<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended: June 30, 2000
Commission File Number: 01-15043
CHEQUEMATE INTERNATIONAL, INC.
----------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Utah 76-0279816
-------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
330 Washington Boulevard, Suite 507, Marina del Rey, California 90292
---------------------------------------------------------
(Address of principal executive offices)
(310) 306-6666
--------------------
(Issuer's Telephone Number)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirement for the past 90 days .
YES X NO
----- -----
State the number of shares outstanding of each of the issuer's common
equity, as of the latest practicable date: August 17, 1999: 10,246,357
Transitional Small Business Format: YES NO X
----- -----
<PAGE>
TABLE OF CONTENTS
PART I-FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
UNAUDITED CONSOLIDATED BALANCE SHEETS............................................................5
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS..................................................8
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS...................................................9
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS............................................10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation...........................................15
GENERAL INFORMATION.............................................................................
RESULTS OF OPERATIONS...........................................................................
LIQUIDITY AND CAPITAL RESOURCES.................................................................
FORWARD LOOKING STATEMENTS......................................................................
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................18
Item 2. Changes in Securities...................................................................18
Item 5. Other Information.......................................................................18
Item 6. Exhibits and Reports on Form 8-K........................................................19
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
CHEQUEMATE INTERNATIONAL, INC.
AND SUBSIDIARIES
(dba C3-D Digital)
Consolidated Financial Statements
June 30, 2000 and 1999
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
Chequemate International, Inc. and Subsidiaries
(dba C3-D Digital)
124 Ferry St. SW
Albany, OR 97321
We have reviewed the accompanying consolidated balance sheet of Chequemate
International, Inc. and Subsidiaries as of June 30, 2000 and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
three months ended June 30, 2000. These consolidated financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, which will be performed for the full
year with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Chequemate
International, Inc. and Subsidiaries as of March 31, 2000, and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
year then ended (not presented herein) and in our report dated July 7, 2000, we
expressed an unqualified opinion on those consolidated financial statements.
HJ & Associates, LLC
Salt Lake City, Utah
August 17, 2000
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Consolidated Balance Sheets ..................................................................................... 5
Consolidated Statements of Operations ........................................................................... 7
Consolidated Statements of Cash Flows ........................................................................... 8
Notes to Consolidated Financial Statements ...................................................................... 9
</TABLE>
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 262,575 $ 49,815
Accounts receivable - net of allowances of $472,096
and $422,096, respectively 105,898 213,268
Inventory (Note 2) 707,603 727,512
Prepaid expenses 141,037 74,170
----------------- -----------------
Total Current Assets 1,217,113 1,064,765
----------------- -----------------
PROPERTY AND EQUIPMENT (Note 3) 1,586,575 1,428,641
----------------- -----------------
OTHER ASSETS
Notes receivable 50,000 50,000
Product rights 2,327,645 2,548,259
Movie production cost (net) 801,732 809,640
Refundable deposits 135,366 47,159
----------------- -----------------
Total Other Assets 3,314,743 3,455,058
----------------- -----------------
TOTAL ASSETS $ 6,118,431 $ 5,948,464
================= =================
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 428,941 $ 1,089,974
Short-term obligations 753,410 1,972,502
Accrued expenses 373,149 376,391
Income tax payable 500 500
Accrued interest payable 226,105 123,605
Current portion long-term debt (Note 5) 2,995,787 3,625,787
----------------- -----------------
Total Current Liabilities 4,777,892 7,188,759
----------------- -----------------
Total Liabilities 4,777,892 7,188,759
----------------- -----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.0001 par value, 500,000,000 shares
authorized, 10,345,925 and 6,781,669 shares
outstanding at June 30, 2000 and March 31, 2000,
respectively 1,035 678
Capital in excess of par 45,632,593 36,900,982
Accumulated deficit (44,293,089) (38,141,955)
----------------- -----------------
Total Stockholders' Equity (Deficit) 1,340,539 (1,240,295)
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 6,118,431 $ 5,948,464
================= =================
</TABLE>
The accompanying notes are an integral part of this financial statement.
7
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
---------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
REVENUES $ 117,709 $ 767,009
COST OF SALES 364,412 332,949
----------------- -----------------
GROSS PROFIT (LOSS) (246,703) 434,060
----------------- -----------------
EXPENSES
Selling expenses 254,628 810,875
General and administrative 5,553,271 1,515,306
----------------- -----------------
Total Expenses 5,807,899 2,326,181
----------------- -----------------
OTHER INCOME (EXPENSE)
Interest income 12,544 7,481
Interest expense (109,076) (90,486)
----------------- -----------------
Net Other Expense (96,532) (83,005)
----------------- -----------------
NET (LOSS) BEFORE INCOME TAXES (6,151,134) (1,975,126)
INCOME TAX PROVISION - -
----------------- -----------------
NET (LOSS) $ (6,151,134) $ (1,975,126)
================= =================
(LOSS) PER SHARE $ (0.75) $ (0.35)
================= =================
AVERAGE NUMBER OF SHARES OUTSTANDING 8,173,783 5,664,162
================= =================
</TABLE>
The accompanying notes are an integral part of this financial statement.
8
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
---------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (6,151,134) $ (1,975,126)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 309,053 113,783
Bad debt expense 50,000 -
Common sock and options issued for services 7,431,968 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 57,370 (125,645)
(Increase) decrease in inventory 19,909 (166,624)
(Increase) decrease in prepaid expense (66,867) (120,630)
(Increase) decrease in deposits (88,207) -
Increase (decrease) in accounts payable (661,033) 156,567
Increase (decrease) in short-term debt (1,219,092) -
Increase (decrease) in accrued expenses (3,242) 11,548
Increase (decrease) in accrued interest 102,500 55,774
----------------- -----------------
Net Cash (Used) by Operating Activities (218,775) (2,351,797)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (238,465) -
Purchase of movie rights - (262,876)
----------------- -----------------
Net Cash (Used) by Investing Activities (238,465) (262,876)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock - 465,980
Proceeds from debt 670,000 500,000
Payments of capital leases - (13,602)
Payments of long-term debt - (59,746)
----------------- -----------------
Net cash Provided by Financing Activities 670,000 892,632
----------------- -----------------
NET (DECREASE) IN CASH 212,760 (1,420,597)
CASH AT BEGINNING OF PERIOD 49,815 1,732,199
----------------- -----------------
CASH AT END OF PERIOD $ 262,575 $ 311,602
================= =================
</TABLE>
The accompanying notes are an integral part of this financial statement.
9
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements presented are those of
Chequemate International, Inc. and its wholly-owned subsidiary.
Chequemate International, Inc. is presently engaged in the
business of centric graphical software applications, hotel
pay-per-view services and cable channel services.
In the opinion of management, the unaudited financial statements
reflect all adjustments, consisting only of normal recurring
accruals necessary for a fair presentation of (a) the consolidated
statements of operations for the three month period ended June 30,
2000 and 1999, (b) the consolidated financial position at June 30,
2000 and (c) the consolidated statements of cash flows for the
three month period ended June 30, 2000 and 1999. The accounting
policies followed by the Company are set forth in the Notes to the
Consolidated Financial Statements of the Company for the fiscal
year ended March 31, 2000. The results of operations for interim
periods are not necessarily indicative of the result to be
expected for the full year.
The unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-Q. Accordingly, they do not include all of the footnotes
required to be presented for complete financial statements. The
accompanying financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the
results for the interim periods presented.
The financial statements and related disclosures have been
prepared with the presumption that users of the interim financial
information have read or have access to the audited financial
statements for the preceding fiscal year. Accordingly, these
financial statements should be read in conjunction with the
audited financial statements and the related notes thereto
included in the Company's Annual Report on Form 10-K as filed with
the Securities and Exchange Commission on July 14, 2000.
REVENUE RECOGNITION
Revenue is recognized on an accrual basis upon deliver of the
software or product, or as customers view pay-per-view items.
Revenue consists of software sales, product sales, license fees,
and monthly hotel pay-per-view fees.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost with depreciation and
amortization computed on the straight line method. Property and
equipment are depreciated over the following estimated useful
lives:
<TABLE>
<CAPTION>
Years
---------
<S> <C>
Office furniture 5-7
Machinery and equipment 5
</TABLE>
10
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
BASIC LOSS PER SHARE
Basic loss per share is calculated using a weighted average for
common stock.
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, 2000
----------------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net loss $ (6,151,134) 8,173,783 $ (0.75)
================== ================== ==================
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, 1999
----------------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net loss $ (1,975,126) 5,664,162 $ (0.35)
================== ================== ==================
</TABLE>
CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and cash on deposit with banks.
INCOME TAXES
The Company's tax basis is the same as the Company's financial
statement basis. The Company has net operating loss carryforwards
of approximately $23,000,000 available to offset future federal
and state income tax through 2020. The Company has not recorded a
tax benefit attributable to the carryforwards because realization
of such has been offset by a valuation allowance for the same
amount.
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
11
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE 2 - INVENTORY
<TABLE>
<CAPTION>
June 30, March 31,
2000 1999
----------------- ---------------
<S> <C> <C>
Finished goods $ 707,603 $ 727,512
----------------- ---------------
$ 707,603 $ 727,512
================= ===============
</TABLE>
The Company inventories are stated at the lower of cost or market,
using the first-in, first-out (FIFO) method. Inventories consist
mainly of components related to the 3-D electronic devices product
and pay-per-view operations.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 2000 and March 31, 2000 are
detailed in the following summary:
<TABLE>
<CAPTION>
Net Book Value
Accumulated ---------------------------------
Cost Depreciation 6-30-2000 3-31-2000
------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Office furniture and fixtures $ 196,759 $ 45,401 $ 151,358 $ 126,894
Machinery and equipment 1,275,682 299,608 976,074 949,013
Hotel pay-per view equipment 582,918 123,775 459,143 351,734
------------- ---------------- --------------- ----------------
Total $ 2,055,359 $ 468,784 $ 1,586,575 $ 1,428,641
============= ================ =============== ================
</TABLE>
Depreciation expense is computed principally on the straight line
method in amounts sufficient to write off the cost of depreciable
assets over their estimated useful lives. Depreciation expense for
the three months ended June 30, 2000 and March 31, 2000 amounted
to $77,531 and $205,471, respectively.
NOTE 4 - STOCKHOLDERS' EQUITY
The Company is authorized to issue 500,000,000 shares of common
stock, par value $.0001. As of June 30, 2000, the Company has
issued 10,345,925 shares of common stock. On February 2, 2000, the
Company authorized a 1:4 reverse stock split. The consolidated
financial statements have been retroactively restated to reflect
the reverse stock split.
12
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE 5 - LONG-TERM DEBT
Notes payable as of June 30, 2000 and March 31, 2000 are detailed
in the following summary:
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
--------------- ----------------
(Unaudited)
<S> <C> <C>
Note payable to a company; due in monthly
installments of $3,244 which includes
interest at 8%; due July, 1999, unsecured. $ 48,287 $ 48,287
Promissory notes to various companies;
April 1, 2001, which includes interest at 12%,
secured by tangible and intangible assets. 2,500,000 3,050,000
Note payable to a company; due June 8, 2000,
interest at 10% due monthly, secured by
equipment and inventory. 440,000 440,000
Note payable to a company; unsecured, due in
monthly installments of $19,654, which includes
interest at 6%; due October 1999. 7,500 87,500
--------------- ----------------
Total long-term debt 2,995,787 3,625,787
Less: current portion (2,995,787) 3,625,787
--------------- ----------------
Long-term portion $ - $ -
=============== ================
</TABLE>
Maturities of long-term debt are summarized below:
<TABLE>
<S> <C>
Period ending June 30, 2001 $ 2,995,787
2002 -
2003 -
2004 -
2005 -
-----------------
Total $ 2,995,787
=================
</TABLE>
13
<PAGE>
CHEQUEMATE INTERNATIONAL, INC. AND SUBSIDIARIES
(dba C3-D Digital)
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE 6 - CASH FLOW AND NON CASH INVESTING AND FINANCING ACTIVITIES
CASH FLOW INFORMATION
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
-------------- -------------
<S> <C> <C>
Interest paid $ 18,478 $ 2,134
Income taxes paid $ 500 $ 500
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
For the years ending June 30, 2000 and March 31, 2000, the Company
incurred the following non-cash investing and financing
activities.
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
-------------- -------------
<S> <C> <C>
Capital lease obligations incurred $ - $ -
Issuance of stock and options for services
rendered $ 7,431,968 $ 8,345,561
Issuance of stock for assets $ - $ 510,313
Issuance of stock for debt $ 1,300,000 $ 3,768,610
</TABLE>
14
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL INFORMATION
For more detailed information regarding the financial position of
the Company, please refer to the Unaudited Financial Statements for the first
quarter (three months) of the fiscal year 2001 ended June 30, 2000.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
------------------------
2000 1999
-------- ---------
<S> <C> <C>
REVENUES $117,709 $ 767,009
COST OF SALES 364,412 332,949
-------- ---------
GROSS PROFIT (LOSS) (246,703) 434,060
-------- ---------
</TABLE>
Revenues fell substantially, as a contract for the sale of
software in Japan expired. This contract previously yielded approximately
$100,000 per month. Additionally, the software development division of the
Company adopted a new strategy this year of giving the Strata3D software package
away for free, and charging for upgrades and plugins, manuals and instructional
videotapes.
<TABLE>
<S> <C> <C>
EXPENSES
Selling expenses 254,628 810,875
General and administrative 5,553,271 1,515,306
---------------
Total Expenses 5,807,899 2,326,181
---------------
OTHER INCOME (EXPENSE)
Interest income 12,544 7,481
Interest expense (109,076) (90,486)
--------------- --------------
Net Other Expense (96,532) (83,005)
--------------- --------------
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C>
NET (LOSS) BEFORE INCOME TAXES (6,151,134) (1,975,126)
INCOME TAX PROVISION - -
----------- -----------
NET (LOSS) $(6,151,134) $(1,975,126)
=========== ===========
</TABLE>
ASSETS
<TABLE>
<CAPTION>
June 30,
2000
-----------------
(Unaudited)
<S> <C>
CURRENT ASSETS
Cash $ 262,575
Accounts receivable - net of allowances 105,898
Inventory 707,603
Prepaid expenses 141,037
-----------------
Total Current Assets 1,217,113
-----------------
PROPERTY AND EQUIPMENT 1,586,575
-----------------
OTHER ASSETS
Notes receivable 50,000
Product rights 2,327,645
Movie production cost (net) 801,732
Refundable deposits 135,366
-----------------
Total Other Assets 3,314,743
-----------------
TOTAL ASSETS $ 6,118,431
=================
</TABLE>
16
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
June 30,
2000
-----------------
(Unaudited)
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 428,941
Short-term obligations 753,410
Accrued expenses 373,149
Income tax payable 500
Accrued interest payable 226,105
Current portion long-term debt (Note 5) 2,995,787
-----------------
Total Current Liabilities 4,777,892
-----------------
Total Liabilities 4,777,892
-----------------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be dependent on investment capital to fund its
operations. The Company has made arrangements with some of its consultants to
receive stock in lieu of cash for the services they render to the Company. There
can be no assurance that the Company will continue to be able to attract
sufficient investment capital to fund its operations, or that the consultants
will continue to accept stock in lieu of cash. The Company is negotiating with
an offshore investor to establish an equity line of credit.
FORWARD LOOKING STATEMENTS
This filing includes "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "PSLRA"). The SLRA
provides a "safe harbor" for such statements to encourage companies to provide
prospective information about themselves so long as such information is
identified as forward-looking and is accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in the information. All statements other
than statements of historical fact made in this report or incorporated by
reference are forward-looking. In particular, the statements herein regarding
the availability of adequate funding and progress in the development of its
various business segments are forward-looking statements. Forward-looking
statements represent management's current expectations and are inherently
uncertain. Investors are warned that the Company's actual results may differ
significantly from management's expectations and, therefore, from the results
discussed in such forward-looking statements.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
On June 22, 1998 a suit was filed against Chequemate International, Inc. in
the District Court for the Northern District of Illinois Eastern Division. The
plaintiff, BH Productions, Inc., d/b/a Ignite Advertising is seeking payment
remaining under a contract for advertising services entered into in October
1997. The case was settled, and the Company is making monthly payments of
$10,000. There are four payments remaining under the settlement agreement. The
liability is reflected in the financial statements.
The Company has been named as a defendant in litigation entitled Rocky
Mountain Employee Benefits, Inc. v. Chequemate International, Inc., Case No.
990912557, Third Judicial District Court of Salt Lake County, Utah. This suit
was filed on December 30, 1999, and is for damages for an alleged breach by the
Company of a lease for commercial property. Settlement negotiations are in
progress. The Company's maximum exposure is estimated to be approximately
$170,000 (present value of balance of lease)
The Company has been named as a defendant in litigation entitled
Transwestern American Plaza II, L.L.C. v. Chequemate International, Inc., Case
No. 990903164, Third Judicial District Court of Salt Lake County, Utah. This
suit was filed on or about March 23, 1999, and is for damages for an alleged
breach of a lease for commercial property. Settlement negotiations are in
progress. The Company's maximum exposure is estimated to be approximately
$100,000 (present value of balance of lease)
There may be other ongoing litigation not deemed material by management.
ITEM 2 - Changes in Securities
Set forth in the table below is a summary of all securities sold by the
Company through the month of June in calendar year 2000 (without registering the
securities under the Securities Act of 1933), and which have not been previously
reported in the SEC filings of the Company.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Date Title and amount of Consideration Class of persons to
Securities sold whom sold
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A 6/30/2000 2,728 shares common $30,000 worth U.S. Investor
stock Of advertising
---------------------------------------------------------------------------------------------------------------------
</TABLE>
This transaction constituted a private placement under Regulation D.
The private placement transaction was made for services rendered to the Company,
and the investor is believed to be an accredited investor, as defined in Rule
501(a) of Regulation D.
ITEM 5 - Other Information
In August, 2000, the Company renegotiated three agreements relating to its
Hotel Movie Network division.
First, the Company received the necessary consent to acquire the Pay-Per-View
assets of a Canadian based company (Cinema Internet Networks, Inc.) partly in
exchange for stock to be registered. These assets were already being operated by
the Company, but the revenues were inaccessible to the Company.
Second, the Company agreed to acquire, in exchange for registered stock, a
lease of personal property wherein the above Cinema Internet Networks was the
lessee, from the lessor, Scott Applegate.
Third, the Company agreed to acquire from United Business Services, Inc., a
facility for manufacturing
18
<PAGE>
and servicing Video On Call systems and devices, including all copyrighted
software and technology of the business.
ITEM 6 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
a. Exhibits:
<TABLE>
<S> <C> <C>
10.1 Agreement between the Company and Cinema Internet Networks,
Inc. dated as of August 3, 2000. 21
10.2 Agreement between the Company and Scott Applegate, dated
August 9, 2000. 44
10.3 Agreement between the Company and United Business Services,
dated August 8, 2000 45
10.4 Consent of accountants HJ & Associates, LLC. 67
27 Financial Data Schedule (for SEC use only) 68
</TABLE>
Reports on Form 8-K.
May 26, 2000 Form 8-K report regarding the sale of stock to
Crooks Hollow Road, LLC for $2.8M, and the issuance of a dozen
convertible line of credit promissory notes aggregating $3M
and another two such notes for $1M each.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly
authorized on the 21st day of August, 2000.
CHEQUEMATE INTERNATIONAL, INC.
By /s/ J. Michael Heil
-----------------------------------
J. Michael Heil
Chairman and CEO
By /s/ Andre Peterson
-----------------------------------
Andre Peterson
Director and Principal Accounting Officer
20
