SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                        COMMISSION FILE NUMBER 0 - 23672

                               SMART GAMES INTERACTIVE, INC.
                       (Name of small business issuer in its charter)



                DELAWARE                                 34-1692323
     (state or other jurisdiction of                  (I.R.S. Employer
     incorporation of organization)                  identification No.)



           1612 North Osceola
           Clearwater, Florida                              33755
  (Address of principal executive effices)               (Zip Code)

                    Issuer's Telephone Number (727) 443-3434

Securities registered under Section 12(b) of the Exchange Act:

         Title of each class           Name of each exchange on which registered

           Not Applicable                           Not Applicable



Securities registered under Section 12(g) of the Exchange Act:

      Common Stock, $0.0002 par value



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 12 months (or for
such shorter period that the issuer was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

         Yes [X]                 No [_]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.

      The issuer had no revenue during the year ended December 31, 1999.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days.

      Based on the average bid and asked price of the  issuer's  common stock on
April 10, 2000, the aggregate  market value of the  12,648,244  shares of common
stock held by non-affiliates was $1,897,000.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

      On April 10, 2000,  the issuer had a total of 27,648,244  shares of common
stock issued and outstanding.

                       Documents Incorporated by Reference

      The  Issuer's  Current  Report on Form 8-K  dated  April  17,  2000  which
discloses  a change in  control  of the  Issuer is  incorporated  herein by this
reference.

PART I

Item 1. Description of Business

      Business  History.  Sports Sciences,  Inc., the predecessor to Smart Games
Interactive, Inc. (the "Issuer") was incorporated under the laws of the State of
Ohio in October,  1991.  In April 1994,  Sports  Sciences  completed  an initial
public offering of securities  pursuant to an effective  registration  statement
under  the  Securities  Act of 1933 (the  "Securities  Act").  Subsequently,  in
connection  with the  listing of its  securities  on the Nasdaq  system,  Sports
Sciences  registered  its common  stock under  Section  12(g) of the  Securities
Exchange Act of 1934 (the  "Exchange  Act").  At the 1996 Annual  Meeting of the
stockholders of Sports Sciences,  the stockholders approved a plan to change the
corporate  domicile of Sports  Sciences by means of a statutory  merger  between
Sports Sciences and Smart Games Interactive,  Inc., a newly formed  wholly-owned
subsidiary of Sports  Sciences.  This merger was consummated on October 11, 1996
and the Issuer has been subject to the  reporting  requirements  of the Exchange
Act since that date.

      Originally,  the  Issuer  created,   designed,   developed  and  assembled
interactive  electronic game simulators that incorporated  proprietary  hardware
and software technology.  However, the cash flow generated from these operations
was not  sufficient  to pay the  Issuer's  operating  costs and the  Issuer  had
accumulated  approximately  $5,570,000 in net losses by December 31, 1996. After
several  unsuccessful  attempts to attract additional equity and debt financing,
the  Issuer  significantly  reduced  the level of  operations  during the second
quarter of 1997 and  subsequently  decided to  terminate  all  ongoing  business
operations  in the third  quarter of 1997.  During the year ended  December  31,
1997,  the Issuer  incurred net losses of  approximately  $1,311,000,  including
non-recurring  charges of  approximately  $784,000  associated with reducing its
inventories and other assets to net realizable value.

      During  the  year  ended   December  31,  1998,   the  Issuer   liquidated
substantially  all its  inventories  and  other  operating  assets  and used the
proceeds therefrom to reduce its outstanding liabilities.  At December 31, 1998,
the Issuer had no material assets and substantial unpaid liabilities. Therefore,
the Issuer was insolvent  during the entire fiscal year ended December 31, 1999.
The Issuer did not generate any revenues  during the fiscal year ended  December
31, 1999.  The Issuer had no backlog of orders for goods or services and did not
make any research and  development  expenditures  during the year ended December
31, 1999.

      Although dormant, the Issuer has not been dissolved,  filed for bankruptcy
protection  nor been placed  into  receivership.  During the fiscal  years ended
December  31,  1998  and  1999,  the  Issuer's  only  operations   consisted  of
investigation  and  consideration  of  a  potential  business  combination  with
Brandmakers, Inc. While the Issuer and Brandmakers made considerable progress in
negotiating  the  terms  of  a  potential  business  combination  and  filing  a
preliminary proxy statement for the transaction,  the transaction was ultimately
abandoned  in the third  quarter of 1999 when  Brandmakers  concluded a business
combination with another publicly-held company.

      Change in Control.  On March 30, 2000, Tobem Investments Limited purchased
15,000,000  shares of common  stock from the Issuer for  $75,000 in cash.  After
giving  effect to the Tobem  transaction,  the Issuer has a total of  27,648,244
shares of common stock issued and outstanding.  The 15,000,000  shares of common
stock held by Tobem represent  approximately  54% of the total voting power held
by all stockholders.

      In connection with the sale of a controlling  interest to Tobem, Ms. Sally
A. Fonner was appointed to serve as a member of the Issuer's  Board of Directors
and the three remaining directors resigned from the board. Tobem and the Company
then entered into a Project  Management  Agreement  ("PMA") with Capston Network
Company of Clearwater,  Florida, a company  controlled by Ms. Fonner.  Under the
PMA, Capston is specifically authorized to:

         (i)      manage the ministerial accounting and administrative functions
                  associated  with preparing and filing the Issuer's  delinquent
                  reports under the Exchange Act;

         (ii)     negotiate  the  payment  and/or  compromise  of  the  Issuer's
                  outstanding liabilities;

         (iii)    identify and negotiate a business  combination with a suitable
                  private company; and

         (iv)     pay, at its sole risk, the costs and expenses  associated with
                  maintaining  the Issuer's  status as a reporting  issuer under
                  the  Exchange  Act and  locating  and  investigating  business
                  combination opportunities.

      Capston is also  authorized to purchase for its own account or arrange for
the sale to third parties of sufficient additional shares of the Issuer's common
stock to provide  sufficient cash resources for the satisfaction of the Issuer's
outstanding obligations.

     Tobem is a private investment company that made a $25,000 unsecured loan to
Capston in February 2000. Except for this loan, there was no prior  relationship
between Tobem and Capston.  Tobem is not,  directly or indirectly,  controlling,
controlled  by or under  common  control with  Capston.  Tobem does not have the
power to  direct  or cause the  direction  of the  management  and  policies  of
Capston,  whether  through the  ownership of voting  securities,  by contract or
otherwise.

      The  Board  of  Directors  of the  Issuer  has  resolved  to  continue  to
investigate  possible  opportunities  to  establish  a business  for the Issuer.
Criteria  used in  evaluating  future  opportunities  will  include,  but not be
limited to,  establishing  an asset base for the Issuer and  confirmation of the
availability  of cash flow from  operations  to enhance  viability and establish
value for the Issuer's  shareholders.  The Issuer  anticipates  future  business
combinations  may  take  the  form of a  merger,  assets  acquisition  or  stock
acquisition. However, there is no assurance that such a transaction will ever be
consummated.

      Capston is presently involved in preliminary  negotiations with the owners
of an  established  Chinese  language  internet  portal  and a Chinese  language
internet search engine.  While  management of the Target Company has expressed a
desire to move toward a business combination  transaction,  the negotiation of a
definitive  agreement  will not be possible until the Issuer's  liabilities  are
either paid or  compromised.  Since there is no  assurance  that Capston will be
able to negotiate  suitable  payment or compromise  agreements with the Issuer's
creditors, there is no assurance that the pending discussions will result in the
successful  conclusion of a business combination or that the common stock of the
Issuer will ever have any value.

Item 2. Properties

      At December  31,  1998,  the Issuer had no  material  assets and had total
liabilities  of  approximately  $688,080.  Therefore,  the Issuer was  insolvent
during the entire fiscal year ended December 31, 1999.

Item 3. Legal Proceedings

      Miles  Rubber.  On May 9,  1997,  the  Issuer  entered  into a  settlement
agreement  with Miles  Rubber & Packing  Co. with  respect to a suit  brought by
Miles Rubber in the Court of Common Pleas,  Summit County,  Ohio (Case No. CV 96
07 2853). This agreement,  which provided for aggregate  payments of $237,970 to
Miles  Rubber,  was  subsequently  incorporated  into a judgment  entered by the
court. The Issuer failed to honor several terms of the settlement  agreement and
Miles  Rubber  foreclosed  on all  of  the  Issuer's  remaining  inventories  in
February,  1999.  These  inventories were  subsequently  sold to Brandmakers for
approximately  $3,000.  The Issuer will be required to negotiate a final payment
or compromise  agreement with Miles Rubber before it can proceed with a business
combination transaction.

      Summit County Ohio. The Issuer is subject to outstanding  judgments in the
amount  of  $6,500  for taxes due to Summit  County  Ohio.  The  Issuer  will be
required to negotiate a final payment or compromise of these judgments before it
can proceed with a business combination transaction.

      State of Delaware. On November 19, 1998, CT Corporation System resigned as
the  Issuer's  registered  agent in the  State  of  Delaware.  Subsequently,  in
compliance  with the  provisions  of ss.136 of the  General  Corporation  Law of
Delaware,  the Secretary of State declared that the Issuer's  corporate  charter
was forfeit due to the Issuer's  failure to maintain a  registered  agent in the
State of Delaware.

      On April 7, 2000, the Issuer appointed a new registered agent in the State
of  Delaware  and  filed  a  Certificate  of  Renewal,  Revival,  Extension  and
Restoration  of  its  Certificate  of   Incorporation  in  accordance  with  the
provisions of ss.312 of the General  Corporation  Law of Delaware.  Accordingly,
the Issuer is, at the date of this Annual Report on Form 10-KSB, duly organized,
validly existing and in good standing under the laws of the State of Delaware.

Item 4. Submission of Matters to a Vote of Security Holders

      No matters were submitted for a vote of the Issuer's  security  holders in
the year ended December 31, 1999 or the subsequent interim period.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

      The   Issuer's   common   stock  is  listed  on  the   NASD's   Electronic
Over-the-Counter  Bulletin Board (symbol SSCI).  The following table sets forth,
for the periods shown, the high and low trading prices for the common stock. The
quoted prices reflect  interdealer  prices  without  retail markup,  markdown or
commissions, and may not necessarily represent actual transactions. On April 12,
2000,  the  closing  bid and asked  prices for the  common  stock were $0.14 and
$0.20, respectively.

                                                    Low         High
    Year ending December 31, 1999

    First Quarter                                   0.0051      0.009
    Second Quarter                                  0.0051      0.06
    Third Quarter                                   0.03        0.08
    Fourth Quarter                                  0.011       0.06

    Year ending December 31, 1998

    First Quarter                                   0.011       1/32
    Second Quarter                                  0.015       0.04
    Third Quarter                                   0.015       0.025
    Fourth Quarter                                  0.006       0.02

      On April 12, 2000, the number of stockholder accounts of record was 230.

      On March 30,  2000,  the Issuer sold  15,000,000  newly  issued  shares of
common  stock to Tobem  for a price of  $0.005  per  share,  or  $75,000  in the
aggregate.  The offer and sale to Tobem were made in reliance  on the  exemption
from registration set forth in Securities and Exchange  Commission  Regulation S
and the  $75,000  purchase  price  was paid to the  Issuer  in cash  from  funds
belonging  to  Tobem.  The  shares  issued  to  Tobem  in  connection  with  the
transaction  are  "restricted  securities" as that term is defined in Securities
and Exchange  Commission Rule 144 and all certificates  representing such shares
have  been  imprinted  with an  appropriate  restrictive  legend.  Prior  to the
transaction,  neither Tobem nor any of its officers, directors or affiliates had
any direct or indirect interest in the Issuer.

Item 6. Plan of Operations.

      At December 31, 1998,  the Issuer had no material  assets and  substantial
liabilities.  Therefore,  the Issuer was insolvent during the entire fiscal year
ended  December  31, 1999.  The Issuer did not generate any revenues  during the
fiscal year ended  December  31,  1999.  The Issuer had no backlog of orders for
goods or services  and did not make any research  and  development  expenditures
during the year ended  December 31, 1999.  During the fiscal year ended December
31,  1999,  the  Issuer's  only  operations   consisted  of  investigation   and
negotiation of a potential business combination with Brandmakers, Inc. While the
Issuer and Brandmakers made considerable  progress in negotiating the terms of a
potential business  combination and filing a preliminary proxy statement for the
transaction,  the  transaction  was  ultimately  abandoned by Brandmakers in the
third  quarter of 1999 when it  concluded a business  combination  with  another
publicly-held company.

      At the  date  of this  Annual  Report  on  Form  10-KSB,  the  Issuer  has
liabilities that are significantly greater than its total assets, and has had no
active  management or ongoing  operations  since September  1997.  Nevertheless,
Capston  believes  that  it may be  possible  to  recover  some  value  for  the
Shareholders  through the  implementation  of a plan  whereby the Issuer will be
restructured  as a "public  shell"  for the  purpose  of  effecting  a  business
combination   transaction  with  a  suitable   privately-held  company  ("Target
Company"). In general, Capston believes the Issuer will offer owners of a Target
Company the opportunity to acquire a controlling  ownership interest in a public
company at  substantially  less cost than would otherwise be required to conduct
an initial public offering.

      Under  the  plan  developed  by  Capston,  the  Issuer  will  be used as a
corporate vehicle to seek, investigate and, if the results of such investigation
warrant,  effect a business  combination  with an existing  Target  Company that
seeks the perceived  advantages of a publicly  held  corporation.  Before such a
business combination can be effected, however, there are a number of preliminary
steps. The specific actions that Capston intends to take include:

      Negotiate  Creditor  Agreements--after  giving  effect to the  receipt  of
      $75,000  in  cash  proceeds  from  the  Tobem  transaction,  the  Issuer's
      liabilities exceed it's total assets by approximately $615,000. Before the
      Issuer will be suitable  for use as a public  shell,  Capston will need to
      negotiate the payment and/or  compromise of such outstanding  liabilities.
      There  can be no  assurance  that  Capston  will  be  able  to pay  and/or
      compromise all of the Issuer's outstanding liabilities using the available
      resources  of the  Issuer.  If  Capston  is unable to  negotiate  suitable
      payment  or  compromise  agreements  with a  significant  majority  of the
      Issuer's  creditors,   it  may  be  impossible  to  negotiate  a  business
      combination with an acceptable Target Company.

      Negotiate Business  Combination--if  Capston is able to negotiate suitable
      payment or compromise agreements with the Issuer's creditors, it must then
      seek,  investigate  and,  if the  results of such  investigation  warrant,
      attempt to negotiate business combination with an existing Target Company.

      Effect  Required  Corporate  Changes--before  proceeding  to  closing on a
      proposed business combination, Capston will be required to effect a number
      of material changes in the Issuer's  corporate  structure.  At the date of
      this  Annual  Report  on  Form  10-KSB,  Capston  expects  that it will be
      required to:

         (i)      effect a  reverse  split of at least 1 for 40 and  perhaps  as
                  much as 1 for 45;

         (ii)     authorize the issuance of sufficient  shares to facilitate the
                  business  combination  and the  go-forward  activities  of the
                  combined entities;

         (iii)    change  the  Issuer's  name to a one  selected  by the  Target
                  Company;

         (iv)     authorize  stock  option  and  other  incentive  plans for the
                  combined entities; and

         (v)      effect  any  other  reasonable  structural  changes  that  are
                  required by the Target  Company as a condition of the business
                  combination.

      Since Tobem owns a controlling interest in the Issuer, it is expected that
all required  changes will be effected with the written consent of Tobem.  Under
Delaware law, all corporate  changes that would otherwise  require a stockholder
vote may be  effected  without  a  meeting  and  without  notice  if a  majority
stockholder  consents  in writing to the  proposed  action.  Accordingly,  it is
anticipated that the other  shareholders will not have an opportunity to analyze
the various  business  opportunities  presented to the Issuer,  or to approve or
disapprove  the  terms  of any  business  combination  transaction  that  may be
negotiated.

      The Issuer's potential success will be wholly dependent on the efforts and
abilities of Ms. Fonner and Capston who will have virtually unlimited discretion
in  searching  for,   negotiating  and  entering  into  a  business  combination
transaction  with a Target  Company.  Ms.  Fonner and  Capston  have had limited
experience  in the  proposed  business of the Issuer.  Although  Ms.  Fonner and
Capston  believe  that  the  Issuer  will  be  able  to  enter  into a  business
combination  transaction  within  3 to 6 months  from  the  date of this  Annual
Report,  there can be no  assurance  as to how much time  will  elapse  before a
business  combination  is  effected,  if ever.  The Issuer will not restrict its
search to any specific  business,  industry or  geographical  location,  and the
Issuer may participate in a business venture of virtually any kind or nature.

      Ms. Fonner and Capston  anticipate  that the selection of a Target Company
for the Issuer will be complex and extremely risky.  Because of general economic
conditions,  rapid  technological  advances being made in some  industries,  and
shortages of available  capital,  Ms. Fonner and Capston  believe that there are
numerous  privately-held  companies seeking the perceived  advantages of being a
publicly traded corporation. Such perceived advantages include facilitating debt
financing  or  improving  the terms on which  additional  equity  may be sought,
providing  liquidity for the  principals  of the business,  creating a means for
providing  incentive  stock  options  or  similar  benefits  to  key  employees,
providing liquidity for all Shareholders and other factors.

      Potential  business  opportunities may occur in many different  industries
and at  various  stages  of  development,  all of  which  will  make the task of
comparative  investigation and analysis of such business opportunities extremely
difficult and complex. Ms. Fonner and Capston anticipate that the Issuer will be
able to participate in only one business venture.  This lack of  diversification
will not permit the Issuer to offset losses from one venture  against gains from
another.  Moreover,  due to the  Issuer's  lack  of  any  meaningful  financial,
managerial or other  resources,  Ms. Fonner and Capston believe the Company will
only be viewed as a suitable  business  combination  partner for companies which
have substantially  greater financial and managerial  resources than the Issuer.
Therefore, the Issuer's relative bargaining power may be limited.

Summary Description of Plan

      At the  date  of this  Annual  Report  on  Form  10-KSB,  the  Issuer  has
27,648,244  shares of Common  Stock  issued  and  outstanding.  Since  Tobem and
Capston  believe that (i) the owners of a Target Company will ordinarily want to
control  at least 90% of the  Issuer's  Common  Stock upon the  completion  of a
business  combination  transaction,  and (ii) an ultimate  capitalization in the
7,000,000 to 12,000,000  share range is ideal for a small public company,  Tobem
and Capston  believe that it will be in the best  interest of the Issuer and its
Shareholders  to effect a reverse split in the range of 1 new share for every 40
to 45 shares presently  outstanding.  Tobem and Capston believe such action will
optimize  the  number  of  shares  issued  and  outstanding   after  a  business
combination transaction,  result in a higher reported market price for the stock
of the combined  entity,  and reduce the market  volatility  of the stock of the
combined  entity.  These  factors,  in turn, are expected to enhance the overall
perception of the stock among  institutional  investors and brokerage  firms and
enhance the combined entity's ability to raise additional equity capital.

      The  determination of the number of shares to be issued in connection with
a business  combination  transaction is not an exact science and entails a great
deal  of  subjective  business  judgment.  In  arriving  at an  optimal  capital
structure  for a  business  combination  transaction,  Capston  will  ordinarily
evaluate the  strengths,  weaknesses  and growth  potential of a Target  Company
against similarly situated  publicly-held  companies in the same market segment.
Based on this  analysis,  Capston will then  attempt to estimate the  stabilized
market  capitalization  that the Target  Company  can  expect to  achieve  under
reasonably foreseeable  circumstances.  This value will then be risk weighted by
an  appropriate  factor and used to  determine  the number of shares that can be
issued by the Issuer if the goal is to reach a target  stabilized stock price of
$5 to $10 per share.  In the case of a Target  Company that can only  reasonably
expect a stabilized  market  capitalization  of $10 million to $15 million,  the
number of shares  issuable  to the  owners of the  Target  Company  will be much
smaller than would be the case if the Target Company could  reasonably  expect a
stabilized market  capitalization of $50 million to $75 million, or more. In any
event,  Capston does not intend to enter into a transaction where it expects the
stabilized market price of the Common Stock to be less than $5 per share.  There
can be no  assurance,  however,  that Capston will be successful in meeting this
performance  benchmark,  that its subjective business judgments will prove to be
accurate or that its estimate of the  stabilized  market  capitalization  that a
Target Company can expect to achieve will prove to be reasonable.

Pending Discussions

      Capston is presently involved in preliminary  negotiations with the owners
of an  established  Chinese  language  internet  portal  and a Chinese  language
internet search engine.  While  management of the Target Company has expressed a
desire to move toward a business combination  transaction,  the negotiation of a
definitive  agreement  will not be possible  until the  Issuer's SEC Reports are
brought up to date and its  liabilities  are either paid or  compromised.  Since
there is no assurance that Capston will be able to negotiate suitable payment or
compromise  agreements with the Issuer's  creditors,  there is no assurance that
the pending  discussions will result in the successful  conclusion of a business
combination or that the common stock of the Issuer will ever have any value.

Item 7. Financial Statements.

      For the information called for by this Item, see the Financial  Statements
attached.

Item 8. Changes  in and  Disagreements   With  Accountants  on   Accounting  and
Financial Disclosure.

      During  the years  ended  December  31,  1999,  there  were no  reportable
disagreements  between the Issuer and its  auditors on any matter of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act

      Ms.  Sally A.  Fonner,  age 50, has been the sole  director  of the Issuer
since March 30, 2000. For most of the last 15 years, Ms. Fonner has worked as an
independently   employed  business  consultant.   She  graduated  from  Stephens
University  in 1969 with a Bachelor  of Arts Degree in Social  Systems.  After a
stint in the private  sector,  Ms. Fonner  returned to further her education and
obtained her MBA Degree from the Executive Program of the University of Illinois
in 1979.  For the past five  years Ms.  Fonner has been  engaged in the  complex
field of  restructuring  public  companies  and arranging  business  combination
transactions.  Ms.  Fonner has  previously  served as the sole  director  of the
following public companies:

         o        Telemetrix, Inc. (TLXT), a Delaware corporation formerly known
                  as Arnox Corporation.

         o        eNote.com,  Inc. (ENOT), a Delaware corporation formerly known
                  as Webcor Electronics, Inc.

         o        Dupont  Direct  Financial  Holdings,  Inc.  (DIRX)  a  Georgia
                  corporation  formerly  known as Marci  International  Imports,
                  Inc.

         o        Liberty Group Holdings,  Inc. (LGHI),  a Delaware  corporation
                  formerly known as Bio Response, Inc.


Item 10. Executive Compensation.

      None of the Issuer's  officers or directors have received any compensation
from the Issuer during the years ended December 31, 1998 and 1999.

     As its principal  compensation  for services to be rendered  under the PMA,
Tobem has agreed to sell to Capston or its  designees  12,000,000  shares of the
Issuer's  common  stock  at a price of  $0.005  per  share,  or  $60,000  in the
aggregate.  The purchase  price for such shares will be paid to Tobem in cash on
before  the  closing  date of a  business  combination.  Except as  specifically
provided in the PMA,  Capston and its affiliates will not be entitled to receive
any  common  stock or other  securities  of the  Issuer,  or any other  options,
warrants  appreciation  rights or similar instruments that will or might entitle
Capston or any of its affiliates to receive additional shares of common stock in
the future.  The PMA also provides that Capston shall be entitled to negotiate a
reasonable " acquisition fee" or  "non-accountable  expense allowance" that will
be payable to Capston  solely by an  unrelated  third-party  who elects to enter
into a business  combination with the Issuer.  Neither the Issuer nor any of its
Stockholders  shall  have  any  claim  to or  interest  in any  fees or  expense
allowances that are paid to Capston by any third party.

     The sale of 12,000,000 shares of common stock to Capston under the PMA will
not result in the issuance of additional shares by the Issuer. It will, however,
reduce the number of shares  held by Tobem from  15,000,000  to  3,000,000,  and
increase  the number of shares  held by Capston  or its  designees  from zero to
12,000,000. Capston does not presently intend to close on its purchase of shares
from Tobem until immediately before the closing of a business combination of the
type described  below.  If Capston  changes its plans and closes its purchase of
the shares  before the closing of a business  combination,  such a purchase  may
constitute a change in control.

Item 11. Security Ownership of Certain Beneficial Owners and Management

      A total of 27,648,244  shares of common stock were issued and  outstanding
on the date of this Annual Report on Form 10-KSB. The following table sets forth
certain  information  with respect to the beneficial  ownership of shares of the
Issuer's common stock by (i) each person known to be the beneficial  owner of 5%
or more of the common  stock,  (ii) each  executive  officer or  director of the
Issuer, and (iii) all executive officers and directors as a group.
<TABLE>
<CAPTION>

    Name and Address                    Number of Shares
   of Beneficial Owner                 Beneficially Owned       Percent of Class

<S>                                        <C>                        <C>
Tobem Investments Limited (1)
Genesis Building
Georgetown, Grand Cayman                   15,000,000                 54.25%

Sally A. Fonner (1)
1612 North Osceola
Clearwater, Florida                        12,000,000                 43.40%

All Officers and Directors as a Group      12,000,000                 43.40%
<FN>

  (1) Tobem has agreed to sell to Capston or its designees  12,000,000 shares of
      the Issuer's  common  stock at a price of $0.005 per share,  or $60,000 in
      the aggregate.  This sale of 12,000,000  shares to Capston will not result
      in the  issuance of  additional  shares by the Issuer.  It will,  however,
      reduce the number of shares held by Tobem from  15,000,000  to  3,000,000,
      and  increase the number of shares held by Capston or its  designees  from
      zero to 12,000,000.
</FN>
</TABLE>

Item 12. Certain Relationships and Related Transactions

      No  officer,  director  or family  member of an  officer or  director  has
engaged  in a  reportable  transaction  with the Issuer  during the years  ended
December 31, 1998 and 1999.

      While the proposed business combination between the Issuer and Brandmakers
was  abandoned by  Brandmakers  in the third  quarter of 1999,  Brandmakers  has
advised the Issuer that it believes it is entitled to repayment of approximately
$78,500 in  expenses  incurred  on behalf of the Issuer in  connection  with the
earlier business combination negotiations.  The board of directors has requested
documentation relating to the expenses incurred by Brandmakers and may determine
that  all  or a  portion  of  the  Brandmakers  claim  is  justified  under  the
circumstances.  If the board of  directors  determines  that the  Issuer  should
compensate Brandmakers for the expenses incurred,  Brandmakers will be paid with
restricted common stock of the Issuer valued at $0.04 per share.

     The board of  directors  has been advised that  Brandmakers  purchased  the
entire  inventory  of the Issuer from Miles Rubber for  approximately  $3,000 in
January 1999. This purchase price is  significantly  less than the book value of
the  inventory as reported on the  Issuer's  financial  statements  for the year
ended December 31, 1998. The board of directors intends to evaluate the fairness
of the inventory  purchase in light of the relationship that existed between the
Issuer and Brandmakers at the time of the inventory purchase transaction. If the
board of  directors  determines  that such terms were unfair to the  Issuer,  it
intends to reduce the allowable  portion of the Brandmakers  claim to offset the
bargain element.

     As its principal  compensation  for services to be rendered  under the PMA,
Tobem has agreed to sell to Capston or its  designees  12,000,000  shares of the
Issuer's  common  stock  at a price of  $0.005  per  share,  or  $60,000  in the
aggregate.  The purchase  price for such shares will be paid to Tobem in cash on
before  the  closing  date of a  business  combination.  Except as  specifically
provided in the PMA,  Capston and its affiliates will not be entitled to receive
any  common  stock or other  securities  of the  Issuer,  or any other  options,
warrants  appreciation  rights or similar instruments that will or might entitle
Capston or any of its affiliates to receive additional shares of common stock in
the future. Capston is, however, specifically authorized to purchase for its own
account or arrange for the sale to third parties of sufficient additional shares
of the  Company's  common stock to provide  sufficient  cash  resources  for the
satisfaction  of the Company's  outstanding  obligations.  The PMA also provides
that Capston shall be entitled to negotiate a reasonable "  acquisition  fee" or
"non-accountable expense allowance" that will be payable to Capston solely by an
unrelated  third-party who elects to enter into a business  combination with the
Issuer.  Neither the Issuer nor any of its Stockholders  shall have any claim to
or  interest in any fees or expense  allowances  that are paid to Capston by any
third party.

     The sale of 12,000,000 shares of common stock to Capston under the PMA will
not result in the issuance of additional shares by the Issuer. It will, however,
reduce the number of shares  held by Tobem from  15,000,000  to  3,000,000,  and
increase  the number of shares  held by Capston  or its  designees  from zero to
12,000,000. Capston does not presently intend to close on its purchase of shares
from Tobem until immediately before the closing of a business combination of the
type described  below.  If Capston  changes its plans and closes its purchase of
the shares  before the closing of a business  combination,  such a purchase  may
constitute a change in control.

Item 13. Exhibits and Reports on Form 8-K.

Exhibits

      None.

Reports on Form 8-K

      Reference is made to the Issuer's  Current  Report on Form 8-K dated April
12, 2000.

                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  the Registrant has duly caused this Annual Report on Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized.

April 18, 2000
                                          Smart Games Interactive, Inc.

                                       By:            /s/
                                          ----------------------------------
                                          Sally A. Fonner, Sole Director and
                                          Chief Executive Officer

<PAGE>

                          Smart Games Interactive, Inc.


                              Financial Statements

                                      &
                          Independent Auditor's Report

                            December 31, 1999 & 1998

                                Harmon & Company

                                 Columbus, Ohio


<PAGE>
------------------------------------------------------------------------------
                          SMART GAMES INTERACTIVE, INC.
------------------------------------------------------------------------------




                                TABLE OF CONTENTS

Independent Auditors' Report   .........................................Page 2

Financial Statements

   Balance Sheets as of December 31, 1999 and 1998  ....................Page 3

   Statements of Operations and Accumulated Deficit
       for the years ended December 31, 1999 and 1998   ................Page 4

   Statements of Cash Flows for the years ended
       December 31, 1999 and 1998    ...................................Page 5

   Notes to Financial Statements    ....................................Page 6



<PAGE>

                          Independent Auditors' Report

To the Board of Directors
Smart Games Interactive, Inc.

      We  have  audited  the   accompanying   balance   sheets  of  Smart  Games
Interactive, Inc. as of December 31, 1999 and 1998 and the related statements of
operations  and  accumulated  deficit  and cash flows for the years then  ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

      We conducted  our audit in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion,  the 1999 and 1998 financial  statements referred to above
present fairly, in all material respects,  the financial position of Smart Games
Interactive,  Inc.  as of  December  31,  1999 and 1998,  and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note B, the
Company has incurred  losses since its start-up and is not currently  generating
sufficient cash flows from operations.  This situation raises  substantial doubt
about the Company's ability to continue as a going concern.  Management's  plans
are set  forth  in  Notes  A, B and H.  The  financial  statements  include  all
necessary   adjustments   to  reflect  the  possible   future   effects  on  the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

--------------------------
Harmon & Company

Dublin, Ohio

April 18, 2000

<PAGE>

<TABLE>
<CAPTION>
                          Smart Games Interactive, Inc.

                                 Balance Sheets

                           December 31, 1998 and 1999

                                                                                      1999         1998
                                                                                      ----         ----
                                     Assets

<S>                                                                                <C>          <C>
Current Assets .................................................................   $        0   $        0
--------------------------------------------------------------------------------   ----------   ----------

Property, Plant & Equipment, less Accumulated
   Depreciation and Amortization

   Property & Equipment ........................................................       29,170       29,170
   Less Accumulated Depreciation and Amortization ..............................      -27,882      -23,715
                                                                                   ----------   ----------
               Total Property, Plant & Equipment ...............................        1,288        5,455
                                                                                   ----------   ----------
                          Total Assets .........................................   $    1,288   $    5,455
                                                                                   ----------   ----------

                 Liabilities and Shareholder's Equity (Deficit)

Current Liabilities

   Note Payable ................................................................   $   14,000   $   14,000
   Accounts Payable ............................................................      577,252      151,604
   Accrued Settlement Expenses .................................................       50,000            0
   Other Accrued Expenses ......................................................       46,828       14,600
                                                                                   ----------   ----------
                   Total Current Liabilities ...................................      688,080      180,204
                                                                                   ----------   ----------
Shareholders' Equity (Deficit)

   Preferred Stock, at par value ($.0002), 5,000,000 shares authorized,
   - 0 - shares issued and outstanding .........................................            0            0
   Common Stock, at par value ($.0002), 50,000,000 shares authorized, 12,648,244
   shares issued and outstanding in 1999 and 1998, respectively ................        2,530        2,530
   Paid-in Capital .............................................................    6,262,943    6,262,943
   Accumulated Deficit .........................................................   -6,952,265   -6,440,222
                                                                                   ----------   ----------
              Total Shareholders' Equity (Deficit) .............................     -686,792     -174,749
                                                                                   ----------   ----------
       Total Liabilities & Shareholders' Equity (Deficit) ......................   $    1,288   $    5,455
                                                                                   ----------   ----------
</TABLE>





     The accompanying notes are an integral part of the financial statements








<PAGE>
<TABLE>
<CAPTION>
                          Smart Games Interactive, Inc.

                Statements of Operations and Accumulated Deficit

                 For the Years Ended December 31, 1999 and 1998

                                                                 1999            1998
                                                                 ----            ----


<S>                                                         <C>             <C>
Net Sales ...............................................   $          0    $     44,468
Cost of Goods Sold ......................................              0          21,300
                                                            ------------    ------------
                   Gross Margin .........................              0          23,168
                                                            ------------    ------------

Selling, General and Administrative Costs ...............          6,967          54,988
                                                            ------------    ------------
               Loss from Operations .....................         -6,967         -31,820
                                                                            ------------
Other Expenses, including Brandmakers settlement ........         51,700           1,200
                                                            ------------    ------------
    Loss before Extraordinary Items .....................        -58,667         -33,020
Extraordinary Items .....................................       -453,376         474,426
                                                            ------------    ------------
                Net Income (Loss) .......................   ($   512,043)   $    441,406
                                                            ------------    ------------
Accumulated Deficit, beginning of the period ............     -6,440,222      -6,881,628
                                                            ------------    ------------
Accumulated Deficit, end of the period ..................   ($ 6,952,265)   ($ 6,440,222)
                                                            ------------    ------------

Net Income (Loss) per common share before
extraordinary item ......................................   ($      0.00)   ($      0.00)
                                                            ------------    ------------

Net Income (Loss) per common share ......................   ($      0.04)   $       0.03
                                                            ------------    ------------

Shares used in calculation of net income (loss) per share     12,648,244      12,648,244
                                                            ------------    ------------
</TABLE>





     The accompanying notes are an integral part of the financial statements









<PAGE>

<TABLE>
<CAPTION>
                          Smart Games Interactive, Inc.

                            Statements of Cash Flows

                 For the Years Ended December 31, 1999 and 1998

                                                           1999         1998
                                                           ----         ----

<S>                                                     <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES

   Loss before extraordinary activities .............   ($ 58,667)   ($ 33,020)
   Extraordinary item ...............................    -453,376      474,426
                                                        ---------    ---------
   Net income (loss) ................................    -512,043      441,406

   Adjustments to reconcile net loss to net cash used
    by operating activities

    Depreciation and amortization ...................       4,167        4,167

    Cash provided (used) by the change in:

      Accounts receivable ...........................           0        1,925
      Inventories ...................................           0       21,300
      Prepaid expenses and other assets .............           0        1,000
      Accounts payable ..............................     425,648     -425,648
      Accrued settlement expenses ...................      50,000            0
      Accrued expenses ..............................      32,228      -46,728
                                                        ---------    ---------
NET CASH USED BY OPERATING ACTIVITIES ...............   $       0    ($  2,578)
                                                        ---------    ---------

NET INCREASE (DECREASE) IN CASH .....................   $       0    ($  2,578)
                                                        ---------    ---------

Cash and cash equivalents, beginning of year ........   $       0    $   2,578
                                                        ---------    ---------

Cash and cash equivalents, end of year ..............   $       0    $       0
</TABLE>
                                                        ---------    ---------







     The accompanying notes are an integral part of the financial statements



<PAGE>




                          Smart Games Interactive, Inc.

                          Notes to Financial Statements

                           December 31, 1999 and 1998

Note A - Summary of Significant Accounting Policies

      Organization and Nature of Prior  Operations - Sports Sciences,  Inc., the
predecessor to Smart Games Interactive,  Inc. was incorporated under the laws of
the State of Ohio in October,  1991. In April 1994, Sports Sciences completed an
initial  public  offering of  securities  pursuant to an effective  registration
statement under the Securities Act of 1933. Subsequently, in connection with the
listing of its securities on the NASDAQ system,  Sports Sciences  registered its
common stock under Section 12(g) of the Securities  Exchange Act of 1934. At the
1996 Annual Meeting of the  stockholders of Sports  Sciences,  the  stockholders
approved a plan to change the corporate  domicile of Sports Sciences by means of
a statutory merger between Sports Sciences and Smart Games Interactive,  Inc., a
newly  formed  wholly-owned  subsidiary  of Sports  Sciences.  This  merger  was
consummated  on  October  11,  1996  and the  Company  has been  subject  to the
reporting requirements of the Exchange Act since that date.

      Originally,  the  Company  created,  designed,   developed  and  assembled
interactive  electronic game simulators that incorporated  proprietary  hardware
and software technology.  However, the cash flow generated from these operations
was not  sufficient  to pay the  Company's  operating  costs and the Company had
accumulated approximately $6,881,000 in net losses by December 31, 1997.

      Cessation of Operations - After several  unsuccessful  attempts to attract
additional  equity and debt  financing,  the Company  significantly  reduced the
level of  operations  during  1997 and  subsequently  decided to  terminate  all
ongoing business operations.

      During  the  year  ended  December  31,  1998,   the  Company   liquidated
substantially  all its  inventories  and  other  operating  assets  and used the
proceeds therefrom to reduce its outstanding liabilities.  At December 31, 1999,
the  Company  had  no  material  assets  and  substantial  unpaid   liabilities.
Therefore,  the  Company  was  insolvent  during  the entire  fiscal  year ended
December 31, 1999.  The Company did not generate any revenues  during the fiscal
year ended  December 31, 1999. The Company had no backlog of orders for goods or
services and did not make any research and development  expenditures  during the
year ended  December  31,  1999.  Although  dormant,  the  Company  has not been
dissolved, filed for bankruptcy protection or been placed into receivership.

      Abandonment  of Proposed  Merger - During the fiscal years ended  December
31, 1998 and 1999, the Company's only operations  consisted of investigation and
consideration of a potential business  combination with Brandmakers,  Inc. While
the Company and Brandmakers Inc., a potential target compnay,  made considerable
progress in negotiating the terms of a potential business combination and filing
a  preliminary  proxy  statement  for  the  transaction,   the  transaction  was
ultimately  abandoned in the third quarter of 1999 when Brandmakers  concluded a
business combination with another publicly-held company.

      Property  and  Equipment  -  Property  and  equipment  is  stated at cost.
Depreciation  is computed on a  straight-line  basis over the  estimated  useful
lives of the assets,  ranging from five to seven years.  Repairs and maintenance
costs are charged to expense as incurred.

      Income  Taxes - Income  taxes are  accounted  for in  accordance  with the
provisions  of Statement of  Financial  Accounting  Standards No 109 (SFAS 109),
"Accounting for Income Taxes." Under SFAS 109, the asset and liability method is
used to account  for income  taxes.  This method  requires  the  recognition  of
deferred tax liabilities and assets for the expected future tax  consequences of
temporary  differences  between the financial  reporting  basis and tax basis of
assets and liabilities.  Valuation allowances are established,  if necessary, to
reduce the  deferred  tax asset to the amount  that will more likely than not be
realized.  Income tax expense is the current tax payable or  refundable  for the
period plus or minus the net change in the deferred tax assets and liabilities.


<PAGE>
Smart Games Interactive, Inc.                      Notes to Financial Statements

                                                                     (Continued)

      Net Loss Per Common  Share - Net loss per common  share is computed  using
the  weighted  average  number of shares of common  stock and common  equivalent
shares outstanding.

      Use of Estimates - The  preparation of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates and assumptions  that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

Note B - Basis of Presentation

      The Company's  financial  statements have been prepared on a going concern
basis and include certain  adjustments to reflect the possible future effects on
the   recoverability   and   classification   of  assets  or  the   amounts  and
classification of liabilities that may result from the possible inability of the
Company to continue as a going concern.

Note C - Extraordinary Items

      Extraordinary Item recorded in 1998 - As previously  indicated the Company
initiated a program  whereby it  negotiated  settlements  of  outstanding  trade
payable  indebtedness  owed by the Company.  Prior to and in anticipation of the
proposed merger,  the principals of Brandmakers,  Inc., on the Company's behalf,
continued the program  whereby it negotiated  settlements of  outstanding  trade
payable indebtedness owed by the Company. Brandmakers has executed notes payable
and/or  cash of  approximately  $155,000  in order  to  settle  indebtedness  of
approximately  $577,000.  Because  Company  management felt it likely that these
payables would be paid by  Brandmakers,  Inc. (a third party),  during 1999, the
Company reduced its accounts payable and other accrued expenses by approximately
$476,000 and recorded an extraordinary after tax gain of approximately $476,000.

      Reversal of  Extraordinary  Item in 1999 - Prior to the abandonment of the
proposed merger,  Brandmakers  actually paid $6,000 in full and final settlement
of  approximately  $19,000 in claims against the Company.  Since the Brandmakers
transaction was abandoned in the third quarter of 1999 and Company does not have
sufficient resources to honor the previously negotiated  settlement  agreements,
the Company has increased its accounts payable by $425,648 and its other accrued
expenses by $27,728 in the current quarter,  and recorded an extraordinary  loss
of $453,376 in the quarter ended September 30, 1999.

Note D - Common Stock

      In October 1996, the Company's  shareholders  approved an amendment to the
Company's  Articles of Incorporation to increase the number of authorized shares
of the  Company's  common stock from  10,000,000 to  50,000,000.  On October 11,
1996,  Sports  Sciences,   Inc.   ("SSI"),   the  predecessor  to  the  Company,
reincorporated  from the  State of Ohio to the State of  Delaware  by means of a
merger with and into the Company ("Merger"),  then a wholly-owned  subsidiary of
SSI. The Company was the  surviving  corporation  in the Merger.  In the Merger,
SSI's outstanding common stock was automatically extinguished and converted into
issued and outstanding shares of the Company's common stock.

      The  Company's  stock is  currently  traded on the over the counter  (OTC)
market.

Note E - Income Taxes


<PAGE>
Smart Games Interactive, Inc.                      Notes to Financial Statements

                                                                     (Continued)

      Prior to October 20,  1993,  the Company  was  treated as a  Subchapter  S
corporation   under  the  Internal   Revenue  Code  for  income  tax   purposes.
Accordingly, substantially all of the income and expenses of the Company through
October 19, 1993 are included in the federal and state income tax returns of the
shareholders  and  operating  losses  generated  through  such  period  are  not
available to the Company for carryover.  Net operating  losses since October 19,
1993 of  approximately  $7,350,000  are  available  for  carryover and expire in
various years through 2013.

      Deferred  income taxes  reflect the net effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.

      Significant  components  of the  Company's  deferred tax  liabilities  and
assets are as follows at December 31, 1997 and 1998:

                                                         1999             1998

Deferred tax liabilities, principally property
and equipment, patents and return reserves             $ - 0 -          $ - 0 -

Net deferred taxes                                     $ - 0 -          $ - 0 -
                                                        =======          =======

      Management  has  provided a valuation  allowance  for its net deferred tax
assets as the Company has incurred losses since inception.

Note F - Related Party Transactions

      During 1997,  in separate  transactions,  the Company  borrowed a total of
$14,000 from two (2) former officers and directors of the Company. The notes are
for $10,000  and $4,000  respectively  and bear  interest at the rate of 10% per
annum. Interest expense 0f $1,400 was incurred in 1999.

Note G - Contingencies

      The Company is subject to potential  claims and legal  actions  arising in
the ordinary  course of business.  Management  believes  that it has defenses of
considerable  merit and has or will seek  settlements  favorable to the Company,
but is not able to predict the ultimate  outcome of these  matters at this time.
Accordingly,  resolutions  unfavorable  to the Company  could result in material
liabilities  and  charges  which  have not been  reflected  in the  accompanying
financial statements.

Note I - Legal Proceedings


<PAGE>
Smart Games Interactive, Inc.                      Notes to Financial Statements

                                                                     (Continued)

      Miles  Rubber.  On May 9, 1997,  the  Company  entered  into a  settlement
agreement  with Miles  Rubber & Packing  Co. with  respect to a suit  brought by
Miles Rubber in the Court of Common Pleas,  Summit County,  Ohio (Case No. CV 96
07 2853). This agreement,  which provided for aggregate  payments of $237,970 to
Miles  Rubber,  was  subsequently  incorporated  into a judgment  entered by the
court. The Company failed to honor several terms of the settlement agreement and
Miles Rubber foreclosed on all of the Company's  remaining  inventories in 1999.
These  inventories  were  subsequently  sold to  Brandmakers  for  approximately
$3,000.  The Company will be required to negotiate a final payment or compromise
agreement  with Miles Rubber  before it can proceed with a business  combination
transaction.

      Summit County Ohio. The Company is subject to outstanding judgments in the
amount of approximately  $6,500 for taxes due to Summit County Ohio. The Company
will be required to negotiate a final payment or  compromise of these  judgments
before it can proceed with a business combination transaction.

      State  of  Delaware.  In  1999,  CT  Corporation  System  resigned  as the
Company's registered agent in the State of Delaware. Subsequently, in compliance
with the provisions of ss.136 of the General  Corporation  Law of Delaware,  the
Secretary of State declared that the Company's  corporate  charter was forfeited
due to the  Company's  failure to  maintain a  registered  agent in the State of
Delaware.

      In April 2000, the Company  appointed a new registered  agent in the State
of  Delaware  and  filed  a  Certificate  of  Renewal,  Revival,  Extension  and
Restoration  of  its  Certificate  of   Incorporation  in  accordance  with  the
provisions of ss.312 of the General  Corporation  Law of Delaware.  Accordingly,
the  Company  is,  at the  date of this  Annual  Report  on  Form  10-KSB,  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware.

Note H - Subsequent Events

      Sale of a Majority  Interest - On March 30,  2000,  the Board of Directors
unanimously approved the sale of 15,000,000 newly issued shares of the Company's
$0.0002 par value  common stock to Tobem  Investments  Limited  ("Tobem")  for a
price of $0.005 per share,  or $75,000 in the  aggregate.  The offer and sale to
Tobem were made in  reliance on the  exemption  from  registration  set forth in
Securities and Exchange  Commission  Regulation S and the $75,000 purchase price
was paid to in cash from funds belonging to Tobem.

      After giving effect to the Tobem  transaction,  the Company has a total of
27,648,244  shares of common stock  issued and  outstanding  and the  15,000,000
shares of common stock held by Tobem  represent  approximately  54% of the total
voting power held by all stockholders of the Company.

      It is anticipated  that Tobem will have  sufficient  voting power to elect
all  members  of  Company  Board of  Directors  and  control  substantially  all
corporate  actions and decisions for an indefinite  period of time. As a result,
the other stockholders will not have an effective voice in the management of the
Company.

      Changes in Board of Directors - In connection  with the sale of a majority
interest to Tobem, the Board of Directors  appointed Tobem's nominee to serve as
a member of the Company's  Board of Directors  until the next annual  meeting of
the stockholders, or until her successor is elected and qualified.

      The Board of Directors  also amended  Article II, Section 2 of the Company
By-laws to read in its entirety as follows:

      Section 2. Number, Method of Election Terms of Office of Directors.



<PAGE>
Smart Games Interactive, Inc.                      Notes to Financial Statements

                                                                     (Continued)

            The total  number of  Directors  constituting  the  entire  Board of
      Directors  shall be not less than one (1) nor more than nine (9), with the
      then-authorized  number of Directors  being fixed from time to time solely
      by or pursuant to a resolution passed by the Board of Directors, provided,
      however,  that the total number of Directors  shall be not less than three
      (3)  during  any  period  when  the  total  stockholders'  equity  of  the
      Corporation  exceeds  $100,000.  Each Director  shall hold office until he
      resigns from office, is removed from office by the affirmative vote of the
      holders of a majority in interest of the Corporation's common stock or his
      successor is elected and qualified.

      After  approving  the stock  sale to Tobem,  the  appointment  of  Tobem's
nominee to serve as a member of the Board of Directors  and the amendment of the
by-laws,  all prior directors resigned their respective  positions as members of
the Company's Board of Directors effective immediately.

      Project  Management  Agreement - On March 31, 2000,  the Company and Tobem
entered into a Project  Management  Agreement  (the "PMA") with Capston  Network
Company  ("Capston"),  a Delaware  corporation  owned by the sole  member of the
Company's Board of Directors.  Under the PMA, Capston is specifically authorized
and obligated to

         (i)      manage the ministerial accounting and administrative functions
                  associated  with  preparing and filing the Company's  required
                  reports under the Securities  Exchange Act of 1934, as amended
                  (the "Exchange Act"),

         (ii)     negotiate the payment  and/or  compromise  of the  outstanding
                  liabilities of the Company,

         (iii)    locate and negotiate a business  combination  agreement with a
                  suitable privately held company, and

         (iv)     pay, at its sole risk, the costs and expenses  associated with
                  maintaining the Company's status as a reporting  Company under
                  the  Exchange  Act and  locating  and  investigating  business
                  combination opportunities.

       Capston is also  specifically  authorized to purchase for its own account
or arrange for the sale to third parties of sufficient  additional shares of the
Company's common stock to provide sufficient cash resources for the satisfaction
of the Company's outstanding  obligations,  provided that the net purchase price
payable in connection  with the issuance of additional  shares shall not be less
than $0.01 per share.

      As its principal  compensation for services  rendered pursuant to the PMA,
Tobem has agreed to sell to Capston or its  designees  12,000,000  shares of the
Company's  common  stock at a price of  $0.005  per  share,  or  $60,000  in the
aggregate.  The purchase  price for such shares will be paid to Tobem in cash on
before the closing date of a business combination of the type described below.

      Except as  specifically  provided in the PMA,  Capston and its  affiliates
will not be  entitled  to receive any common  stock or other  securities  of the
Company,  or  any  other  options,  warrants,  appreciation  rights  or  similar
instruments  that will or might  entitle  Capston  or any of its  affiliates  to
receive additional shares of common stock in the future.

      The PMA provides  that Capston shall be entitled to negotiate a reasonable
" acquisition fee" or  "non-accountable  expense allowance" that will be payable
to  Capston  solely by an  unrelated  third-party  who  elects  to enter  into a
business  combination  with the  Company.  Neither  the  Company  nor any of its
Stockholders  shall  have  any  claim  to or  interest  in any  fees or  expense
allowances that are paid to Capston by any third party.


<PAGE>



      The sale of  12,000,000  shares of common  stock to Capston  under the PMA
will not result in the issuance of  additional  shares by the Company.  It will,
however, reduce the number of shares held by Tobem from 15,000,000 to 3,000,000,
and increase the number of shares held by Capston or its designees  from zero to
12,000,000. Capston does not presently intend to close on its purchase of shares
from Tobem until immediately before the closing of a business combination of the
type described  below.  If Capston  changes its plans and closes its purchase of
the shares  before the closing of a business  combination,  such a purchase  may
constitute a change in control.

      Proposed Operations - As previously  indicated,  the Company currently has
liabilities that are significantly greater than its total assets, and has had no
active  management or ongoing  operations  since September  1997.  Nevertheless,
Capston  believes  that  it may be  possible  to  recover  some  value  for  the
Shareholders  through the  implementation  of a plan whereby the Company will be
restructured  as a "public  shell"  for the  purpose  of  effecting  a  business
combination   transaction  with  a  suitable   privately-held  company  ("Target
Company").  In general,  Capston  believes  the Company  will offer  owners of a
Target Company the opportunity to acquire a controlling  ownership interest in a
public company at  substantially  less cost than would  otherwise be required to
conduct an initial public offering.

      Under  the  plan  developed  by  Capston,  the  Company  will be used as a
corporate vehicle to seek, investigate and, if the results of such investigation
warrant,  effect a business  combination  with an existing  Target  Company that
seeks the perceived  advantages of a publicly  held  corporation.  Before such a
business combination can be effected, however, there are a number of preliminary
steps. The specific actions that Capston intends to take include:

      (1.)  File Delinquent SEC Reports

            The Company  has not yet filed its Form 10-QSB for the period  ended
            September  30, 1999 or its Form  10-KSB for the year ended  December
            31,  1999.  The  Company's  auditors  are  presently  working on the
            preparation of its financial  statements and it is anticipated  that
            the delinquent  Form 10-QSB for the period ended  September 30, 1999
            will be filed prior to April 20, 2000 and the delinquent Form 10-KSB
            for the year ended  December  31,  1999 will be filed prior to April
            30, 1999.

      (2.) Negotiate Creditor Agreements

            At  December  31,  1998,  the  Company  had no  material  assets and
            substantial unpaid liabilities. Therefore, the Company was insolvent
            during the entire fiscal year ended  December 31, 1999..  Before the
            Company  will be suitable  for use as a public  shell,  Capston will
            need to negotiate the payment and/or  compromise of such outstanding
            liabilities.  There can be no assurance that Capston will be able to
            pay and/or  compromise  all of the  Company's  liabilities  with the
            available  resources  of  the  Company.  If  Capston  is  unable  to
            negotiate   suitable   payment  or  compromise   agreements  with  a
            significant  majority  of  the  Company's   creditors,   it  may  be
            impossible  to negotiate a business  combination  with an acceptable
            Target Company.

      (3.) Negotiate Business Combination

            If  Capston is able to  negotiate  suitable  payment  or  compromise
            agreements  with  the  Company's  creditors,   it  must  then  seek,
            investigate  and,  if the  results  of such  investigation  warrant,
            attempt to negotiate  business  combination  with an existing Target
            Company.

      (4.) Effect Required Corporate Changes

            Before  proceeding  to closing on a proposed  business  combination,
            Capston  will be required to effect a number of material  changes in
            the Company's corporate  structure.  In this regards Capston expects
            that it will be required to:

            (a.)  Effect a reverse split of at least 1 for 40 and perhaps as
                  much as 1 for 45;


<PAGE>




            (b.)  authorize the issuance of sufficient shares to facilitate
                  the business combination and the go-forward activities of
                  the combined entities;

            (c.)  change the Company's name to a one selected by the Target
                  Company;

            (d.)  authorize stock option and other incentive plans for the
                  combined entities; and

            (e.)  effect any other reasonable structural changes that are
                  required by the Target Company as a condition of the
                  business combination.

      Since Tobem owns a  controlling  interest in the  Company,  it is expected
that all required  changes will be effected  with the written  consent of Tobem.
Under  Delaware  law,  all  corporate  changes  that would  otherwise  require a
stockholder  vote may be  effected  without a meeting  and  without  notice if a
majority stockholder consents in writing to the proposed action. Accordingly, it
is  anticipated  that the other  shareholders  will not have an  opportunity  to
analyze the various  business  opportunities  presented  to the  Company,  or to
approve or disapprove the terms of any business combination transaction that may
be negotiated.

      Although  Capston  believes  that the Company will be able to enter into a
business  combination  transaction  within 3 to 6  months  from the date of this
Annual  Report on Form 10KSB, there can be no assurance as to how much time will
elapse before a business combination is effected,  if ever. The Company will not
restrict its search to any specific business, industry or geographical location,
and the Company may  participate in a business  venture of virtually any kind or
nature.