UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-28184
BRANDMAKERS, INC.
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(Exact name of small business issuer as specified in its charter)
Utah 37-1099747
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1325 Capital Circle, NW Lawrenceville, Georgia 30043
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(Address of principal executive offices)
(770) 338-1958
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(Issuer's telephone number)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Not Applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 123,135,787 shares common
stock, $.001 par value, were outstanding as of February 14, 2001.
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BRANDMAKERS, INC.
FORM 10-QSB
For the Quarter Ended December 31, 2000
INDEX
PAGE
PART I: FINANCIAL INFORMATION
Item 1 -
Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2000
and December 31, 2000 . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statement of Operations for the
three and six Months ended December 1999 and 2000 . . . 4
Condensed Consolidated Statements of Cash Flows for
the six months ended December 1999 and 2000 . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . 6
Item 2 -
Management's Discussion and Analysis . . . . . . . . . . . . . . 7
PART II: OTHER INFORMATION
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 8
Item 2 Changes in Securities and Use of Proceeds . . . . . . . . . 8
Item 3 Default Upon Senior Securities . . . . . . . . . . . . . . 8
Item 4 Submission of Matters to a Vote of Security Holders . . . . 8
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . . 8
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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Brandmakers, Inc.
CONSOLIDATED BALANCE SHEETS
December 31,
June 30, 2000
2000 (unaudited)
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CURRENT ASSETS
Cash and cash equivalents $ 82,587 $ 1,263
Accounts receivable, trade
(less allowance of $25,000) 828,607 348,998
Inventory 448,071 523,802
Other current assets 18,839 36,288
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Total current assets 1,378,104 910,352
PROPERTY AND EQUIPMENT - AT COST
Furniture, fixtures and equipment 1,258,822 1,256,135
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1,258,822 1,256,135
Less accumulated depreciation 164,521 274,916
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1,094,301 981,219
OTHER ASSETS
Pledged certificates of deposit 357,980 357,980
Deferred stock options 395,214 0
Goodwill 480,755 0
Deposits 55,243 55,244
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1,289,192 413,224
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$ 3,761,597 $ 2,304,794
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 888,336 $ 1,007,262
Accounts payable 452,697 799,053
Accrued expenses 250,514 50,363
Current maturities of capital leases 291,531 289,008
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Total current liabilities 1,883,078 2,145,686
CAPITAL LEASES, less current maturities 422,362 279,334
STOCKHOLDERS' EQUITY
Common stock- authorized 200,000,000 shares
of no par value; issued 121,140,504 shares
at December and June 2000 121,141 121,141
Additional paid-in capital 3,255,961 2,912,272
Retained earnings (deficit) (1,920,945) (3,153,639)
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1,456,157 (120,226)
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$ 3,761,597 $ 2,304,794
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Brandmakers, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended Three Months Ended
December 31, December 31,
1999 2000 1999 2000
(unaudited) (unaudited) (unaudited) (unaudited)
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Revenues $ 733,937 $ 2,087,110 $ 362,331 $ 953,335
Cost of goods sold 401,797 1,407,041 195,148 696,435
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Gross profit 332,140 680,069 167,183 256,900
Operating Expenses
Salaries and wages 319,449 532,065 173,607 161,202
Rent 48,006 97,079 34,884 34,977
Advertising and promotion 20,220 16,292 19,771 1,421
Depreciation and amortization 19,113 110,478 9,557 55,239
Research and development 708 68,831 416 6,794
Other operating expenses 124,869 305,893 66,248 33,419
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532,365 1,130,638 304,483 293,052
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Operating loss (200,225) (450,569) (137,300) (36,152)
Other income (expense)
Interest expense (5,012) (99,690) (6,784) (35,994)
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(5,012) (99,690) (6,784) (35,994)
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Loss before taxes (205,237) (550,259) (144,084) (72,146)
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Income taxes (benefit)
Loss from continuing operations (205,237) (550,259) (144,084) (72,146)
Discontinued operations:
Loss from operations of
K.W. Leisure, Ltd. Ltd. (0) (682,679) (0) (563,360)
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Net loss ($205,237) ($1,232,938) ($144,084) ($635,506)
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Per share information:
Basic
Loss from continuing operations ($0.00) ($0.00) ($0.00) ($0.00)
Loss from discontinued operations (0.00) (0.01) 0.00 (0.00)
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($0.00) ($0.01) ($0.00) ($0.01)
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Diluted
Loss from continuing operations ($0.00) ($0.00) ($0.00) ($0.00)
Loss from discontinued operations (0.00) (0.01) 0.00 (0.00)
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($0.00) ($0.01) ($0.00) ($0.01)
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Average number of shares outstanding:
Basic 104,628,837 121,140,504 104,767,171 121,140,504
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Diluted 104,628,837 122,044,080 104,767,171 122,044,080
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Brandmakers, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
December 31,
1999 2000
(unaudited) (unaudited)
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Net loss $ (205,237) $ (1,232,938)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 19,113 130,009
Stock option expense 0 51,525
Write-off of K.W. Leisure Ltd. Goodwill 0 486,729
(Increase) decrease in assets and
increase (decrease) in liabilities
Accounts receivable 83,656 479,609
Inventories (25,166) (75,731)
Other current assets 1,268 (17,449)
Accounts payable (71,310) 346,356
Accrued expenses (50,004) (207,930)
Spin off accrual (82,193) 0
Income taxes payable (3,669) 0
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Net cash used in (333,542) (39,821)
operating activities
Cash flows used in investing activities
Capital expenditures 0 0
(Increase) decrease in Deposits (5,241) (1)
Other changes in long term assets 0 (14,877)
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(5,241) (14,878)
Cash flows provided by financing activities
Reductions in long-term debt and
capital leases (44,209) (145,551)
Proceeds from sale of stock 316,500 0
Advances on notes payable 0 118,926
Decrease in due to related parties (856) 0
Increase in other liability 47,500 0
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318,935 (26,625)
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Net decrease in cash and
cash equivalents (19,848) (81,324)
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Cash and cash equivalents at beginning
of the period 111,021 82,587
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Cash and cash equivalents at end
of the period $ 91,173 $ 1,263
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<FN>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES AND
CERTAIN CASH FLOW INFORMATION:
The Company's noncash investing and financing activities for the six month
period ended December 31, 2000 are as follows:
There were no significant noncash investing and financing activities for the
six month period ended December 31, 2000.
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Brandmakers, Inc.
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of Brandmakers Inc.'s (the "Company") significant accounting
policies are incorporated by reference to the Company's annual report on
Form 10-KSB dated June 30, 2000.
The accompanying unaudited consolidated financial statements reflect all
adjustments, which in the opinion of management are necessary for a fair
presentation of results of operations, financial position, and cash flows.
The results of the interim period are not necessarily indicative of the
results for the full year.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
and continues to suffer from significant losses and has a negative working
capital. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plan in regard to these matters
is described in the management discussion and analysis. The consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
From time to time, the Company may have asserted or unasserted claims arising
in the normal course of business. The Company does not expect losses, if any,
arising from these asserted or unasserted claims to have a material effect on
the financial statements.
During December 2000, the Company made a decision to discontinue the operations
of its United Kingdom operations of K.W. Leisure. The Company is seeking a
manufacturer that would continue to produce the pusher machines under a license
agreement. The operations of K.W. Leisure have been shown as discontinued
operations, including the write-off of the remaining goodwill related to this
segment in the approximate amount of $486,000. The revenues of the segment for
the six-month period ended December 31, 2000 were approximately $40,000. The
operations of the segment have ceased since the time of the Company's decision.
The remaining assets and liabilities of the segment are as follows, management
expects that there will be further adjustment to these figures in the third
quarter as further decisions as to the discontinued segment are made:
Current assets $253,000
Property and equipment $44,000
Current liabilities $270,000
During January 2001, Brandmakers principal shareowners made a decision to
terminate negotiations to sell a controlling interest in Brandmakers to World
Sales & Merchandising, Inc (WSMI).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed forward-looking statements. Without limiting the
foregoing, the words "believe," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, changes in the regulation of the
wireless communication and internet industry at either the federal and state
levels, competitive pressures in the wireless communication and internet
industry and the Company's response thereto, the Company's ability to obtain
and retain favorable arrangements with third-party payers, the Company's
ability to obtain capital in favorable terms and conditions, and general
conditions in this economy. However, due to the discontinued operations of
K.W. Machines, and the resulting related write-off of goodwill in the amount of
approximately $486,000, the loss for the three month period ending
December 31, 2001 was $635,506.
The following discussion of the Company's results of operations and financial
conditions should be read in conjunction with the Company's condensed
consolidated unaudited Financial Statements listed in Part I, Item I and the
Notes thereto appearing elsewhere in this Form 10-QSB.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
DECEMBER, 2000 AND 1999
Revenue increased 263% from $362,331 to $953,335 for the three months ended
December 31, 2000 compared to December 31, 1999. The increase in revenues was
primarily achieved by the ZOOM Communications Division. The company had a net
loss of $144,084 for the period ended in 1999. However, due to discontinued
operations of K.W. Machines, goodwill in the amount of $563,360 was written off
increasing the total loss for the three months ending December 31, 2000 to
$635,506.
For the six-month period ended December 31, 2000 revenue increased 284% from
$733,937 to $2,087,110 compared to December 31, 1999. The company had a net
loss of $205,237 for the period ended in 1999 and a net loss of $1,232,938 in
2000 due to increased operating expenses and a loss of $682,679 from the
discontinued operations of K.W. Machines.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities - Net cash used in operating activities was a
deficit of $39,821 for the six-months ended December 31, 2000 and a deficit of
$333,542 for the same period in 1999. For the six months ended
December 31, 2000 accounts receivable decreased by $479,609 and accounts
payable increased by $346,356 compared to June 30, 2000.
Cash Flow from Financing activities- The company's net cash flow from financing
activities was a deficit of $26,625 for the six month period ended
December 31, 2000 versus positive cash flow of $318,935 for the same period in
1999. Proceeds from the sale of stock were zero in the six months ending
December 31, 2000 versus $316,500 during the same period in 1999. Advances on
notes payable were $118,926 from borrowing on credit in the 2000 period to none
in the 1999 period. Reductions in capital leases were $145,551 in the six
months ended December 31, 2000 versus $44, 209 in the 1999 period due to
additional equipment for the Internet division in 2000.
Brandmakers continues to need funds to meet objectives set forth in the
company's business plan with current concentration on the profitability of each
division.
RECENT DEVELOPMENTS
The private transaction to sell controlling interest of Brandmakers, Inc. has
been discontinued. The three principal shareowners were in agreement with a
letter of intent by World Sales & Merchandising, Inc. (WSMI) based upon funding
for Brandmakers, which never materialized.
Negotiations commenced in December 2000 to locate a manufacturer to produce the
Pusher machine product line under a license agreement. See item one under
Legal Proceedings for further detail. The operations of K.W. Machines have
been discontinued.
Plans were formulated in late December 2000 to early January 2001 to commence a
pay for use of unlimited access email service for $6 per year on WebBox.
Implementation commenced on January 15, 2001, and we are pleased with the
progress. MailStart usage is limited to once per week, and as of
February 6, 2001, 24,000 have signed up for the WebBox service.
The WebBox email service has all of the features of MailStart, plus:
* Address book
* Calendar
* File Storage
* Bookmark Storage
* Publishing
With WebBox, users may have up to five email accounts and can send and receive
attachments.
The purchase of Multi-Page Communications on February 24, 2000 called for a
settlement in cash or stock in January, 2001. Settlement negotiations are
underway and it is anticipated that an agreement will be reached to extend the
time period for ninety days.
PART 2: OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
A lawsuit was filed by Jtech, a primary competitor in the pager business, on
October 19, 2000, claiming unfair competition, false advertising, trademark
infringement, etc. Zoom Communications negotiated to have a preliminary
injunction set aside. The lawsuit involves advertising and soliciting the
repair of Jtech units.
The legal costs of defense are covered by our Business Insurance policy. The
income generated by the repair of Jtech pagers is considerably less than 1% of
Zoom Communications annual sales.
A lawsuit was filed by K.W. Machines Ltd. against Brandmakers, Inc. for
$286,260 plus costs for the failure by Brandmakers to make the final payment on
the coin pusher manufacturing business. Brandmakers is not currently in a
position to make this payment and will attempt to negotiate a settlement.
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3: Default upon Senior Securities
None
Item 4: Submission of matters to a vote of security holders.
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRANDMAKERS, INC.
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(Registrant)
February 12, 2001 By: /s/ Geoff Williams
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(Date) Geoff Williams,
Director & Chief Executive Officer