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 March 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.
(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)
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 May 4, 2000.
BRANDMAKERS, INC.
FORM 10-QSB
For the Quarter Ended March 31, 2000
INDEX
Part I: Financial Information Page
Item 1 -
Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2000
and June 30, 1999 3
Condensed Consolidated Statement of Operations for the three and nine
Months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for the nine months
ended March 31, 2000 and 1999 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 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 9
Signatures 10
Brandmakers Inc.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
June 30, 2000
1999 (unaudited)
CURRENT ASSETS
Cash and cash equivalents $56,318 $314,501
Accounts receivable, trade 177,737 511,589
Inventory 74,154 586,857
Other current assets 4,791 193,483
Stock subscriptions 289,750
------------- --------------
Total current assets 313,000 1,896,180
PROPERTY AND EQUIPMENT - AT COST
Furniture, fixtures and equipment 131,110 1,227,297
------------- --------------
131,110 1,227,297
Less accumulated depreciation 53,080 103,315
------------- --------------
78,030 1,123,982
OTHER ASSETS
Goodwill 669,101
Deposits 11,466 22,013
Pledged certificates of deposit 357,980
------------- --------------
11,466 1,049,094
------------- --------------
------------- --------------
$402,496 $4,069,256
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $171,869 $150,577
Accrued expenses 67,215 63,066
Due to related parties 10,108 0
Income taxes payable 26,843 -1,737
Current maturities of long-term debt 2,446 874,584
Current maturities of capital leases 16,586 279,069
------------- --------------
Total current liabilities 295,067 1,365,559
LONG-TERM DEBT, less current maturities 6,163
CAPITAL LEASES, less current maturities 13,672 517,850
DEFERRED TAXES 6,400 6,400
STOCKHOLDERS' EQUITY
Common stock- authorized 200,000,000 shares
of no par value; issued 121,140,504 shares
at 3/00 and 104,490,504 at 6/99 100 121,118
Additional paid-in capital 2,688,350
Retained earnings (deficit) 81,094 -630,021
------------- --------------
81,194 2,179,447
------------- --------------
$402,496 $4,069,256
============= ==============
Brandmakers Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended Three Months Ended
----------------- ------------------
March, 31 March 31,
--------- ---------
1999 2000 1999 2000
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $1,256,755 $1,860,554 $666,161 $1,126,617
Cost of goods sold 631,690 1,101,780 195,774 699,983
------------------------------------------------------------------------
Gross profit 625,065 758,774 470,387 426,634
Operating Expenses
Salaries and wages 259,825 751,722 115,031 432,273
Other operating expenses 271,045 600,477 114,448 387,561
------------------------------------------------------------------------
530,870 1,352,199 229,479 819,834
------------------------------------------------------------------------
Operating loss 94,195 -593,425 240,908 -393,200
Other income (expense)
Interest expense 0 -13,300 0 -8,288
------------------------------------------------------------------------
0 -13,300 0 -8,288
------------------------------------------------------------------------
Loss before taxes 94,195 -606,725 240,908 -401,488
Income taxes (benefit) 28,000 59,000 0
------------------------------------------------------------------------
NET LOSS $66,195 -$606,725 $181,908 -$401,488
========================================================================
Basic net loss per common share $0.00 -$0.01 $0.00 $0.00
========================================================================
Weighted average number of
shares outstanding 104,490,504 110,965,504 104,490,504 112,815,504
========================================================================
Brandmakers Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
March, 31
1999 2000
---- ----
(unaudited) (unaudited)
Net loss $66,195 -$606,725
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 24,497 51,411
(Increase) decrease in assets and
increase (decrease) in liabilities
Accounts & note receivable -141,638 -333,852
Inventories -60,817 -375,583
Other current assets 11,991 -188,692
Accounts payable 44,587 -21,292
Accrued expenses -1,874 -4,149
Stock issued for compensation 81,250
Income taxes payable 27,764 -28,580
-------------------------------
Net cash used in -29,295 -1,426,212
operating activities
Cash flows used in investing activities
Capital expenditures -1,223 -268,207
Increase in deposits -18,241 -10,547
Increase in goodwill 0
-------------------------------
-19,464 -278,754
Cash flows provided by (used in) financing activities
Reductions in long-term debt and capital leases -2,740
Decrease in due to related parties -7,608 -10,108
Proceeds from sale of stock 2,333,977
Increase in pledged certificate of deposit -357,980
-------------------------------
-7,608 1,963,149
-------------------------------
Net increase (decrease) in cash and
cash equivalents -56,367 258,183
-------------------------------
Cash and cash equivalents at beginning
of the period 98,159 56,318
-------------------------------
Cash and cash equivalents at end
of the period $41,792 $314,501
===============================
Supplemental schedule of noncash investing and financing activities and certain
cash flow information:
The Company's noncash investing and financing activities for the nine month
period ended March 31, 2000 are as follows: The Company entered into capital
leases with a value of approximately $765,000 and financed approximately
$875,000 in assets acquired through asset purchases. Additionally, the Company
issued common stock with an approximate value of $81,250 for compensation.
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. ["Mason Oil'] acquired
substantially all of the assets and operations of Brandmakers, Inc.
("Brandmakers") a closely held Georgia corporation by the issuance of 89,000,000
restricted shares of common stock to Brandmakers' shareholders. To implement
this acquisition of assets, Mason Oil did a spin-off of all assets connected
with its prior business and a reserve for the pending distribution of
approximately $404,000 was recorded at the time of the combination.
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 - Asset Acquisitions
During March 2000 the Company acquired certain assets of Multi Page
Communications, LLC from Joshua Friedman and Phyllis Zyskind. The assets
included inventories and fixed assets. The assets were acquired for
approximately $600,000, to be paid in cash or Company stock (at the Company's
choice) ten months from the date of acquisition. This acquisition has been
treated as an asset acquisition with the purchase price being allocated to the
fair market value of the assets acquired with any excess allocated to goodwill.
During March 2000 the Company acquired certain assets from K.W.
Machines, Ltd., a British concern, for approximately $640,000, with $320,000
being paid at closing with the remaining $320,000 due in September 2000. The
assets included inventories and fixed assets. This acquisition has been treated
as an asset acquisition with the purchase price being allocated to the fair
market value of the assets acquired with any excess allocated to goodwill.
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 NINE MONTHS ENDED MARCH 31, 2000 AND 1999
Revenue increased 48% to $1,860,554 for the nine months ended March 31,
2000 from $1,256,755 for the comparable 1999 period. This increase in revenues
was largely achieved through the acquisition of Multi-Page Communications. The
Company experienced a net loss of $606,725 for the nine months ended March 31,
2000 in comparison to a net profit of $66,195 for the same period in 1999. The
Company attributes much of this cash drain to its investment in infrastructure,
consisting of its absorption of three acquisitions, namely Splash Media, KW
Machines and KW Leisure of England, and the Multi-Page Communications business.
As a consequence, payroll increased 189% over the previous period with the
addition of 35 new employees. The Company currently has 46 employees, as opposed
to 11 employees at the same time last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities - The Company's net cash flow from
operating activities resulted in deficits of $1,426,212 and $29,295 for the nine
months ended March 31, 2000 and 1999, respectively. This deficit was largely the
product of a ramp-up in sales and the resulting need to support this increasing
level of business with a higher investment in inventories, coupled with
increasing accounts receivable and additional marketing expenditures. The Games
and Vending division was responsible for most sales during the 1999 period but a
major change in direction for Gamosity (the present name for the former Games
and Vending division) has resulted in low revenue on a temporary basis as the
company progresses through this transition period. Sales from new lines of
equipment are anticipated to replace and exceed the lost revenue from the former
games product line.
Cash used in investing activities - Consistent with management's plan
to invest in infrastructure, the Company's net cash used in investing activities
for the nine months ended March 31, 2000 was $278,754 as compared to net cash
used in investing activities for the nine months ended March 31, 1999 of
$19,464.
Cash flow from financing activities - The Company's net cash flow from
financing activities during the nine months ended March 31, 2000 increased by
$1,963,149 from an outflow of $7,608 during the nine months ended March 31,
1999, due primarily to proceeds from investors while the Company was still
private, and subsequently from an increase in private placement proceeds
received during the nine months ended March 31, 2000. During the nine months
ended March 31, 2000, the Company, pursuant to a private placement, netted
$2,333,977 from the private placements. These funds were used to purchase assets
of KW Machines, equipment for the Mailstart division, and for general working
capital purposes.
In spite of the significant investment in infrastructure which has
already been made, the Company believes that additional capital expenditures
will be required to meet the objectives set forth in the Company's business
plan. Negotiations are currently underway with a financing company to establish
an asset based line of credit. The Company believes the revenues which are
projected from operations, supplemented with funds available from the proposed
line of credit, should be sufficient to fund ongoing operations and its business
plan. Notwithstanding, there is no assurance that such anticipated profits, cash
flows, and financing will in fact be sufficient to fund operations and meet the
needs of the Company's business plan.
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.
Part 2: OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
None
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
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 restricted common stock, par value $.001
per share and a 3/4 warrant. Each full warrant entitles the holders to purchase
one share of restricted common stock at an exercise price of $.50, expiring in
three years. The private placement offering was withdrawn on January 28, 2000,
after selling 3,882,000 Units, consisting of 7,764,000 restricted shares and
2,911,500 restricted warrants resulting in $970,500 in cash flow from this
financing activity.
Beginning in February 2000, Brandmakers proposed through a Private
Placement Memorandum to offer 4,118,000 Units, at $.375 per Unit, each
consisting of two (2) restricted shares of common stock, par value $.001 per
share and a 3/4 warrant. Each full warrant entitles the holder to purchase one
share of restricted common stock at an exercise price of $.75 per restricted
share, expiring in three years. During the quarter ended March 31, 2000, the
Company sold 3,345,333 Units, consisting of 6,690,667 restricted shares and
2,509,000 restricted warrants resulting in $1,254,500 in cash flow from
financing activity. The proceeds from these offerings was used to finance the
Company's increasing sales volume and to fund general working capital purposes.
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
(a) None.
(b) Exhibits incorporated herein by reference.
1. Forms 8-K filed during the last quarter.
The company has filed one 8-K in the last period. This 8-K
was filed on March 9, 2000 regarding Multi-Page
Communications and the full contents of this filing is
hereby incorporated by reference.
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)
May 15, 2000 By: /s/ Geoff Williams
- ------------ -----------------------------------
(Date) Geoff Williams,
Director & Chief Executive Officer