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UNITED STATES
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: Commission File Number
March 31, 1999 0-23672
SMART GAMES INTERACTIVE, INC
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(Exact name of Small Business Issuer as specified in its charter)
Delaware 34-1692323
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(State of Incorporation) (IRS Employer Identification Number)
2075 Case Parkway South
Twinsburg, OH 44087
(216) 963-0660
(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.0002 par value
Common Stock Purchase Warrants
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 12,648,244 SHARES OF COMMON STOCK,
$.0002 PAR VALUE, AT FEBRUARY 9, 1999.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
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Traditional Small Business Disclosure Format (Check One):
Yes No X
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SMART GAMES INTERACTIVE, INC.
Notes to Financial Statements
March 31, 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-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the financial statements
and footnotes thereto for the year ended December 31, 1997 included in the
registrant's Annual Report on Form 1O-KSB filed on February 11, 1999.
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. EXTRAORINARY ITEM
The Company significantly reduced the level of operations during the second
quarter of 1997 and accordingly proceeded to close down all operations of the
Company in the last half of 1997 which has continued through March 31, 1999.
Accordingly, the Company terminated all employees, including the president and
chief executive officer, John D. Lipps. Due to this termination, all patents
assigned by Mr. Lipps to the Company reverted back to Mr. Lipps.
In addition, the Company submitted to the Board of Directors a draft of an
Acquisition and Merger Agreement whereby in a reverse merger, the Company would
acquire Brandmakers, Inc. a Georgia corporation. Under the terms of the
agreements Brandmakers, Inc. would be merged into the Company. The Smart Games
Board of Directors approved the merger in February 1999.
Prior to and in anticipation of the merger, the principals of Brandmakers Inc.
have, on the Company's behalf, continued the program whereby it negotiated
settlements of outstanding trade payable indebtedness owed by the Company.
Brandmakers has executed notes payable and/or agreed to issue cash of
approximately $155,000 in order to settle indebtedness of approximately
$577,000. Because it is more likely than not that these payables will be paid by
Brandmakers Inc. a third party, the Company reduced its accounts payable and
other accrued expenses by approximately $476,000 and recorded an extraordinary
after tax gain of approximately $476,000 in 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,1998 COMPARD TO THE THREE MONTHS ENDED MARCH
31,1999.
The Company has ceased operations, terminated all employees and is not likely to
restart operations with its former business.
FINANCIAL CONDITION AND LIQUIDITY
Cash flow used by operations was zero for the three month period ended March 31,
1999 compared to cash flow used by operations of $12,557 for the three month
period ended March 31, 1998.
During the third quarter of 1997, the Company terminated all employees,
including the president and chief executive officer, Mr. John D. Lipps. Due to
this termination, all patents assigned by Mr. Lipps to the Company reverted back
to Mr. Lipps. Since the Company has ceased operations it will not operate as a
going concern with its former business. As a consequence, the Company has
written incurred unusual, non-recurring charges related to reducing the value of
inventories and certain assets to net realizable value.
During the third quarter of 1997, the Company's largest creditor received a
judgement lien against all the Company's assets, excluding certain intangible
assets.
The Company will not be able to generate or raise sufficient funds to meet
minimum liquidity needs in 1999 or future years and repay any liabilities of the
Company.
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PART 2. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
The Company has ceased operations, terminated all employees
and is not likely to restart operations with its former
business. The Smart Games Board of Directors approved a merger
with Brandmakers Inc.
ITEM 6 REPORTS OF FORM 8-K
On February 1999 the Board of Directors approved a merger with
Brandmakers Inc. The Board further authorized a proxy for
submission to all shareowners after a final review by the
Securities and Exchange Commission.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized:
SMART GAMES INTERACTIVE. INC.
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Date: February 11, 1999 /s/ Nicholas J. Chuma
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Nicholas J. Chuma, Director
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SMART GAMES INTERACTIVE, INC.
Balance Sheets
December 31, 1998 and March 31, 1999
Audited Unaudited
12/31/98 3/31/99
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ASSETS
Current Assets
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Cash $ 0 $ 0
Accounts Receivable 0 0
Inventory 0 0
Prepaid Expenses and Other Current Assets 0 0
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Total Current Assets 0 0
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Property, Plant & Equipment, less Accumulated
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Depreciation and Amortization
Furniture & Fixtures 29,170 29,170
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29,170 29,170
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Less Accumulated Depreciation and Amortization (23,715) (24,757)
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Total Property, Plant & Equipment 5,455 4,413
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Other Assets 0 0
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Total Assets $ 5,455 $ 4,413
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LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities
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Note Payable $ 14,000 $ 14,000
Accounts Payable 151,604 151,604
Other Accrued Expenses 14,600 14,900
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Total Current Liabilities 180,204 180,504
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Shareholders' Equity (Deficit)
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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 1997 and 1998, respectively 2,530 2,530
Paid-in Capital 6,262,943 6,262,943
Accumulated Deficit (6,440,222) (6,441,564)
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Total Shareholders' Equity (Deficit) (174,749) (176,091)
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Total Liabilities & Shareholders' Equity (Deficit) $ 5,455 $ 4,413
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SMART GAMES INTERACTIVE, INC.
Statements of Operations
For the Year Ended December 31, 1998
and the Three Months Ended March 31, 1999
Audited Unaudited
12/31/98 3/31/99
Net Sales $ 44,468 $ 0
Cost of Goods Sold 21,300 0
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Gross Margin 23,168 0
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Selling, General and Administrative Costs 54,988 1,042
Research and Development Costs 0 0
Non-recurring Charges 0 0
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54,988 1,042
Loss from Operations (31,820) (1,042)
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Other Expenses 1,200 300
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Loss before Extraordinary Items (33,020) (1,342)
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Extraordinary Items 474,426 0
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Net Income (Loss) 441,406 (1,342)
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Net Income (Loss) per common share before extraordinary item (0.00) 0.00
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Net Income (Loss) per common share 0.03 (0.00)
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Shares used in calculation of net income (loss) per share 12,648,244 12,648,244
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SMART GAMES INTERACTIVE, INC.
Statements of Shareholders' Equity (Deficit)
For the Year Ended December 3, 1998 (Audited)
and the Three Months Ended March 31, 1999 (Unaudited)
Total
Common Stock Paid in Accumulated Shareholders'
Shares Amount Capital Deficit Equity
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Balance December 31, 1996 12,648,244 $ 2,530 $ 6,262,943 ($5,570,179) $ 695,294
Net Loss (1,311,449) (1,311,449)
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Balance December 31, 1997 12,648,244 2,530 6,262,943 (6,881,628) (616,155)
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Net Loss 441,406 441,406
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Balance December 31, 1998 12,648,244 2,530 6,262,943 (6,440,222) (174,749)
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Net Loss (1,342) (1,342)
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Balance March 31, 1999 12,648,244 $ 2,530 $ 6,262,943 ($6,441,564) ($ 176,091)
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SMART GAMES INTERACTIVE, INC.
Statements of Cash Flows
For the Year Ended December 31, 1998
and the Three Months Ended March 31, 1999
Audited Unaudited
12/31/98 3/31/99
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CASH FLOWS FROM OPERATING ACTIVITIES
Loss before extraordinary activities ($ 33,020) ($ 1,342)
Extraordinary item 474,426 0
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Net income (loss) 441,406 (1,342)
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Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation and amortization 4,167 1,042
Cash provided (used) by the change in:
Accounts receivable 1,925 0
Inventories 21,300 0
Prepaid expenses and other assets 1,000 0
Note Payable 0 0
Accounts payable (425,648) 0
Accrued expenses (46,728) 300
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NET CASH USED BY OPERATING ACTIVITIES (2,578) 0
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CASH FLOWS FROM INVESTING ACTIVITIES 0 0
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CASH FLOWS FROM FINANCING ACTIVITIES 0 0
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NET INCREASE (DECREASE) IN CASH (2,578) 0
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Cash and Cash equivalents, beginning of year 2,578 0
Cash and Cash equivalents, end of year $ 0 $ 0
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