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 June 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 number of shares outstanding of the registrant's common
stock as of August 1, 2001:
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 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 June 30, 2001 December 31, 2000
(Restated)
Current assets:
Cash $ 149,490 $ 58,124
Accounts receivable - trade, net 150,465 117,505
Inventories 12,970 86,453
Prepaid expenses 2,500 14,099
----------------- ---------------------
Total current assets 315,425 276,181
----------------- ---------------------
Property and equipment, at cost - net 546,486 684,340
----------------- ---------------------
Other assets:
Intangible assets - net - 36,121
Deferred financing costs - 34,484
Deposits 15,190 27,741
----------------- ---------------------
Total other assets 15,190 98,346
----------------- ---------------------
Total assets $ 877,101 $ 1,058,867
================= =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade and accrued expenses $ 245,452 $ 403,352
Current maturities of long-term debt 165,171 200,482
Current maturities of capital lease obligations 338,993 277,567
----------------- ---------------------
Total current 749,616 881,401
liabilities
Long-term debt, less current maturities 20,695 21,814
Capital lease obligations, less current maturities 70,782 190,901
----------------- ---------------------
Total 841,093 1,094,116
liabilities
----------------- ---------------------
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 979,660 936,253
Retained earnings (deficit) (953,337) (980,643)
----------------- ---------------------
Total stockholders'equity 36,008 (35,249)
----------------- ---------------------
Total liabilities and stockholders' equity $ 877,101 $ 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 Six Months Ended
------------------------------- ---------------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
(Restated) (Restated)
------------- ------------ ----------- -----------
Revenue:
Machine rental $ 599,726 - $ 646,645 $ -
Phone card sales 99,753 769,924 433,920 1,548,506
Hall rental and concession income 29,676 84,091 96,199 167,175
Machine sales - 10,990 22,500 35,981
Other revenue - 14,254 805 25,691
------------- ------------ ----------- -----------
Total revenue 729,155 879,259 1,200,069 1,777,353
------------- ------------ ----------- -----------
Cost of revenue:
Phone cards 62,601 226,317 166,617 444,071
Machine depreciation 64,499 71,416 128,997 142,785
Prizes paid 3,378 266,407 113,360 514,365
Hall rental and concession expenses 173 56,901 36,235 95,761
Machines sold - 7,750 27,125 23,830
------------- ------------ ----------- -----------
Total cost of revenue 130,651 628,791 472,334 1,220,812
------------- ------------ ----------- -----------
Gross margin 598,504 250,468 727,735 556,541
General and administrative expenses 387,304 364,058 671,450 658,580
------------- ------------ ----------- -----------
Operating income (loss) 211,200 (113,590) 56,285 (102,039)
Gain on sale of asset 4,602 - 46,165 -
Interest expense (43,840) (58,289) (75,144) (127,882)
------------- ------------ ----------- -----------
Income (loss) before federal income tax 171,962 (171,879) 27,306 (229,921)
Federal income tax - - - -
------------- ------------ ----------- -----------
Net income (loss) 171,962 (171,879) 27,306 (229,921)
Retained earnings (deficit):
Beginning (1,125,299) (378,643) (980,643) (320,601)
------------- ------------ ----------- -----------
Ending $ (953,337) $ (550,522) $ (953,337) $ (550,522)
============= ============ =========== ===========
Basic income (loss) per common share:
Income (loss) applicable to
common stockholder $ 0.02 $ (0.02) $ 0.00 $ (0.03)
============= ============ =========== ===========
Diluted income (loss) per common share:
Income (loss) applicable to
common stockholder $ 0.02 (0.02) $ 0.00 $ (0.03)
============= ============ =========== ===========
The accompanying notes are an integral part of these financial statements.
4
BGI, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
2001 2000
(Restated)
---------------- ------------
Operating activities:
Net income $ 27,306 $ (229,921)
(loss)
Adjustments to reconcile net income to net cash income:
Depreciation and amortization 202,747 183,329
Provision for bad debts 14,095 -
Recovery from bad debts - (62,114)
Stock issued for services 43,951 74,099
Deferred financing cost 34,484 29,914
Gain on disposal of property (46,165) -
Changes in current assets and liabilities:
Accounts receivable (32,960) 46,464
Inventories 73,483 14,553
Prepaid expenses 11,599 (8,878)
Accounts payable - trade and accrued expenses (157,900) 18,913
---------------- ------------
Cash provided by operating activities 170,640 66,359
---------------- ------------
Investing activities:
Purchase of property and equipment (11,974) (32,837)
Increase (decrease) in other assets (5,100) (13,348)
Proceeds from sale of equipment 62,000 3,000
---------------- ------------
Cash provided (used) by investing activities 44,926 (43,185)
---------------- ------------
Financing activities:
Payments on long-term debt (65,507) (48,872)
Payments on long-term leases (58,693) (77,525)
Proceeds from issuance of common stock - 65,000
---------------- ------------
Cash provided (used) by financing activities (124,200) (61,397)
---------------- ------------
Net increase (decrease) in cash 91,366 (38,223)
Cash at beginning of period 58,124 89,636
---------------- ------------
Cash at end of period $ 149,490 $ 51,413
================ ============
Supplemental disclosures of cash flow information:
Interest paid $ 75,144 $ 101,801
================ ============
Cash flow from non-cash transfer activities
Purchases of fixed assets $ (14,982) $ -
Proceeds from long term debt 14,982 -
---------------- ------------
$ - $ -
================ ============
The accompanying notes are an integral part of these financial statements.
5
BGI, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The financial statements for the six months ended June 30, 2001 and June 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 June
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 and
the accrual of non-cash compensation expense in connection with a consulting
agreement.
The affect of the restatement for the three months ended June 30, 2001, is as
follows:
Three Months Ended June 30, 2001
As Reported Restated
--------------- -----------
Statement of Income Data
Total revenue $ 729,155 729,155
Total cost of revenue 130,651 130,651
Gross margin 598,504 598,504
General and administrative expenses 381,953 387,304
Operating income 216,551 211,200
Net income 177,313 171,962
Basic income per common share .02 .02
Diluted income per common share .02 .02
The affect of the restatement for the six months ended June 30, 2001, is as
follows:
Six Months Ended June 30, 2001
As Reported Restated
------------- -----------
Statement of Income Data:
Total revenue $ 1,200,069 1,200,069
Total cost of revenue 472,334 472,334
Gross margin 727,735 727,735
General and administrative expenses 617,131 671,450
Operating income 110,604 56,285
Net income 81,625 27,306
Basic income per common share .01 .00
Diluted income per common share .01 .00
6
BGI, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2001
As of June 30, 2001
As Reported Restated
----------- ---------
Balance Sheet Data: $
Total current assets 315,425 315,425
Total other assets 51,509 15,190
Total liabilities 823,093 841,093
Total stockholder's equity 90,327 36,008
GOING CONCERN:
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
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. Any significant adverse
change in any of these factors could have an adverse effect on the Company's
consolidated financial position or results of operations. Further, the Company
had losses for the year ended December 31, 2000, and its working capital
position deteriorated. At June 30, 2001, current liabilities exceeded current
assets by $434,191.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheets is dependent upon the Company's success with its
operations in the future.
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
June 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 June 30, Six Months Ended June 30,
2001 2000 2001 2000
------ ----- ----- -----
Weighted average number of common shares
used in basic earnings per share 9,574,158 8,981,549 9,486,700 9,073,983
Effect of dilutive securities:
Stock Options 161,519 - 186,195 -
Warrants - - - -
---------------- -------------- -------------- -------------
Weighted average number of common shares
and dilutive potential common stock used in
diluted earnings per share 9,735,677 8,981,549 9,672,895 9,073,983
================ ============== ============== =============
7
BGI, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2001
NOTE 2 - EARNINGS PER SHARE-CONTINUED
843,000 and 917,500 options and warrants were excluded from weighted average
shares outstanding for the six months ended June 30, 2001 and 2000,
respectively, because they are anti-dilutive.
NOTE 3 - RELATED PARTY
During the quarter that ended June 30, 2001, Reid Funderburk, Chairman, CEO and
Director, and/or other employees of BGI, Inc., assisted in the organization of
and/or invested in certain Donation Station charity center locations. The
charity that leases the location contracts with BGI, Inc. for the placement of
Donation Station charity machines.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company is including the following cautionary statement in this Quarterly
Report on Form 10-QSB to make applicable and utilize the safe harbor provisions
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 result 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 June 30, 2001
Compared with the Three Months Ended June 30, 2000
Total revenue for the three months ended June 30, 2001, was $729,155 compared to
$879,259 for the three months ended June 30, 2000. This 17% decrease resulted
from an 87% decline in phone card and machine sales as many phone card machines
were being converted to the new Donation Station Machine. Revenues from rental
of the Donation Station Machine were $599,726 compared to no rental sales in
June 2000.
Cost of sales were $130,651 for three months ended June 30, 2001 compared to
$628,791 for three months ended June 30, 2000. The 79.6% decrease was due to the
conversion of phone card machines to the new Donation Station machine that has
less cost of sales.
Gross margin for the three months ended June 30, 2001, was $598,504 as compared
to $250,468 for the three months ended June 30, 2000. The increase of $348,036
resulted from the new Donation Station game having a reduced cost of sales.
General and administrative expense for the three months ended June 30, 2001 was
$387,304 as compared to $364,058 for the three months ended June 30, 2000. The
6.4% increase was due to write-offs of obsolete inventory of maintenance
supplies.
The $14,449 decline in interest expense is due to several notes having been paid
off.
9
Six Months Ended June 30, 2001
Compared with the Six Months Ended June 30, 2000.
Total revenue for the six months ended June 30, 2001, was $1,200,069 compared to
$1,777,353 for the six months ended June 30, 2000. This 32.4% decrease was the
result of declines in phone card and machine sales and the time necessary to
convert the phone card machines to the new Donation Station machine. Revenues
from machine rentals of the new Donation Station machine were $646,645 for the
six months ended June 30, 2001 compared to no revenues for machine rentals for
the six months ended June 30, 2000.
Cost of revenues decreased $748,478 or 61.3% from the six months ended June 30,
2001 to $472,334 compared to the six months ended June 30, 2000 of $1,220,812.
The decrease is due to the Donation Station machine having less cost of sales.
Gross margin increased 30.7% or $171,194 for the six months ended June 30, 2001
to $727,735 compared to June 30, 2000 gross margin of $556,541. The increase was
due to the new Donation Station machine having less cost of revenues and the
decrease of the number of phone card machines that have been converted to the
new machine.
General and administrative expenses for the six months ended June 30, 2001, were
$671,450 compared to $658,580 for the six months ended June 30, 2000. The
increase was due to write-offs of obsolete inventory of maintenance supplies.
LIQUIDITY
Current assets of $315,425 as of June 30, 2001, represented 42.1% of current
liabilities of $749,616 as compared to current assets of $276,181 at December
31, 2000, which represented 31.3% of current liabilities of $881,401. The
Company had cash and cash equivalents of $149,490 as of June 30, 2001 compared
to $58,124 as of December 31, 2000.
Cash provided by operating activities was $170,640 for the six months ended June
30, 2001 as compared to cash provided by operating activities of $66,359 in the
2000 period. The change is due to net income in the six months ended June 30,
2001 of 27,306 as compared to a net loss of 229,921 in the 2000 period.
During the six months ended June 30, 2001, the Company had $44,926 of cash
provided by investing activities primarily as a result of sale of equipment
related to bingo facilities. This compares to cash used in investing activities
of $43,185 in 2000 period, which was related to purchases of phone card
machines.
The Company used $124,200 for financing activities during the six 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 $61,397 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
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