SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended December 31, 1999
or
[ ] 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.
(Exact name of small business issuer as specified in its charter)
Utah 37-1099747
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1325 Capital Circle, NW Lawrenceville, Georgia 30043
(Address of principal executive offices)
(770) 338-1958
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Not Applicable
APPLICABLE ONLY TO CORORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 106,150,504 shares common
stock, $.001 par value, were outstanding as of December 31, 1999.
BRANDMAKERS, INC.
FORM 10-QSB
For the Quarter Ended December 31, 1999
INDEX
Part I: Financial Information Page
Item 1 -
Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1999
and June 30, 1999 ......................................... 3
Condensed Consolidated Statement of Operations for the three
and six months ended December 31, 1999 and 1998 ............. 4
Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1999 and 1998 ..................... 5
Notes to Consolidated Financial Statements .................. 6
Item 2 -
Management's Discussion and Analysis .......................... 7
Part II: Other Information
Item 1 Legal Proceedings ...................................... 9
Item 2 Changes in Securities and Use of Proceeds .............. 9
Item 3 Default Upon Senior Securities ......................... 9
Item 4 Submission of Matters to a Vote of Security Holders .... 9
Item 5 Other Information ...................................... 9
Item 6 Exhibits and Reports on Form 8-K ....................... 13
Signatures ........................................................ 14
BRANDMAKERS, INC.
Condensed Consolidated Balance Sheets
PART I
FINANCIAL INFORMATION
June 30, December 31,
1999 1999
(unaudited)
Assets
CURRENT ASSETS
Cash and cash equivalents ................... $ 56,318 $ 91,173
Accounts receivable, trade .................. 177,737 147,188
Inventory ................................... 74,154 99,320
Note receivable ............................. 64,859
Other current assets ........................ 4,791 3,523
----------- -----------
Total current assets .......... 313,000 406,063
PROPERTY AND EQUIPMENT - AT COST
Unproved oil and gas properties,
full cost method .......................... 520,531
Furniture, fixtures and equipment ........... 131,110 304,826
----------- -----------
131,110 825,357
Less accumulated depreciation .......... 53,080 91,617
----------- -----------
78,030 733,740
OTHER ASSETS
Deposits .................................... 11,466 36,878
----------- -----------
$ 402,496 $ 1,176,681
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ............................ $ 171,869 $ 184,813
Accrued expenses ............................ 67,215 17,211
Due to related parties ...................... 10,108 265,249
Income taxes payable ........................ 26,843 23,174
Current maturities of long-term debt ........ 2,446 7,210
Current maturities of capital leases ........ 16,586 60,790
Total current liabilities ..... 295,067 558,447
----------- -----------
LONG-TERM DEBT, less current maturities ........ 6,163
CAPITAL LEASES, less current maturities ........ 13,672 50,330
SPIN OFF ACCRUAL ............................... 321,547
OTHER LIABILITY ................................ 47,500
DEFERRED TAXES ................................. 6,400 6,400
STOCKHOLDERS' EQUITY
Common stock- authorized 200,000,000 shares
par value $.001; issued 106,150,504 shares at 100 106,151
12/99 and 104,490,504 at 6/99
Additional paid-in capital .................. 314,840
Retained earnings (deficit) ................. 81,094 (228,534)
----------- -----------
81,194 192,457
----------- -----------
$ 402,496 $ 1,176,681
=========== ===========
BRANDMAKERS, INC.
Condensed Consolidated Statements of Operations
Six Months Ended Three Months Ended
December 31, December 31,
1998 1999 1998 1999
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues ....................... $ 590,594 $ 733,937 $ 357,177 $ 362,331
------------- ------------- ------------- -------------
Cost of goods sold ............. 435,916 401,797 273,516 195,148
------------- ------------- ------------- -------------
Gross profit ................ 154,678 332,140 83,661 167,183
Operating Expenses
Salaries and wages .......... 144,794 319,449 125,527 173,607
Other operating expenses .... 156,314 212,916 69,590 130,876
------------- ------------- ------------- -------------
301,108 532,365 195,117 304,483
------------- ------------- ------------- -------------
Operating loss . (146,430) (200,225) (111,456) (137,300)
Other income (expense)
Interest expense ............ (283) (5,012) (279) (6,784)
------------- ------------- ------------- -------------
(283) (5,012) (279) (6,784)
------------- ------------- ------------- -------------
Loss before taxes ........... (146,713) (205,237) (111,735) (144,084)
Income taxes (benefit) ......... (31,000) (24,000) 0
------------- ------------- ------------- -------------
NET LOSS .................... ($ 115,713) ($ 205,237) ($ 87,735) ($ 144,084)
============= ============= ============= =============
Basic net loss per common share $ 0.00 $ 0.00 $ 0.00 $ 0.00
============= ============= ============= =============
Weighted average number of
shares outstanding .......... 104,490,504 104,628,837 104,490,504 104,767,171
============= ============= ============= =============
BRANDMAKERS, INC.
Condensed Consolidated Statements of Cash Flows
Six Months Ended
December31,
1998 1999
(unaudited) (unaudited)
Net loss .................................. ($115,713) ($205,237)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation ........................... 16,332 19,113
(Increase) decrease in assets and
increase (decrease) in liabilities
Accounts & note receivable .......... (122,792) 83,656
Inventories ......................... 184 (25,166)
Other current assets ................ 11,979 1,268
Accounts payable .................... 162,961 (71,310)
Accrued expenses .................... 30,705 (50,004)
Spin off accrual .................... (82,193)
Income taxes payable ................ (30,547) (3,669)
--------- ---------
Net cash used in ..................... (46,891) (333,542)
operating activities
Cash flows used in investing activities
Capital expenditures ................... (1,223) 0
Increase in deposits ................... (20,741) (5,241)
--------- ---------
(21,964) (5,241)
Cash flows provided by financing activities
Payments on long-term debt ............. (17,071)
Reductions in capital leases ........... (27,138)
Decrease in due to related parties ..... (7,608) (856)
Proceeds from sale of stock ............ 316,500
Increase in other liability ............ 47,500
========= =========
(7,608) 318,935
Net decrease in cash and
cash equivalents ..................... (76,463) (19,848)
--------- ---------
Cash and cash equivalents at beginning
of the period ........................ 98,159 111,021
--------- ---------
Cash and cash equivalents at end
of the period ........................ $ 21,696 $ 91,173
========= =========
Supplemental schedule of noncash investing and financing activities and certain
cash flow information:
The Company entered into capital leases with a value of approximately $108,000
during the six month period ended December 31, 1999.
BRANDMAKERS, INC.
Notes to Consolidated Financial Statements
Note 1 - Summary of 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, 1999 and Form 8-K/A dated January 5, 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.
Note 2 - Business Combination
On October 22, 1999, Mason Oil Company, Inc. acquired substantially all of the
assets and operations of Brandmakers, Inc. ("Brandmakers") a closely held
Georgia corporation by the issuance of 89,000,000 shares of common stock to
Brandmakers' shareholders.
Simultaneous with the transaction, the old board of directors of the Mason Oil
Company, Inc. approved the issuance of 4,600,000 shares of the common stock to
two officers pursuant to an Executive Stock Plan ("the Plan"). The Mason Oil
Company, Inc. issued the stock under the Plan in compensation for services
rendered. Additionally, Brandmakers has made plans to distribute substantially
all of the Mason Oil Company assets and liabilities, as of the acquisition date,
to certain shareholders of the Company. Therefore, a reserve for the pending
distribution of approximately $404,000 has been recorded.
For accounting purposes, the acquisition has been treated as a reverse
acquisition and as a recapitalization of Brandmakers. The historical financial
statements prior to October 22, 1999 are those of Brandmakers. Pro forma
information giving effect to the acquisition as if the acquisition took place on
July 1, 1999 is not presented, as they would show the same information as
already presented due to the accounting as discussed.
Note 3 - Subsequent Event
After December 31, 1999, the Company agreed to acquire certain assets from Multi
Page Communications, LLC and Splash Media, Inc., a Georgia corporation. Both
transactions are expected to close in February 2000. 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.
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 SIX MONTHS ENDED
DECEMBER 31, 1999 AND 1998
Revenue increased 24% to $733,937 for the six months ended December 31,
1999 from $590,594 for the 1998 period, driven by increases in all business
segments except games and vending which remained stable. The Company experienced
a net loss of $200,225 for the six months ended December 31, 1999 in comparison
to a net loss of $115,713 for the same period in 1998. The results were driven
by the need of additional personnel, facilities to support the new Internet
division, and the cost of the recent reverse acquisition and subsequent
requirements of a public company.
The primary source of revenues for the Company over the past two fiscal
years were derived from the games and vending division through the sales of the
Virtual Reality Golf game. The Hospitality Innovators division, which sells
onsite-paging systems, was profitable in the fiscal year ended June 30, 1999 as
well as the six months ended December 31, 1999. The Internet Division,
MailStart, acquired by the Company on June 1, 1998 has not yet reached
profitability, but the user base continues to grow rapidly.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities - The Company's net cash flow from
operating activities resulted in deficits of $333,542 and $46,891 for the six
months ended December 31, 1999 and 1998, respectively. The $286,651 increase is
attributed to a decrease in profitability, increase in accounts receivable
coupled with a decrease in accounts payables, and the spin off accrual for old
Mason Oil Company assets and liabilities.
Cash used in investing activities - The Company's net cash used in
investing activities for the six month ended December 31, 1999 was $5,241 as
compared to net cash used in investing activities for the six months ended
December 31, 1998 of $21,964.
Cash flow from financing activities - The Company's net cash flow from
financing activities during the six months ended December 31, 1999 increase by
$326,543 from an outflow of $7,608 during the six month ended December 31, 1998,
due primarily to proceeds from investors while the Company was still private,
and subsequently from an increase in private placement proceeds received during
the six months ended December 31, 1999. During the six months ended December 31,
1999, the Company, pursuant to a private placement, sold $255,000 of units
containing two restricted shares and a warrant. The proceeds are to be used for
general working capital purposes.
The Company's capital requirements in connection with its business plans
will be significant. The Company believes that net proceeds of future
anticipated securities offerings, and giving effect to revenues which are
projected to be realized from operations, should be sufficient to fund ongoing
operations and its business plan. Notwithstanding, there is no assurance that
such anticipated offering will be undertaken, and if undertaken, will be
successful or that such proceeds derived therefrom, will in fact be sufficient
to fund operations and meet needs of the Company's business plans.
YEAR 2000
The Company did not experience any significant problems resulting from computer
system and program failures or equipment malfunctions, and suffered no
disruption of business operations.
PROPOSED ACQUISITIONS
In December 1999, discussions were underway to acquire the pager business of
Multi-Page Communications, LLC. The structure of the deal involves the purchase
of the business only and not the company. Substantial inventory and equipment
will be included and it is evident that significant capital will be necessary to
purchase additional pagers and parts to service the existing customer base. In
addition, discussions were underway in December 1999 for the Company to acquire
Splash Media, a multimedia production firm. The plan is to strengthen Washburn
Studios division and expand media services.
Part 2: OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
None.
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
Reverse Acquisition
In October 1999, the Company f/k/a Mason Oil Company, Inc. issued
89,000,000 shares of common stock for the purchase of Brandmakers, Inc. Mason
Oil Company, Inc adopted the name Brandmakers, Inc. after the acquisition was
completed.
Private Placement
In October 1999, the Company d/b/a Mason Oil Company, Inc. proposed
through a Private Placement Memorandum to offer for sale 8,000,000 Units, each
Unit consisting of two (2) shares of common stock, par value $.001 per share and
a 3/4 warrant. The warrants entitle the holders thereof to purchase a 3/4 or .75
share of common stock for each warrant held at an exercise price of $.50 per
share expiring in three years. Subscriptions for the Units were offered and
accepted by the Company at a price of $0.25 per Unit. The Units, common stock
and warrants offered were not registered with, approved, or disapproved by the
Securities and Exchange Commission (i.e., restricted stock).
During the quarter ended December 31, 1999, the Company sold 1,020,000
Units, consisting of 2,040,000 shares and 765,000 warrants resulting in $255,000
in cash flow from this financing activity. The proceeds from the sale will be
used for general purposes to support the current business segments. After
December 31, 1999, the private placement offering was withdrawn on January 28,
2000, after selling 3,882,000 Units, consisting of 7,764,000 shares and
2,911,500 warrants resulting in $970,500 in cash flow from this financing
activity. The Company believes that these proceeds will be sufficient to meet
its short term funding requirements.
Item 3: Default upon Senior Securities
None
Item 4: Submission of matters to a vote of security holders.
The Board of Directors and a majority of shareowners approved a name
change in October 1999 from Mason Oil Company, Inc. to Brandmakers, Inc. All
shareholders were provided ten days notice prior to an effective date to comply
with regulations in the State of Utah. The name change was effective November
18, 1999 and Brandmakers, Inc. is now a Utah Corporation.
Item 5: Other Information
Executive Overview
Brandmakers' Division Leaders have a common vision. Their vision is to
combine their business lines, talents, and passions to create an extremely
valuable property; one that will attract forward thinking investors. Their
collective experience and history, with diverse, yet connected businesses,
provide a strategically, unique opportunity for phenomenal growth.
Each division leader has a proven record of accomplishment of
entrepreneurial spirit, leadership and commitment. These leaders share
compelling stories of taking companies from startup to maturity, private to
public, through mergers and acquisitions. Understanding enterprise critical
timing, as Brandmakers' organization does, is vital to their long-term success
and competitive advantage in their fields.
With backgrounds in banking, finance, securities, sales, marketing,
production, manufacturing, distribution, technology and creative services, the
mission of the Brandmakers' group remains focused; to deliver state-of-the-art
service, products and quality to clients, solid returns to investors, and
continued investment in their greatest asset, their people.
The Future
Brandmaker's latest acquisitions are in the fast-paced world of technology
and communications. The Company understands the impact of these rapidly changing
industries and is positioning itself as a leader in these fields. Brandmakers
continues to exploit the integration and convergence of technology-based
businesses for acquisition and expansion.
Brandmakers' History
Mr. Geoff Williams founded Brandmakers, Inc. in 1993 with a focus on the
games and vending industry. Williams started his career in the electronic gaming
industry in the United Kingdom and has thirty years experience in this growing
industry. Well known in the gaming community, Williams has owned, operated,
expanded and sold numerous amusement enterprises. Prior to establishing
Brandmakers, Williams sold his startup games and coin operated company, G.W.
Leisure, Ltd.
With a handful of loyal employees and its first extremely, successful
product, Camera Vending Machines that dispensed Kodak products, Williams grew
the company to its market position today. Headquartered in Lawrenceville,
Georgia, Brandmakers is a diversified company engaged in communications,
Internet development, new media creation and electronic game and vending
equipment.
Mason Oil Company, Inc., a fully reporting public company, acquired
Brandmakers on October 22, 1999, and subsequently changed its name to
Brandmakers, Inc. Prior to this reverse acquisition, Brandmakers had expanded
its umbrella to add complementary divisions spurring phenomenal overall growth.
With its first acquisitions in 1998, of Hospitality Innovators, a communications
company; Tim Washburn Studios, a digital design house; and MailStart an internet
technology development firm, Brandmaker's boldly expanded its presence in the
technology community. Additional expansion included leasing a new facility with
4000 square feet of office space and 7,400 square feet of warehouse space to
house the Brandmakers' Divisions. Continuing this momentum to expand its
business lines, Brandmakers is in the process of completing two additional
acquisitions in January 2000, Multi-Page Communications, LLC, a wireless paging
manufacturing company to vertically integrate with Hospitality Innovators and
Splash Media, a New Media firm which will combine creative forces with Washburn
Studios creating a full digital design and new media firm "Splash Studios".
Today Brandmakers has 28 employees and numerous subcontractors in all
divisions. William's vision remains the same. "The future is in technology.
Bringing the best together will cement the success of our combined goals. That
is, to be the industry leaders in our fields, and to merge our efforts for our
shareholders." Brandmakers is a publicly held company with a strong agenda for
2000.
Company Divisions
MailStart Division
The Internet Development division of Brandmakers, takes great pride in
their universal web based solutions. MailStart (www.mailstart.com) is an email
access gateway, which allows consumers to access their POP3 email boxes via the
Web. MailStart currently handles over 680,000 email transactions daily allowing
the display of mailbox contents, reading, replying, forwarding and deleting of
email messages. It is a free service supported by advertising. Additional
revenue is generated by supplying the service, ad-free to ISP's, schools, and
web-sites. MailStart currently provides complimentary ad-free email services for
the United Nations Small Island Development Services.
WebBox (www.webbox.com), an information consolidation management product,
was added to MailStart's services in October 1999. WebBox offers complete email
consolidation for five email accounts, online file storage, calendar and
schedule functions, contact management, and Web bookmark and page monitoring
features.
Zoom Communications Division (Formerly Hospitality Innovators)
Onsite Paging
Brandmakers' communication division focuses on the sale of on-premise
paging systems for various industries such as restaurants, hospitals, and
churches. Their core product is "Coaster Call", a guest paging system using a
lighted coaster to notify the holder that they are being paged. Clients using
"Coaster Call" include Applebee's, Ruby Tuesdays, Bennigans, Long Horn
Steakhouse and Outback. Managers say that patrons are happier as they do not
lose their place in line or have to stand in crowded entryways. It's popularity
and success has evolved to encompass nursery paging, medical, professional and
manufacturing paging. In addition, Hospitality offers a wide variety of systems
such as Scope, Long Range, and Visiplex.
Wide Area Paging
The Company expects to complete its acquisition of Multi- Page
Communications, LLC's business in February 2000. This will provide the Company a
pager manufacturer and distributor that naturally fits with the Hospitality
Innovators division. Zoom Communications will have a combined client base of
over 3000 customers. Zoom serves local as well as wide area pager consumers.
Games & Vending Division
The Games & Vending division, produces and manufactures vending machines and
computerized games. Some of their products include:
Virtual Reality Golf
Virtual Reality Golf is a computerized golf game with a 34" monitor housed in
custom-built cabinetry. The patented club, sensor pad and roller ball are on a
separate console placed in front and to the side of the cabinet. Players swing a
club with an infrared beam over the sensor base, which activates the ball on the
screen whether driving, pitching or putting. The console roller ball allows
players to choose courses and options. The game allows the player(s) to play a
round of golf on one of fifteen world- renowned courses with audio that provides
commentary on player's swings.
Direct Sales have been primarily through Business Opportunity Markets. Other
markets include golf enthusiasts for home use, corporate recreation centers and
vending distributors. Brandmakers has Virtual Reality Golf hardware rights, and
Links software licensed through Access Software.
Telephone Prepaid Card Machines:
Our two column phone card machines are competitively priced for today's market.
These machines offer consumers an easy, inexpensive way to purchase phone cards
at extremely reasonable rates. Attractive metal housing units are freestanding
and convenient to install, working well in shopping malls as well as
universities, and numerous retail outlets. Card machines are also used in
casinos to vend smart cards. These cards hold a players credits and debits.
Skill Machines:
Brandmakers designs and imports amusement with prize (AWP) machines to its plant
in Lawrenceville Georgia. Bill acceptors, printers, or ticket dispensers are
installed to comply with U.S. laws and standards. Final testing of all machinery
is done on site. These machines are available for distributorships. Casinos,
bars, sports facilities and recreation centers are prime locations for these
machines where local laws permit.
Postcard Machines:
We are pleased to be the leading manufacturer of this new vending product, which
sells pre-stamped postcards. Postcards are vended from an attractive metal
machine that provides the consumer with a pre-stamped postcard ready for
mailing. Several machines are in the Orlando, Florida and Cancun, Mexico markets
where vacationers provide a natural consumer base.
Computer Disk Dispenser
A professionally designed Computer Disk dispensing machine, with educational
facilities being the prime market, proves to be a distributor's dream. The
machine dispenses floppy disks, zip disks, super disks and compact disc for a
nominal fee. Each machine has an attractive exterior for advertising in addition
to a scrolling marquis, which gives the operator multiple revenue opportunities.
Computer Disk Machines come with a full one-year warranty.
Splash Studios Division (Formerly Washburn Studios) Brandmaker's new media and
digital design division, produces multimedia projects from concept to
completion. Award winning web-sites, video production, illustration and design
provide clients with a broad range of communication services. Merging creativity
with technology has grown Splash Studio's client list to include over 200 major
companies in the U.S.
Partial client list includes Cartoon Network, Coca-Cola, Burger King, Nabisco,
Disney, Delta Airlines, McDonalds, Hard Rock Cafe, the Georgia Bureau of
Investigation and Universal Studios.
Locations:
The company leases 11,400 square feet of office and warehouse space at 1325
Capital Circle, Suites B and C, Lawrenceville, Georgia 30043.
The Internet division, MailStart, leased new offices located at 9261 Folsom
Boulevard, Suite 400, Sacramento, CA 95826 on
December 15, 1999.
Item 6: Exhibits and Reports on Form 8-K
(a) None.
(b) Exhibits incorporated herein by reference.
1. Forms 8-K filed during the last quarter.
* Changes in Control of Registrant - November 4, 1999
* Change of Name and Address - November 18, 1999
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.
(Registrant)
February 11, 2000 By: /s/ Geoff Williams
(Date) Geoff Williams,
Director &
Chief Executive Officer