U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission File No. 0-10519
BGI, INC.
(Name of Small Business Issuer in Its Charter)
OKLAHOMA 73-1092118
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
13581 Pond Springs Rd. Suite 105
Austin, Texas 78729
(Address of Principal Executive Offices)
Issuer's Telephone Number: (512) 335-0065
Indicate by check whether the Issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
(1) Yes X No ____ (2) Yes X No ___
Indicated below is the quantity of shares outstanding as of September 30, 2001
of the registrants common stock at
Class Number of shares outstanding
Common stock, $.001 par value 9,685,165
TABLE OF CONTENTS
Page
Number
-------------
Part I:
Item 1. Financial Statements* 3
Item 2. Management's Discussion and Analysis 9
Part II:
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
*This amended 10-Q is being filed as a result of the following: The audit of the
Company's financial statements for the year ended December 31, 2001 produced
several adjustments that affected the financial statements for the 2001
quarterly periods which has resulted in the Company restating the financial
statements for the affected quarterly periods. See Note 1 of the Notes to
Financial Statements.
2
PART I
ITEM 1. FINANCIAL STATEMENTS
BGI, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS September 30, 2001 December 31, 2000
(Restated)
======================= =======================
Current assets:
Cash $ 256,610 $ 58,124
Accounts receivable - trade, net 95,742 117,505
Inventories 16,783 86,453
Prepaid expenses - 14,099
----------------------- -----------------------
Total current assets 369,135 276,181
----------------------- -----------------------
Property and equipment, at cost - net 1,212,779 684,340
----------------------- -----------------------
Other assets:
Intangible assets - net - 36,121
Deferred financing costs - 34,484
Deposits 4,118 27,741
----------------------- -----------------------
Total other assets 4,118 98,346
----------------------- -----------------------
Total assets $ 1,586,032 $ 1,058,867
======================= =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade and accrued expenses $ 453,003 $ 403,352
Current maturities of long-term debt 48,685 200,482
Current maturities of capital lease obligations 271,286 277,567
----------------------- -----------------------
Total current liabilities 772,974 881,401
Long-term debt, less current maturities 61,126 21,814
Capital lease obligations, less current maturities 4,124 190,901
----------------------- -----------------------
Total liabilities 838,224 1,094,116
----------------------- -----------------------
Stockholders' equity:
Preferred stock, nonvoting; $.001 par; 10,000,000
shares authorized; no shares issued and outstanding - -
Common stock, $.001 par; 70,000,000 shares authorized;
9,685,165 and 9,141,142 issued and outstanding 9,685 9,141
Additional paid-in capital 1,068,622 936,253
Retained earnings (deficit) (330,499) (980,643)
----------------------- -----------------------
Total stockholders' equity (deficit) 747,808 (35,249)
----------------------- -----------------------
Total liabilities and stockholders' equity $ 1,586,032 $ 1,058,867
======================= =======================
The accompanying notes are an integral part of these financial statements.
3
BGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
(Restated) (Restated)
------------------ ------------------ ------------------ ------------------
Revenue:
Machine $ 1,443,350 $ - $ 2,085,795 $ -
Phone card 19,071 560,193 452,991 2,108,699
Hall rental and concession income 6,000 82,602 102,199 249,777
Machine sales 13,500 4,995 36,000 40,976
Other revenue 459 8,367 5,464 34,058
------------------ ------------------ ------------------ ------------------
Total revenue 1,482,380 656,157 2,682,449 2,433,510
------------------ ------------------ ------------------ ------------------
Cost of revenue:
Phone cards 42,915 171,730 209,531 615,801
Machine Depreciation 53,729 71,629 182,726 214,414
Prizes paid - 187,040 113,360 701,405
Hall rental and concession expenses 3,428 47,632 39,663 143,393
Machines sold 12,225 3,875 39,350 27,705
------------------ ------------------ ------------------ ------------------
Total cost of revenue 112,297 481,906 584,630 1,702,718
------------------ ------------------ ------------------ ------------------
Gross margin 1,370,083 174,251 2,097,819 730,792
General and administrative expenses 720,408 290,088 1,391,856 948,668
------------------ ------------------ ------------------ ------------------
Operating income (loss) 649,675 (115,837) 705,963 (217,876)
Other income (expense):
Gain on sale of asset - - 46,163 -
Interest expense (26,837) (78,981) (101,982) (206,863)
------------------ ------------------ ------------------ ------------------
Income (loss) before federal income tax 622,838 (194,818) 650,144 (424,739)
Federal income tax - - - -
Net income (loss) 622,838 (194,818) 650,144 (424,739)
Retained earnings (deficit):
Beginning (953,337) (550,522) (980,643) (320,601)
------------------ ------------------ ------------------ ------------------
Ending $ (330,499) $ (745,340) $ (330,499) $ (745,340)
================== ================== ================== ==================
Basic income (loss) per common share:
Income (loss) applicable to common
stockholder $ 0.06 $ (0.02) $ 0.07 $ (0.05)
================== ================== ================== ==================
Diluted income (loss) per common share:
Income (loss) applicable to common
$ 0.06 $ (0.02) $ 0.07 $ (0.05)
stockholder
================== ================== ================== ==================
The accompanying notes are an integral part of these financial statements.
4
BGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months Ended September 30,
---------------------------------------
2001
(Restated) 2000
------------------ ----------------
Operating activities:
Net income (loss) $ 650,144 $ (424,739)
Adjustments to reconcile net income to net cash income:
Depreciation and amortization 264,031 278,445
Recovery from bad debts 14,095 87,613
Stock issued for services 132,913 76,433
Deferred financing cost 34,484 39,398
Gain on disposal of property (46,262) -
Changes in current assets and liabilities:
Accounts receivable 21,760 38,874
69,670 45,775
Inventories
Prepaid expenses 14,099 (6,464)
Accounts payable - trade and accrued expenses 49,651 20,126
------------------ ----------------
Cash provided by operating activities 1,204,585 155,461
------------------ ----------------
Investing activities:
Purchase of property and equipment (726,064) (57,757)
Increase (decrease) in other assets 1,973 (25,807)
Proceeds from sale of equipment 82,612 3,000
------------------ ----------------
Cash provided (used) by investing activities (641,479) (80,564)
------------------ ----------------
Financing activities:
Payments on long-term debt (171,562) (73,884)
Payments on long-term leases (193,058) (98,281)
Proceeds from issuance of common stock - 65,000
------------------ ----------------
Cash provided (used) by financing activities (364,620) (107,165)
------------------ ----------------
Net increase (decrease) in cash 198,486 (32,268)
Cash at beginning of period 58,124 89,636
------------------ ----------------
Cash at end of period $ 256,610 $ 57,368
================== ================
Supplemental disclosures of cash flow information:
Interest paid $ 101,982 $ 206,863
================== ================
Cash flow from non-cash transfer activities
Purchases of fixed assets with long-term debt $ 44,982 $ -
================== ================
The accompanying notes are an integral part of these financial statements.
5
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The financial statements for the nine months ended September 30, 2001 and
September 30, 2000 are unaudited. They have however, been prepared from the
books and records of the Company in accordance with generally accepted
accounting principles and the rules and regulations of the Securities and
Exchange Commission. All adjustments (consisting only of normal recurring
accruals) which are, in the opinion of management, necessary for a fair
presentation of financial position and operating results for the interim periods
have been reflected. These financial statements should be read in conjunction
with the Company's most recent Annual Report on Form 10-KSB, which includes
audited financial statements for the year ended December 31, 2000.
RECLASSIFICATIONS:
Certain prior period amounts have been reclassified to conform with this
September 30, 2001 presentation.
RESTATEMENT OF FINANCIAL STATEMENTS:
As a result of adjustments discovered during the audit of the Company's
financial statements for the year ended December 31, 2001, the Company has
restated the quarterly financial statements that were affected by audit
adjustments. The adjustments related to the write-off of expenses previously
capitalized in connection with an internet project that was later abandoned, the
accrual of non-cash compensation expense in connection with a consulting
agreement, the recognition of non-cash compensation expense for warrants issued
in connection with a management agreement, and the reclassification of a gain on
sale of assets to deferred revenue.
The affect of the restatement for the three months ended September 30, 2001, is
as follows:
Three Months Ended September 30, 2001
As Reported Restated
--------------- ----------------
Statement of Income Data:
Total revenue $ 1,482,380 1,482,380
Total cost of revenue 112,297 112,297
Gross margin 1,370,083 1,370,083
General and administrative expenses 618,011 720,408
Operating income 752,072 649,675
Gain on sale of asset 33,489 -
Net income 758,724 622,838
Basic income per common share .08 .06
Diluted income per common share .07 .06
The affect of the restatement for the nine months ended September 30, 2001, is
as follows:
Nine Months Ended September 30, 2001
As Reported Restated
---------------- -------------
Statement of Income Data:
Total revenue $ 2,682,449 2,682,449
Total cost of revenue 584,630 584,630
Gross margin 2,097,819 2,097,819
General and administrative expenses 1,235,142 1,391,856
Operating income 862,677 705,963
Gain on sale of asset 79,652 46,463
Net income 840,346 650,144
Basic income per common share .09 .07
Diluted income per common share .08 .07
6
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
As of September 30, 2001
As Reported Restated
-------------- ------------
Balance Sheet Data: $
Total current assets 369,135 369,135
Total other assets 57,971 4,118
Total liabilities 790,836 838,224
Total stockholder's equity 849,049 747,808
TAXES ON INCOME:
The Company accounts for income taxes under the asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than possible changes in the tax laws or rates. The Company provides a valuation
allowance against its deferred tax assets to the extent that management
estimates that it is not "more likely than not" that such deferred tax assets
will be realized. However, the company will use portions of NOL tax benefits in
this period to offset income tax expense.
NOTE 2 - EARNINGS PER SHARE
Basic income or loss per common share is computed based on the weighted average
number of common shares outstanding during each period. For the periods ended
September 30, 2001, diluted income or loss per common share is computed based on
the weighted average number of common shares outstanding, after giving effect to
the potential issuance of common stock on the exercise of options and warrants
and the impact of assumed conversions. The following table provides a
reconciliation between basic and diluted shares outstanding:
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
----------------- ---------------- ----------------- ----------------
Weighted average number of common shares
used in basic earnings per share 9,685,165 9,004,639 9,555,452 9,323,870
Effect of dilutive securities:
Stock options 590,264 - 360,550 -
Warrants 79,400 - 16,472 -
----------------- ---------------- ----------------- ----------------
Weighted average number of common shares and dilutive potential common stock
used in diluted earnings per
share 10,354,829 9,004,639 9,932,474 9,323,870
================= ================ ================= ================
There were 497,000 and 806,000 options and warrants excluded from weighted
average shares outstanding for the three months ended September 30, 2001 and
2000, respectively, because they are anti-dilutive.
There were 1,017,000 and 806,000 options and warrants excluded from weighted
average shares outstanding for the nine months ended September 30, 2001 and
2000, respectively, because they are anti-dilutive.
7
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 3 - RELATED PARTY
During the quarter that ended September 30, 2001, Reid Funderburk, Chairman, CEO
and Director, and/or other employees of BGI, Inc., assisted in the organization
of and /or invested Charity Station locations.
The Company does not contract with or have any other direct relationship with
any Charity Station location. However, subsequent to September 30, 2001, the
Board of Directors voted effective December 31, 2001, in an effort to avoid any
perceived conflicts of interest, any and all employees of the Company will no
longer be allowed to assist in the organization of and/or invest in Charity
Station locations.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
BGI, Inc. and Subsidiaries (the Company) is including the following cautionary
statement in this Quarterly Report 10-QSB to make applicable and utilize the
safe harbor provision of the Private Securities Litigation Reform Act of 1995
regarding any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and, accordingly,
involve risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in such statements.
The Company's expectations, beliefs and projections are expressed in good faith
and are believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectations, beliefs or
projections will be realized.
RESTATEMENT OF HISTORICAL FINANCIAL STATEMENTS
See Note 1 of Notes to Financial Statements for a description of certain
adjustments to previously issued quarterly financial statements.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2001
Compared with the Three Months Ended September 30, 2000
Total Revenue for the three months ended September 30, 2001 amounted to
$1,482,380 compared to $656,157 for the three months ended September 30, 2000.
The 125.9% increase was due to the installation of 185 new Charity Station
machines and the conversion of the existing Lucky Strike phone card machines
into Charity Station machines. Charity Station rental revenue accounted for
$1,443,350 of the total revenue for the three months ended September 30, 2001 as
compared to no Charity Station rental revenue during the comparable period of
2000.
Cost of Sales was $112,297 for three months ended September 30,2001 compared to
$481,906 for three months ended September 30, 2000. This 76.7% decrease in cost
of sales was due to the conversion of phone card machines to the new Charity
Stations and the elimination of the cost associated with the phone cards.
Gross Margin for the three months ended September 30, 2001, was $1,370,083 as
compared to $174,251 for the three months ended September 30, 2000. This can
again be attributed to the conversion of the phone card machines and the
elimination of the cost associated with the actual phone cards.
General and administrative expense was $720,408 for the three months ended
September 30, 2001 compared to $290,288 for the three months ended September 30,
2000. The increase was primarily due to consultant fees for the development of a
new business plan that included exploration of opportunities in other states and
the addition of new employees.
9
Nine Months Ended September 30, 2001
Compared with the Nine Months Ended September 30, 2000.
Total revenue for the nine months ended September 30, 2001, were $2,682,449
compared with $2,433,510 for the nine months ended September 30, 2000. This
10.2% increase is due to the increased revenue from the Charity Station
machines. Phone card revenues for the nine months ended September 30, 2001
decreased to $452,991 from $2,108,699 for the nine months ended September 30,
2000.
Cost of sales decreased from $1,702,718 for the nine months ended September 30,
2000 to $584,630 for the nine months ended September 30, 2001. Cost of sales
decreased as a direct result of the lower number of phone card machines versus
the increasing number of Charity Station which have lower cost of sales.
Gross margin was $2,097,819 for the nine months ended September 30, 2001 as
compared to $730,792 for the nine months ended September 30, 2000. The 187.1%
increase was due to the new Charity Station machines having very little cost
associated with them as compared with the costs associated with the phone card
machines.
General and administrative expenses for the nine months ended September 30,
2001, were $1,391,856 compared to $948,668 for the nine months ended September
30, 2000. The increase was due to efforts to support the continued deployment of
machines as well as infrastructure to service the larger installed base of
machines.
LIQUIDITY
Current assets of $369,135 as of September 30, 2001, represented 47.8% of
current liabilities of $772,974 as compared to current assets of $276,181 at
December 31, 2000, which represented 31.3% of current liabilities of $881,401.
The Company's cash position improved for the nine months ended September 30,
2001, due to an increase in net income.
Cash provided by operating activities was $1,204,585 for the nine months ended
September 30, 2001 as compared to cash provided by operating activities of
$155,461 in the 2000 period. The change is due to net income in the nine months
ended September 30, 2001 of 650,144 as compared to a net loss of 424,739 in the
2000 period.
During the nine months ended September 30, 2001, the Company had $641,479 of
cash used investing activities as the purchase of Charity Station machines was
partially offset by the sale of equipment related to bingo facilities. This
compares to cash used in investing activities of $80,564 in 2000 period, which
was related to purchases of phone card machines.
The Company used $364,620 for financing activities during the nine months ended
June 30, 2001 related to the principal payments on various notes and equipment
leases. This compares to cash used in financing activities of $80,654 in the
2000 period in which the payments on various notes and equipment leases were
offset by $65,000 proceeds from the issuance of common stock.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None as of September 30, 2001.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
Thomas Murphy, President, resigned effective 7/31/2001. Robert
Chappell, Secretary/Treasurer resigned effective May 31, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. None
(b) No reports on Form 8-K were filed during the quarter for which this report
on Form 10-QSB is filed.
11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 14, 2002 By /s/ Reid Funderburk
-------------------
Reid Funderburk
Interim Chief Executive Officer
Date: May 14, 2002 By /s/ William Schwartz
--------------------
William Schwartz, Chief Financial Officer
12