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 MARCH 31, 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 number of shares outstanding of the registrant's common
stock as of May 11, 2001:
Class Number of Shares Outstanding
Common Stock, $.001 Par Value 9,533,142
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 10
ITEM 2. CHANGES IN SECURITIES 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
*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 MARCH 31, DECEMBER 31,
2001 2000
(Restated)
---------------- ----------------------
Current assets:
Cash and cash equivalents $ 43,612 $ 58,124
Accounts receivable - trade, 96,461 117,505
net
39,588 86,453
Inventories
Prepaid 8,367 14,099
expenses
---------------- ----------------------
Total current 188,028 276,181
assets
--- ---------------- ----------------------
Property and equipment, at cost - 613,921 684,340
net
---------------- ----------------------
Other assets:
Intangible assets - - 36,121
net
Deferred financing 25,000 34,484
costs
22,691 27,741
Deposits
---------------- ----------------------
Total other 47,691 98,346
assets
---------------- ----------------------
Total $ 849,640 $ 1,058,867
assets
================ ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade and accrued $ 343,442 $ 403,352
expenses
Current maturities of long-term 173,257 200,482
debt
Current maturities of lease 341,644 277,567
obligations
---------------- ----------------------
Total current 858,343 881,401
liabilities
Long-term debt, net of current 16,272 21,814
maturities
Long-term portion of lease 133,303 190,901
obligations
---------------- ----------------------
Total 1,007,918 1,094,116
liabilities
---------------- ----------------------
Stockholders' equity:
Preferred stock, non-voting; $.001 par; 10,000,000
shares authorized; no shares issued and outstanding - -
Common stock, $.001 par; 70,000,000 shares authorized;
9,533,142 and 9,141,142 issued and outstanding 9,533 9,141
Additional paid-in capital 957,488 936,253
Retained earnings (deficit) (1,125,299) (980,643)
---------------- ----------------------
Total stockholders' equity (158,278) (35,249)
(deficit)
---------------- ----------------------
Total liabilities and stockholders' $ 849,640 $ 1,058,867
equity
================ ======================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
BGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31
(UNAUDITED)
2001 2000
(Restated)
---------------- ---------------------
Revenue:
Phone card and machine sales $ 356,667 $ 803,573
Machine rental 46,856 -
Hall rental 66,523 83,084
Other 868 11,437
---------------- ---------------------
Total revenue 470,914 898,094
---------------- ---------------------
Cost of revenue:
Phone cards 131,140 233,834
Machine depreciation 64,498 71,369
Prizes paid 109,982 247,958
Hall rental 36,062 38,860
---------------- ---------------------
Total cost of revenue 341,682 592,021
---------------- ---------------------
Gross margin 129,232 306,073
General and administrative expenses 284,150 294,526
---------------- ---------------------
Operating income (loss) (154,918) 11,547
Gain on sale of assets 41,569 -
Interest expense (31,307) (69,593)
---------------- ---------------------
Net loss (144,656) (58,046)
Retained earnings:
Beginning (deficit) $ (980,643) $ (320,601)
================ =====================
Ending (deficit) $ (1,125,299) $ (378,647)
================ =====================
Basic and diluted loss per common share $ ($0.02) $ (0.01)
================ =====================
Weighted average shares outstanding 9,218,150 8,805,863
================ =====================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
BGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
(UNAUDITED)
2001 2000
(Restated)
--------------- ----------------
Operating activities:
Net loss $ (144,656) $ (58,046)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 115,232 92,485
Provision for bad debts 14,095 (58,571)
(recovery)
Gain on the sale of fixed (41,569) -
assets
Common stock issued for services 21,627 24,303
Deferred financing cost charged to interest 9,484 16,051
Changes in current assets and liabilities:
Accounts receivable - trade 21,044 40,295
Inventories 46,865 1,408
Prepaid expenses 5,732 (3,500)
Accounts payable - trade and accrued expenses (59,909) (5,581)
---------------- ---------------------
Net cash provided from operating activities (12,055) 48,844
---------------- ---------------------
Investing activities:
Purchase of property and equipment (11,976) (15,360)
Increase (decrease) in other assets 4,900 (4,989)
Proceeds from sale of equipment 45,000 3,000
Cash provided (used) by investing activities 37,924 (17,349)
---------------- ---------------------
Financing activities:
Payments on long-term debt (19,607) (26,139)
Payments on long-term leases (20,774) (48,598)
Proceeds from issuance of common - 65,000
stock
---------------- ---------------------
Cash provided (used) by financing activities (40,381) (9,737)
---------------- ---------------------
Net increase (decrease) in cash and cash equivalents (14,512) 21,758
Cash and cash equivalents at beginning of year 58,124 89,636
---------------- ---------------------
Cash and cash equivalents at end of year $ 43,612 $111,394
================ =====================
Supplemental disclosures of cash flow information:
Interest paid $ 31,305 $ 69,593
================ =====================
Taxes paid $ 2,288 $ 5,169
================ =====================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND BASIS OF PRESENTATION:
BGI, Inc. formerly Bingo & Gaming International, Inc. (Bingo) was formed in
1981and was dormant from 1984 to November 1994. In December 1994, the Company
acquired Monitored Investment, Inc. and Affiliates (Monitored Investment, Inc.,
Red River Bingo, Inc., Tupelo Industries, Inc., and Meridian Enterprises, Inc.,
hereinafter referred to collectively as "Monitored"). Monitored's principal
operations consist of developing, managing and operating charity bingo
entertainment centers. Monitored is a commercial lessor of bingo facilities to
charity lessees which utilize bingo events as a means of fund raising. The
stockholders of Monitored became the controlling stockholders of Bingo in a
"reverse acquisition", whereby each of the corporations comprising Monitored
became wholly-owned subsidiaries of Bingo. As a result, the merger was accounted
for as an "equity restructuring" of Bingo. On September 29, 1999, the
shareholders of Bingo & Gaming International, Inc. voted to change its name to
BGI, Inc.
In October 1997, PrePaid Plus, Inc. ("PPI"), a Texas corporation, was acquired
under the purchase method. PPI is a wholly owned subsidiary of BGI, Inc. PPI was
formed for the purpose of transacting the prepaid telephone card dispenser
operations. PPI began distributing and selling the Lucky Strike Phone Card
Dispenser, a video enhanced prepaid phone card dispenser, under an exclusive
distribution agreement for five years with two successive five year options to
renew with Cyberdyne Systems, Inc.
The consolidated financial statements include the accounts of BGI, Inc. and its
wholly-owned subsidiaries (the Company). All significant inter-company accounts
and transactions have been eliminated in consolidation.
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 and
the accrual of non-cash compensation expense in connection with a consulting
agreement.
The affect of the restatement for the three months ended March 31, 2001, is as
follows:
Three Months Ended March 31, 2001
As Reported Restated
-------------- ---------------------
Statement of Income Data:
Total revenue $ 470,914 470,914
Total cost of revenue 341,682 341,682
Gross margin 129,232 129,232
General and administrative expenses 235,182 284,150
Operating loss (105,950) (154,918)
Net loss (95,688) (144,656)
Basic and diluted loss per common share (.01) (.02)
As of March 31, 2001
As Reported Restated
-------------- ---------------------
Balance Sheet Data:
Total current assets $ 188,028 188,028
Total other assets 78,659 47,691
Total liabilities 989,918 1,007,918
Total stockholder's deficit (109,310) (158,278)
6
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
GOING CONCERN:
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. Numerous factors could affect
the Company's operating results, including, but not limited to, general economic
conditions, competition, and changing technologies. A change in any of these
factors could have an adverse effect on the Company's consolidated financial
position or results of operations. The Company had an operating loss for the
year ended December 31, 2000. In addition, the Company's working capital
position deteriorated due to a loss from operations. At March 31, 2001, current
liabilities exceed current assets by $670,315, and the Company had a deficit
retained earnings of $1,125,299.
In view of these matters, realization of a major portion of the assets in the
accompanying consolidated balance sheet is dependent upon continued operations
of the Company, which in turn may be dependent upon the success of its future
operations.
INVENTORIES:
Inventories, which consist of phone cards, prepaid vending machines, and small
equipment are valued at the lower of cost or market using the first-in,
first-out method.
CASH EQUIVALENTS:
Cash equivalents consist primarily of funds invested in short-term
interest-bearing accounts. The Company considers all highly liquid investments
purchased with initial maturities of three months or less to be cash
equivalents.
INTANGIBLE ASSETS:
Intangible assets include goodwill, the cost of a non-compete agreement, and
development of internet site Goodwill is amortized over five years, the cost of
the non-compete agreement is being amortized over two years.
PROPERTY, EQUIPMENT AND DEPRECIATION AND AMORTIZATION:
Property and equipment are stated at cost, net of accumulated depreciation and
amortization. For financial statement purposes, depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the related assets. Amortization of leasehold improvements is computed using the
straight-line method over the shorter of the term of the related lease or the
useful life of the leasehold improvements. Accelerated depreciation methods are
used for tax purposes.
Maintenance and repairs are charged to expense as incurred. The cost of
betterments and renewals are capitalized. Gains or losses upon disposal of
assets are recognized in the period during which the transaction occurs.
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 enactments of 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 "more likely than not" that such deferred
tax assets will be realized.
7
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
REVENUE RECOGNITION:
Phone card and machine sales as well as rental income are recognized when
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the price to the customer is fixed and determinable and
collectibility is reasonably assured. An allowance for doubtful accounts is
provided based on periodic reviews of the accounts.
ACCOUNTING ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make 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 could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS:
In December 1999, the Staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). This SAB summarizes certain of the Staff's views in applying
generally accepted accounting principles in the United States, to revenue
recognition in financial statements. The Company's revenue recognition policy is
in compliance with SAB 101.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
RESTATEMENT OF HISTROICAL 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
QUARTER ENDED MARCH 31, 2001
COMPARED WITH QUARTER ENDED MARCH 31, 2000
Total revenues for the quarter ended March 31, 2001, were $470,914 as compared
to $898,094 for the prior quarter ended March 31, 2000. This 47.6% decrease was
the result of declines in phone card and machine sales, increased competition in
the Company's primary areas of operations and a decrease in the number of
machines operating in bingo and other facilities. As previously noted in the
Form 10KSB for the year ended December 31, 2000, the Company has converted over
half of its 325 existing phone card machines to a new product called "Charity
Station" and has placed these converted machines in various locations throughout
the State of Texas.
Gross margin was $129,232 or 27.4% of total revenue for the quarter ended March
31, 2001 as compared to $306,073 or 34.1% of total revenue for the quarter ended
March 31, 2000. The decline in gross margin was consistent with the decline in
revenue. The decline in gross margin as a percentage of revenue resulted from
revenue decreasing at a faster rate than the cost of hall rental and machine
depreciation.
General and administrative expenses for the quarter ended March 31, 2001 was
$284,150 compared to $294,526 for the quarter ended March 31, 2000. This 3.5%
decrease was the result of continuing improvements in expense controls
undertaken by management during the fiscal year 2000.
The 55.0% or $38,286 decrease in interest expense is a result of the decline in
outstanding debt balances for the quarter ended March 31, 2001, as compared to
the quarter ended March 31, 2000.
As a result of the above, the Company incurred consolidated net losses for the
quarter ended March 31, 2001 and 2000 of $144,656 and $58,046, respectively.
LIQUIDITY
Current assets of $188,028 represented 21.9% of current liabilities of $858,343
as of March 31, 2001, as compared to current assets of $276,181 representing
31.3% of current liabilities in the amount of $881,401 as of December 31, 2000.
The Company had cash and cash equivalents of $43,612 as of March 31, 2001
compared to $58,124 as of December 31, 2000. The Company's decreased cash
position during the first quarter of 2001 is primarily the result of decreases
in the sale of phone cards, machines, and increased competition in the primary
areas of operation.
Cash used in operating activities was $12,055 for the three months ended March
31, 2001 as compared to cash provided by operating activities of $48,844 in the
2000 quarter. The change is due to increased net loss in the first quarter of
2001 as well as a decrease in accounts payable and an accrued expense, which was
partially offset by, decreased inventory balances as the Company reduced phone
card inventory.
During the three months ended March 31, 2001, the Company had 37,924 of cash
provided by investing activities primarily as a result of sale of equipment
related to a bingo facility. This compares to cash used in investing activities
of $17,349 in 2000 quarter, which was related to purchases of phone card
machines.
The Company used $40,381 for financing activities during the three months ended
march 31, 2001 related to the principal payments on various notes and equipment
leases. This compares to cash used in financing activities of $9,737 in the 2000
quarter in which the payments on various notes and equipment leases were offset
by $65,000 proceeds from the issuance of common stock.
9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
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.
None
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.
10
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
11