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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Smart Games Interactive, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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ACQUISITION BY SMART GAMES INTERACTIVE, INC.
OF BRANDMAKERS, INC.
PURSUANT TO A PLAN
AND AGREEMENT OF MERGER
PREFACE: THIS CONSTITUTES AN UNDERTAKING GOVERNED BY TITLE 8, : 252 AND
259 OF THE GENERAL CORPORATION LAW FOR THE STATE OF DELAWARE, WHEREIN THE
SEPARATE EXISTENCE OF A CONSTITUENT CORPORATION, BRANDMAKERS, INC., SHALL CEASE,
WHEN THE CONSTITUENT CORPORATION SHALL BE MERGED INTO THE SURVIVING CORPORATION,
SMART GAMES INTERACTIVE, INC., PURSUANT TO A PLAN AND AGREEMENT OF MERGER.
THIS ACQUISTION and MERGER AGREEMENT, executed on the date or dates set
forth below, by and between:
SMART GAMES INTERACTIVE, INC., a Delaware corporation acting through
its authorized representative Jim Chuma referred to as Smart Games;
- and-
BRANDMAKERS, INC., a Georgia corporation presently doing business at
1325 Capital Circle, Lawrenceville, GA, 30043, acting through its authorized
representative Bob Palmquist and hereafter referred to as Purchaser;
Declare as their mutual intent and purpose as follows:
RECITIALS:
WHEREAS, the registered office of Smart Games is located in Delaware
where the company is incorporated, and
WHEREAS, the registered office of Brandmakers is 1325 Capital Circle,
Lawrenceville, GA 30043 and the registered agent therein is Joy Williams, upon
whom process against Brandmakers may be served within the State of Georgia; and
WHEREAS, Smart Games is a Delaware corporation in good standing and was
heretofore incorporated under the laws of the State of Delaware, its certificate
of incorporation having been filed in the office of the Secretary of State on
the 17th day of October, 1983: and
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WHEREAS, Brandmakers, is a Georgia corporation in good standing and was
heretofore incorporated under the laws of the State of Georgia, its certificate
of incorporation having been filed with the Secretary of the State on the 18th
day of October, 1993; and
WHEREAS, Smart Games has authorized capital stock consisting of fifty
million (50,000,000) shares of common stock, par value $.001 per share, of which
12,648,244 shares have been duly issued and are now outstanding; and
WHEREAS, Brandmakers, has an authorized capital stock consisting of
1,000 shares of common stock, par value $no par per share, of which 100 shares
have been duly issued and are now outstanding; and
WHEREAS, Smart Games is subject to the reporting requirements imposed
by: 12 of the Securities Exchange Act of 1934 and, further, constitutes a blank
check company, as said term is defined in : 230.419 (17 CFR :230.419) of the
regulation promulgated by the U.S. Securities and Exchange Commission
(hereinafter referred to alternately as the "Commission" or "SEC), and
WHEREAS, Brandmakers is a private company and has the requisite
qualifications and resources to assume the responsibilities imposed upon a
public company; and
WHEREAS, the respective boards of directors of Smart Games and
Brandmakers deem it advisable and to the advantage and welfare of the two
corporate parties and their respective shareholders that Smart Games acquire
Brandmakers (the "Acquisition") and, further, that the management of Brandmakers
should assume control over the operations and management of Smart Games pursuant
to a Plan and Agreement of Merger (the "Merger"), and that this Acquisition and
Merger shall hereafter be referred to as the Acquisition/Merger Agreement, to be
implemented pursuant to the provisions of the General Corporation Law of the
State of Delaware; and
WHEREAS, this Acquisition/Merger Agreement is being executed
concomitantly with a Stock Purchase Agreement, the terms of which address the
disposition of stock between the two corporate parties, and the terms of said
Stock Purchase Agreement constitute an integral part of the consideration
supporting the Acquisition/Merger Agreement, such that, without said Stock
Purchase Agreement, this Acquisition/Merger Agreement is rendered a nullity; and
NOW, THEREFORE, in consideration for the foregoing covenants and of the
mutual agreements herein contained and of the mutual benefits hereby provided,
and with both Parties intended to be legally bound, Smart Games and Brandmakers
hereby agree to enter into this Acquisition/Merger Agreement, pursuant to the
following terms and conditions.
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PART I - ACQUISITION
1. ACQUISITION. Brandmakers shall be and it hereby is acquired by Smart Games.
2. EFFECTIVE DATE. This Acquisition shall become effective when certificates
from the corporate secretaries of the two parties, certifying the approval
of this merger by each parties' stockholders, is filed with the State of
Delaware, Division of Corporations, in compliance with Title 8, : 252 c of
the Delaware General Corporation Law, and the date stamped upon said filing
shall be deemed the Effective Date.
3. SURVIVING CORPORATION. Smart Games shall be the surviving corporation and
shall continue to operate under its existing charter and shall continue to
be governed by the laws of Delaware. The separate corporate existence of
Brandmakers shall cease forthwith upon the Effective Date and its charter
shall be cancelled as soon as practicable thereafter.
4. AUTHORIZED CAPITAL. The Authorized capital stock of Smart Games shall
remain unchanged, both in amount and in par value, and shall also become
the authorized capital stock for the surviving corporation.
5. ARTICLES OF INCORPORATION. The Articles of Incorporation of Smart Games
(the "Articles of Incorporation") shall be adopted as Articles of
Incorporation for the surviving corporation, provided however, said
Articles of Incorporation shall be amended pursuant to the Plan and
Agreement of Merger to reflect the new name and address of the surviving
corporation.
6. REGISTERED OFFICE. The Registered Office of the surviving corporation in
the State of Delaware is Harvard Business Services, Inc., located at 25
Greystone Manor, Lewes, Delaware, postal code 19958-9776, in the county of
Sussex and registered agent therein is Harvard Business Services, Inc.
7. BYLAWS. The Bylaws of Smart Games as they exist on the effective date shall
be the Bylaws of the surviving corporation following the Effective Date
unless and until the same shall be amended or repealed in accordance with
the provisions thereof.
8. STOCK TRANSFER AGENT. The stock transfer agent for the surviving
corporation shall be American Stock Transfer and Trust Company of New York
City.
9. SHAREHOLDERS. All shareholders of Smart Games shall continue to be
shareholders of the surviving corporation. If any Smart Games shareholders
holds less than forty-three shares, prior to the 42.16 reverse split, said
shareholders holdings will be rounded to receive one share or one
additional share and no shareholders interest will be erased. In addition
to the original Smart Games shareholders, the shareholders of Brandmakers
shall also become shareholders of the surviving
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Purchase Agreement, but all said shares held by Brandmakers shareholders shall
be restricted.
PART II - PLAN AND AGREEMENT OF MERGER
1. NAME. The surviving corporation shall change its name from Smart Games
Interactive, Inc. to Brandmakers, Inc.
2. ADDRESS. The Principal Office of the surviving corporation shall be changed
from 950 Cherry Street, Kent, Ohio to 1325 Capital Circle, Suite C,
Lawrenceville, GA 30043.
3. BOARD OF DIRECTORS.
(a) Upon the signing of this Agreement and the Stock Purchase Agreement,
Messrs. Chuma, Groberg, Miller and Waite shall tender their
resignations as Directors and Officers of Smart Games, effective
immediately.
(b) Upon tendering of said resignations, the following individuals shall
be appointed to serve as an interim Board of Directors: Geoff
Williams, Joy Williams and Bob Palmquist. Such persons shall serve
until their respective successors are elected and qualified.
(c) Upon tendering of resignation as Directors in accord with Paragraph
3(a), the following individuals shall be appointed to serve as
Officers for the surviving corporation: Geoff Williams, Joy Williams
and Bob Palmquist.
(d) Within 90 days, the interim Board of Directors shall convene a special
meeting of stockholders, as mandated by: 312, paragraph (h) of the
General Corporation Law of Delaware, for the purpose of allowing the
shareholders to elect a permanent Board of Directors. Prior to
convening said meeting, a Notice and a Proxy Statement shall be sent
to all shareholders of record, in full compliance with SEC rules and
regulations governing proxy solicitations, to permit all shareholders
to vote that cannot attend said meeting in person.
4. NATURE OF BUSINESS. The nature of the business of the surviving corporation
is be to as indicated on Exhibit A.
5. RIGHTS AND LIABILITIES OF SURVIVING COMPANY. At and after the effective
date of the merger, the surviving company shall succeed to and possess,
without further act or deed, all of the estate, rights, privileges, powers,
and franchises, both public and private, and all of the property, real,
personal, and mixed, of each of the parties hereto; all claims, demands,
property, rights, privileges, powers and franchises and every other
interest of either of the parties hereto shall be as effectively the
property of the surviving company as they were of the respective parties
hereto prior to the merger; and the title to any real estate
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vested by deed or otherwise in the constituent corporation shall not revert
or be in any way impaired by reason of the merger, but shall be vested in
the surviving company; all rights of creditors and all liens upon any
property of either of the parties hereto shall be preserved unimpaired,
limited in lien to the property affected by such lien at the effective time
of the merger; and all debts, liabilities, and duties of the respective
parties hereto shall thenceforth attach to the surviving company and may be
enforced against it to the same extent as if such debt, liabilities, and
duties had been incurred or contracted by it.
6. PLAN OF REORGANIZATION. The merger contemplated hereby shall be treated as
a pooling of interests.
IN WITNESS WHEREOF, the foregoing Acquisition/Merger Agreement, having been duly
entered into and signed by Smart Games, a Delaware corporation, and having been
duly entered into and signed by Brandmakers, a Georgia corporation, and having
been approved by the shareholders of both corporations, all in accordance with
the provisions of the General Corporation Law of the State of Delaware, the
Director of Smart Games, and the president of Brandmakers, do now hereby execute
said agreement of merger under the corporate seals of their respective
corporations by authority of the directors and stockholders of each, as the
respective act, deed, and agreement of each of said corporations, on this ____
day of March, 1999.
SMART GAMES INTERACTIVE, INC. BRANDMAKERS, INC.
- ------------------------------ -----------------------------------
Seal Seal
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NOTARY PUBLIC
(State of Ohio)
ss.
(County of Summit)
Be it remembered that on this ____ day of _______________, 1999,
personally came before me, _____________, a party to the foregoing agreement and
known to me personally to be such, and ________________, a party to the
foregoing agreement and known to me personally to be such, and in my presence,
_______________ and _________________ duly acknowledged the said
Acquisition/Merger Agreement and affixed their signature on the lines reserved
for each, and further affirm to me that this act and deed was voluntary and a
product of their own free will.
Given under my hand and seal of office the day and year aforesaid.
By____________________
Notary Public
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Exhibit A
[LOGO]
The products manufactured and assembled by Brandmakers, Inc. are as
follows:
VIRTUAL REALITY GOLF:
A realistic computerized golf game with a 35" monitor and green mat where the
player uses a laser club while playing golf on any one of fifteen popular
courses with excellent graphics. The patented club with a wand activates the
ball on the screen when passing over the sensor pad whether driving, pitching or
putting. Potential markets include sales to affluent individuals for home use,
business opportunities, corporate recreation centers and vending distributors.
The golf game has been a major contributor to sales over the past two years. You
can play courses like: Barton Creek, Austin, Texas; HarbourTown, Hilton Head
Island and Bountiful, South Carolina.
COMPUTER DISK DISPENSING MACHINES:
Many of these machines are in use in computer labs and libraries at Colleges and
Universities. All concerned have been quite pleased with the equipment in terms
of both sales and convenience to the students. A major attraction to the college
market is the control over the disks and funds including a complete accounting
program. Our market research has indicated a strong demand for these dispensing
machines. We are now in production and will commence deliveries in January 1999.
New artwork by the graphics division is modernistic and attracts attention.
LASER CUE:
The cue is in a patent pending status with an impact switch to activate the
laser diode emitting a small rod dot shining through a hole in the cue tip. This
will be featured through a video as a training cue. The cue is currently in the
manufacturing stage with an initial order for 5,000 cues to be placed in
February, 1999 . A marketing plan is in place and will he implemented as the
cues are being assembled. Splash Media will produce and direct the marketing
video.
DUAL VEND PREPAID PHONE CARD OR COPY CARD MACHINES:
The two column machines are priced competitively and are quite attractive with a
blue cabinet and new artwork. The machines may be used to dispense phone cards
most anywhere or copy cards primarily in universities.
INTERNET BROWSERS:
There is no question as to the growth of Internet usage. The kiosk market
continues to grow at an astounding rate. Locations such as malls, airports and
public venues continue to be prime sites for this type of kiosk. We have also
developed a plan to sell or rent machines to exhibitors at trade shows to offer
free e-mail to attract visitors as well as to promote our MailStart division.
MailStart's advertising agency 24/7 will be providing the Internet Browsers free
of charge for the end user and generate income through advertising.
SKILL MACHINES:
These machines are made in the UK. Brandmakers upgrades the software and adds
bill acceptors and printers. The machines can be used for redemption and do
require some skill. Market research indicates several possible markets.
POSTCARD MACHINES:
Brandmakers may be the only firm manufacturing postcard vending machines.
Postage is added so the cards are ready to mail, which is very convenient. At
this time a few machines have been placed in Orlando, Florida. Field experience
is informing Brandmakers of the best places to locate this equipment.
Resort areas area prime target and Cancun, Mexico is a possibility under
consideration.
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[LOGO]
MARIO NINTENDO ARCADE GAME:
This is a dual laser gun game, which will have significant appeal with movement
of Mario, a Dragon, Dolphins and other targets. Mario is ideal for pizza places
like Chuck E Cheese's, for arcades and for Carnivals. It has worldwide appeal
and the prototype should be ready by April 1999. Brandmakers has a marketing
plan and anticipates some substantial orders, both domestic and internationally.
HOSPITALITY INNOVATORS:
Founded is 1994, Hospitality Innovators focuses on the sale of On Premise
Communication systems for various industries. The core product is the "Coaster
Call" -- Guest Paging System from Long Range Systems. Such high profile
restaurant chains as Applebee's, Ruby Tuesday, Bennigans Long Horn Steakhouse
and Outback use this system.
Since its inception in 1988 the On Premise paging industry has grown to over $50
million per year in sales. Its popularity has evolved to encompass nursery
paging, medical, professional and manufacturing paging. Also included in the
Hospitality Innovators family of produucts is a variety of paging systems from
companies such as Motorola, Long Range Systems, SIGnologies and Visiplex.
Hospitality maintains a very loyal customer base. Service has always been the
cornerstone of Hospitality Innovators business philosophy. Taking care of the
customer is the number one priority. This philosophy has allowed Hospitality
Innovators to reach into their competitor's pocket and win over their customers.
Brandmakers, Inc. acquired Hospitality Innovators in May 1998 and now operates
as a wholly owned division.
WASHBURN ILLUSTRATION & DESIGN:
Washburn Illustration & Design has demonstrated expertise in strategic brand
recognition, point of purchase and packaging materials. Coca-Cola, McDonald's
and Burger King are long standing clients. 50% of Washburn Illustration & Design
is web-related. Washburn is also a division of Brandmakers.
MAILSTART:
The MailStart service is a universal web based e-mail access solution. The
service provides users free access to all current e-mail boxes from any Internet
enabled computer. MailStart serves as a virtual gateway to your POP3 e-mail
account(s), providing the ability to remotely check, send, reply, forward and
delete any e-mail message you may have. MailStart allows other sites to utilize
and customize its POP3 e-mail access solution through two different programs
known as the Form Control and Template Program. These programs are ideal for
sites needing a low cost universal e-mail access solution for their users.
Participation in the Form Control Program is free and requires minimal effort by
the participant.
MailStart has just introduced its newest product - MailStart Plus. Plus offers
additional features like: multiple e-mail address support; zero wait technology;
folders; trashcan; message status tracking; MIME Encoded attachment handling;
signature file; address book; multiple resolution support and a context
sensitive help system.
Founded in June 1997 and acquired in June 1998 by Brandmakers, Inc. MailStart is
the Internet division of Brandmakers. Recently, MailStart received agency
representation by 24/7 to sell banner inventory. Traffic to MailStart continues
to grow at an average rate of 34% per month.
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SMART GAMES INTERACTIVE, INC. FEBRUARY __, 1999
1633 17TH STREET
CUYAHOGA FALLS, OHIO 44223
DEAR STOCKHOLDER,
The attached proxy statement is furnished to you in connection with the
solicitation of proxies on behalf of the Board of Directors (the "Board") of
Smart Games Interactive, Inc. (the "Company") for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on March 18, 1999 and at any
adjournments or postponements thereof, at the Holiday Inn, 240 Hines Hill Road,
Hudson, Ohio 44236. Holders of record of the Company's common stock, no par
value ("Common Stock"), at the close of business on February 23, 1999 (the
"Record Date") will be entitled to vote at the Annual Meeting. On the Record
Date there were 12,648,244 shares of Common Stock outstanding and eligible to
vote. Each share of Common Stock entitles the holder thereof to one vote on each
matter scheduled to come before the Annual Meeting.
All votes represented by the enclosed proxy will be cast FOR the three
nominees for director named herein, unless authorization to do so is withheld by
a shareholder. Similarly, in the same manner and unless authorization to do so
is withheld by a shareholder, the enclosed proxy will be cast FOR the other
proposals set forth in the Notice of Annual Meeting.
At the meeting, votes will be tabulated by inspectors of election appointed
by the Chairman of the Board. The Company's regulations provide that a majority
of the votes entitled to be cast by the holders of all shares of the Common
Stock issued and outstanding and entitled to vote, present in person or by
proxy, shall constitute a quorum at a meeting of the shareholders.
The Board does not know of any matters, other than those specified herein,
which will be presented for action at the Annual Meeting. In the event that any
other matters should properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote the proxy in
accordance with their best judgment on such matters.
Nicholas J. Chuma
Secretary
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PROXY STATEMENT
This proxy statement is being mailed to all known Stockholders of Smart
Games Interactive, Inc. (f/k/a Sports Sciences, Inc.), hereafter ("Smart Games"
or the "Company") commencing on or about February 21, 1999, in connection with
the solicitation by Brandmakers, Inc., ("Brandmakers") of proxies to be voted at
an Annual Meeting of Stockholders (the "Meeting") to be held in Hudson, Ohio on
March 18, 1999, and at any adjournment thereof from said meeting. The Meeting
has been called by Brandmakers pursuant to ss.312(h) of the General Corporation
Law of Delaware for the purpose of considering a plan proposed by Brandmakers
(the "Plan") whereby the Company will first acquire Brandmakers, thereby
effecting a business combination transaction with a suitable privately-held
company, then pursuant to a plan of reorganization and merger, management of
Brandmakers will assume control of the surviving company, Smart Games
Interactive, Inc.
Proxies will be voted in accordance with the directions specified thereon
and do not confer discretionary authority on any person. Any proxy on which no
direction is specified will be voted in favor of all proposals. A Stockholder
may revoke a proxy at any time prior to the start of the meeting by (1)
delivering to Brandmakers a written notice of revocation, of (2) delivering to
Brandmakers a signed proxy of a later date or by (3) appearing at the Meeting
and voting in person. Notices of revocation and replacement Proxies that are not
actually received by Brandmakers prior to the start of the meeting will be void
and of no force and effect.
As of December 31, 1997, there were 12,648,244 shares of Common Stock
issued and entitled to vote. Each share of Common Stock entitles the holder to
one vote on each matter presented for consideration by the Stockholders. Under
the Company's By-Laws, the presence, in person or by proxy, of shares entitled
to cast a combined total of 6,324,122 votes or 50% of the shares issued and
outstanding will constitute a quorum. According to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, there are 230 stockholders
entitled to vote. With the exception of Brandmakers, Inc., no stockholder has
indicated a pre-approval of the proposals described in this Proxy Statement.
The required quorum for the transaction of business at the Meeting is a
majority of the shares of Common Stock issued and outstanding on the Record Date
(the "Quorum"). Shares that are voted "FOR", "AGAINST" or "ABSTAIN" in any
matter are treated as being present at the meeting for purposes of establishing
the Quorum, but only shares voted "FOR" or "AGAINST" are treated as shares
"represented and voting" at the Meeting (the "Votes Cast") with respect to a
particular matter. Accordingly, abstentions and broker non-votes will be counted
for purposes of determining the presence or absence of the Quorum for the
transaction of business, but will not be counted for purposes of determining the
number of Votes Cast with respect to a proposal.
PREFATORY NOTE TO THE PLAN
In structuring a Plan for a suitable business combination transaction, the
following ingredients must be present. First, there must be an optimal capital
structure. Second, the Plan must provide for the payment of finders fees and
other costs in the event that a suitable business
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combination transaction is identified and a combination transaction is
negotiated. Third, the Plan must provide for significant payments to Brandmakers
and it should confer upon Brandmakers the requisite authority to negotiate a
suitable combination transaction.
BRANDMAKERS PLAN
Brandmakers has developed a plan (the "Plan") whereby the Company will be
restructured and its previously incurred indebtedness will either be settled or
assumed, for the purpose of effecting a business combination transaction with
Brandmakers, Inc. a privately-held company that has both business history and
operating assets. If this Plan is successfully implemented, you may be able to
salvage some of the value that your Smart Games shares once represented.
However, Brandmakers cannot go forward with the Plan without first obtaining
stockholder approval. Therefore, it is critically important that you read the
enclosed Proxy Statement and promptly mark your vote, sign and return your Proxy
Card.
PROPOSED PLAN
Although still in good standing with the State of Delaware, Smart Games has
no employees and no income from operations. Smart Games does have liabilities.
The Company has not engaged in any business activities since September, 1997.
Brandmakers believes that it may be possible to recover some value for the
Stockholders through the adoption and implementation of a Plan whereby the
Company will be restructured as a "clean public shell" for the purpose of
effecting a business combination transaction with Brandmakers, Inc.
Brandmakers proposes that the Company offer Brandmakers, Inc. the
opportunity to acquire a controlling ownership interest in Smart Games
Interactive at substantially less cost than would otherwise be required for
conducting an initial public offering. Brandmakers is not aware of any empirical
statistical data that would independently confirm or quantify Brandmaker's
beliefs concerning the perceived value of a merger or acquisition transaction
for the owners of a suitable privately-held company such as Brandmakers. The
owners of any existing business selected for a business combination with the
Company will incur significant costs and expenses, including the costs of
preparing this Proxy and the required business combination agreements and
related documents, the costs of preparing the Current Report on Form 8-K
describing the business combination transaction and the costs of preparing the
documentation associated with any future reporting under the Exchange Act and
registrations under the Securities Act.
If the Plan of Brandmakers is approved by the Stockholders, the Company's
debt will be completely restructured and assumed by Brandmakers and the Company
itself will be fully reactivated by merging all the existing operations of
Brandmakers into the Company. [See Brandmakers Existing Operations] This part of
the Plan is termed the Acquisition of Brandmaker. The Company will further be
used as a corporate vehicle to seek, investigate and, if the results of such
investigation warrant, effect a further business combination with a suitable
privately-held company or other business opportunity presented to it by persons
or firms that
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seek the perceived advantages of a publicly held corporation. This part of the
Plan, (i.e. business operations which are proposed but not yet identified) are
sometimes referred to as a "blind pool" because Stockholders will not ordinarily
have an opportunity to analyze the various business opportunities presented to
the Company, or to approve or disapprove the terms of any business combination
transaction that may be negotiated by Brandmakers on behalf of the Company.
Consequently, the Company's potential success will be heavily dependent on the
efforts and abilities of Brandmakers and its officers, directors and
consultants, who will have virtually unlimited discretion in searching for,
negotiating and entering into a business combination transaction. Brandmakers
and its officers, directors and consultants have had limited experience in the
proposed business of the Company. Although Brandmakers believes that the Company
will be able to enter into an additional business combination transaction after
the approval of the Plan by the Stockholders, there can be no assurance as to
how much time will elapse before a business combination is effected, if ever.
The Company will not restrict its search to any specific business, industry or
geographical location, and the Company may participate in a business venture of
virtually any kind or nature.
Brandmakers and its officers, directors and consultants anticipate that the
selection of a business opportunity for the Company will be complex and
extremely risky. Because of general economic conditions, rapid technological
advances being made in some industries, and shortages of available capital,
Brandmakers believes that there are numerous privately-held companies seeking
the perceived benefits of a publicly traded corporation. Such perceived benefits
may include facilitating debt financing or improving the terms on which
additional equity may be sought, providing liquidity for the principals of the
business, creating a means for providing incentive stock options or similar
benefits to key employees, providing liquidity for all stockholders and other
factors.
Potential business opportunities may occur in many different industries and
at various stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex. Brandmakers has previously been successful in identifying suitable
privately-held companies without the benefits of a public vehicle, and
anticipates that the Company will be able to pursue both its existing business
endeavors more effectively while also permitting Brandmakers to become more
effective in attracting and consolidating future business ventures. The existing
businesses of Brandmakers, like Smart Games Interactive, is primarily grounded
in businesses which rely upon breaking computer technology in areas such as
recreation and the Internet. Because Brandmakers has acquired ten such
businesses, unlike the prior operations of the Company, Brandmakers'
diversification permits the Company to offset potential losses from one venture
against gains from another. Moreover, because Smart Games Interactive is saddled
with substantial debt and lacks any meaningful financial, managerial or other
resources, without the assistance of a firm such as Brandmakers, Brandmakers
believes the Company will not be viewed as a suitable business combination
partner for either developing companies or established business that are in need
of substantial additional capital.
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BRANDMAKERS EXISTING OPERATIONS
Brandmakers, Inc. operates its corporate headquarters at 1325 Suite C,
Capital Circle N.W., Lawrenceville, Georgia 30043. Its telephone number is (770)
338 1958 and its telecopier phone number is (770) 338 9331. Brandmakers' email
address is [email protected]. Presently, the Company products consist of
the following.
MAILSTART - THE INTERNET DIVISION OF BRANDMAKERS
INTRODUCTION Mailstart was founded in 1997 and acquired by Brandmakers in
June of 1998. Mailstart is similar to Hotmail Corporation, the firm recently
acquired by Microsoft. Like Hotmail Corporation, Mailstart integrates the core
functionality of text-based email messages with the multimedia and global access
capabilities of the World Wide Web to enable a customer to gain access to the
Internet from any place in the world to all current email boxes from any
Internet enabled computer. Mailstart serves as a virtual gateway to your POP3
email accounts, providing the ability to remotely check, send, reply, forward or
delete any email message you may have waiting for you at your own local server.
Mailstart allows other sites to utilize and customize its POP3 email access
solution through two different programs known as Form Control and Template
Program. These programs are ideal for sites needing a low cost universal email
access solution for their users. Participation in the Form Control Program is
free and requires minimal effort by the participant.
Mailstart is introducing a new product called Mailstart Plus. Mailstart
Plus will offer additional features such as multiple email address support, zero
wait technology, folders, trashcan, message, status tracking, MIME Encoded
attachment handling, signature file, address book, multiple resolution support
and content sensitive help system.
Internet Browsers The usage of the Internet is growing rapidly and public
browsers will increase in popularity. There are 75 million E-mail addresses and
the numbers are increasing daily. Five prototypes for browsers are in the field.
Brandmakers is deciding upon the software to use on a permanent basis.
Discussions are also being held with an internet service provider.
COMPETITION The market for Internet products and services is highly
competitive and competition is expected to continue and increase significantly.
In addition, the Company expects the market for Web-based advertising to be
intensely competitive. There are no substantial barriers to entry in these
markets and the Company expects that competition will continue to intensify.
Although the Company currently believes that the diverse segments of the
Internet market will provide opportunities for more than one supplier of
products and services similar to the email products offered by Mailstart, it is
possible that a single supplier may dominate one or more market segments. The
Company hopes to achieve sufficient size and economies of scale so as to compete
with a dominating or predator-type adversary before this occurs.
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The Company competes with other providers of online email services. Other
companies, most notably Hotmail, offer competitive products and services which
address email access to the Web from remote locations. The Company also faces
competition from providers of software and other Internet products and services
that incorporate search and retrieval features into their offerings. For
example, web browsers offered by Netscape and Microsoft, which are the most
widely used browsers, incorporate buttons in their browser and similar features
that direct search traffic to competing services, including those that may be
developed or licensed by such parties. Entities that sponsor or maintain
high-traffic Web sites or that provide an initial point of entry for Internet
users, such as the Regional Bell Operating Companies or Internet Service
Providers such as Microsoft and AOL, currently offer and could further develop,
acquire or license Internet search and navigation functions that will introduce
additional competition into this market. Microsoft intends to offer additional
Internet search engines and directory services that will be made available in
the near future. It is likely that such search and directory services will be
tightly integrated into the Microsoft operating system, called the Internet
Explorer. Microsoft may promote such services within the Microsoft network
through other end-users services such as Web-TV. Insofar as Microsoft's Internet
navigational offerings may be more conveniently accessed by users than those of
the Company, this may provide Microsoft with significant competitive advantages
that could have a material adverse effect upon the Company's prospects for
success. A large number of Web sites and online services (including, among
others, the Microsoft Network, AOL, and other Web navigation companies such as
Excite, Lycos and Infoseek), offer email services that are competitive with the
services offered by Mailstart. Many of these existing competitors, as well as a
number of potential new competitors, have significantly greater financial,
technical and marketing resources than the Company. In addition, providers of
Internet tools and services may be acquired by, receive investments from or
enter into other commercial relationships with larger, well-established and
well-financed companies, such as Microsoft or Netscape. Greater competition
resulting from such relationships could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company expects to face competition in the various special interest,
demographic and geographic markets addressed by media properties that are under
development. This competition may include companies that are larger and better
capitalized than the Company and that have expertise and established brand
recognition in these markets. There can be no assurance that the Company's
competitors will not develop Internet email products and services that are
superior to those of the Company or that achieve greater market acceptance than
the Company's offerings. Moreover, a number of the Company's current advertising
customers, licensees and partners have also established relationships with
certain of the Company's competitors, and future advertising customers,
licensees and partners may establish similar relationships.
The Company also competes with online services and other Web site
operators, as well as traditional offline media such as television, radio and
print for a share of advertiser's total advertising budgets. The Company
believes that the number of companies selling Web-based advertising and the
available inventory of advertising space have increased substantially during
recent periods. Accordingly, the Company may face increased pricing pressure for
the sale of
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advertisements. There can be no assurance that the Company will be able to
compete successfully against its current and future competitors or that
competition will not have a material adverse effect on the Company's business,
operating results and financial condition.
The Company believes that the principal competitive factors in its markets
are ease of use, comprehensiveness, independence, quality and responsiveness to
computer commands, and access to other end users. Competition among current and
future suppliers of Internet navigational and informational services, high
traffic Web sites and Independent Service Providers, as well as competition for
other media for advertising placements, could result in significant price
competition and reductions in advertising revenues. Moreover, nearly all of the
Company's current and potential competitors have significantly greater
financial, technical, marketing, distribution and other resources than the
Company. There can be no assurance that the Company will be able to compete
successfully against current and future sources of competition or that the
competitive pressures faced by the Company will not have a material adverse
effect on the Company's business, operating results and financial condition.
DEPENDENCE ON GROWTH OF INTERNET Mailstart's future success is
substantially dependent upon continued growth in the use of the Internet and the
Web. Rapid growth in the use of and in the Internet and the Web is a recent
phenomenon. The Internet may not prove to be a viable commercial marketplace for
a number of reasons, including lack of acceptable security technologies,
potentially inadequate development of the necessary infrastructure, such as a
reliable network backbone, or timely development and commercialization of
performance improvements, including high speed modems. To the extent that the
Internet continues to experience significant growth in the number of users and
level of use, there can be no assurance that the Internet infrastructure will
continue to be able to support the demands placed upon it by such potential
growth or that the performance or reliability of the Web will not be adversely
affected by this continued growth. The Internet could lose its viability due to
delays in the development or adoption of new standards and protocols required to
handle increased levels of Internet activity, or due to increased governmental
regulation. Changes in or insufficient availability of telecommunications
services to support the Internet also could result in slower response times and
adversely affect usage of the Web and the Company's online marketing program. If
use of the Internet does not continue to grow, or if the Internet infrastructure
does not effectively support growth that may occur, Mailstart's business,
operating results and financial condition would be materially and adversely
affected.
There is intense competition in the sale of advertising on the Internet,
including competition from other email services as well as other high-traffic
sites, which has resulted in a wide range of rates quoted by different vendors
for a variety of advertising services, which makes it difficult to project
future levels of Internet advertising revenues that will be realized generally
by any specific company. Competition among current and future suppliers of
Internet navigational services or Web sites and advertising placements could
result in significant price competition, reduced pricing for Internet
advertising and reductions in the Company's advertising revenues. There also can
be no assurance that the Company's advertising customers will accept the
internal
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and third-party measurements of impressions received by advertisements on the
Company's web site. There is also no assurance that the advertisements may not
contain errors.
To remain competitive, the Company must continue to enhance and improve
responsiveness, functionality, features and content of its main product, which
is remote access for email. There can be no assurance that the Company will
successfully maintain competitive user response times or implement new features
and functions, such as greater levels of user personalization, localized content
filter and information delivery through "push" methods, which will involve the
development of increasingly complex technologies.
A key element of the Company's business strategy is the development and
introduction of new email products targeted for specific interest areas, user
groups with particular demographic characteristics and geographic areas. There
can be no assurance that the Company will be successful in developing,
introducing and marketing such products or media properties or that such
products and media properties will achieve market acceptance, enhance the
Company's brand name recognition or increase traffic. The Company depends
substantially on third party efforts in the development and operation of these
new media properties. The introduction of new media properties also may be
subject to delays that may negatively affect advertising revenues and the
Company's competitive position. Furthermore, enhancements of or improvements to
its email service may contain undetected errors that require significant design
modifications, resulting in a loss of customer confidence and user support and a
decrease in the value of the Company's brand name recognition. Any failure of
the Company to effectively develop and introduce these properties, or failure of
such properties to achieve market acceptance, could adversely affect the
Company's business, results of operations and financial condition. The market
for Internet products and services is characterized by rapid technological
developments, evolving industry standards and customer demands, and frequent new
product introductions and enhancements. These market characteristics are
exacerbated by the emerging nature of this market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Mailstart's future success will depend in significant part on its
ability to continually improve the performance, features and reliability of its
software and other properties in response to both evolving demands of the
marketplace and comptetitive product offerings, and there can be no assurance
that Mailstart will be successful in doing so.
GOVERNMENT REGULATION Mailstart is not currently subject to direct
regulation by any governmental agency in the United States, other than
regulations applicable to businesses generally, and there are currently few laws
or regulations directly applicable to access to or governing commerce upon the
Internet. Due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet, covering issued such as user privacy, pricing and characteristics
and quality of products and services. For example, although the Communications
Decency Act was held to be unconstitutional, there can be no assurance that
similar legislation will not be enacted in the future and it is possible that
such legislation could expose Mailstart to substantial liability. Such
legislation could also dampen the growth in the use of the Web generally and
decrease the
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acceptance of the Web as a communications and commercial medium, and could,
thereby, have a material adverse effect on the Company's business, results of
operations and financial condition. Other nations, including Germany, have taken
actions to restrict the free flow of material deemed to be objectionable on the
Web. In addition, several telecommunications carriers are seeking to have
telecommunications over the Web regulated by the Federal Communications
Commission [the "FCC"] in the same manner as other telecommunications services.
For example, America's Carriers Telecommunications Association ("ACTA") has
filed a petition with the FCC for this purpose. In addition, because the growing
popularity and use of the Web has burdened the existing telecommunications
infrastructure and many areas with high Web use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate ISPs and OSPs in a manner similar to long
distance telephone carriers and to impose access fees on the ISPs and OSPs. If
either of these petitions is granted, or the relief sought therein is otherwise
granted, the costs of communicating on the Web could increase substantially,
potentially slowing the growth in use of the Web, which could in turn decrease
the demand for the Company's products and media properties. Moreover, the
applicability to the Internet of the existing laws governing issues such as
property ownership, copyright defamation, obscenity and personal privacy is
uncertain, and the Company may be subject to claims that its services violate
such laws. Any such new legislation or regulation or the application of existing
laws and regulations to the Internet could have a material adverse effect on the
Company's business, operating results and financial condition.
BRANDMAKERS GAMING DIVISION
Virtual Reality Golf Brandmakers produces a large, computerized golf game
with a 34 inch monitor screen and mat. The player uses a golf club and thanks to
images projected on the television's screen, hits a fictional ball and plays a
round of golf on any one of fifteen world renown golf courses diplayed on the
monitor with excellent graphics. The patented club with a wand activates the
ball on the screen when passing over the patented sensor pad. The software is
sufficiently sophisticated to ascertain the difference between driving, pitching
or putting. The golf game has been a major contributor to sales for Brandmakers
over the past two years. The potential market includes sales to affluent
individuals for home use, corporate recreation centers and vending distributors.
Skill Machines Brandmakers attended an exhibit at Lake Arrowhead in
Oklahoma on Indian land and received a favorable interest in this equipment.
There appears to be a significant potential in Oklahoma and other native
American reservations across the country. At present we are adding bill
acceptors and printers as well as doing the final testing prior to placement.
Laser Cue Brandmakers is in the process of assembling ten production
prototypes for this cue that will be advertised and highlighted in a video as a
training cue. This project is several months behind schedule, after having
rejected three prototypes made by the "experts". Brandmakers finally decided on
the material to be used for the shaft as well as the appropriate construction to
make the cue strong and professional in appearance. The ten prototype cues will
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be used for production quotes and marketing, including the making of a two
minute video. Brandmakers has numerous marketing ideas for Laser Cue and will be
discussing a possible infomercial. Brandmakers is counting on the cue to provide
a substantial income over the next few years. Our timing is to have the 10
production prototypes completed by the end of November, 1998, and production
pricing and tooling costs as well as an order placed for 5,000 cues by
mid-February, 1999. Realistically, production for the initial order will take 60
to 90 days.
Mario Nintendo Arcade Game This is a dual laser gun game, which will have
significant appeal to the young with movement of Mario, a Dragon, Dolphins and
other targets. This product is ideal for pizza places such as Chuck E Cheese,
for arcades and for Carnivals. It has worldwide appeal and the prototype should
be ready by May 1999. Brandmakers has a marketing plan and anticipates
substantial orders.
BRANDMAKERS VENDING DIVISION
Dual Vend Prepaid Phone Card Machines Brandmakers two column machines are
priced at the very low end of the market. Our dispensing mechanisms were
acquired inexpensively and allow us to maintain this pricing, although design
improvements in the cabinet and circuit board will lead to a small price
increase. We will advertise these machines in February, 1999.
Postcard Machines Brandmakers may be the only firm manufacturing postcard
vending machines. Postage is added so the cards are ready to mail, which is
quite a convenience. At this time we have placed several machines in Orlando,
Florida and are in the process of locating more and relocating others. We have
not yet proven the potential but our field experience is informing Brandmakers
of where to locate this equipment and where not to locate this equipment. We
believe there will be a good market but it is too early to draw any conclusions.
Computer Disk Dispenser Brandmakers currently has two machines at Colleges
dispensing computer disks and copycards (cards to insert in copying machines to
make copies). Brandmakers can also add a column to dispense prepaid phone cards
or dispense the phone cards instead of copy cards. Two other colleges have these
machines which dispense computer disks only from two columns. Research indicates
computer labs in colleges and universities will be our primary market and sales
will commence in December, 1998. Colleges advise us that no one makes a
dispenser of computer disks and that is the primary reason we are entering that
market.
ADDITIONAL BRANDMAKER PRODUCTS
Hospitality Innovators This firm was founded in 1994 and acquired by
Brandmakers in May of 1998. This company distributes an On Premise Communication
system for various industries, but most notably for restaurants. The core
product of this firm is the Coaster Call, a Guest Paging System from Long Range
Systems. Such high profile restaurant chains as Applebee's, Ruby Tuesday,
Bennigan's, Long Horn Steakhouse and Outback have recently adopted the
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Coaster Call as a system for organizing its patrons that are waiting for tables.
When a guest arrives at one of these restaurants, they are handed a coaster.
They are told that when this coaster lights up and vibrates, their table is
ready and they should return to the Hostess Stand. The guest may take this
coaster and wander through an adjoining mall or even leave the building, without
fear of losing their place in the queue for fear of not hearing their names when
they are called by the Hostess. The Coaster Call has become a popular mechanism
for relieving stress among waiting restaurant patrons. It has also eliminated
the crowding that occurs in a restaurants entry way. Finally, because the line
is no longer visually apparent to a person entering the restaurant, the prospect
of waiting for a table is more agreeable.
Hospitality has been the number one sales organization for this system
since the product was introduced three years ago, selling over 90% of all
systems worldwide. Since its inception in 1988, the On Premise paging industry
has realized sales growth of over $50 million per year. In addition to its
"Coaster Call", Hospitality Innovators has other paging systems in use with
companies such as Motorola, Long Range Systems, SIGnologies and Visiplex.
Hospitality has sold systems to numerous churches, dental offices and doctors
offices.
Hospitality Innovators also has its headquarters in Lawrenceville, Georgia
and still prides itself on maintaining a "small company feel" which permits
contact with the owner on a daily basis. This philosophy has contributed to a
very loyal customer base. Substantial growth is projected to come from the
silent paging portion of this business this year, as well as from restaurants
over the past two years. As of the end of October, 1998 the company had over 300
current customers.
Washburn Illustration and Design For Brandmakers, the acquisition of this
firm is seminal to our strategic brand recognition philosophy. Although web
related, this division of brandmakers will also have carry over
responsibililties in the areas of point of purchase and packaging design. Long
standing clients of this firm include Coca Cola, McDonald's and Burger King.
Through reliance on deigital media, companies can reduce costs and still
maintain the high impact visuals needed to stand out in today's communication
environment. Splash media's interactive products include Interactive Press
Release, CD-ROM delivered video; Interactive Reports, Interactive Training
Solutions and Interactive Employee Communications. Additionally, Splash Media
offers clients custom Internet based delivery of all communications products,
including video, through its dedicated Internet Server. The web site for Splash
Media is www.splashnetworks.com.
ACQUISITION OPPORTUNITIES
In implementing a particular business combination transaction, the Company
may become a party to a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. It may also
sell stock, purchase stock or purchase assets of an
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existing business. After the consummation of a business combination transaction,
it is conceivable that the present Stockholders of the Company will suffer some
dilution of their ownership share in the combined companies. Brandmakers does
not intend to obtain the approval of the Stockholders prior to consummating any
acquisition other than a statutory merger that requires a Stockholder vote.
Brandmakers and its officers, directors and consultants do not intend to sell
any shares held by them in connection with a business acquisition.
It is anticipated that any securities issued in a business combination
transaction will be issued in reliance on exemptions from registration under
applicable Federal and state securities laws, including in particular Regulation
D, Rule 506. In some circumstances, however, as a negotiated element of a
business combination, the Company may agree to register such securities either
at the time the transaction is consummated or at some specified time thereafter.
The issuance of substantial additional securities and their potential sale into
any trading market that may develop may have a depressive effect on such market.
While actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so called "tax free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code of 1986, (the "Code"). To obtain
tax free treatment under the Code, it may be necessary for the owners of the
acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the stockholders of the Company would retain less than
20% of the issued and outstanding shares of the combined companies, which could
result in significant dilution in the equity of such stockholders. The Company
intends to structure any business combination in such manner as to minimize
Federal and state tax consequences to the Company and any target company.
As part of the Company's investigation of potential business opportunities,
Brandmakers and its officers, directors and consultants will ordinarily meet
personally with management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of certain information
provided, check reference of management and key personnel, and take other
reasonable investigative measures, to the extent of the Company's limited
resources and Brandmaker's limited expertise. The manner in which the Company
participates in an opportunity will depend on the nature of the opportunity, the
respective needs and desires of the Company and other parties and the relative
negotiating strength of the Company and such other management.
With respect to any business combination negotiations, Brandmakers will
ordinarily focus on the percentage of the Company which target company
stockholders would acquire in exchange for their ownership interest in the
target company. Depending upon, among other things, the target company's assets
and liabilities, the Company's stockholders will in all likelihood only own a
small minority interest in the combined companies upon completion of the
business combination transaction. Any business combination effected by the
Company can be expected to have a significant diluting effect on the percentage
of shares held by the Company's current
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Stockholders.
Upon completion of a business combination transaction, there can be no
assurance that the combined companies will have sufficient funds to undertake
any significant development, marketing and manufacturing activities.
Accordingly, the combined companies may be required to either seek additional
debt or equity financing or obtain funding from third parties, in exchange for
which the combined companies might be required to issue a substantial equity
position. There is no assurance that the combined companies will be able to
obtain additional financing on terms acceptable to the combined companies. It is
anticipated that the investigation of specific business opportunities and the
negotiation, drafting and execution of relevant agreements, disclosure documents
and other instruments will require substantial management time and attention and
substantial costs for accountants, attorneys and others. If a decision is made
not to participate in a specific business opportunity the costs incurred in the
related investigation would not be recoverable. Furthermore, even if an
agreement is reached for the participation in a specific business opportunity,
the failure to consummate that transaction may result in the loss of the Company
of the related costs incurred.
EXEMPTION FROM RULE 419
As an existing Registrant under the Exchange Act, the Company's proposed
activities are not subject to SEC Rule 419 which was adopted to strengthen the
regulation of "blind pool" companies which Congress has found to have been
common vehicles for fraud and manipulation in the penny stock market. The
Company is not subject to Rule 419 because it is not offering stock to the
public in an offering registered under the Securities Act. Accordingly,
Stockholders are not entitled to the substantive protection provided by Rule
419.
FEES TO BRANDMAKERS AND OTHERS
Expense Reimbursement. To date, no cash compensation has been paid or
accrued to Brandmakers or any of its officers, directors or consultants. Under
the Plan, Brandmakers and its officers, directors and consultants will be
entitled to reimbursement for the actual out-of-pocket expenses incurred in
connection with the preparation of the Company's quarterly and annual reports to
the Securities and Exchange Commission, the preparation and filing of the
Company's reports under the Exchange Act and the negotiation of a business
combination transaction, but they will not be entitled to any cash compensation
in connection with services rendered prior to the closing of a business
combination.
Stock Issuance. Subject to Stockholder approval, the Company intends file a
Form S-8 Registration Statement under the Securities Act to register 300,000
shares of Common Stock that will be issuable to persons designated by
Brandmakers as compensation for services rendered in connection with the
implementation of the Plan.
Debenture Certificates For the past ten months, Brandmakers has been
conducting due
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diligence on Smart Games Interactive and negotiating with the
Company's creditors. In addition, Brandmakers will have to advance funds to
attorneys, accountants and others for the preparation of reports required by the
SEC. Brandmakers has already presented a proposal to the Company's Board of
Directors and, subject to stockholder approval, this proposal has been favorably
received. In return for the expenses which Brandmakers will have to advance to
prepare for this business combination transaction and for the commitments which
it must make to settle outstanding obligations with the Company's creditors,
Brandmakers will be issued a Debenture Certificate (or Certificates). These
Debenture Certificates will be convertible into Common Stock of the Company at
the prevailing price for the stock of Smart Games Interactive when these
financial disbursements commenced, which was equal to $0.04 (4 cents) per share.
At the option of Brandmakers, these Debentures may be converted into Restricted
Common Stock of the Company. Because of this convertibility feature, the Company
will file a Form D and engage Rule 506 at the time these Debentures are issued.
RISK FACTORS
The Plan proposed by Brandmakers involves a high degree of risk.
Stockholders should carefully consider the following factors, among others,
before executing the form of Proxy enclosed herewith.
No Recent Operating History. Smart Games has liabilities. Smart Games does
not have any assets, management or ongoing operations and Smart Games has not
engaged in any business activities since September, 1997. Even if the
Brandmakers' Plan is approved by the Stockholders, Smart Games will be subject
to all of the risks inherent in the commencement of a new business enterprise
with new management. There can be no assurance that Smart Games will make the
transition smoothly with Brandmakers or that Brandmakers will be profitable.
Although Brandmakers and its officers, directors and consultants have had
experience with respect to business acquisitions, Smart Games has no recent
operating history to aid stockholders in making an informed judgment regarding
the merits of the Plan. As of the date of this Proxy Statement, and qualified by
the list of businesses above described, Smart Games has not entered into any
arrangement for, nor is it presently negotiating with respect to, an acquisition
of any operating business other than Brandmakers.
No Specific Acquisition Plans. The Brandmakers' Plan includes a proposal to
vest its officers, directors and consultants with the requisite authority to
seek out and secure opportunities with privately-held firms and to act upon such
opportunities without first acquiring stockholder approval, the so-called "blind
pool" aspect to this proposal. Brandmakers has made no specific acquisition
plans beyond the products and companies which make up its existing business and
no specific industry or area of business has been selected for investment. There
is no assurance Brandmakers and its officers, directors and consultants will
possess the experience and skills necessary to make an informed judgment about
any business or industry that may be chosen. Accordingly, the nature of the Plan
involves an extremely high degree of risk and the Common Stock is not a suitable
investment for anyone who cannot afford the loss of his entire investment.
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Intense Competition. The Company is and will continue to be an
insignificant participant in the business of seeking business opportunities. A
large number of established and well-financed entities, including venture
capital firms, have recently increased their merger and acquisition activities,
especially among companies active in high technology fields. Nearly all such
entities have significantly greater financial resources, technical expertise and
managerial capabilities than the Company and, consequently, the Company will be
at a competitive disadvantage in identifying suitable acquisition candidates and
concluding a business combination transaction.
Dependence on Part-Time Management. Smart Games has no employees as of the
date hereof. Accordingly, the Company's success will be largely dependent on the
decisions made by its Directors, all of whom are working only part-time.
Brandmakers and its officers, directors and consultants will not devote their
full time to the affairs of the Company unless and until this Plan is approved
by the Stockholders.
Control of Combination Procedure by Brandmakers. A combination of the
Company with another entity may be structured as a merger or consolidation or
involve the direct issuance of the Company's Common Stock in exchange for the
other company's stock or assets. The General Corporation Law of Delaware
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of a Delaware corporation's capital stock to approve a merger
or consolidation, except in certain situations in which no vote of the
stockholders is necessary. Since stockholder approval is not required in
connection with the issuance of stock in exchange for stock or assets and since
the Plan will specifically authorize the issuance of up to eleven million
(11,000,000) shares of Common Stock, without prior Stockholder approval, in
connection with a business combination transaction, it is anticipated that
Brandmakers will have complete control over the Company's combination policies
and procedures.
No Market Maker. The Company's securities may be quoted on NASD's
Electronic Bulletin Board which reports quotations by brokers or dealers making
a market in particular securities. The Company has no agreement with any broker
or dealer to act as a market maker for the Company's securities and there is no
assurance that Brandmakers and its advisors will be successful in obtaining a
market maker.
No Assurance of Public Market Prior to this Proxy Statement. There has been
no public market for the Common Stock and there is no assurance that a public
market will ever develop. If a trading market does in fact develop for the
Common Stock, there is a possibility that it will not be sustained and
Stockholders may have difficulty in selling their Common Stock in the future at
any price.
Possible Issuance of Additional Shares. If the Plan is approved by the
Stockholders, approximately 88% of the Company's authorized shares of Common
Stock will remain unissued. After completion of a business combination, the
Board of Directors of the combined companies will have the power to issue
additional shares of Common Stock without stockholder approval.
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Although the Company currently has no commitments, contracts or intentions to
issue any additional shares, Stockholders should be aware that any such issuance
may result in a reduction of the book value or market price, if any, of the
outstanding shares of Common Stock. If the Company issues additional shares,
such issuances will also cause a reduction in the proportionate ownership and
voting power of all other Stockholders. Further, any new issuance of shares of
Common Stock may result in a change of control of the Company. If any
acquisition resulted in a change of control, there can be no assurance as to the
experience or qualifications of those new persons involved in either the
management of the Company or of the business being acquired. In that event,
future operations of the Company and the payment of dividends, if any, would be
wholly dependent upon such persons.
No Assurance of Dividends. The Company has not paid any dividends upon its
Common Stock, and by reason of its present financial status and its contemplated
financial requirements, does not contemplate paying any dividends in the
foreseeable future.
ELECTION OF DIRECTORS
Since the Company has not convened an annual meeting since November,
1997, the present members of the Company's Board are serving terms which have
expired. It is necessary for the Company to appoint new directors. The nominees
of Brandmakers are set forth as the slate recommended by the Company. None of
the Company's present directors have indicated a desire to stand for an
additional term. Accordingly, the slate of directors proposed by Brandmakers are
also the only individuals that have indicated a desire to fill these positions.
A brief account of the business experience and education follows of these
nominees follows:
Geoff Williams, age 54, Chairman and C.E.O., founded Brandmakers in 1992.
Mr. Williams has been operating his own company since 1983, when he started G.
W. Leisure, Ltd. This company manufactured amusement machines and it was
eventually sold to Manchester Leisure Ltd., then in turn by Greyhound Electronic
Inc. At the time of this last acquisition, Mr. Williams was Chief Executive of
Greyhound UK. Mr. Williams next formed Imperial Resources Inc. to allow his
company to expand in the overseas market. In 1990, he developed "Clown A Round"
and "Beat the Pro" leisure games for Star Manufacturing, USA. Mr. Williams moved
to Atlanta from England in September of 1991 while still employed by Star
Manufacturing as head of its new products. He has been a Fellow of the Import &
Export Trade since 1987.
Robert J. Palmquist, age 67, President, is a graduate of the University of
Nebraska with a degree in Business Administration and graduate work in economics
and finance. For the past five years, he has been an executive with Brandmakers.
Before becoming associated with Brandmakers, Mr. Palmquist served as Vice
President for the national securities firm Hayden Stone, Inc. in the 1970's, as
president of Professional Management Enterprise, his own management consulting
firm in Burbank, California, and as president of Personal Investment Co., a real
estate brokerage firm. From 1986 to 1991, Mr. Palmquist served as Executive
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<PAGE> 26
Director of a charitable organization.
Joy Williams, age 41, Secretary, has been the administrator and accountant
for Brandmakers for the last five years. Prior to becoming associated with
Brandmakers, Ms. Williams was assistant to the chief financial officer of a
theatrical agent for 3 years, a partner in charge of all bookkeeping and payroll
for an Italian Restaurant and a partner in several pubs in England with duties
that included staff management and administration.
Board and Committee Activity, Structure and Compensation. The Company does
not currently have any standing committees which are presently functioning.
However, it is expected that the Board will likely designate an Executive
Committee, a Compensation Committee and an Audit Committee if the Brandmakers
Plan is approved.
STOCKHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED.
Directors will be elected by a plurality of the votes cast by the holders
of shares of Common Stock represented and voting at the Meeting, in person or by
proxy.
BRANDMAKERS ASKS ALL STOCKHOLDERS TO VOTE FOR THE ELECTION OF BRANDMAKERS'
CANDIDATES TO SERVE AS DIRECTORS UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS.
THE PROXY ENCLOSED HEREWITH WILL BE VOTED FOR EACH PROPOSAL UNLESS THE
STOCKHOLDER SPECIFICALLY VOTES AGAINST ONE OR MORE PROPOSALS OR EXPRESSLY
ABSTAINS FROM VOTING. SINCE BRANDMAKERS HAS PROPOSED THE PLAN AS AN INTEGRATED
WHOLE, BRANDMAKERS MAY ELECT TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS
OF THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
PROPOSED REVERSE SPLIT
At the date of this Proxy Statement, the Company has an aggregate of
12,648,244 shares of Common Stock issued and outstanding. Since (i) Brandmakers
believes that the optimal capital structure will vest it with control over of
95% of the Company's Common Stock upon the completion of the business
combination transaction contemplated between the Company and Brandmakers, Inc.,
and (ii) Brandmakers believes an ultimate capitalization in the 2,500,000 to
5,000,000 share range is appropriate for a small public Company and that a
capitalization of 5,000,000 to 10,000,000 shares is appropriate for a larger
Company, Brandmakers believes that it will be in the best interest of the
Company and its Stockholders to reduce the number of outstanding shares to
approximately 300,000 shares by means of a reverse split and then issue
5,400,000 restricted shares and 300,000 registered shares to Brandmakers, Inc.
as compensation for the acquisition of all of its operations. Brandmakers
believes such action will optimize the number of shares issued and outstanding
after a business combination transaction, result in a higher reported market
price for the Common Stock of the combined companies, and reduce the market
volatility of the Common Stock of the combined companies. These changes, in
turn, are
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<PAGE> 27
expected to enhance the overall perception of the Common Stock among
institutional investors and larger brokerage firms. These goals, if achieved,
are expected to enhance the Company's ability to raise additional equity
capital, and attract new market makers and institutional stockholders.
Brandmakers believes that the proposed reverse split will be beneficial to
the Company by significantly reducing the number of issued and outstanding
shares of Common Stock, reducing the expected level of price volatility, and
otherwise stabilizing the anticipated market price of the Common Stock.
Brandmakers also believes the proposed reverse split would increase the
Company's posture and relative worth of its shares in the eyes of the investment
community, although there is a risk that the market may not adjust the price of
the Company's Common Stock by the ratio of a reverse split. Brandmakers is aware
of instances where only modest price appreciation per share has resulted from a
reverse stock split. Trading in the Common Stock thereafter will be at prices
determined by supply and demand and prevailing market conditions, which will not
necessarily result in the Common Stock of the Company maintaining a market price
in proportion to the reverse split effected.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act, and as a result, the Company is subject to the periodic reporting
and other requirements of the Act. The proposed reverse split will not effect
the registration of the Common Stock under the Act, and the Company has no
present intention of terminating its registration under the Act in order to
become a "private" company.
Other than the decrease in the total shares to be outstanding, no
substantive changes are being made in the rights of Common Stock. Accordingly,
upon the Effective Date of a reverse split, each holder of record of new shares
would be entitled to one vote for each new share held at each Meeting of the
Stockholders in respect to any matter on which Stockholders have the right to
vote. Stockholders have no cumulative voting rights, nor will they have the
preemptive right to purchase any additional shares of Common Stock. Holders
would be entitled to receive, when and as declared by the Company's Board of
Directors, out of earnings and surplus legally available therefor, any dividends
payable either in cash, in property or in shares of the capital stock of the
Company.
No fractional new shares will be issued. Each holder of less than
forty-three shares will be issued one share in exchange for whatever number of
shares, be it one or any other number up to forty-three, that they previously
held. No stockholder will suffer the complete elimination of their stock due to
this reverse split. If a stockholder holds only one share, under the directive
noted herein, this shareholder will receive one share of stock in the surviving
company.
As soon as practical after the Effective Date of a reverse split, the
Company will mail letters of transmittal to each holder of record of a stock
certificate or certificates which represents issued shares of Common Stock
outstanding on the Effective Date. The letter of transmittal will contain
instructions for the surrender of such certificate or certificates to the
Company's transfer agent in
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<PAGE> 28
exchange for the certificates representing the number of whole shares of new
Common Stock into which the shares of Common Stock have been converted as a
result of a reverse split. No payment will be made or new certificate issued to
a stockholder until he has surrendered his outstanding certificates together
with the letter of transmittal to the Company's transfer agent.
STOCKHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED
The affirmative vote of the holders of a majority of all shares of Common
Stock represented and voting at the Meeting, in person or by proxy, will be
required to approve the proposed reverse split. Stockholders have no right under
Delaware law or the Certificate of Incorporation to dissent from a reverse
split.
BRANDMAKERS ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED REVERSE SPLIT.
THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN FAVOR OF THE PROPOSED REVERSE SPLIT
UNLESS THE STOCKHOLDER SPECIFICALLY VOTES AGAINST THE PROPOSAL OR EXPRESSLY
ABSTAINS FROM VOTING. SINCE BRANDMAKERS HAS PROPOSED THE PLAN AS AN INTEGRATED
WHOLE, BRANDMAKERS MAY ELECT TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS
OF THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
ISSUANCE OF COMPENSATION SHARES
As part of its Plan, Brandmakers proposes to issue a total of 300,000
shares of Common Stock ("Compensation Shares") to individuals designated by
Brandmakers as compensation for services rendered in connection with the
implementation of the Plan. The purpose of this proposed grant of Compensation
Shares is to increase the personal stake of the Grantees in the Company since
the Company's long-term business objectives will be dependent in large part upon
their efforts, expertise and abilities.
Subject to Stockholder approval, the Company intends file a Form S-8
Registration Statement to register the 300,000 Compensation Shares under the
Securities Act. Thereafter, the Compensation Shares will be issued from time to
time to individuals designated by Brandmakers who have materially participated
in the implementation of the Plan. Such shares will not, however, be issued to
finders or for services rendered in a capital raising transaction.
A Grantee will recognize income for federal tax purposes at the time the
Compensation Shares are issued. In general, the amount of ordinary income
recognized by a Grantee will equal the fair market value of the Compensation
Shares on the date of grant. Gain or loss (if any) from a disposition of
Compensation Shares after the Grantee recognizes ordinary income will generally
constitute short or long-term capital gain or loss. The Company will be entitled
to a tax deduction at the time the Grantee recognizes ordinary income on the
Compensation Shares.
STOCKHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED
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<PAGE> 29
The affirmative vote of the holders of a majority of all shares of Common
Stock represented and voting at the Meeting, in person or by proxy, will be
required to approve the proposed issuance of 300,000 Compensation Shares to
persons designated by Brandmakers.
BRANDMAKERS ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED ISSUANCE OF
300,000 COMPENSATION SHARES. THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN FAVOR
OF THE PROPOSED ISSUANCE OF COMPENSATION SHARES UNLESS THE STOCKHOLDER
SPECIFICALLY VOTES AGAINST THE PROPOSAL OR EXPRESSLY ABSTAINS FROM VOTING. SINCE
BRANDMAKERS HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE, BRANDMAKERS MAY ELECT
TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE PLAN ARE NOT APPROVED
BY THE STOCKHOLDERS.
THE REST OF THIS PAGE IS DELIBERATELY LEFT BLANK.
APPROVAL OF NAME CHANGE
AND BUSINESS COMBINATION FORMAT
In general, a business combination may be structured in the form of a
merger, consolidation, reorganization, joint venture, franchise, licensing
agreement or purchase of the stock or assets of an existing business. Certain
business combination transactions, such as a statutory merger, are complex to
negotiate and implement and require stockholder approval from both parties to
the merger. On the other hand, the simplest form of business combination is
commonly known as a reverse takeover. In a reverse takeover transaction, the
stockholders of the privately-held company exchange their private company shares
for newly issued stock of the public company. As a result of the transaction,
the privately-held company becomes a wholly-owned subsidiary of the Public
Company and due to the large number of public company shares that are
customarily issued to stockholders of the privately-held company, those
stockholders end up with a controlling interest in the public company and are
then free to appoint their own slate of officers and directors.
By using an existing public company, a privately-held concern that wants to
establish a public market for its stock can start with an existing stockholder
base. In addition, there are usually several brokers who will have an interest
in the newly reorganized company because they have stock on their books.
There are several potential problems that arise in connection with a
reverse takeover. First,
19
<PAGE> 30
there may be large blocks of stock in the hands of individuals who are eager to
sell at any price, thereby making it difficult to support the market during the
period immediately after the reorganization. Second, in addition to inheriting
the stockholders and brokers associated with the public company, the
stockholders of the private company will also inherit the business history of
the public company. Accordingly, a thorough due diligence investigation of the
public company and its principal stockholders is essential to ensure that there
are no unreported liabilities or other legal problems.
In general, reverse takeovers are viewed with some skepticism by both the
financial community and the regulatory authorities until the reorganized company
has been active for a sufficient period of time to demonstrate credible
operating performance. Until this performance is demonstrated, it can be
difficult to raise additional money for a company that went public through a
reverse takeover transaction. Therefore, the reverse takeover strategy is most
appropriate in cases where the purpose for establishing a public trading market
is not related to a perceived short-term need for additional capital. If a
privately-held company believes that substantial additional capital will be
required within the next 6 to 12 months, a reverse takeover transaction may not
be the best alternative.
In connection with a business combination transaction, it is almost certain
that management of the acquisition target will require the Company to change its
name to one selected by the Board of Directors or stockholders of the
acquisition target. Since it is also almost certain that the stockholders of the
acquisition target will possess sufficient voting power to cause the Company to
change its name after the acquisition, Brandmakers is seeking prior stockholder
authorization for a change in the Company's name that is (i) a negotiated
element of a business combination transaction of the type contemplated by the
Plan, and (ii) communicated to all Stockholders of the Company as soon as
possible following the consummation of the Plan.
STOCKHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED
Authorization of Name Change. The affirmative vote of the holders of a
majority of all shares of Common Stock represented and voting at the Meeting, in
person or by proxy, will be required to authorize an amendment to the Company's
Certificate of Incorporation to effect a Change in the Company's name that is
(i) a negotiated element of a business combination transaction of the type
contemplated by the Plan, and (ii) communicated to all Stockholders of the
Company as soon as possible following the consummation of the Plan.
BRANDMAKERS ASKS ALL STOCKHOLDERS TO APPROVE EACH OF THE FOREGOING
PROPOSALS. THE PROXY ENCLOSED HEREWITH WILL BE VOTED FOR EACH PROPOSAL UNLESS
THE STOCKHOLDER SPECIFICALLY VOTES AGAINST ONE OR MORE PROPOSAL OR EXPRESSLY
ABSTAINS FROM VOTING. SINCE BRANDMAKERS HAS PROPOSED THE PLAN AS AN INTEGRATED
WHOLE, BRANDMAKERS MAY ELECT TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS
OF THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
20
<PAGE> 31
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shareholdings of those persons who own
more than five percent of the Company's common stock as of the date of this
Report:
<TABLE>
<CAPTION>
Name and Address Shares Beneficially
Percent of Class
of Beneficial Owner Owned
<S> <C>
Michael Taglish 650,966
Robert Taglish 1,050,966
</TABLE>
The above information is taken from the last filed 10-K for December 31,
1997. Neither the Transfer Agent nor Brandmakers has information which would
indicate this information is still not the best available. Brandmakers believes
that all of these individuals has sole investment and voting power with regard
to the securities listed opposite his name.
ADDITIONAL INFORMATION
The Board, upon the recommendation and with the financial assistance of
Brandmakers, has engaged the public accounting firm of Harmon & Company, CPA,
Inc. of Columbus, Ohio to audit the Company's financial statement for the period
ending December 31, 1997. A representative from the firm of Harmon & Company,
CPA, Inc. will attend the meeting and be available to answer questions from
stockholders.
Additional materials enclosed herewith include copies of the Company's
Annual Report on Form 10K for the year ended December 31, 1997. The Form 10-K is
incorporated herein by this reference and all disclosures herein relating to the
Company and its management, business and financial condition are qualified in
their entirety by reference to the Form 10-K.
This solicitation is being conducted by Brandmakers,Inc. on behalf of Smart
Games Interactive, Inc. The cost of soliciting proxies in the accompanying form
will be advanced by
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<PAGE> 32
Brandmakers and reimbursed by the Company if, as and when a suitable business
combination transaction is effected. There is no known opposition to the
solicitation. In addition to solicitations by mail, Directors, officers and
regular employees of Brandmakers may solicit proxies by telephone, telegram, fax
or personal solicitation. Brokers, nominees, fiduciaries and other custodians
will be instructed to forward soliciting material to the beneficial owners of
shares held of record by them, and such custodians will be reimbursed for their
expenses.
The persons designated as proxies to vote shares at the Meeting intend to
exercise their judgment in voting such shares on other matters that may properly
come before the Meeting. Brandmakers does not expect that any matters other than
those referred to in this proxy statement will be presented for action at the
Meeting.
ANNUAL REPORT
The Annual Report on Form 10-KSB of the Company, including financial
statements and schedules, may be obtained by any person without charge on
written request to: Harmon & Company, CPA, Inc., at 6089 Frantz Road, Suite 103,
Dublin, Ohio 43017.
By Order of the Board of Directors
Nicholas J. Chuma
Secretary
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<PAGE> 33
STOCK PURCHASE AGREEMENT
PREFACE : THE ACQUISITION BY ONE CORPORATION, EXCHANGING NINETY PERCENT OF
ITS VOTING STOCK FOR SUBSTANTIALLY ALL OF THE PROPERTIES OF ANOTHER CORPORATION,
IS HEREIN STRUCTURED AS A TRANSACTION IN WHICH NO GAIN OR LOSS SHALL BE
RECOGNIZED FOR INCOME TAX PURPOSES PURSUANT TO SECTIONS 355 AND 368 OF THE
INTERNAL REVENUE SERVICE CODE OF 1986, AS AMENDED.
THIS STOCK PURCHASE AGREEMENT ["Agreement"], executed on the date (or
dates) set forth below, by and between:
SMART GAMES INTERACTIVE, INC. ["Smart Games"] a Delaware
Corporation, and acting through its duly authorized officer, Nicholas
Chuma. Smart Games Corporation is engaged by this Agreement in two
separate and distinct capacities. Smart Games is both the "Company" and
the "Seller". Accordingly, Smart Games shall hereinafter be referred to
as the "Company" if the specific passage engages Smart Games in its
capacity as the Company; and as the "Seller" if the passage engages
Smart Games in its capacity as the Seller of stock; and as "Smart
Games" if the passage engages both capacities, referring to the Company
and the Seller;
- and -
Brandmakers, Inc., a Georgia Corporation with its principal place
of business located at 1325 Suite C, Capital Circle N.W.,
Lawrenceville, Georgia 30004, and acting through its duly authorized
officer Bob Palmquist, and hereinafter referred to as the Purchaser;
Declare as their mutual intent and purpose as follows.
WHEREAS, Smart Games constitutes a dormant company with no staff, no
functioning business and no revenues; and
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<PAGE> 34
WHEREAS, shareholders of Smart Games approved a Reorganization, to be
effected pursuant to Section 368(a) of the Internal Revenue Code and consisting
of the acceptance of a 42.16 to one reverse split by existing shareholders,
simultaneous with the issuance of a ninety-five percent block of stock
surrendered to a qualified Purchaser, and further conditioned upon the Purchaser
of this ninety-five percent block of stock transferring their business
properties and management into Smart Games in a noncash transaction, thereby
imbuing Smart Games with a new business purpose; and
WHEREAS, by virtue of a mandate returned in proxy solicitation from the
stockholders, the Seller is fully vested with authority to sell, convey and
confer good title for ninety-five percent of the Company's existing voting
securities; and
WHEREAS, Purchaser hereby affirms its avowed purpose to purchase said
shares in a private placement transaction and pursuant to a section 368(a)
Reorganization;
WHEREAS, this Stock Purchase Agreement is being executed concomitantly with
an Acquisition / Merger Agreement, the terms of which address the administration
of the two corporate parties, and the terms of said Acquisition / Merger
Agreement constitute an integral part of the consideration supporting this Stock
Purchase Agreement such that without said Acquisition / Merger Agreement, this
Stock Purchase Agreement is rendered a nullity; and
NOW, THEREFORE, in consideration for the foregoing covenants and with both
Parties intended to be legally bound, Smart Games hereby agrees to sell
ninety-five percent of its outstanding voting securities in blocks more fully
described in Exhibit A attached hereto, and Purchaser agrees to purchase said
securities and conduct its business from this point hence under the corporate
aegis of Smart Games, pursuant to the following terms and conditions.
Section 1 - DEFINITION OF TERMS.
(a) Reorganization refers to the acquisition by one corporation, in
exchange for all or a controlling part of its voting stock, for substantially
all of the properties of another corporation, such that the transaction
qualifies, pursuant to sections 355 and 368 of the Internal Revenue Service Code
of 1986, as amended, as a transaction in
- 2 -
<PAGE> 35
which no gain or loss shall be recognized and, therefore, need not be includable
by any shareholder as income upon receipt of stock at the transaction's
conclusion.
(b) Closing shall refer to a formal meeting between Smart Games and the
Purchaser convened to perform the following functions: to execute all agreements
necessary to effect the above described Reorganization, to transfer all
corporate records, and to sign all documentation required by the SEC for the
Company's maintenance of its Registration. It is further understood that unless
and until all of the above referenced functions have been performed, a Closing,
as defined herein, has not occurred and, if any documents or orders have been
executed or issued prior to an aborted Closing, all such documents and orders
shall be rescinded and all such acts taken shall be declared null and void.
(c) Shares shall refer to the Common Stock sold pursuant to this Agreement.
Section 2 - SALE AND TRANSFER OF THE COMPANY'S SHARES
(a) Subject to the terms and conditions hereof, at the Closing, and
subsequent to the signing of this Agreement, the Seller shall do the following.
(1) Sign and date a previously reviewed and approved Corporate Resolution
which orders a 42.16 to one reverse split for all existing shareholders; the
issuance of the shares which are surrendered by existing shareholders to the
Purchaser; the specific consideration which is to be exchanged by the Purchaser
for said shares; that said shares are Common Stock with $.001 par value and full
voting privileges; and the name of the corporate officer authorized by the
corporation to act on behalf of the Company and notify the stock transfer agent
to effect this reverse split and then issue the securities to Purchaser which
have just been surrendered.
(2) Sign and date a previously prepared and approved letter of instruction
to the Company's stock transfer agent, American Stock Transfer & Trust Co.
["American"], indicating the recipient (or recipients) of the stock issued to
the Purchaser, along with all of the other information required for issuance of
stock.
(3) Prepare for Purchaser's signature, a previously reviewed and approved
investment letter in which each recipient of the Purchaser's stock acknowledges
the restrictive nature of the securities to be received.
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<PAGE> 36
(4) (a) Sign and date a previously prepared and approved Legal Opinion from
the Company's counsel which addresses the legality of the shares to be issued
and cites the SEC exemption which is being relied upon in lieu of registration.
Said Legal Opinion will be made in favor of American and shall further outline
what steps the stock transfer agent should take, in addition to affixing a
restrictive legend to said shares (e.g. placement of stop transfer instructions
upon the Company's books), to further insure that the securities issued are
restricted.
(b) When Seller and Seller's counsel have signed and dated the
documentation described in subparagraphs (1),(2) and (4) above and, conditioned
upon and subject to the Purchaser's signature upon the documentation described
in subparagraph (3), the Seller has transferred, conveyed and delivered to
Purchaser the shares which are the subject of this Agreement.
(c) By signing the documentation stipulated in subparagraph (3) of
paragraph (a) above, the Purchaser has formally accepted the transfer,
conveyance and delivery of the aforementioned stock. The shares which are the
subject of this Agreement will be deemed transferred and fully vested in the
Purchaser when all the documents set forth in Section 7(a) shall be signed and
delivered as required.
(5) Deliver a list of shareholders, including addresses and the amount of
shares held by each shareholder. Said list will reflect shares held in street
name for those shareholders that have opted to deposit their shares with a
licensed broker-dealer.
(6) Deliver documentary proof of stockholders' consent to implement the
42.16-for-one reverse split and approve the Purchaser's purchase of 95% of said
shares. A letter from American advising of the tabulation of shares shall be
considered sufficient proof under this paragraph.
(7) Deliver a current Certificate of Good Standing from the Secretary of
State of Delaware for Smart Games.
Section 3 - CONSIDERATION TO SUPPORT TRANSFER OF SHARES
(a) Purchaser agrees to merge an established, operating private company,
into Smart Games, pursuant to an Acquisition / Merger Agreement to be signed
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<PAGE> 37
concomitantly with this Stock Purchase Agreement. In said Acquisition / Merger
Agreement, Purchaser shall cause Brandmakers, Inc. to transfer all of its
assets, subject to all liabilities and obligations owed by Brandmakers, Inc.,
into Smart Games. All liabilities and obligations of Brandmakers, Inc. shall be
assumed by Smart Games. In return for the assumption of these liabilities and
obligations, Brandmakers, Inc. shall cancel all of its capital stock and its
present charter in the State of Georgia, and thereafter, Brandmakers, Inc. shall
operate solely under the charter of Smart Games in the State of Delaware.
(b) The shareholders of Brandmakers, Inc. shall certify through a sworn and
notarized statement of its corporate secretary, that at a duly convened
stockholders meeting, and with a sufficient plurality to comply with any
applicable statute in force and governing Brandmakers, Inc. at the time of said
meeting, that sufficient votes were cast by the stockholders to transfer the
assets of Brandmakers, Inc. into Smart Games, subject to all liabilities and
obligations owed by Brandmakers, Inc., in return for the transfer of a
ninety-five percent block of outstanding stock in Smart Games. Said Secretary's
Certificate shall further state, that in consideration for the assumption by
Smart Games of all liabilities and obligations owed by Brandmakers, Inc., the
stockholders of Brandmakers, Inc. have further agreed to cancel all of its stock
and, then, voluntarily dissolve the corporate charter. Said Secretary's
Certificate shall be attached to this Stock Transfer Agreement as Exhibit B.
(c) Purchaser further undertakes to effect the cancellation of the capital
stock and charter of Brandmakers, Inc. by filing with the Secretary of State of
Georgia, the appropriate petition and attachments necessary for dissolving the
charter of Brandmakers, Inc. Proof of said filing shall be lodged in the
Company's Corporate Minute Book as soon as practical following this Closing.
Section 4 - REPRESENTATIONS AND WARRANTIES BY THE COMPANY
(a) Organization. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company is operating under the same corporate charter in effect when the
Company's Registration Statement was approved by the SEC. The Company has all
requisite corporate power and authority to own, lease and operate properties and
to conduct any lawful business.
- 5 -
<PAGE> 38
(b) Authorized Capitalization. The authorized capitalization of the Company
consists of fifty-five million [55,000,000] shares. Of said shares, 50,000,000
authorized shares are designated as Common Stock with $0.001 par value per
share; and five million 5,000,000 authorized shares are designated preferred
stock with a par value of $0.01 per share. There are 12,648,244 shares of
Common Stock issued and outstanding, prior to the execution of this Stock
Purchase Agreement. Subsequent to this Stock Purchase Agreement and the
successful consumation of a Closing for the Reorganization of Smart Games, these
shareholders will hold 300,000 shares and the Purchaser, through recipients and
in blocks of stocks reflected in Exhibit A attached hereto, shall hold 5,700,000
shares of Common Stock. The total issued and outstanding stock of the Company
shall become 6,000,000 shares.
(c) Description of Securities. The Shares of Common Stock have been duly
authorized, validly issued and are fully paid and nonassessable with no personal
liability attaching to the ownership thereof. This Offer of stock is made
pursuant to a Private Offering Exemption. The stock hereby issued to Purchaser
is not Registered with the SEC and, as a consequence, each certificate will be
burdened with a restrictive legend.
(d) Stock Transfer Agent. The Company has appointed American to serve as its
stock transfer agent. American served as the Company's stock transfer agent
while the stock was actively traded on NASDAQ. To the extent practical, American
has restored the Company's previous stock transfer records.
(e) Authority. Management of Smart Games has been duly empowered by the
stockholders to execute this Agreement and to perform any and all acts necessary
to consummate the Reorganization and restructuring of Smart Games.
(f) Financial Statements. The Company's financial statements are complete
and were prepared in accordance with generally accepted accounting principles
applied on a consistent basis with prior periods. These statements accurately
reflect the financial position of the Company as of the dates indicated for said
audits.
(g) No Undisclosed Liabilities. Except as set forth in the Company
Financial Statements previously delivered to Purchaser, the Company is not aware
of any
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<PAGE> 39
liabilities for which the Company is liable or will become liable in the future.
(h) Books and Records. The books and records of the Company are complete
and correct. Said books have been maintained in accordance with good business
practices.
(j) Power of Attorney. The Company has no powers of attorney or similar
authorizations outstanding as of this time.
(k) No Litigation. There are no actions, suits, claims, complaints or
proceedings pending or threatened against the Company, and there are no facts
which would provide a valid basis for any such action, suit or proceeding. There
are no orders, judgments or decrees of any governmental authority outstanding
which specifically apply to the Company or to its officers or directors.
(l) Full Disclosure. All statements made in this Agreement and in any other
written document delivered by or on behalf of the Company is true and correct in
all material respects and does not omit any material fact necessary to make the
statements contained therein misleading in light of the circumstances in which
they were made.
Section 5 - REPRESENTATIONS AND WARRANTIES BY SELLER / DISCLAIMER
(a) Title to the Shares. Seller warrants that it has the authority to
convey good title for the Shares surrendered by existing shareholders and
possesses full lawful authority to transfer said Shares to the Purchaser. All
said Shares which are being transferred are free and clear of any liens,
encumbrances, pledges, charges and assessments of any kind or type or of any
nature whatsoever. No person has any preemptive rights or rights of first
refusal with respect to any of these Shares. There exists no voting trust,
voting agreement, or outstanding proxy with respect to any of these Shares.
(b) Investment Intent. The subject shares have not been the subject of a
public offer and are being sold to Purchaser for investment purposes only, and
not with a view to make a sale or distribution of any part thereof.
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<PAGE> 40
(c) Broker's and Finders'Fees. Seller has not incurred and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, the
Acquisition / Merger Agreement or any other transaction contemplated hereby.
(d) Disclaimer. Seller makes no representations or warranties whatsoever as
to a market for its stock or that a market for its stock may develop in the
future.
Section 6 - REPRESENTATIONS AND WARRANTIES BY PURCHASER
(a) Organization. The Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Georgia. The
Purchaser has all requisite corporate power to enter into this Agreement and
consummate this transaction.
(b) Investment Intent. Purchaser is acquiring these Shares for investment
purposes and not with a view to the sale or distribution of any part thereof.
(c) Full Disclosure. All statements made by the Purchaser in this Agreement
and in any other written document delivered by or on behalf of the Purchaser to
Smart Games or to its counsel is true and correct in all material respects and
does not omit any material fact necessary to make the statements contained
therein misleading in light of the circumstances in which they were made.
(e) Compliance with Laws. The Company is not in violation of any federal,
state or local law and the Company has not received any actual or threatened
complaint, citation or notice of violation or notice of the commencement of an
investigation into any alleged violation of law from any governmental authority.
(f) Compliance with SEC Regulations. Purchaser warrants that he is aware of
the responsibilities which attach when a company becomes public. Purchaser
further warrants that he is prepared to comply with all SEC rules and
regulations, beginning with an 8 - K Current Report which shall be due when this
Closing is fully consummated. Purchaser further undertakes to attach a copy of
this Stock Purchase Agreement, the Acquisition / Merger Agreement, and other
documents deemed pertinent by Purchaser's counsel, to said filing as Exhibits to
Form 8 - K.
(g) Stockholder Relations. Purchaser warrants that he is cognizant of the
responsibilities owed by public companies to stockholders, and Purchaser further
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<PAGE> 41
warrants that he will maintain proper stockholder relations, including convening
an annual meeting and mailing an annual report to all shareholders of record.
(i) Reasonable Review. Purchaser represents that this Stock Purchase
Agreement, the accompanying Acquisition / Merger Agreement, the Certificate of
the Secretary Concerning stockholder approval of the merger for the Delaware
Secretary of State, the Amendment to the Company's Registration Statement for
the SEC, the instructions for the stock transfer agent, all Minutes of the Board
of Directors meetings, the Definitive Proxy Statements mailed to stockholders of
record, the tabulation of results and the documentation of stockholder consents,
and all SEC filings from 1989 to the present time have been presented to
Purchaser's counsel preparatory to this Closing and, where applicable, said
documents were presented in draft form with opposing counsel's views solicited
for the final version. Further, Purchaser confirms that this Closing was not
convened until Purchaser's counsel evidenced his acceptance and / or his written
approval to the effect that all documents to be executed herein were
satisfactory.
(j) No Stock Benefits. Purchaser warrants that the entire ninety-five
percent block of stock which is being conveyed pursuant to this Agreement, will
be received by recipients chosen by the Purchaser, and among said recipients, no
existing officer or director of Smart Games is included.
Section 7 - DOCUMENTS TO BE EXECUTED AND / OR DELIVERED
(a) The following documents form an integral part of this Agreement and
constitute conditions precedent for ownership of the Shares to vest in the
Purchaser. If any of these documents are not signed or delivered, the failure to
do so shall give rise to a cause of action by the other for nullification:
(1) The Corporate Resolution of Smart Games detailed in Section 2,
paragraph (a)(1) above;
(2) The letter of instruction to the Company's stock transfer agent,
American Stock Transfer & Trust Co. ["American"], conferring stock to the
recipients set forth in Exhibit A attached hereto;
(3) An investment letter, to be signed by the Purchaser, acknowledging the
restrictive nature of the securities to be conveyed;
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<PAGE> 42
(4) The Legal Opinion from the Company's counsel which addresses the
legality of the Shares to be issued and cites the SEC exemption which is being
relied upon in lieu of registration.
Section 8 - MISCELLANEOUS
(a) Applicable Law. This Agreement shall be construed under the commercial
laws enacted by the Delaware Legislature, as interpreted by the Delaware Courts.
(b) Attachments. This Agreement incorporates by reference two attachments,
an Exhibit A, which sets forth the list of recipients for the Purchaser's stock,
and Exhibit B, which contains a Secretary's Certificate for the Company and a
Secretary's Certificate for the Purchaser's business. Unless said Exhibits are
attached to this Agreement and initialed by both parties, this Agreement is not
complete.
IN WITNESS WHEREOF, the Parties attest to their approval of the above terms
and conditions and affix their signatures below, as evidence thereof.
SMART GAMES BRANDMAKERS, INC.
- ----------------------------- ----------------------------
By Nicholas Chuma / Secretary By Bob Palmquist
Dated : ___________ Dated : _____________
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<PAGE> 43
LETTER OF NON-DISTRIBUTIVE INTENT
Ref. : Smart Games Interactive, Inc. / Robert Palmquist
Common Stock / Certificate #'s
Dear Mr. Palmquist;
In connection with the acquisition of the securities referenced above, you
represent that you are making this purchase without a view to the distribution
of said securities.
Mr. Palmquist accepts the condition that before any transfer occurs in
connection with the resale of the securities which are the subject of this
acquisition, written approval must first be obtained from counsel for the
issuer. Issuer represents that such approval shall not be unreasonably withheld.
The basis of consideration shall be compliance with the requirements of the
Securities Act of 1933 by reason of the exemption under Section 4(1) of the
Securities Act of 1933 and Rule 144 promulgated thereunder.
It is understood that upon issuance of any stock certificate in accordance
with this letter, the issuer will have placed thereupon a legend setting forth
the restricted character of these securities and further indicating that these
securities have not been registered under the Securities Act of 1933, and that
they may not be offered, sold, transferred, pledged or hypothecated without the
prior written approval of Issuer's counsel concerning the certificate in
question.
It is further understood that the Issuer's stock transfer agent has been
ordered to effectuate transfers of this certificate in accordance with the above
instructions.
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<PAGE> 44
All of the foregoing correctly express my intentions and I fully understand
the representations made herein.
By Robert Palmquist
Social Sec. # ______________
Subscribed and sworn to before me
this ___ day of ___________, 1999
- --------------------------------
EXHIBIT A
Existing Shares 300,000
Compensatory Shares 300,000
240,000 shares for Brandmakers, Inc.
20,000 shares each for Joy Williams,
Geoff Williams and Bob Palmquist
Division Shares - Restricted 350,000
100,000 shares Russ Ford
100,000 shares Sal Veni
50,000 shares Christopher Duxler
50,000 shares Richard Sutherland
50,000 shares Tim Washburn
Employees (to be determined) - Restricted 22,000
Bob Palmquist 716,000
Joy Williams 716,000
Geoff Williams 716,000
Total 3,120,000
Debentures
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<PAGE> 45
$115,200 equals 2,880,000 Restricted Shares
Convertible at $0.04 per share [each $1,000 Debenture equals 25,000 shares]
Bob Palmquist $36,000 equals 900,000 shares
Joy Williams $36,000 equals 900,000 shares
Geoff Williams $36,000 equals 900,000 shares
Norman Sirak $7,200 equals 180,000 shares
Total 2,880,000
Total Capitalization 6,000,000 shares
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<PAGE> 46
PROXY - SMART GAMES INTERACTIVE
Annual Meeting of Shareholders - October 9, 1997
The undersigned hereby appoints Nicholas J. Chuma, and grants him with full
power to appoint his substitute, attorneys and proxies to represent the
shareholder and to vote and act with respect to all shares that the shareholder
would be entitled to vote on all matters which come before the annual meeting of
shareholders of Smart Games Interactive referred to above and at any adjournment
of that meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF THIS PROXY IS
PROPERLY EXECUTED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATIONS ARE MADE, THE SHARES WILL BE VOTED FOR EACH OF
THE PROPOSALS ON THIS PROXY. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTER, INCLUDING
SUBSTITUTION OF DIRECTOR NOMINEES, WHICH MAY COME BEFORE THE MEETING.
(Continued and to be signed on the reverse side.)
<PAGE> 47
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD Nomination: Geoff Williams,
1. Election of [ ] [ ] Robert J. Palmquist, FOR AGAINST ABSTAIN
Directors Jay Williams 2. Proposed and Reverse [ ] [ ] [ ]
Split
FOR AGAINST ABSTAIN
3. Issuance of [ ] [ ] [ ]
Compensation Shares
FOR AGAINST ABSTAIN
4. Approval of Name [ ] [ ] [ ]
Change and Business
Combination Format
SIGNATURE(S) ____________________________________________ DATE ________ , 1999
NOTE: Please sign exactly as your name appears on this proxy. If signed for
estates, trust, or corporations, title or capacity should be stated.
If shares are held jointly, each holder should sign.
</TABLE>
