the acquisition of Multi-Page
Communications. The Company experienced a net loss of $597,432 for the three
months ended September 30, 2000 in comparison to a net loss of $52,825 for the
same period in 1999. The Company attributes much of this cash drain to its
investment in infrastructure, consisting of its absorption of three
acquisitions, namely Splash Media, KW Machines and KW Leisure of England, and
the Multi-Page Communications business. As a consequence, payroll increased
246% over the previous period with the addition of new employees.
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LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities - The Company's net cash flow from
operating activities resulted in deficits of $131,865 and $124,378 for the
three months ended September 30, 2000 and 1999, respectively. This deficit was
largely the product of a ramp-up in sales and the resulting need to support
this increasing level of business with a higher investment in inventories,
coupled with increasing accounts receivable and additional marketing
expenditures. The Games and Vending division was responsible for most sales
during the 1999 period but a major change in direction for Gamosity (the
present name for the former Games and Vending division) has resulted in low
revenue on a temporary basis as the company progresses through this transition
period. Sales from new lines of equipment are anticipated to replace and
exceed the lost revenue from the former games product line.
Cash used in investing activities - Consistent with management's plan to
invest in infrastructure, the Company's net cash used in investing activities
for the three months ended September 30, 2000 was a deficit of $29,419 as
compared to net cash used in investing activities for the three months ended
September 30, 1999 which was a deficit of $12,252.
Cash flow from financing activities - The Company's net cash flow from
financing activities during the three months ended September 30, 2000 increased
by $148,071 from $108,712 during the three months ended September 30, 1999, due
primarily to proceeds from advances on notes payable in 2000 versus a sale of
stock in 1999.
In spite of the significant investment in infrastructure which has already
been made, the Company believes that additional capital expenditures will be
required to meet the objectives set forth in the Company's business plan.
Brandmakers is in need of funds to continue operations and is relying on an
agreement with WSMI (see Recent Developments) to provide the necessary capital.
RECENT DEVELOPMENTS
As of August, 2000 Brandmakers, Inc. announced that a preliminary
agreement had been reached in a private transaction to sell controlling
interest of the company to World Sales and Merchandising, Inc. (WSMI).
Negotiations for a final definitive agreement are underway and both parties are
confident that it will soon be concluded with appropriate changes. Robert
Palmquist and Joy Williams resigned from The Board of Directors September 15,
2000 and were replaced by Richard Delaguardia and Brian Zufelt of WSMI. Chuck
Massey, Chief Financial Officer and Hank Cleare, President and Chief Operations
Officer, submitted their resignations I October, 2000 to pursue other business
interests.
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PART 2: OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
None
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None during the three months ended September 30, 2000.
Item 3: Default upon Senior Securities
None
Item 4: Submission of matters to a vote of security holders.
None.
Item 5: Other Information
None.
Item 6: Exhibits and Reports on Form 8-K
(a) None.
(b) Exhibits incorporated herein by reference.
1. Forms 8-K filed during the last quarter.
The company filed an 8-K/A Amended Current Report on
September 6, 2000 regarding a change in accounting firms.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRANDMAKERS, INC.
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(Registrant)
November 27, 2000 By: /s/ Geoff Williams
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(Date) Geoff Williams,
Director & Chief Executive Officer
