BMKS - Brandmakers, Inc. (fka BMKS)

[jmhollen]

BRANDMAKERS INC
Form: 10QSB Filing Date: 5/15/2003
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TYPE: 10QSB
SEQUENCE: 1
FILENAME: bm1.htm
DESCRIPTION: PREPARED BY: [e-mail]

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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, 2003
[ ] 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 incorporation or (IRS Employer Identification No.)
organization)
140 Satellite Blvd. Ste. C, Suwanee, Georgia 30043
(Address of principal executive offices)
[phone]
(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: 128,567,147 shares common stock, $.001 par value, were outstanding as of May 1, 2003.




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BRANDMAKERS, INC.
FORM 10-QSB
For the Quarter Ended March 31, 2003



INDEX




Page
Part I: Financial Information
Item 1 -
Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2002 and March 31, 2003 3
Condensed Consolidated Statement of Operations for the three and nine months ended March 31, 2002 4
and 2003
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2002 and 2003 5
Notes to Consolidated Financial Statements 6
Item 2 -
Management's Discussion and Analysis 7-9
Part II: Other Information
Item 1 Legal Proceedings 10
Item 2 Changes in Securities and Use of Proceeds 10
Item 3 Default Upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 10




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Brandmakers, Inc.
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
ASSETS 2002 2003, unaudited
CURRENT ASSETS
Cash and cash equivalents $6,224 $2,959
Receivables
Trade $24,493 $88,317
Less allowance for doubtful accounts -$20,000 -$10,000
$4,493 $78,317
Inventories $20,041 $92,763
Employee advance $700
Total current assets $30,758 $174,739
PROPERTY AND EQUIPMENT - net $540,760 $390,757
OTHER ASSETS
Certificates of deposit - pledged $38,951 $38,951
Deposits $15,269 $16,602
NTN Stock $20,000 $20,000
$74,220 $75,553
$645,738 $641,049
LIABILITIES AND STOCKHOLDERS' EQUITY
2002 2003
CURRENT LIABILITIES
Line of credit $50,092
Notes payable $825,512 $320,000
Accounts payable $116,728 $223,021
Deferred revenue $296,162 $264,993
Other current liabilities $71,239 $5,856
Due to stockholder $30,000
Current portion of long-term debt $2,153 $2,696
Current portion of capital leases $112,289 $83,097
Total current liabilities $1,424,083 $979,755
LONG-TERM DEBT $11,758 $9,618
CAPITAL LEASES, less current portion
STOCKHOLDERS' EQUITY
Common stock - authorized 200,000,000
shares of $0.001 par value $127,568 $128,568
Additional paid-in capital $2,995,672 $2,997,672
Retained earnings (deficit) -$3,913,343 -$3,474,564
-$790,103 -$348,324
$645,738 $641,049




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Brandmakers, Inc
CONSOLIDATED STATEMENT OF OPERATIONS
9 Months Ended 9 Months Ended 3 Months Ended 3 Months Ended
March 31, 2002 March 31, 2003 March 31, 2002 March 31, 2003
Revenues $813,135 $1,211,621 $317,616 $377,037
Cost of goods sold $219,108 $507,779 $108,287 $126,078
Gross Profit $594,027 $703,842 $209,329 $250,959
Operating Expenses
Salaries and Wages $233,347 $241,455 $75,006 $120,842
Other operating expenses $291,900 $431,778 $100,397 $132,374
$525,247 $673,233 $175,403 $253,216
Operating income $68,780 $30,609 $33,926 -$2,257
Other Income (expense)
Interest Expense -$33,949 -$2,336 -$3,132 -$488
(Loss) on disposal of asset -$37,267 -$37,267
-$71,216 -$2,336 -$40,399 -$488
Income (loss) from continuing operations -$2,436 $28,273 -$6,473 -$2,745
Discontinued operations
Gain on disposal of Zoom Communications $39,856 $39,856
(Loss) on discontinued operations of
Zoom Communications -$236,590 $0 -$138,711 $0
Total discontinued operations -$196,734 $0 -$98,855 $0
Income (loss) before extraordinary item -$199,170 $28,273 -$105,328 -$2,745
Extraordinary item
Gain on forgiveness of debt $410,505 $410,505
N et income (loss) -$199,170 $438,778 -$105,328 $407,760
Per share information
Basic
Income (loss) from continuing operations $0.00 $0.00 $0.00 $0.00
Income (loss) from discontinued operations ($0.00) $0.00 ($0.00) $0.00
Income from extraordinary item $0.00 $0.00 $0.00 $0.00
($0.00) $0.00 ($0.00) $0.00
Diluted
Income (loss) from continuing operations $0.00 $0.00 $0.00 $0.00
Income (loss) from discontinued operations ($0.00) $0.00 ($0.00) $0.00
Income from extraordinary item $0.00 $0.00 $0.00 $0.00
($0.00) $0.00 ($0.00) $0.00
Average number of shares outstanding
Basic 121,140,504 127,789,069 121,140,504 127,789,069
Diluted 122,671,794 127,789,069 122,671,794 127,789,069




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Brandmakers, Inc
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended
March 31, 2002 March 31, 2003
(unaudited) (unaudited)
------------ ------------
Net Income (loss) -$199,170 $438,778
Adjustments to reconcile net lincome (loss) to net cash used in operating activities
Depreciation and amortization $165,216 $150,003
Stock issued for services $3,000
Loss on disposal of assets $37,267
(Gain) on sale of Zoom -$39,856
(Gain) on forgiveness of debt -$410,505
(Increase) decrease in assets and
Increase (decrease) in liabilities
Accounts receivable $87,098 -$73,824
Inventories $126,686 -$72,722
Employee advances -$700
Accounts Payable -$39,162 $106,294
Deferred Revenue $29,951 -$31,169
Other current liabilities $36,096 -$65,383
------------ ------------
Net cash provided by operating activities $204,126 $43,772
Cash flows used in investing activities
Capital expenditures -$41,411 $0
(increase) decrease in deposits $1,676 -$1,333
Proceeds from the disposal of equipment $1,900 $0
------------ ------------
-$37,835 -$1,333
Cash flows used in financing activities
Net proceeds (borrowings) on line of credit -$69,748 $50,092
Reductions in notes payable, long-term debt, and capital leases -$91,274 -$125,796
Advances from stockholder $30,000
------------ ------------
-$161,022 -$45,704
Net increase (decrease) in cash and cash equivalents $5,269 -$3,265
Cash and cash equivalents at beginning of the period $51,917 $6,224
Cash and cash equivalents at end of the period $57,186 $2,959
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, 2003 are as follows:
There was no significant noncash investing and financing activities for the nine months ended March 31, 2003.




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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, 2002.


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 suffered from significant losses and losses have continued during 2002 forcing a divesture of the
ZOOM Communications division as reported previously. There are still financial difficulties with a negative working capital
that must be overcome. 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 operations of the segment have ceased which resulted in a judgment against Brandmakers, Inc.


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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 internet industry at either the federal and state levels, competitive pressures in the games and vending or 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 the
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 THREE MONTHS ENDED March 2003 and 2002.


After adjustments, revenue increased to $377,037 for the three months ending March 31, 2003 from $317,616 for the three
months ending March 31, 2002. Cost of sales were $126,078 in the 2003 period resulting in a gross profit of $250,959
compared with cost of sales of $108,287 in the 2002 period resulting in a gross profit of $209,329. Salaries were $120,842
and operating expenses $132,374 in 2003 versus salaries of $75,006 and operating expenses of $100,397 in 2002. After
expenses and interest the net loss from continuing operations was $2,745 in the three months ending March 31, 2003. After
debt forgiveness of $410,505 from the agreement with Multi-Page Communications, the profit in the 2003 period was
$407,760. In the 2002 period the loss from continuing operations was $6,473 which included a loss of $37,267 for a disposal
of assets. After restating the loss from discontinued operations of $138,711 from the ZOOM Communications division and a
gain of $39,856 on the sale of ZOOM, the total net loss for the three-month period ended in 2002 was $105,328. The
settlement with Multi-Page resulting in debt forgiveness of $410,505 is covered in more detail under Recent Developments.


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COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED MARCH 2003 AND 2002.


Revenue increased to $1,211,621 for the nine months ended March 31, 2003 from $813,135 for the nine months ended March 31,
2002. Cost of goods sold amounted to $507,779 for the 2003 period versus $219,108 in 2002. Gross profits increased to
$703,842 for the nine month period ended 2003 compared to $594,027 in 2002. Salaries for the nine month period ended 2003
were $241,455 and expenses were $431,778 resulting in operating income of $30,609 and after interest expense of $2,336, the
income from continuing operations was $28,273. After the gain from debt forgiveness of $410,505 from the negotiated
settlement with Multi-Page, the profit for the nine months ended March 31, 2003 was $438,778. Salaries for the nine month
period ended 2002 were $233,347 and expenses were $291,900 resulting in a loss from continuing operations of $2,436 after
interest expense of $33,949 and $37,267 from a loss on disposal of assets. With a gain of $39,856 on the sale of ZOOM and
loss of $236,590 on the discontinued operations of ZOOM, the net loss for the period ended March 31, 2002 was $199,170. The
increased revenues for the 2003 period were due to increased sales in the Gamosity division which also results in a higher
cost of goods sold. Cash flow for the period was fair when considering that depreciation was $150,003.


LIQUIDITY AND CAPITAL RESOURCES


CASH USED IN OPERATING ACTIVITIES - the company's net cash flow from operating activities was $43,772 for the nine month
period ended March 31, 2003 compared to $204,126 for the 2002 period. Accounts receivable increased $73,824 in the 2003
period compared to a decrease of $87,098 in 2002. Inventories increased by $72,722 in the nine month period ended March 31,
2003 versus a decrease of $126,686 in 2002. Accounts payable increased by $106,294 in the 2003 period versus a decrease of
$39,162 in 2002. Other current liabilities decreased by $65,383 in 2003 compared to an increase of $36,096 in 2002. Deferred
revenue recognized by WebBox sign ups decreased by $31,169 in the 2003 period versus an increase of $29,951 in
2002. Accounts receivable, inventories and accounts payable all increased due to sales increases in the Gamosity division.


CASH FLOWS FROM INVESTING ACTIVITIES - The company's net cash used in investing activities was an increase in deposits of
1,399 in the nine month period ended March 31, 2003 compared to a net of $37,835 in the 2002 period primarily for capital
expenditures.


CASH FLOW FROM FINANCING ACTIVITIES - The Company's net cash flow from financing activities was a decrease of $45,704 in the
2003 period which included a reduction of notes payable to Multi-Page as well as long term debt and capital leases and an
increase of $50,092 in our line of credit. In addition, a company Director advanced the company $30,000 as of March 31,
2003. In the 2002 period there was a reduction of $91,274 in long term debt.


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RECENT DEVELOPMENTS


Brandmakers continues to focus on profitability, its core competencies, and continuing to strengthen its organization. In
this quarter, Brandmakers reduced its debt by nearly $500,000 based upon an agreement with Multi Page Communications. In
February of 2002, Brandmakers negotiated a settlement amount of $100,000 due on or before March 22, 2003. In March of 2003,
Brandmakers paid its final payment in full to Multi Page which removed a total of $491,707 from its notes payable on the
balance sheet.


In April of 2003, Brandmakers released its newest product, a vending machine called the Booster Vender. The product was
developed at its corporate headquarters located in Suwanee, GA. After extensive site testing, it is ready for the
marketplace. The Booster Vender is the first vending machine of its kind in that it vends a product, a cell phone antenna
booster as seen on TV, for a set price, then; it vends four free sweepstake tickets. Buyers of the product can then redeem
their sweepstakes tickets for cash prizes. It is our belief that the Booster Vender is accepted in all states that have
specific sweepstakes laws and also those that allow for redemption.


Brandmakers continues to successfully sell its Royal Magic redemption game and is currently working on modifications to the
game to make it even more attractive to its patrons. Also under development is our Magic Touch coin pusher. We expect this
to be completed by early next quarter. We are continuing to look for opportunities to expand our product offering and we
feel the coin pusher marketplace is wide open for growth.


Also in the quarter, Brandmakers has begun selling service to operators, to manage large redemption game routes for a
percentage of the profits of each machine. We believe this to be a lucrative expansion of our service and support
offering. We have launched with our first client late in the quarter and are expecting it to be producing consistent
revenues in the following quarters.


WebBox, the web-based email and virtual office division of Brandmakers continues to work on improvements by the addition of
features as well as increasing speed and reliability. MailStart continues as a free email service with usage limited to once
per week to encourage sign ups to WebBox. The WebBox renewals provided good cash flow in the three month period ended March
31, 2003.


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Part 2: OTHER INFORMATION

Item 1: LEGAL PROCEEDINGS
We reported previously that a final judgment was granted to K.W. Machines Ltd. in the amount of $320,000 and is carried on
our balance sheet for that amount.

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. (Registrant)
May 12, 2003 By: /s/ Timothy J. Minard
( Chief Executive Officer)
By: /s/ Joy Williams
(Joy Williams, Secretary)




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