SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED 30 SEPTEMBER 1999
COMMISSION FILE NUMBER 0 - 23672
SMART GAMES INTERACTIVE, INC.
(Name of small business issuer in its charter)
DELAWARE 34-1692323
(state or other jurisdiction of (I.R.S. Employer
incorporation of organization) identification No.)
1612 North Osceola
Clearwater, Florida 33755
(address of principal executive office) (Zip Code)
Issuer's Telephone Number (727) 443-3434
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0002 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
On 10 April 2000, the issuer had a total of 27,648,244 shares of common
stock, $0.0002 par value, issued and outstanding.
Transitional Small Business Disclosure Format (Check One):
Yes [_] No [X]
<PAGE>
Smart Games Interactive, Inc.
Form 10 QSB
For the Quarterly Period Ended 30 September 1999
Part I Financial Information
Item 1 Financial Statements
Balance Sheets 30 September 1999 and 31 December 1998 3
Statements of Operation for the Three and Nine-Month
Periods Ended 30 September 1999 and 1998 4
Statements of Cash Flow for the Nine-Month
Periods Ended 30 September 1999 and 1998 5
Notes to Financial Statements 6
Item 2 Plan of Operations 7
Part II Other Information 7
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Default upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Reports of Form 8 - K
Signatures 8
<PAGE>
Smart Games Interactive, Inc.
Balance Sheets
September 30, 1999 and December 31,1998
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
Unaudited Audited
<S> <C> <C>
Assets
Current Assets ................................................................. $ 0 $ 0
---------- ----------
Property, Plant & Equipment, less Accumulated
Depreciation and Amortization
Property & Equipment ........................................................ 29,170 29,170
Less Accumulated Depreciation and Amortization .............................. -26,841 -23,715
---------- ----------
Total Property, Plant & Equipment ............................... 2,329 5,455
---------- ----------
Total Assets .......................................... $ 2,329 $ 5,455
---------- ----------
Liabilities and Shareholder's Equity (Deficit)
Current Liabilities
Note Payable ................................................................ $ 14,000 $ 14,000
Accounts Payable ............................................................ 577,252 151,604
Other Accrued Expenses ...................................................... 45,428 14,600
---------- ----------
Total Current Liabilities ................................... 636,680 180,204
---------- ----------
Shareholders' Equity (Deficit)
Preferred Stock, at par value ($.0002), 5,000,000 shares authorized,
- 0 - shares issued and outstanding ......................................... 0 0
Common Stock, at par value ($.0002), 50,000,000 shares authorized, 12,648,244
shares issued and outstanding in 1999 and 1998, respectively ................ 2,530 2,530
Paid-in Capital ............................................................. 6,262,943 6,262,943
Accumulated Deficit ......................................................... -6,899,824 -6,440,222
---------- ----------
Total Shareholders' Equity (Deficit) .............................. -634,351 -174,749
---------- ----------
Total Liabilities & Shareholders' Equity (Deficit) ....................... $ 2,329 $ 5,455
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
Smart Games Interactive, Inc.
Statements of Operations and Accumulated Deficit
For the periods indicated
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
September 30, September 30,
1999 1998 1999 1998
Unaudited Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C>
Net Sales ............................................... $ 0 $ 0 $ 0 $ 44,468
Cost of Goods Sold ...................................... 0 0 0 23,721
------------ ------------ ------------ ------------
Gross Margin .......................... 0 0 0 20,747
------------ ------------ ------------ ------------
Selling, General and Administrative Costs ............... 3,842 3,832 5,926 57,398
------------ ------------ ------------ ------------
Loss from Operations ...................... -3,842 -3,832 -5,926 -36,651
Other Expenses .......................................... 0 0 300 0
------------ ------------ ------------ ------------
Loss before Extraordinary Items ..................... -3,842 -3,832 -6,226 -36,651
Extraordinary Items ..................................... -453,376 0 -453,376 0
------------ ------------ ------------ ------------
Net Income (Loss) ....................... ($ 457,218) ($ 3,832) ($ 459,602) ($ 36,651)
------------ ------------ ------------ ------------
Accumulated Deficit, beginning of the period ............ 6,442,606 -6,881,628 -6,440,222 -6,881,628
------------ ------------ ------------ ------------
Accumulated Deficit, end of the period .................. $ 6,899,824 ($ 6,885,460) $ 6,899,824 ($ 6,918,279)
------------ ------------ ------------ ------------
Net Income (Loss) per common share before
extraordinary item ...................................... ($ 0.00) ($ 0.00) ($ 0.00) ($ 0.00)
------------ ------------ ------------ ------------
Net Income (Loss) per common share ...................... ($ 0.04) ($ 0.00) ($ 0.04) ($ 0.00)
------------ ------------ ------------ ------------
Shares used in calculation of net income (loss) per share 12,648,244 12,648,244 12,648,244 12,648,244
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
Smart Games Interactive, Inc.
Statements of Cash Flows
For the periods indicated
<TABLE>
<CAPTION>
Nine month period ended
September 30,
1999 1998
Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Loss before extraordinary activities ............. ($ 6,226) ($ 36,651)
Extraordinary item ............................... -453,376 0
--------- ---------
Net income (loss) ................................ -459,602 -36,651
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation and amortization ................... 3,126 6,597
Cash provided (used) by the change in:
Accounts receivable ........................... 0 1,925
Inventories ................................... 0 21,301
Prepaid expenses and other assets ............. 0 -6,500
Accounts payable .............................. 425,648 0
Accrued expenses .............................. 30,828 10,750
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES ............... $ 0 ($ 2,578)
--------- ---------
NET INCREASE (DECREASE) IN CASH ..................... $ 0 ($ 2,578)
--------- ---------
Cash and Cash equivalents, beginning of year ........ $ 0 $ 2,578
--------- ---------
Cash and Cash equivalents, end of year .............. $ 0 $ 0
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
Smart Games Interactive, Inc.
Notes to Financial Statements
September 30, 1999
Unaudited
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The statements are unaudited but,
in the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September
30, 1999 are not necessarily indicative of the results that may be expected for
the year ending December 31,1999. For further information, refer to the
financial statements and footnotes thereto for the year ended December 31, 1998
included in the registrant's Annual Report on Form 10-KSB.
The Company's financial statements have been prepared on a going
concern basis and do not include certain adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
Note 2 - Net Loss Per Common Share
Net loss per common share is computed using the weighted average number
of shares of common stock and common equivalent shares outstanding.
Note 3 - Cessation of Operations
The Company significantly reduced the level of operations during the
second quarter of 1997 and subsequently decided to terminate all ongoing
business operations in the third quarter of 1997. At December 31, 1998, the
Company had no material assets and substantial unpaid liabilities. Therefore,
the Company was insolvent during the entire nine-month period ended September
30, 1999. The Company did not generate any revenues during the nine-month period
ended September 30, 1999. The Company had no backlog of orders for goods or
services and did not make any research and development expenditures during the
year ended nine-month period ended September 30, 1999.
Note 4 - Abandonment of Proposed Merger
During the nine-month period ended September 30, 1999, the Company's
only operations consisted of investigation and negotiation of a potential
business combination with Brandmakers, Inc. While the Company and Brandmakers
made considerable progress in negotiating the terms of a potential business
combination and filing a preliminary proxy statement for the transaction, the
transaction was ultimately abandoned by Brandmakers in the third quarter of 1999
when it concluded a business combination with another publicly-held company.
<PAGE>
Smart Games Interactive, Inc. Notes to Financial Statements
(Continued
Note 5 - Reversal of Extraordinary Item
In anticipation of the merger with Brandmakers, the Company negotiated
settlements of substantially all outstanding trade payables owed by the Company.
In connection therewith, the Company agreed to pay cash of approximately
$155,000 in order to settle indebtedness of approximately $577,000. As a result
of these settlement agreements, the Company recorded an extraordinary gain of
$474,426 in the fourth quarter of 1998. Prior to the abandonment of the proposed
merger, Brandmakers actually paid $6,000 in full and final settlement of
approximately $19,000 in claims against the Company.
Since the Brandmakers transaction was abandoned in the third quarter of
1999 and Company does not have sufficient resources to honor the previously
negotiated settlement agreements, the Company has increased its accounts payable
by $425,648 and its other accrued expenses by $27,728 in the current quarter,
and recorded an extraordinary loss of $453,376 in the quarter ended September
30, 1999.
Note 6 - Financial Condition, Liquidity and Plan of Operations
During the year ended December 31, 1998, the Company liquidated
substantially all its inventories and other operating assets and used the
proceeds therefrom to reduce its outstanding liabilities. At December 31, 1998,
the Company had no material assets and substantial unpaid liabilities.
Therefore, the Company could be considered insolvent during the entire nine
month period ended September 30, 1999. The Company did not generate any
revenues, had no backlog of orders for goods or services and did not make any
research and development expenditures during the nine months ended September 30,
1999.
As previously indicated , the Company has liabilities that are
significantly greater than its total assets, and has had no active management or
ongoing operations since September 1997.
During the nine month period ended September 30, 1999, the Company's
only operations consisted of investigation and negotiation of a potential
business combination with Brandmakers, Inc. While the Company and Brandmakers
made considerable progress in negotiating the terms of a potential business
combination and filing a preliminary proxy statement for the transaction, the
transaction was ultimately abandoned by Brandmakers in the third quarter of 1999
when it (Brandmakers) concluded a business combination with another
publicly-held company.
The Company's Board of Directors has resolved to continue to
investigate possible opportunities to establish a business for the Company.
Criteria used in evaluating future opportunities will include, but not be
limited to, establishing an asset base for the Company and confirmation of the
availability of cash flow from operations to enhance viability and establish
value for the Company's shareholders. The Company anticipates future business
combinations may take the form of a merger, assets acquisition or stock
acquisition. However, there is no assurance that such a transaction will ever be
consummated.
<PAGE>
Part 2 Other Information
Item 1 Legal Proceedings
None
Item 2 Changes in Securites
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
On 17th day of April 2000, the Company filed a Current Report on Form 8-K
which discloses a change in control of the Issuer and discusses the Plan of
.Operations to be implemented by the new control group. Such Current Report on
Form 8-K is incorporated herein by this reference.
Item 6 Reports on Form 8-K
None duirng the reporting quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on
Form 10-QSB to be signed on its behalf by the undersigned, thereunto duly
authorized.
17th day of April 2000
Smart Games Interactive, Inc.
By: /s/
----------------------------------
Sally A. Fonner, Sole Director and
Chief Executive Officer
