U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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SEC File No: 33-14982-LA
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ___________
BEVERLY HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 33-14982-LA 77-0530472
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(State or other (Commission (IRS Employ
jurisdiction of File Number) Identification No.)
incorporation)
5215 North O'Connor Boulevard, Suite 200, Irving, Texas 75039
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (972) 443-9800
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(Former name or former address, if changed since last report)
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 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.
[ X ] Yes [ ] No
State the number of shares outstanding of each of the issuers classes of common
equity as of the latest practicable date.
Approximately 5,490,473 Shares as of the date of this report.
Transitional Small Business Disclosure Format (check one): [ ] Yes [ X ] No
See accompanying notes to unaudited condensed financial statements.
1
BEVERLY HOLDINGS, INC.
Form 10-QSB for the Quarter ended September 30, 2002
Table of Contents
Page
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Condensed Balance Sheets (Unaudited) - June 30, 2002 and
September 30, 2002 3
Condensed Statements of Operations (Unaudited) for the Three
Months Ended September 30, 2002 and 2001 and for the Period
from August 30, 2000 (Date of Reorganization) through September
30, 2002 3
Condensed Statements of Cash Flows (Unaudited) for the Three
Months Ended September 30, 2002 and for the Period from
August 30, 2000 (Date of Reorganization) through September
30, 2002 5
Notes to Condensed Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - OTHER INFORMATION 12
ITEM 1 - LEGAL PROCEEDINGS
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS 12
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 12
ITEM 5 - OTHER INFORMATION 12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE 13
2
BEVERLY HOLDINGS, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Item 1. Condensed Financial Statements
BEVERLY HOLDINGS, INC.
(A Development Stage Enterprise)
CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30 June 30
2002 2002
------------ ------------
Current Assets
Cash $ 126 $ 868
Prepaid expenses and other current asset 5,263 2,000
------------ ------------
Total Current Assets 5,389 2,868
Investments in Non-Marketable Securities -- 285,000
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Total Assets $ 5,389 $ 287,868
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 154,708 $ 113,679
Advances from related party 8,400 6,400
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Total Current Liabilities 163,108 120,079
Stockholders' Equity (Deficit)
Common stock, $0.001 par value; 50,000,000
shares authorized; 5,590,473 and
5,490,473 shares issued and outstanding,
respectively 5,590 5,490
Additional paid-in capital 472,915 463,015
Deficit accumulated during the development stage (636,224) (300,716)
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Total Stockholders' Equity (Deficit) (157,719) 167,789
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Total Liabilities and Stockholders' Equity (Deficit) $ 5,389 $ 287,868
============ ============
See accompanying notes to unaudited condensed financial
statements.
3
BEVERLY HOLDINGS, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Period
From August 30,
2000 (Date of
For the Three Months Reorganization)
Ended September 30, Through
---------------------- September 30,
2002 2001 2002
--------- --------- ---------
Sales $ -- $ -- $ --
Cost of Sales -- -- --
--------- --------- ---------
Gross Profit -- -- --
General and Administrative Expenses 50,508 51,916 326,224
Impairment of investment in non-
marketable securities 285,000 -- 310,000
--------- --------- ---------
Net Loss $(335,508) $ (51,916) $(636,224)
========= ========= =========
Basic and Diluted Loss Per Share $ (0.06) $ (0.01)
========= =========
Weighted Average Number of Shares
Outstanding 5,563,299 4,264,114
========= =========
See accompanying notes to unaudited condensed financial
statements.
4
BEVERLY HOLDINGS, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Period
From August 30,
2000 (Date of
For the Three Months Reorganization)
Ended September 30, Through
---------------------- September 30,
2002 2001 2002
--------- --------- ---------
Cash Flows From Operating Activities
Net loss $(335,508) $ (51,916) $(636,224)
Impairment of investment in non-
marketable securities 285,000 -- 310,000
Changes in current assets and liabilities:
Prepaid expenses and other current assets (3,263) -- (5,263)
Accounts payable 41,029 2,778 73,213
Advances from related party 2,000 -- 8,400
--------- --------- ---------
Net Cash Used in Operating Activities (10,742) (49,138) (249,874)
--------- --------- ---------
Cash Flows From Investing Activities
Investments in non-marketable securities -- (25,000) (310,000)
--------- --------- ---------
Net Cash Used in Investing Activities -- (25,000) (310,000)
--------- --------- ---------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 10,000 80,000 560,000
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Net Cash Provided by Financing Activities 10,000 80,000 560,000
--------- --------- ---------
Net Change In Cash (742) 5,862 126
Cash at Beginning of Period 868 3,102 --
--------- --------- ---------
Cash at End of Period $ 126 $ 8,964 $ 126
========= ========= =========
See accompanying notes to unaudited condensed financial
statements.
5
BEVERLY HOLDINGS, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements--The accompanying condensed financial statements
are unaudited. In the opinion of management, all necessary adjustments (which
include only normal recurring adjustments) have been made to present fairly the
financial position, results of operations and cash flows for the periods
presented. Certain information and disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
Company's financial statements and notes thereto included in the Form 10-KSB
dated June 30, 2002. The results of operations for the period ended September
30, 2002 is not necessarily indicative of the operating results to be expected
for the full year.
Basis of Presentation -- The accompanying condensed financial statements have
been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
During the three months ended September 30, 2002, the Company incurred a net
loss of $335,508. As of September 30, 2002, the Company has had no revenues and
the accumulated deficit from reorganization totaled $636,224. These factors,
among others, indicate that the Company may be unable to continue as a going
concern. The accompanying financial statements do not include any adjustments
relating to the carrying amount and classification of recorded assets or the
amount and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to generate sufficient
cash flows to meet its obligations on a timely basis, to obtain additional
financing and ultimately to attain successful operations. The Company is
currently considered a development stage enterprise whose purpose is to seek
merger and acquisition candidates.
NOTE 2 - INVESTMENT IN NON-MARKETABLE SECURITIES
During July of 2001, the Company entered into an agreement with Sonic Garden,
Inc. (SGI), a privately held California corporation in the business of online
music and traditional recordings that gives the Company the right to purchase up
to 2,000,000 shares of SGI at $0.50 per share. The price per share was
determined as a result of an arms length negotiation between SGI and the
Company. Other than the option agreement, there are no shares being actively
traded. Were the entire 2,000,000 options to be exercised, the Company would own
approximately 22% of the outstanding equity securities of SGI. The Company
originally planned to exercise the Option in multiple traunches over a 12 month
period, however, the Company is not obligated to purchase any shares from SGI.
The Company considered this to be a long-term investment.
During the year ended June 30, 2002 the Company purchased 570,000 common shares
of SGI for $285,000. Because the present ownership of SGI by the Company is only
a minority ownership (less than 8%), the investment has been reported at its
market value as an investment in non-marketable securities. Because SGI is a
privately held corporation and because there are no comparable shares being
traded, the fair market value of the shares was determined to be the option
price of $0.50 per share.
As of September 30, 2002, management determined that its investment in SGI was
impaired and wrote the investment to zero. If SGI becomes a publicly traded
company, or a readily determinable market value becomes available, the carrying
value of the investment will be adjusted to the readily determinable market
value.
On January 24, 2002, the Company purchased 100,000 common shares of Corporate
Playbook Holdings, Inc., (Corporate Playbook) a privately held corporation in
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BEVERLY HOLDINGS, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
the online human resources industry, for $25,000, or $0.25 per share. The
purchase price was determined as the result of an arms length negotiation
between the Company and Corporate Playbook. Because Corporate Playbook is a
privately held corporation, the purchase was recorded as an investment in
non-marketable securities at the purchase price of $0.25 per share.
As of June 30, 2002, management determined that its investment in Corporate
Playbook was impaired and wrote the investment to zero. If Corporate Playbook
becomes a publicly traded company, or a readily determinable market value
becomes available, the carrying value of the investment will be adjusted to the
readily determinable market value.
NOTE 3 - STOCKHOLDERS' EQUITY
On August 30, 2000 and August 10, 2001, the Company authorized a 1-for-25
reverse stock split and a 1-for-4 reverse stock split, respectively, of the
Company's $0.001 par value common stock. All share and per share data have been
retroactively restated to reflect these reverse stock splits.
On March 31, 2001, the Company's Board of Directors approved the terms of a
financial proposal from an institutional investor for the sale of up to
1,000,000 shares of common stock to the investor at $1.00 per share after the
Company conducted a $200,000 private placement offering (20,000,000 shares at
$0.01 per share) and a subsequent 4-to-1 reverse stock split. During April of
2001, the Company entered into a stock purchase agreement with various investors
in connection with the private placement offering spoken of above. As of June
30, 2001, $120,000 in proceeds had been received. During August of 2001, the
remaining $80,000 was collected. After the $200,000 had been received, the
5,000,000 common shares were issued on August 30, 2001. For financial reporting
purposes, the shares were considered issued upon the receipt of proceeds,
therefore, 2,000,000 shares were considered to have been issued during August of
2001. No underwriting discounts were experienced and no commissions or finder's
fees were paid. The proceeds were used for the Company's general operational
purposes and to invest in common shares of SGI.
During the year ended June 30, 2002, the Company sold 350,000 shares of common
stock for $350,000 in proceeds pursuant to the exercise of 350,000 options by an
institutional investor. The options were issued in connection with the financial
proposal for the sale of up to 1,000,000 shares of common stock at $1.00 per
share. The proceeds were used for the Company's general operational purposes and
for further investment in SGI.
On July 25, 2002, the Company issued 100,000 shares of common stock for $10,000
in proceeds to the president of the Company in consideration for his service as
a director and as President, Secretary and Treasurer.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the three months ended September 30, 2002, and the year ended June 30,
2002, MSI made advances to the Company to meet current operating expenses. As of
September 30, 2002, the balance of $8,400 was due on demand with no other terms
stated.
7
PART 1 - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR BEVERLY HOLDINGS, INC.
The following discussion of the financial conditions and results of operations
of the Company should be read in conjunction with the financial statements,
including notes thereto, for the Company.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
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This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks or uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumption prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
OVERVIEW OF THE COMPANY
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Beverly Holdings, Inc. (the "Company") was incorporated as "Golden Queens Mining
Company" on July 31, 1986 under the laws of the State of Nevada, primarily for
the purpose of exploration, development and production of certain mining
properties located in Esmeralda County, Nevada. In July, 1987, the Company
changed its name to "Breakthrough Electronics, Inc.," terminated its activities
in the mining business, and began efforts to develop and market electronic
products, including a telephone device designed to screen telephone calls,
acquired from its then President. This business was terminated several years
ago. On November 22, 1999, the Company acquired Digital D.J., Inc., pursuant to
a reverse triangular merger in a transaction in which approximately 12,466,992
shares of the Company's common stock were issued to the shareholders of Digital
D.J., Inc. (the "Reorganization"). The Reorganization resulted in control of the
Company transferring from the former shareholders to the former shareholders of
Digital D.J., Inc. The terms and conditions of the Reorganization are set forth
in the Company's Form 8-K filed with the Commission for the period beginning on
November 22, 1999.
8
Digital DJ Inc. was incorporated in December 1991. Its primary business activity
was the development and marketing of a digital data system that provides a
variety of information services to radio listeners using FM subcarrier
technology. The Company licensed the use of its technology to its subsidiaries
for the territories of Europe, North America and Latin America.
On August 30, 2000, the Company's shareholders and its Board of Directors voted
to distribute the majority of the outstanding shares of each of the Company's
subsidiaries, Digital D.J., Inc., a California corporation ("DDJ California"),
the primary operating company Latin American Subcarrier Services, a California
corporation ("LASS"), the Latin American licensee, European Licensing Group, a
California corporation ("ELG") and Domestic Transmission Technologies, a
California corporation ("DTT"), the North American licensee, to the Company's
shareholders. Ninety-five percent (95%) of the outstanding shares of each of the
subsidiaries were distributed to the shareholders, ratably, based upon their
ownership interest. The Company retained approximately five percent (5%) of the
outstanding shares of DDJ California and ELG, LASS and DTT. The shareholders and
the Board of Directors also voted to amend the Company's Articles of
Incorporation to change the Company's name to Digital D.J. Holdings, Inc., and
to conduct a twenty-five for one reverse stock split of the Company's common
stock. After distributing out approximately ninety-five percent (95%) of the
ownership of the core businesses of the Company to its shareholders, the Company
elected to seek other acquisition candidates and to sell up to 1,000,000 shares
of its common stock for up to $.10 per share, to be paid in goods, services or
cash. The Company was unable to sell shares at $.10 per share since the
Company's stock was priced at $0.02 per share and had virtually no volume at
that price level. Effective March 6, 2001, the Company changed its name to
Beverly Holdings, Inc.
Acquisition of Interest in Sonic Garden
On July 19, 2001, the Company entered into an option agreement with Sonic
Garden, Inc. (the "Option"), to purchase up to 2,000,000 shares of common stock
of Sonic Garden for $0.50 per share for a total purchase price of $1,000,000,
which purchase represents approximately 22% of the outstanding equity securities
of Sonic Garden as of the date of the Option. The Company is not obligated to
purchase any additional shares from Sonic Garden. The price per share for the
common stock was determined as a result of an arms length negotiation between
the Company and Sonic Garden. The Company has been informed that Sonic Garden
obtained title to certain proprietary intellectual property rights and
technology from The Phoenix Group International, LLC ("Phoenix"). The Company is
further informed that Phoenix obtained the digital music and web-based
intellectual property and technology from a third party that spent in excess of
$10,000,000 in developing the assets now owned by Sonic Garden. The Company was
9
unable to raise sufficient funds to purchase 2,000,000 shares of Sonic Garden
and ultimately only exercised options to purchase $285,000 worth of stock, or
570,000 shares since there was only a limited investment in Sonic Garden, the
Company determined that it would be more attractive to a merger candidate if it
divested its Sonic Garden shares and focused on a complete merger with an
operating company. On January 24, 2002, the Company purchased 100,000 common
shares of Corporate Playbook Holdings, Inc., (Corporate Playbook) a privately
held corporation in the online human resources industry, for $25,000, or $0.25
per share. The purchase price was determined as the result of an arms length
negotiation between the Company and Corporate Playbook. Because Corporate
Playbook is a privately held corporation, the purchase was recorded as an
investment in non-marketable securities at the purchase price of $0.25 per
share.
Results of Operations
Until August 30, 2000, the Company was primarily engaged in research and
development activities. On August 30, 2000, the Company elected to divest its
operating subsidiary and search for an acquisition candidate. Accordingly, the
accompanying statements of operations should not be regarded as typical for
normal periods of operation. The Company's development stage status, recurring
net losses and capital deficit raise substantial doubt about its ability to
continue as a going concern. Additional financing or restructuring of its
liabilities will be required in order for the Company to complete its
development stage activities. Management hopes that it will be able to obtain
such financing from new investors, and restructure its liabilities.
The Company had no operations or revenues, or significant assets or liabilities
since it divested its operating subsidiaries prior to August 2000. The Company
had minimal activities at the operating subsidiary level from the period between
July 1, 2000 and August 30, 2000. Thereafter, the Company's activities related
only to the actions necessary to complete the divestiture of the operating
subsidiaries.
Three Months Ended September 30, 2002
Revenue. The Company had no revenues during the quarter ended September
30, 2002. The lack of revenue is the result of the lack of new sales in the
quarter ended September 30, 2002 and the previous divestiture of its operating
subsidiaries.
Cost of Sales. The Company incurred no cost of sales for the quarter
ended September 30, 2002. This decrease is primarily due to the fact that the
Company did not sell any new products during the quarter ended September 30,
2002.
Gross Profit. The Company experienced no gross profit for the three
months ended September 30, 2002.
10
Operating Expenses. The Company had minimal operating expenses for the
three months ended September 30, 2002 of $50,508, primarily from consulting and
other professional services.
The preceding results are not compared with the same periods for the
preceding year due to the change in the Company's business.
Liquidity and Capital Resources
Cash and cash equivalents and net working (deficit) totaled $126 and $157,719,
respectively, as of September 30, 2002.
The Company has only minimal existing cash and cash equivalents and no cash flow
from operations. The Company will have to rely upon cash raised through private
placements or loans from its shareholders or others to meet the Company's
presently anticipated working capital needs for the next 13 months. The Company
will be required to obtain additional funds, if available, through borrowings or
equity financings. There can be no assurance that such capital will be available
on acceptable terms. If the Company is unable to obtain sufficient financing, it
may be unable to continue to operate.
Material Changes in Operations
The Company has had no material change in operation during the quarter ended
September 30, 2002.
11
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not a party to or aware of any legal proceeding,
involving the Company and the Company is not aware of any proceedings involving
any of the Company's directors, officers, agents, representatives or persons
that beneficially own 5% or more of the Company's voting securities.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
Change In Registrant's Certifying Accountant
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
12
The Company's financial statements for the periods described herein are
attached.
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.
BEVERLY HOLDINGS, INC.
By: /s/ Vincent Traina
-----------------------------
Vincent Traina, President
13