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, 2002
[ ] 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 incorporation or organization) Identification No.)
140 Satellite Blvd. Ste. C, Suwanee, 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 15, 2002.
BRANDMAKERS, INC.
FORM 10-QSB
For the Quarter Ended March 31, 2002
INDEX PAGEPART I: FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2001 and March 31, 2002 . . . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statement of Operations for the nine and three months ended March 2001 and 2002. . . 4 Condensed Consolidated Statements of Cash Flows for the nine and three months ended March 2001 and 2002. . . 5 Notes to Consolidated Financial Statements . . . . . . . . 6 Item 2 - Management's Discussion and Analysis . . . . . . . . . . . . . . 7 - 8PART 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 . . . . . . . . . . . . . 9SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
- 2 -
Brandmakers, Inc.
CONSOLIDATED BALANCE SHEETS June 30, March 31, 2001 2002 ----------- ----------- ASSETSCURRENT ASSETS Cash and cash equivalents $ 51,917 $ 57,186 Receivables Trade $ 302,910 $ 70,132 Less allowance for doubtful accounts $ (25,000) $ (25,000) ----------- ----------- $ 277,910 $ 45,132 Inventories $ 206,402 $ 31,669 ----------- ----------- Total current assets $ 536,229 $ 133,987PROPERTY AND EQUIPMENT - net $ 845,293 $ 586,003OTHER ASSETS Certificates of deposit - pledged $ 37,096 $ 37,096 Deposits $ 45,606 $ 47,282 NTN Stock $ - $ 20,000 ----------- ----------- $ 82,702 $ 104,378 $ 1,464,224 $ 824,368 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES Line of credit $ 142,013 $ - Notes payable $ 843,400 $ 831,428 Accounts payable $ 405,768 $ 132,322 Deferred revenue $ 267,108 $ 297,059 Other current liabilities $ 36,037 $ 6,942 Accrued Salaries $ - $ 65,191 Current portion of capital leases $ 158,915 $ 59,787 ----------- ----------- Total current liabilities $ 1,853,241 $ 1,392,729CAPITAL LEASES, less current portion $ 31,026 $ 50,852LONG-TERM DEBTSTOCKHOLDERS' EQUITY Common stock - authorized 200,000,000 shares of $0.001 par value $ 123,141 $ 123,141 Additional paid-in capital $ 2,979,672 $ 2,979,672 Retained earnings (deficit) $(3,522,856) $(3,722,026) ----------- ----------- $ (420,043) $ (619,213) ----------- ----------- $ 1,464,224 $ 824,368 =========== ===========
- 3 -
Brandmakers, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended Three Months Ended March 31, March 31, 2001 2002 2001 2002 ------------ ------------ ------------ ------------Revenues $ 492,649 $ 813,135 $ 162,106 $ 317,616Cost of goods sold $ 157,706 $ 219,108 $ 40,389 $ 108,287 ------------ ------------ ------------ ------------ Gross Profit $ 334,943 $ 594,027 $ 121,717 $ 209,329Operating Expenses Salaries and Wages $ 468,045 $ 265,540 $ 153,158 $ 83,653 Other operating expenses $ 616,140 $ 486,852 $ 203,293 $ 146,678 ------------ ------------ ------------ ------------ $ 1,084,185 $ 752,392 $ 356,451 $ 230,331Operating income (loss) $ (749,242) $ (158,365) $ (234,734) $ (21,002)Other Income (expense) Interest Expense $ (113,840) $ (38,194) $ (27,922) $ (3,781) Loss on disposal of assets $ - $ (37,267) $ - $ (37,267) ------------ ------------ ------------ ------------ $ (113,840) $ (75,461) $ (27,922) $ (41,048) Loss from continuing operations $ (863,082) $ (233,826) $ (262,656) $ (62,050)Discontinued operations Gain on sale of Zoom communications $ - $ 39,856 $ - $ 39,856 Gain (loss) on discontinued operations of Zoom Communications $ 194,803 $ (5,200) $ 144,636 $ (83,134) Gain (loss) on discontinued operations of KW Leisure LTD $ (682,679) $ - $ - $ - ------------ ------------ ------------ ------------ Total discontinued operations $ (487,876) $ 34,656 $ 144,636 $ (43,278) Net income (loss) $ (1,350,958) $ (199,170) $ (118,020) $ (105,328) ============ ============ ============ ============Per share information Basic Loss from continuing operations $ (0.01) $ 0.00 $ 0.00 $ 0.00 Loss from discontinued operations $ (0.01) $ 0.00 $ 0.00 $ 0.00 ------------ ------------ ------------ ------------ $ (0.01) $ 0.00 $ 0.00 $ 0.00 Diluted Loss from continuing operations $ 0.01 $ 0.00 $ 0.00 $ 0.00 Loss from discontinued operations $ 0.01 $ 0.00 $ 0.00 $ 0.00 ------------ ------------ ------------ ------------ $ 0.01 $ 0.00 $ 0.00 $ 0.00 ============ ============ ============ ============ Average number of shares outstanding Basic 121,140,504 121,140,504 121,140,504 121,140,504 ============ ============ ============ ============ Diluted 122,044,080 122,671,794 122,044,080 122,671,794 ============ ============ ============ ============
- 4 -
Brandmakers, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended March 31, 2001 2002 (unaudited) (unaudited) ------------ ------------Net loss $ (1,350,958) $ (199,170)Adjustments to reconcile net loss to net cash(used in) provided by operating activities Depreciation and amortization $ 165,717 $ 165,216 Stock option expense $ 51,525 $ - Write-off of K.W. Leisure Ltd, Goodwill $ 486,729 $ - Loss on disposal of assets $ - $ 37,267 (Gain) on sale of Zoom communications $ - $ (39,856) (Increase) decrease in assets and Increase (decrease) in liabilities Accounts receivable $ 461,594 $ 87,098 Inventories $ (76,852) $ 126,686 Other current assets $ 514 $ - Accounts Payable $ 245,915 $ (39,162) Accrued expenses $ (197,652) $ 36,096 Deferred Revenue $ 205,406 $ 29,951 ------------ ------------Net cash (used in) provided by operating activities $ (8,062) $ 204,126Cash flows used in investing activities Capital expenditures $ - $ (41,411) Proceeds from the disposal of equipment $ - $ 1,900 (Increase) decrease in Deposits $ (5,252) $ 1,676 Other changes in long term assets $ (11,165) $ - ------------ ------------ $ (16,417) $ (37,835)Cash flows provided by financing activities Reductions in long-term debt and capital leases $ (478,126) $ (91,274) Reduction in line of credit $ - $ (69,748) Advances on notes payable $ 151,134 $ - Decrease (Increase) in pledged certificate of deposit $ 322,980 $ - ------------ ------------ $ (4,012) $ (161,022)Net increase or decrease in cash and cash equivalents $ (28,491) $ 5,269Cash and cash equivalents at beginning of the period $ 82,587 $ 51,917Cash and cash equivalents at end of the period $ 54,096 $ 57,186SUPPLEMENTAL SCHEDULE of noncash investing and financing activities and certaincash flow information:The Company's noncash investing and financing activities for the nine monthperiod ended March 31, 2002 are as follows:The Company sold the various assets and liabilities of the Zoom Communicationdivision per the attached 8-K for 20,202 shares valued at $20,000 in restrictedstock of NTN Communications.
- 5 -
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, 2001.
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 one division discussed under recent developments. 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. In addition, as discussed under recent developments, the Company has sold its Zoom Communication division which has resulted in gains and losses in discontinued operations as presented.
- 6 -
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 THREE MONTHS ENDED MARCH 2002
and 2001.
For accounting purposes, we have removed the revenue, cost of goods sold and the majority of expenses from the income statements in both 2001 and 2002 from the ZOOM Communications division to discontinued operations. See Recent Developments.
After adjustments, revenue increased to $317,616 for the three months ending March 31, 2002 from $162,106 for the three months ending March 31, 2001. Cost of sales were $108,287 in the 2002 period resulting in a gross profit of $209,329 compared with cost of sales of $40,389 in the 2001 period resulting in a gross profit of $121,717. Salaries were $83,653 and operating expenses $146,678 in 2002 versus salaries of $153,158 and operating expenses of $203,293 in 2001. After losses on disposal of assets and interest the loss from continuing operations was $62,050 in the three months ending March 31, 2002 versus a loss from continuing operations of $262,656 in the same period in 2001. After a gain on discontinued operations of the Zoom Communication division of $144,636 in the three months ended March 31, 2001 and a loss on discontinued operations of $83,134 for the three months ended March 31, 2002, the net loss for three months ended March 31, 2001 totaled $118,020 compared to a net loss of $105,328 for the three months ended March 31, 2002. WebBox renewal income commenced in February 2002, providing good cash flow for the period although the income is spread out over twelve months. See Recent Developments.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED
MARCH 2002 AND 2001.
For accounting purposes, we have removed the revenue, cost of goods sold and the majority of expenses from the income statements in both 2001 and 2002 from the ZOOM Communications division and KW Leisure, LTD to discontinued operations. See Recent Developments.
After adjustments, revenue increased to $813,135 for the nine months ended March 31, 2002 from $492,649 for the nine-month period ended March 31, 2001. Cost of sales were $219,108 in the 2002 period resulting in a gross profit of $594,027 compared with cost of sales of $157,706 in the 2001 period resulting in a gross profit of $334,943. Salaries were $265,540 and operating expenses $486,852 in the 2002 period versus salaries of $468,045 and operating expenses of $616,160 in 2001. After a gain on discontinued operations of $194,803 for the Zoom Communication division, and a loss on discontinued operations of $682,679 for KW Leisure, LTD, the net loss totaled $1,350,958 for the nine month period ended March 31, 2001. After a gain on sale of Zoom Communications of $39,856 and a loss on discontinued operations of Zoom Communications of $5,200, the net loss for the nine month period ended March 31, 2002 total $199,170. WebBox renewal income commenced in February 2002, providing good cash flow for the period although the income is spread out over twelve months.
- 7 -
LIQUIDITY AND CAPITAL RESOURCES
Please note that adjustments were made to the balance sheet on March 31, 2002 due to the sale of ZOOM Communications, which have an effect upon our comparisons.
CASH USED IN OPERATING ACTIVITIES - the company's net cash flow from operating activities was $204,126 for the nine month period ended March 31, 2002 compared to a deficit of $8,062 for the 2001 period. Accounts receivable decreased $87,098 in the 2002 period compared to a decrease of $461,594 in 2001. Inventories decreased by $126,686 in the nine-month period ended March 31, 2002 versus an increase of $76,852 in 2001. Other current assets did not change in 2002 as compared to a decrease of $514 in the 2001 period. Accounts payable decreased by $39,162 in the 2002 period versus an increase of $245,915 in 2001. Accrued expenses increased by $36,096 in 2002 compared to a decrease of $197,652 in 2001. Deferred revenue recognized by WebBox sign ups increased by $29,951 versus an increase of $205,406 in 2001. Note that the WebBox subscription service commenced in February 2001 resulting in the initial large increase and the increase in 2002 is a result of renewal income. The net loss decreased significantly from $1,350,958 in 2001 to $199,170 in the nine-month period ended March 31, 2002.
CASH FLOWS FROM INVESTING ACTIVITIES - The company's net cash used in investing activities was $37,835 in the nine month period ended march 31, 200 compared to a deficit of $16,417 for the same period in 2001.
CASH FLOW FROM FINANCING ACTIVITIES - The Company's net cash flow from financing activities was a deficit of $161,022 in the 2002 period versus a deficit of $4,012 in 2001.
RECENT DEVELOPMENTS
Brandmakers Inc. sold their ZOOM Communications division effective April 5, 2002 under an Asset Purchase Agreement with NTN Communications, Inc. The transaction was consummated and substantially complete as of March 31, 2002 and has been reflected in this 10QSB. Brandmakers Board of Directors determined that they had to divest themselves of the division to survive without the resources to absorb the losses or for expansion. A copy of the Form 8-K filed with the Securities and Exchange Commission is attached as an exhibit indicating the assets and liabilities that were transferred. As indicated, Brandmakers also received $20,000 of restricted common shares of NTN Communications, Inc.
For the three months ended March 31, 2002, ZOOM Communications in House paging shows a loss of $36,910. However, the separate corporate overhead for the period was a loss of $197,905, so with a significant share of this loss allocated to ZOOM, the decision by the Board of Directors was not difficult.
Also, as reported in Form 8-K attached as an exhibit, Multi-Page Communications was quite cooperative in restructuring the outstanding debt of $518,400 to $100,000 with $5,000 down and $95,000 amortized over five years at 9% interest with a balloon payment at the end of one year. If a payment is missed under the new agreement, the full amount becomes due; therefore the entire outstanding debt of $518,400 still remains recorded in notes payable.
As discussed under Legal Proceedings, there is a final judgment in favor of K. W. Machines Limited in the amount of $320,000. Brandmakers is hopeful that this debt can be restructured as well and avoid a reorganization proceeding.
WebBox commenced renewal income in February 2002, which has been quite beneficial in terms of cash flow. We have an opt-in procedure for those whose credit cards have expired and an opt-out procedure for all others when we charge their credit cards. It is still too premature to quote a renewal percentage. Approximately two thirds of our new WebBox subscriptions come from MailStart, which is our free service that can be used only once per week.
- 8 -
Part 2: OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
We reported in our 10QSB for the three-month period ending on December 31, 2001 that there was a summary judgment granted to K.W. Machines, Ltd. for $320,000. This has subsequently been recorded as a final judgment. This liability is recorded under notes payable on the consolidated balance sheet.
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
Form 8-K attached as an exhibit with an effective date of 4/5/02 but pertinent to this 10QSB Filing.
- 9 -
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, 2002 By: /s/ Geoff Williams -------------------------- (Geoff Williams, Director & Chief Executive Officer) By: /s/ Joy Williams -------------------------- (Joy Williams, Secretary)
- 10 -
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) ____April 5, 2002 ____
_________________ Brandmakers, Inc. _________________
(Exact Name of Regristrant as Specified in Its Charter)
_______________________ Utah ________________________
(State or Other Jurisdiction of Incorporation)
_____ 0-28184 ____ _______ 37-1099747 _______
(Commission File Number) (IRS Employer Identification Number)
_ 140 Satellite Bl. Suite C Suwanee, GA _ __ 30024 __
(Address of Principal Executive Offices) (Zip Code)
________________ 770 - 338 - 1958 ________________
(Registrant's Telephone Number, Including Area Code)
__________________________________________________
(Former Name of Former Address, if Changed Since Last Report)
Brandmakers, Inc. sold their ZOOM Communications division effective April 5, 2002 under an Asset Purchase Agreement with NTN Communications, Inc. (AMEX: NTN). Assets and Liabilities were transferred per Exhibit A which was the book value as of March 15, 2002. In addition, Brandmakers, Inc. received $20,000 of restricted common shares of NTN Communications, Inc. Brandmakers, Inc. was relieved from the responsibility of current losses as well as the liabilities. Russ Ford, President and Sal Veni, Chief Operating Officer, resigned their positions with Brandmakers to manage the division for NTN.
Brandmakers restructured the outstanding debt of $518,400 with Multi-Page Communications, reducing the note to $100,000 with $5,000 down and $95,000 amortized over five years at 9% interest with a balloon payment at the end of one year. However, the full amount less payments will remain on the balance sheet until the final payment is made. All payments must be made on a timely basis with a thirty day grace period.
Book Value
As of March 15, 2002
ZOOM Communications Division
Assets:
Accounts Receivable
Factored $ 90,047.36
90 days from invoice date 21.311.17
Other 18,363.83
-----------
129,722.36
Prepaid inventory 2,995.00
Inventory 45,052.04
Demo Systems 11,898.50
Advanced Replacement Systems 11,272.50
Fixed Assets, Net 92,966.17
-----------
Total Assets $ 293,906.57
-----------
Liabilities
Accounts Payable $ 234,284.20
Line of Credit 72,265.22
Deferred Revenue:
Credit Balances in A/R 7,213.35
-----------
Total Liabilities 313,762.77
-----------
Net Book Value (19,856.20)
===========
End of Filing
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, 2002
[ ] 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 incorporation or organization) Identification No.)
140 Satellite Blvd. Ste. C, Suwanee, 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 15, 2002.
BRANDMAKERS, INC.
FORM 10-QSB
For the Quarter Ended March 31, 2002
INDEX PAGEPART I: FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2001 and March 31, 2002 . . . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statement of Operations for the nine and three months ended March 2001 and 2002. . . 4 Condensed Consolidated Statements of Cash Flows for the nine and three months ended March 2001 and 2002. . . 5 Notes to Consolidated Financial Statements . . . . . . . . 6 Item 2 - Management's Discussion and Analysis . . . . . . . . . . . . . . 7 - 8PART 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 . . . . . . . . . . . . . 9SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
- 2 -
Brandmakers, Inc.
CONSOLIDATED BALANCE SHEETS June 30, March 31, 2001 2002 ----------- ----------- ASSETSCURRENT ASSETS Cash and cash equivalents $ 51,917 $ 57,186 Receivables Trade $ 302,910 $ 70,132 Less allowance for doubtful accounts $ (25,000) $ (25,000) ----------- ----------- $ 277,910 $ 45,132 Inventories $ 206,402 $ 31,669 ----------- ----------- Total current assets $ 536,229 $ 133,987PROPERTY AND EQUIPMENT - net $ 845,293 $ 586,003OTHER ASSETS Certificates of deposit - pledged $ 37,096 $ 37,096 Deposits $ 45,606 $ 47,282 NTN Stock $ - $ 20,000 ----------- ----------- $ 82,702 $ 104,378 $ 1,464,224 $ 824,368 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES Line of credit $ 142,013 $ - Notes payable $ 843,400 $ 831,428 Accounts payable $ 405,768 $ 132,322 Deferred revenue $ 267,108 $ 297,059 Other current liabilities $ 36,037 $ 6,942 Accrued Salaries $ - $ 65,191 Current portion of capital leases $ 158,915 $ 59,787 ----------- ----------- Total current liabilities $ 1,853,241 $ 1,392,729CAPITAL LEASES, less current portion $ 31,026 $ 50,852LONG-TERM DEBTSTOCKHOLDERS' EQUITY Common stock - authorized 200,000,000 shares of $0.001 par value $ 123,141 $ 123,141 Additional paid-in capital $ 2,979,672 $ 2,979,672 Retained earnings (deficit) $(3,522,856) $(3,722,026) ----------- ----------- $ (420,043) $ (619,213) ----------- ----------- $ 1,464,224 $ 824,368 =========== ===========
- 3 -
Brandmakers, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended Three Months Ended March 31, March 31, 2001 2002 2001 2002 ------------ ------------ ------------ ------------Revenues $ 492,649 $ 813,135 $ 162,106 $ 317,616Cost of goods sold $ 157,706 $ 219,108 $ 40,389 $ 108,287 ------------ ------------ ------------ ------------ Gross Profit $ 334,943 $ 594,027 $ 121,717 $ 209,329Operating Expenses Salaries and Wages $ 468,045 $ 265,540 $ 153,158 $ 83,653 Other operating expenses $ 616,140 $ 486,852 $ 203,293 $ 146,678 ------------ ------------ ------------ ------------ $ 1,084,185 $ 752,392 $ 356,451 $ 230,331Operating income (loss) $ (749,242) $ (158,365) $ (234,734) $ (21,002)Other Income (expense) Interest Expense $ (113,840) $ (38,194) $ (27,922) $ (3,781) Loss on disposal of assets $ - $ (37,267) $ - $ (37,267) ------------ ------------ ------------ ------------ $ (113,840) $ (75,461) $ (27,922) $ (41,048) Loss from continuing operations $ (863,082) $ (233,826) $ (262,656) $ (62,050)Discontinued operations Gain on sale of Zoom communications $ - $ 39,856 $ - $ 39,856 Gain (loss) on discontinued operations of Zoom Communications $ 194,803 $ (5,200) $ 144,636 $ (83,134) Gain (loss) on discontinued operations of KW Leisure LTD $ (682,679) $ - $ - $ - ------------ ------------ ------------ ------------ Total discontinued operations $ (487,876) $ 34,656 $ 144,636 $ (43,278) Net income (loss) $ (1,350,958) $ (199,170) $ (118,020) $ (105,328) ============ ============ ============ ============Per share information Basic Loss from continuing operations $ (0.01) $ 0.00 $ 0.00 $ 0.00 Loss from discontinued operations $ (0.01) $ 0.00 $ 0.00 $ 0.00 ------------ ------------ ------------ ------------ $ (0.01) $ 0.00 $ 0.00 $ 0.00 Diluted Loss from continuing operations $ 0.01 $ 0.00 $ 0.00 $ 0.00 Loss from discontinued operations $ 0.01 $ 0.00 $ 0.00 $ 0.00 ------------ ------------ ------------ ------------ $ 0.01 $ 0.00 $ 0.00 $ 0.00 ============ ============ ============ ============ Average number of shares outstanding Basic 121,140,504 121,140,504 121,140,504 121,140,504 ============ ============ ============ ============ Diluted 122,044,080 122,671,794 122,044,080 122,671,794 ============ ============ ============ ============
- 4 -
Brandmakers, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended March 31, 2001 2002 (unaudited) (unaudited) ------------ ------------Net loss $ (1,350,958) $ (199,170)Adjustments to reconcile net loss to net cash(used in) provided by operating activities Depreciation and amortization $ 165,717 $ 165,216 Stock option expense $ 51,525 $ - Write-off of K.W. Leisure Ltd, Goodwill $ 486,729 $ - Loss on disposal of assets $ - $ 37,267 (Gain) on sale of Zoom communications $ - $ (39,856) (Increase) decrease in assets and Increase (decrease) in liabilities Accounts receivable $ 461,594 $ 87,098 Inventories $ (76,852) $ 126,686 Other current assets $ 514 $ - Accounts Payable $ 245,915 $ (39,162) Accrued expenses $ (197,652) $ 36,096 Deferred Revenue $ 205,406 $ 29,951 ------------ ------------Net cash (used in) provided by operating activities $ (8,062) $ 204,126Cash flows used in investing activities Capital expenditures $ - $ (41,411) Proceeds from the disposal of equipment $ - $ 1,900 (Increase) decrease in Deposits $ (5,252) $ 1,676 Other changes in long term assets $ (11,165) $ - ------------ ------------ $ (16,417) $ (37,835)Cash flows provided by financing activities Reductions in long-term debt and capital leases $ (478,126) $ (91,274) Reduction in line of credit $ - $ (69,748) Advances on notes payable $ 151,134 $ - Decrease (Increase) in pledged certificate of deposit $ 322,980 $ - ------------ ------------ $ (4,012) $ (161,022)Net increase or decrease in cash and cash equivalents $ (28,491) $ 5,269Cash and cash equivalents at beginning of the period $ 82,587 $ 51,917Cash and cash equivalents at end of the period $ 54,096 $ 57,186SUPPLEMENTAL SCHEDULE of noncash investing and financing activities and certaincash flow information:The Company's noncash investing and financing activities for the nine monthperiod ended March 31, 2002 are as follows:The Company sold the various assets and liabilities of the Zoom Communicationdivision per the attached 8-K for 20,202 shares valued at $20,000 in restrictedstock of NTN Communications.
- 5 -
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, 2001.
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 one division discussed under recent developments. 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. In addition, as discussed under recent developments, the Company has sold its Zoom Communication division which has resulted in gains and losses in discontinued operations as presented.
- 6 -
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 THREE MONTHS ENDED MARCH 2002
and 2001.
For accounting purposes, we have removed the revenue, cost of goods sold and the majority of expenses from the income statements in both 2001 and 2002 from the ZOOM Communications division to discontinued operations. See Recent Developments.
After adjustments, revenue increased to $317,616 for the three months ending March 31, 2002 from $162,106 for the three months ending March 31, 2001. Cost of sales were $108,287 in the 2002 period resulting in a gross profit of $209,329 compared with cost of sales of $40,389 in the 2001 period resulting in a gross profit of $121,717. Salaries were $83,653 and operating expenses $146,678 in 2002 versus salaries of $153,158 and operating expenses of $203,293 in 2001. After losses on disposal of assets and interest the loss from continuing operations was $62,050 in the three months ending March 31, 2002 versus a loss from continuing operations of $262,656 in the same period in 2001. After a gain on discontinued operations of the Zoom Communication division of $144,636 in the three months ended March 31, 2001 and a loss on discontinued operations of $83,134 for the three months ended March 31, 2002, the net loss for three months ended March 31, 2001 totaled $118,020 compared to a net loss of $105,328 for the three months ended March 31, 2002. WebBox renewal income commenced in February 2002, providing good cash flow for the period although the income is spread out over twelve months. See Recent Developments.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED
MARCH 2002 AND 2001.
For accounting purposes, we have removed the revenue, cost of goods sold and the majority of expenses from the income statements in both 2001 and 2002 from the ZOOM Communications division and KW Leisure, LTD to discontinued operations. See Recent Developments.
After adjustments, revenue increased to $813,135 for the nine months ended March 31, 2002 from $492,649 for the nine-month period ended March 31, 2001. Cost of sales were $219,108 in the 2002 period resulting in a gross profit of $594,027 compared with cost of sales of $157,706 in the 2001 period resulting in a gross profit of $334,943. Salaries were $265,540 and operating expenses $486,852 in the 2002 period versus salaries of $468,045 and operating expenses of $616,160 in 2001. After a gain on discontinued operations of $194,803 for the Zoom Communication division, and a loss on discontinued operations of $682,679 for KW Leisure, LTD, the net loss totaled $1,350,958 for the nine month period ended March 31, 2001. After a gain on sale of Zoom Communications of $39,856 and a loss on discontinued operations of Zoom Communications of $5,200, the net loss for the nine month period ended March 31, 2002 total $199,170. WebBox renewal income commenced in February 2002, providing good cash flow for the period although the income is spread out over twelve months.
- 7 -
LIQUIDITY AND CAPITAL RESOURCES
Please note that adjustments were made to the balance sheet on March 31, 2002 due to the sale of ZOOM Communications, which have an effect upon our comparisons.
CASH USED IN OPERATING ACTIVITIES - the company's net cash flow from operating activities was $204,126 for the nine month period ended March 31, 2002 compared to a deficit of $8,062 for the 2001 period. Accounts receivable decreased $87,098 in the 2002 period compared to a decrease of $461,594 in 2001. Inventories decreased by $126,686 in the nine-month period ended March 31, 2002 versus an increase of $76,852 in 2001. Other current assets did not change in 2002 as compared to a decrease of $514 in the 2001 period. Accounts payable decreased by $39,162 in the 2002 period versus an increase of $245,915 in 2001. Accrued expenses increased by $36,096 in 2002 compared to a decrease of $197,652 in 2001. Deferred revenue recognized by WebBox sign ups increased by $29,951 versus an increase of $205,406 in 2001. Note that the WebBox subscription service commenced in February 2001 resulting in the initial large increase and the increase in 2002 is a result of renewal income. The net loss decreased significantly from $1,350,958 in 2001 to $199,170 in the nine-month period ended March 31, 2002.
CASH FLOWS FROM INVESTING ACTIVITIES - The company's net cash used in investing activities was $37,835 in the nine month period ended march 31, 200 compared to a deficit of $16,417 for the same period in 2001.
CASH FLOW FROM FINANCING ACTIVITIES - The Company's net cash flow from financing activities was a deficit of $161,022 in the 2002 period versus a deficit of $4,012 in 2001.
RECENT DEVELOPMENTS
Brandmakers Inc. sold their ZOOM Communications division effective April 5, 2002 under an Asset Purchase Agreement with NTN Communications, Inc. The transaction was consummated and substantially complete as of March 31, 2002 and has been reflected in this 10QSB. Brandmakers Board of Directors determined that they had to divest themselves of the division to survive without the resources to absorb the losses or for expansion. A copy of the Form 8-K filed with the Securities and Exchange Commission is attached as an exhibit indicating the assets and liabilities that were transferred. As indicated, Brandmakers also received $20,000 of restricted common shares of NTN Communications, Inc.
For the three months ended March 31, 2002, ZOOM Communications in House paging shows a loss of $36,910. However, the separate corporate overhead for the period was a loss of $197,905, so with a significant share of this loss allocated to ZOOM, the decision by the Board of Directors was not difficult.
Also, as reported in Form 8-K attached as an exhibit, Multi-Page Communications was quite cooperative in restructuring the outstanding debt of $518,400 to $100,000 with $5,000 down and $95,000 amortized over five years at 9% interest with a balloon payment at the end of one year. If a payment is missed under the new agreement, the full amount becomes due; therefore the entire outstanding debt of $518,400 still remains recorded in notes payable.
As discussed under Legal Proceedings, there is a final judgment in favor of K. W. Machines Limited in the amount of $320,000. Brandmakers is hopeful that this debt can be restructured as well and avoid a reorganization proceeding.
WebBox commenced renewal income in February 2002, which has been quite beneficial in terms of cash flow. We have an opt-in procedure for those whose credit cards have expired and an opt-out procedure for all others when we charge their credit cards. It is still too premature to quote a renewal percentage. Approximately two thirds of our new WebBox subscriptions come from MailStart, which is our free service that can be used only once per week.
- 8 -
Part 2: OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
We reported in our 10QSB for the three-month period ending on December 31, 2001 that there was a summary judgment granted to K.W. Machines, Ltd. for $320,000. This has subsequently been recorded as a final judgment. This liability is recorded under notes payable on the consolidated balance sheet.
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
Form 8-K attached as an exhibit with an effective date of 4/5/02 but pertinent to this 10QSB Filing.
- 9 -
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, 2002 By: /s/ Geoff Williams -------------------------- (Geoff Williams, Director & Chief Executive Officer) By: /s/ Joy Williams -------------------------- (Joy Williams, Secretary)
- 10 -
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) ____April 5, 2002 ____
_________________ Brandmakers, Inc. _________________
(Exact Name of Regristrant as Specified in Its Charter)
_______________________ Utah ________________________
(State or Other Jurisdiction of Incorporation)
_____ 0-28184 ____ _______ 37-1099747 _______
(Commission File Number) (IRS Employer Identification Number)
_ 140 Satellite Bl. Suite C Suwanee, GA _ __ 30024 __
(Address of Principal Executive Offices) (Zip Code)
________________ 770 - 338 - 1958 ________________
(Registrant's Telephone Number, Including Area Code)
__________________________________________________
(Former Name of Former Address, if Changed Since Last Report)
Brandmakers, Inc. sold their ZOOM Communications division effective April 5, 2002 under an Asset Purchase Agreement with NTN Communications, Inc. (AMEX: NTN). Assets and Liabilities were transferred per Exhibit A which was the book value as of March 15, 2002. In addition, Brandmakers, Inc. received $20,000 of restricted common shares of NTN Communications, Inc. Brandmakers, Inc. was relieved from the responsibility of current losses as well as the liabilities. Russ Ford, President and Sal Veni, Chief Operating Officer, resigned their positions with Brandmakers to manage the division for NTN.
Brandmakers restructured the outstanding debt of $518,400 with Multi-Page Communications, reducing the note to $100,000 with $5,000 down and $95,000 amortized over five years at 9% interest with a balloon payment at the end of one year. However, the full amount less payments will remain on the balance sheet until the final payment is made. All payments must be made on a timely basis with a thirty day grace period.
Book Value
As of March 15, 2002
ZOOM Communications Division
Assets:
Accounts Receivable
Factored $ 90,047.36
90 days from invoice date 21.311.17
Other 18,363.83
-----------
129,722.36
Prepaid inventory 2,995.00
Inventory 45,052.04
Demo Systems 11,898.50
Advanced Replacement Systems 11,272.50
Fixed Assets, Net 92,966.17
-----------
Total Assets $ 293,906.57
-----------
Liabilities
Accounts Payable $ 234,284.20
Line of Credit 72,265.22
Deferred Revenue:
Credit Balances in A/R 7,213.35
-----------
Total Liabilities 313,762.77
-----------
Net Book Value (19,856.20)
===========
End of Filing
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
