SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-QSB
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001 or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-25561
BEDFORD HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
NEW JERSEY 13-3901466
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
300 Blaisedell Road
Orangeburg, New York 10962
(Address of Principal Executive Offices) (Zip Code)
(845) 398-1844
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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. Yes
|X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 21,263,500 shares of the
Company's Common Stock, no par value, were outstanding as of November 10, 2001.
ITEM I - FINANCIAL STATEMENTS
Bedford Holdings Inc.
Unaudited Consolidated Balance Sheet
As of September 30, 2001 and December 31, 2000
Restated
9/30/01 12/31/00
ASSETS
Current assets:
Cash $ 636,156 $ 55,166
Accounts receivable 3,035 0
Deposits with clearing broker 1,860,488 193
----------- -----------
Total Current Assets 2,499,679 55,359
Other assets:
Fixed assets (net of accumulated depreciation) 67,785 20,639
Goodwill 120,000 0
Trademark (net of accumulated amortization) 16,785 0
Security deposits 10,000 10,000
----------- -----------
Total Assets $ 2,714,249 $ 85,998
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Customers' deposits 2,368,583 0
Payable to shareholders 49,360 0
Short term loans payable 888,197 888,197
Interest payable 258,932 147,523
Deferred income 0 32,013
Credit line payable 67,962 0
Accrued expenses & accounts payable 83,399 12,671
----------- -----------
Total Current Liabilities 3,716,433 1,080,404
Long term note payable 100,000 100,000
Shareholders' Equity:
Common stock, $.001 par value; authorized
40,000,000 shares, issued, and outstanding
21,263,500 at December 31, 2000 and June 30, 2001 21,263 21,263
Additional paid in capital 1,214,468 1,044,468
Treasury stock, 6,500 shares at cost (6,500) (6,500)
Retained deficit (2,331,415) (2,153,637)
----------- -----------
Total shareholders deficit (1,102,184) (1,094,406)
----------- -----------
Total Liabilities & Shareholders' Equity $ 2,714,249 $ 85,998
=========== ===========
Please see the accompanying notes to the financial statements.
Bedford Holdings Inc.
Unaudited Consolidated Statement of Operations
For the Nine and Three Months Ended September 30, 2001 and September 30, 2000
Nine months Nine months Three months Three months
9/30/01 9/30/00 9/30/01 9/30/00
Gross Revenues $ 559,378 $ 154,291 $ 395,831 $ 66,125
Less cost of revenues (153,545) 0 (107,787) 0
------------ ------------ ------------ ------------
Gross profit on revenues 405,833 154,291 288,044 66,125
General administrative expenses:
Salaries and office costs 459,935 201,795 303,239 74,096
Depreciation & amortization expense 10,516 1,972 6,507 373
------------ ------------ ------------ ------------
Total general administrative expenses 470,451 203,767 309,746 74,469
------------ ------------ ------------ ------------
Income (loss) from operations (64,618) (49,476) (21,702) (8,344)
Other Income (expenses):
Realized gain (loss) on short term investments 0 0 0
Loss on fixed asset disposal (21,685) 0 (21,685)
Interest income 44,155 573 30,267 267
Interest expense (135,630) (153,144) (53,098) (75,036)
------------ ------------ ------------ ------------
Net income (loss) before income tax provision (177,778) (202,047) (66,218) (83,113)
Provision for income tax 0 0 225 0
------------ ------------ ------------ ------------
Net income (loss) ($177,778) ($202,047) ($65,993) ($83,113)
============ ============ ============ ============
Loss per common share:
Basic & fully diluted ($0.01) ($0.01) ($0.00) ($0.00)
Weighted average of common shares:
Basic & fully diluted 21,263,500 21,263,500 21,263,500 21,263,500
Please see the accompanying notes to the financial statements.
Bedford Holdings Inc.
Unaudited Consolidated Statement of Cash Flows
For the Nine Months Ended September 30, 2001 and September 30, 2000
9/30/01 9/30/00
Operating Activities:
Net loss ($177,778) ($202,047)
Adjustments to reconcile net income items
not requiring the use of cash:
Depreciation 8,033 1,972
Amortization 2,483 0
Deferred income (32,013) 94,520
Changes in other operating assets and liabilities:
Accounts receivable 22,248 0
Deposits with clearing broker 3,916,928 (31,280)
Customers' deposits (3,201,171) 0
Short term loans payable 0 (5,000)
Interest payable 111,409 114,356
Accrued expenses & accounts payable (49,874) (743)
----------- ---------
Net cash provided by (used by) operations 600,265 (28,222)
Investing activities
Purchase of office construction 0 (11,580)
Purchase of office equipment & furniture 0 (12,382)
----------- ---------
Net cash provided by (used by) investing activities 0 (23,962)
Financing Activities:
Trading balances due to shareholders (60,401) 0
Payment of bank credit line (8,874) 0
Capital contributed by shareholder 50,000 0
----------- ---------
Net cash provided by financing activities (19,275) 0
----------- ---------
Net increase (decrease) in cash during period 580,990 (52,184)
Cash balance at beginning of period 55,166 63,062
----------- ---------
Cash balance at end of period $ 636,156 $ 10,878
=========== =========
Supplemental disclosures of cash flow information:
Interest paid during the fiscal year $ 0 $ 0
Income taxes paid during the fiscal year $ 0 $ 0
Please see the accompanying notes to the financial statements.
Bedford Holdings Inc.
Unaudited Consolidated Statement of Stockholders' Equity
For the Nine Months Ended September 30, 2001
Common Common Paid in Treasury Retained
Shares Amount Capital Stock Deficit Total
Balance at January 1, 2001 21,263,500 $ 21,263 $ 1,044,468 ($6,500) ($2,153,637) ($1,094,406)
Capital contributed by shareholder 50,000 50,000
Issued stock to purchase ItradeCurrency.Com 1,500,000 1,500 118,500 120,000
Shares returned to treasury (1,500,000) (1,500) 1,500 0
Net income for the period (177,778) (177,778)
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 2001 21,263,500 $ 21,263 $ 1,214,468 ($6,500) ($2,331,415) ($1,102,184)
=========== =========== =========== =========== =========== ===========
Please see the accompanying notes to the financial statements.
Bedford Holdings, Inc.
Notes to the Unaudited Financial Statements:
Note 1: Organization of the Company
Bedford Holdings, Inc. (the Company) is a New Jersey State Corporation formed in
July 1996. The consolidated financial statements include the accounts of the
Company's wholly owned subsidiaries, Allen & Pierce Securities Inc., Bedford
Holdings Club, Inc., and ItradeCurrency.Com, Inc.
Allen & Pierce Securities, Inc. (A&P) is a New York State Corporation formed in
January 1989 for the purpose of conducting business as a broker dealer in
securities and as an introducing broker in futures and options. Allen & Pierce
Securities Inc. is registered with the National Association of Securities Dealer
as a broker dealer and with the Commodity Futures Trading Commission as an
introducing broker. The subsidiary operates under the provisions of paragraph
(k)(2)(ii) of Rule 15c3-3 of the Securities and Exchange Commission and
accordingly, is exempt from the remaining provision of the rule. Essentially,
the requirements of paragraph (k)(2)(ii) provide that the subsidiary clear all
transactions on behalf of customers on a fully disclosed basis with a clearing
broker dealer. The clearing broker dealer carries the accounts of the Company's
customers and maintains all related books and records required. Likewise, as an
introducing broker in futures and options, the Company is required to carry all
customer accounts on a fully disclosed basis with a clearing futures commission
merchant. The clearing futures commission merchant is required to maintain the
books and records that are required to service these customers.
Bedford Holding Club Inc. (Club) is a New York State corporation formed in
August 2000 to provide its card members various services purchased at a discount
on Club's web-site.
ItradeCurrency.Com, LLC (ITrade) was purchased by the Company in May 2001 for
1,500,000 shares of common stock. ITrade was originally formed in 1999 in the
State of Delaware as GFX, LLC. ITrade engages in brokerage and speculative
trading in "over the counter" spot foreign currency.
Note 2: Summary of Significant Accounting Principles
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principals requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from these estimates.
Revenue Recognition: A&P's commission revenues for securities and futures and
options are recorded at the closing of the underlying transaction. Membership
fee revenues for Club are amortized over the life of the membership, which is
generally one year. Itrade recognizes commission revenue from brokered
transactions upon the closing of a client's foreign currency position. Trading
revenues are recognized upon the realization of foreign currency losses or
gains. Open positions at period end are marked to the market using the closing
New York cash settlement price.
Cash- Includes cash balances at banks and other financial institutions and
includes highly liquid short-term investments with an original maturity of three
months or less.
Customer deposits payable- Include the total of all funds held by the Company at
September 30, 2001 for the benefit of customers.
Payables to shareholders- Represents account balances of shareholders of the
Company trading in foreign currency through ITrade.
Short term loans payable: Short-term loans payable include the face value
unsecured promissory notes due to individuals. The notes mature in October 2001
with interest rates ranging from 8.5% to 25% payable at maturity. The loan
balance includes $70,000 of promissory notes that are overdue and currently in
default.
Note 3: Net Capital Requirements
The following note applies to the Company's wholly owned subsidiary, Allen &
Pierce Securities, Inc.
As a broker dealer, the Company is subject to the Securities and Exchange
Commission's Uniform Net Capital Rule 15c3-1, which requires that the ratio of
aggregate indebtedness to the excess net capital, as defined, shall not exceed
15 to 1. In addition, the Company is required to maintain net capital, as
defined, in excess of the greater of $5,000 or 6 2/3% of aggregate indebtedness.
As of September 30, 2001, the Company is in excess of the net capital
requirements by $49,590.
As an introducing broker, the Company is subject to the Commodities Futures
Trading Commission's Net Capital Rule 1.17 which requires the Company to
maintain net capital, as defined, of the greater of $30,000 or $3,000 per
associated person, as defined. As of September 30, 2001, the Company was in
excess of these net capital requirements by $24,590.
Note 4: Earnings per Share
The Company applies SFAS No. 128, Earnings per Share. In accordance with SFAS
No. 128, basic net income per share has been computed based upon the weighted
average of common shares outstanding during the year. All net losses reported in
the financial statements are
available to common stockholders. The Company has no other financial instruments
outstanding that are convertible into common shares.
Note 5: Litigation
The Company is currently involved in litigation concerning the defaulted notes
amounting to $70,000 with interest. The Company has accrued the amounts of the
defaulted notes and interest in the balance sheet.
Note 6: Long Term Debt
Long term debt consist of an unsecured note payable to a shareholder that
matures in fiscal year 2005 and is non interest bearing.
Note 7- Income Taxes
Provision for income taxes is comprised of the following:
Nine Months Nine Months
9/30/01 9/30/00
Net income (loss) before provision for income taxes ($177,778) ($202,047)
========= =========
Current tax expense:
Federal $ 48,900 $ 56,326
State 17,778 20,430
--------- ---------
Total $ 66,678 $ 76,756
Less deferred taxes:
Loss carry-forward (66,678) (76,756)
Allowance for recoverability 0 0
--------- ---------
Provision for income taxes $ 0 $ 0
========= =========
A reconciliation of provision for income taxes at the statutory rate to
provision for income taxes at the Company's effective tax rate is as follows:
Statutory U.S. federal rate 34% 34%
Statutory state and local income tax 10% 10%
Less tax loss carry forward -44% -44%
--------- ---------
Effective rate 0% 0%
========= =========
Deferred income taxes are comprised of the following:
Federal loss carry-forward $ 338,980 $ 202,962
Allowance for recoverability (338,980) (202,962)
--------- ---------
Deferred tax benefit $ 0 $ 0
========= =========
Note 12- Segment Information
The activities of A&P are included in equities and futures, the activities of
Itrade are included in foreign currency, and Club and corporate administration
are included in corporate. The following is a summary of the Company's segment
information:
Nine months Nine months Three months Three months
9/30/01 9/30/00 9/30/01 9/30/00
Gross Commissions and Franchise Fee
Equities and futures brokerage $ 30,947 $ 162,259 ($1,000) $ 69,108
Foreign exchange 386,219 0 247,987 0
Gross Trading Gains (Losses)
Equities and futures brokerage 0 (7,968) 0 (2,983)
Foreign exchange 142,212 0 148,844 0
----------- --------- --------- --------
Total gross revenues $ 559,378 $ 154,291 $ 395,831 $ 66,125
=========== ========= ========= ========
Gross Profit
Equities and futures brokerage $ 30,947 $ 154,291 ($1,000) $ 66,125
Foreign exchange 374,886 0 289,044 0
----------- --------- --------- --------
Total $ 405,833 $ 154,291 $ 288,044 $ 66,125
=========== ========= ========= ========
Operating Income (loss)
Equities and futures brokerage ($2,036) ($49,476) $ 18,136 ($8,344)
Foreign exchange (62,582) 0 (39,838) 0
----------- --------- --------- --------
Total ($64,618) ($49,476) ($21,702) ($8,344)
=========== ========= ========= ========
Total Assets
Equities and futures brokerage $ 86,970 $ 74,591
Foreign exchange 2,507,279 0
Corporate 120,000 558
----------- ---------
Total $ 2,714,249 $ 75,149
=========== =========
Depreciation & Amortization
Equities and futures brokerage $ 1,715 $ 1,972 $ 19 $ 373
Foreign exchange 8,801 0 6,488 0
----------- --------- --------- --------
Total $ 10,516 $ 1,972 $ 6,507 $ 373
=========== ========= ========= ========
Interest
Equities and futures brokerage $ 0 $ 0 $ 0 $ 0
Foreign exchange 24,221 0 14,070 0
Corporate 111,409 153,144 39,028 75,036
----------- --------- --------- --------
Total $ 135,630 $ 153,144 $ 53,098 $ 75,036
----------- --------- --------- --------
Item 2. Management's Discussion and Analysis of Financial Condition
The Company, through its wholly owned subsidiaries, seeks to generate revenue
through two business segments: equity and futures brokerage and foreign currency
brokerage and trading.
The Company and its subsidiaries are located in Orangeburg, New York.
General Statement: Factors that may affect future results
With the exception of historical information, the matters discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward looking statements under the 1995 Private Securities
Litigation Reform Act that involve various risks and uncertainties. Typically,
these statements are indicated by words such as "anticipates", "expects",
"believes", "plans", "could", and similar words and phrases. Factors that could
cause the company's actual results to differ materially from management's
projections, forecasts, estimates and expectations include but are not limited
to the following:
* Inability of the company to secure additional financing
* Unexpected economic changes in the United States and overseas
* The imposition of new restrictions or regulations by government agencies that
affect the Company's trading and brokerage activities.
To the extent possible, the following discussion will highlight the relative
activities of the Company's business segments.
I. Consolidated Results of Operations
The Company's auditors have expressed significant doubt as to the Company's
ability to continue to operate as a going concern because of the significant
losses have been incurred in the last two fiscal years. Management's plan to
address these concerns is as follows.
The Company continues to pursue acquisition possibilities in the foreign
currency brokerage industry. As a result of laws enacted by the Commodity
Futures Trading Commission in late 2000, many firms dealing in spot foreign
currency over the counter trading and brokerage must be affiliated with a large
financial institution, such as a bank, or with a futures commission merchant or
broker dealer. The Company's designation as a broker dealer has enabled to
acquire ITrade in late May 2001. The Company will continue to explore other
acquisitions in this industry.
In the absence of additional revenues or capital, the Company will seek to roll
over the short-term loans coming due in October 2001. Based upon conversations
with the short- term lenders, the Company is confident that these loans will be
extended for another six months to a year. The
holder of the notes presently in default is seeking legal relief. This could
make it difficult for the Company to continue its plans to seek additional
acquisitions or to continue as a going concern.
Comparison of operating results:
Nine months consolidated sales, gross profit, and net income:
During the period, the Company's consolidated gross revenues were $559,378
compared to $154,291 generated for the same period last year. Gross profits were
$405,833 for the period as compared to $154,291 for the same period last year.
The significant increase in gross revenues and gross profits are due to the
acquisition of ITrade in late May 2001.
General and administrative expenses for the period were $470,451 compared to
$203,767 in the same period of 2000. The significant increase in gross revenues
and gross profits are due to the acquisition of ITrade in late May 2001. A
consolidated detail of general and administrative expenses for the period is as
follows:
9/30/01 9/30/00
Salaries and payroll taxes 269,141 16,575
Medical insurance 31,094 26,137
Office Rent 68,094 54,310
Office administration 35,363 36,533
Travel and automobile costs 18,915 12,354
Entertainment 4,850 21,116
Telephones 7,700 11,675
Data processing 19,500 23,095
Advertising & promotion 5,278 0
-------- --------
Total $459,935 $201,795
======== ========
The increase in general and administrative costs is due to the acquisition of
ITrade.in May 2001.
After deducting general and administrative costs, the Company experienced a loss
from operations of $64,618 as compared to a loss of $49,476 for the same period
last year.
The Company recognized a loss on the disposal of some office equipment of $21,
685. The assets were disposed of as result of moving the ITrade subsidiary from
lower Manhattan to Orangeburg, New York during the period. The Company had
interest income of $44,155 for the nine-month period and interest expense of
$135,630. The Company recognized a net loss of $177,778 for the nine-month
period as compared with a net loss of $202,047 for the nine-month period ended
September 30, 2000. On a per share basis, net loss per share remained unchanged
from last year at a loss of $0.01 per share.
Three months consolidated sales, gross profit, and net income:
The consolidated results of operations for the three-month period ended
September 30, 2001 as compared to September 30, 2000 is very much identical to
the nine-month discussion above. Since the purchase of ITrade occurred on May
24, 2001, the results of operations discussed above include the results of the
ITrade subsidiary, which comprises most of the Company's business activities,
for the period from the purchase date through September 30, 2001. A detail of
the quarterly general administration expenses is as follows:
9/30/01 9/30/00
Salaries and payroll taxes 189,730 35,453
Medical insurance 28,503 1,296
Office Rent 25,867 21,114
Office administration 11,879 11,742
Travel and automobile costs 13,201 2,857
Entertainment 2,700 1,075
Telephones 7,281 210
Data processing 19,500 0
Advertising & promotion 4,578 350
-------- -------
Total $303,239 $74,096
======== =======
The increase in general and administrative costs is due to the acquisition of
ITrade.in May 2001.
Nine-month results for spot foreign currency segment (Itrade):
The foreign currency segment generated brokerage revenues of $386,219 for the
nine- month period and enjoyed trading gains of $142,212. Gross profits on
revenues were $374,886.
After deducting office and administration costs of $437,468, the segment
incurred a loss from operations of $62,582.
Depreciation costs for the segment were $8,801 for the nine-month period.
Interest costs represents interest paid to clients based upon available cash
balances maintained with ITrade. Interest cost is mostly offset by the interest
income earned on the investment of client deposits in short term government
securities. The segment does maintain a line of credit with a bank. At September
30, 2001, the balance of the credit line was $67,962 and interest expense of the
line through September 30, 2001 was $5,915.
Three-month results for spot foreign currency segment (Itrade):
The results of operations for the three-month period ended September 30, 2001
for the foreign currency segment as compared to September 30, 2000 is very much
identical to the nine-month
discussion above. Since the purchase of ITrade occurred on May 24, 2001, the
results of operations discussed above include the results of the ITrade
subsidiary, which comprises most of the Company's business activities, for the
period from the purchase date through September 30, 2001.
Nine-month and three month results for equity and futures brokerage:
The segment had no significant business activity for nine-months ended September
30, 2001 and September 30, 2000. The segment continues to incur depreciation
expense on office equipment of about $270 per month. The corporate office has
short-term borrowings from various individuals of approximately $888,000 coming
due in October 2001. Management expects to be able to extend the maturity date
of this debt for an additional six months at no additional interest cost to the
Company, however at the date of this report, a final agreement on the extension
has not been reached with the creditors. Interest expense for the period on the
debt is $111,409 and $39,028 for the quarter.
Discussion of Financial Condition: Liquidity and Capital Resources
At September 30, 2001, the company had a working capital deficit of $1,216,754
as compared to a working capital deficit of $1,025,045 at December 31,2000, or
an increase in the deficit of $191,709, which can be mostly attributed the
operating loss incurred for the last nine months.
On a consolidated basis at cash on hand was $636,156 as compared with $55,166 at
December 31, 2000. During the period, operations provided cash of $600,265. In
addition, a shareholder contributed capital of $50,000. Cash was used to pay
$8,874 of ITrade's bank credit line and $60,401 of shareholder trading balances
maintained with ITrade.
The Company purchased no fixed assets during the period nor are there plans to
purchase equipment in the near future.
Total assets at June 30, 2001 increased to $2,714,249 from $85,998 at December
31, 2000 mostly as a result of the purchase of ITrade in May 2001.
The Company's total stockholders' deficit increased from $1,094,406 at December
31, 2000 to a deficit of $1,102,184 at September 30, 2001 as a result of net
losses of $177,778 incurred during the period and the capital contribution of a
shareholder of $50,000.
During the coming fiscal year, the Company projects no significant additional
expenditures in connection with any of the Company's business activities.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
On June 19, 2001 holders of several short-term notes issued by the Company in
the aggregate principal amount of approximately $135,000 commenced litigation in
the Supreme Court, New York County, New York seeking to recover the unpaid
balance (approximately $100,000) on those notes. The Company asserted several
defenses, including improper venue and criminal usury. The plaintiffs have
consented to have the case transferred to Rockland County. The Company intends
vigorously to defend the litigation.
(a) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEDFORD HOLDINGS, INC.
(Registrant)
Date: November 13, 2001
/s/ Leon Zapoll
------------------------------------------
Leon Zapoll
President
Date: November 13, 2001
/s/ Robert Samila
------------------------------------------
Robert Samila
Chief Financial Officer
(Principal Financial and Accounting Officer)