UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008
Commission file number 333-145471
BWI HOLDINGS, INC.
(formerly Gray Creek Mining, Inc.)
(Exact name of the registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
3915 61 Avenue South East
Calgary, Alberta, Canada T2C 1V5
(formerly 313-6688 Willingdon Ave.
Burnaby, British Columbia, Canada, V5H 2V8)
(Address of principal executive offices, including zip code)
(403) 255-2900 (formerly (604) 434-8539)
(Telephone number, including area code)
Val-U-Corp Services, Inc.
1802 North Carson Street, Suite 212
Carson City, NV 89701-9141 (800) 555-0738 (775) 887-0738
(Name and address of agent for Service (Telephone Number) (Fax Number)
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 last90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer",
"non-accelerated filer", and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the last practicable date:
As at December 31, 2008
Common 10,696,054
Preferred nil
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The un-audited quarterly financial statements for the period ended December 31,
2008, prepared by the company immediately follow.
2
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS\
(UNAUDITED - PREPARED BY MANAGEMENT)
Consolidated Balance Sheets Statement "A"
Consolidated Statements of Income and Comprehensive Income Statement "B"
Consolidated Statements of Stockholders' Equity Statement "C"
Consolidated Statements of Cash Flows Statement "D"
Notes to Consolidated Financial Statements Statement "E"
3
STATEMENT "A"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(US Dollars)
December 31, 2008
December 31, March 31,
2008 2008
----------- -----------
ASSETS
Current:
Cash $ 29,902 $ --
Accounts receivable 1,582,124 2,190,912
Prepaid expenses 159,848 110,940
----------- -----------
1,771,673 2,301,852
----------- -----------
Performance bonds 24,631 48,645
Property and equipment, net 5,846,041 7,674,767
Goodwill 2,622,293 3,107,397
Customer lists 94,589 179,339
----------- -----------
8,587,554 11,010,148
----------- -----------
$10,359,226 $13,312,000
=========== ===========
Approved on Behalf of the Board:
"Jim Can", Director
"Kendall Dilling", Director
- - See accompanying notes -
4
STATEMENT "A"
CONTINUED
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(US Dollars)
December 31, 2008
December 31, March 31,
2008 2008
------------ ------------
LIABILITIES
Current:
Bank overdraft $ -- $ 39,009
Revolving bank loan 15,218 56,743
Accounts payables and accrued liabilities 2,951,724 4,380,479
Notes payable 13,240 47,068
Due to related parties 222,607 811,289
Corporate taxes payable 21,210 23,825
Due to shareholders 520,438 1,738,755
Current portion of long-term debt 26,453 34,433
Current portion of obligations under capital lease 1,077,868 1,374,549
------------ ------------
4,848,758 8,507,150
------------ ------------
Long-term debt 11,022 36,572
Obligations under capital lease 1,930,801 3,100,043
Non-controlling interest -- 3,307,861
------------ ------------
1,941,823 6,444,476
------------ ------------
6,790,581 14,951,626
------------ ------------
STOCKHOLDERS' EQUITY
Common stock
Authorized
100,000,000 common voting stocks with a par value of $0.001 each
20,000,000 preferred non-voting stock with a par value of $0.001 each
Issued and outstanding
(10,746,054, 2008 - 5,250,000) common stock par value 10,746 95,734
Contributed surplus 10,661,733 5,905,201
Cumulative other comprehensive income (loss) (782,186) 150,319
Accumulated deficit (6,321,648) (7,790,880)
------------ ------------
3,568,645 (1,639,426)
------------ ------------
Nature of operations (Note 1)
Commitments, contingencies, and subsequent events (Note 10)
$ 10,359,226 $ 13,312,000
============ ============
- - See accompanying notes -
5
Statement "B"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Statements of Income
(Unaudited - Prepared by Management)
(US Dollars)
For the Eight Months Ended December 31, 2008 and
the nine Months Ended December 31, 2007
2008 2007
------------ ------------
Revenue $ 1,738,958 $ 4,160,039
Cost of sales 1,057,316 2,742,406
------------ ------------
Gross earnings before general and administrative expenses 681,642 1,417,634
------------ ------------
General and Administrative Expenses:
Advertising and promotion 39,836 34,983
Automotive 2,019 3,745
Bad debts (recovery) (97,633) --
Depreciation 223,785 478,971
Insurance 7,382 0
Interest and bank charges 14,332 57,687
Interest on long-term debt 65,970 105,603
Office 30,276 145,182
Professional fees 39,715 211,145
Rent 76,970 188,983
Repairs and maintenance 18,666 84,154
Salaries and benefits 202,260 234,916
Telephone 32,180 42,331
Travel 2,376 --
------------ ------------
658,134 1,478,352
------------ ------------
Income (Loss) before other items and income taxes 23,508 (60,718)
------------ ------------
Other Income (Expenses):
Write off mining claims -- --
Gain on sale of assets -- 541,257
------------ ------------
Income (Loss) before income taxes 23,508 480,539
Income taxes -- --
------------ ------------
Net Income (Loss) 23,086 480,539
Other comprehensive income (loss)
Foreign currency translation adjustment (74,328) (150,403)
------------ ------------
Total comprehensive Loss for the quarter $ 51,242 $ 330,136
============ ============
Basic and diluted Income (Loss) per share $ 0.00 $ (0.01)
Weighted average stock outstanding 10,746,054 48,861,043
============ ============
- - See accompanying notes -
6
Statement "B"
Continued
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Statements of Income
(Unaudited - Prepared by Management)
(US Dollars)
For the Eight Months Ended December 31, 2008 and
the nine Months Ended December 31, 2007
2008 2007
------------ ------------
Revenue $ 8,339,263 $ 12,128,636
Cost of sales 5,850,877 8,976,127
------------ ------------
Gross earnings before general and administrative expenses 2,488,386 3,152,509
------------ ------------
General and Administrative Expenses:
Advertising and promotion 219,885 141,719
Automotive 11,100 7,489
Bad debts (242,288) --
Depreciation 861,538 1,315,876
Insurance 10,971 --
Interest and bank charges 58,185 137,742
Interest on long-term debt 270,912 372,472
Office 114,253 545,357
Professional fees 114,015 173,125
Rent 278,692 157,481
Repairs and maintenance 50,811 11,242
Salaries and benefits 862,903 894,338
Telephone 114,791 117,077
Travel 24,171 --
------------ ------------
2,768,605 4,164,326
------------ ------------
Income (Loss) before other items and income taxes (280,219) (1,011,817)
------------ ------------
Other Income (Expenses):
Write off of mining claim (8,000)
Gain on sale of assets 441,695 541,257
------------ ------------
Income (Loss) before income taxes 153,476 (470,560)
Income taxes -- --
------------ ------------
Net Income (Loss) 153,476 (470,560)
Other comprehensive income (loss)
Foreign currency translation adjustment (826,549) (335,894)
------------ ------------
Total comprehensive loss for the year $ 673,073 $ 806,454
============ ============
Basic and diluted Income (Loss) per share $ 0.01 $ (0.02)
Weighted average stock outstanding 10,746,054 48,900,751
============ ============
- - See accompanying notes -
7
Statement "C"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Statement of Stockholders' Equity
(Unaudited - Prepared by Management)
(US Dollars)
For the Two Months Ended December 31, 2008 and
the Three Months Ended December 31, 2007
Retained
Common Stock Stock to Contributed Comprehensive Earnings
Comment Number Par Value be Issued Surplus Income (Deficit) Total
------- ------ --------- --------- ------- ------ --------- -----
Balance 8/10/06 -- $ -- $ -- $ -- $ -- $ -- $ --
Issued for cash 5,250,000 5,250 -- 20,250 -- -- 25,500
Net loss -- -- -- -- -- (174) (174)
----------- ------- -------- ----------- --------- ----------- ----------
Balance 4/30/07 5,250,000 5,250 -- 20,250 -- (174) 25,326
----------- ------- -------- ----------- --------- ----------- ----------
Net loss -- -- -- -- -- (23,838) (23,838)
----------- ------- -------- ----------- --------- ----------- ----------
Balance 4/30/08 5,250,000 5,250 -- 20,250 -- (24,012) 1,488
----------- ------- -------- ----------- --------- ----------- ----------
Issued on
recapitalization and
acquisition of
Budget Waste Inc. 5,496,054 5,496 -- 10,641,483 150,319 (6,581,080) 4,216,218
Other Comprehensive
Income -- -- -- -- (752,221) -- (752,221)
Net Income -- -- -- -- -- 129,968 129,968
----------- ------- -------- ----------- --------- ----------- ----------
Balance 10/31/08 10,746,054 10,746 -- 10,661,733 (601,902) (6,451,112) 3,619,465
----------- ------- -------- ----------- --------- ----------- ----------
Other Comprehensive
Income -- -- -- -- (74,328) -- (74,328)
Net Income -- -- -- -- -- 23,508 23,508
----------- ------- -------- ----------- --------- ----------- ----------
Balance 12/31/08 10,746,054 $10,746 $ -- $10,661,733 $(676,230) $(6,427,604) $3,568,645
=========== ======= ======== =========== ========= =========== ==========
- - See accompanying notes -
8
Statement "D"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Consolidated Statement of Cash Flows
For the Eight Months Ended December 31, 2008 and
the Nine Months Ended December 31, 2007
2008 2007
----------- -----------
Operating Activities:
Net Income (Loss), per Statement "B" $ 153,476 $ (470,561)
Adjustments for non-cash items -
Depreciation 861,538 1,315,876
Loss (Gain) on sale of asset (433,695) --
Changes in non-cash working capital -
(Increase) Decrease in accounts receivable 297,491 (571,794)
(Increase) Decrease prepaid expenses (77,296) (36,988)
Increase (Decrease) in corporate taxes payable (1,231) (16,879)
Increase (Decrease) in accounts payable and accrued liabilities (348,889) 1,130,583
----------- -----------
Cash flows from (used in) operating activities 297,918 1,069,478
Investing Activities:
(Increase) Decrease in performance bonds 20,000 (6,464)
Additions to property and equipment (498,356) (1,479,828)
Proceeds on sale of property and equipment 122,419 --
Acquisitions of business assets, net of cash acquired -- (117,776)
----------- -----------
Cash flows from (used in) investing activities (355,937) (1,604,068)
Financing Activities:
Increase (Decrease) in revolving bank loans (36,712) (73,793)
Increase (Decrease) in bank overdraft (39,009) 60,557
Increase (Decrease) in notes payable (29,530) (16,732)
Proceeds on issuance of capital stock -- 475,442
Repayment of long-term debt (25,971) (76,725)
Repayment of obligations under capital lease (855,787) (929,293)
Proceeds from related parties 866,445 (473,148)
Proceeds from shareholders 188,614 545,206
----------- -----------
Cash flows from (used in) financing activities 68,050 (949,745)
----------- -----------
Effect of exchange rate changes on cash -- --
Net Increase (Decrease) in Cash and Cash Equivalents 19,871 415,156
Cash and cash equivalents, beginning -- (42)
----------- -----------
Cash and cash equivalents, ending $ 29,902 $ (58,958)
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 270,912 $ 372,595
Income taxes paid -- 31,342
- - See accompanying notes -
9
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
1. NATURE OF OPERATIONS:
a) Condensed Financial Statements -
These financial statements do not include all of the disclosure contained in the
Company's April 30, 2008 year end financial statements, but only descriptions of
significant and material changes that have incurred in this interim period.
Readers are requested to read these financial statements in conjunction with the
financial statements included in the Company's 10-K Annual Report filed July 24,
2008 and the Company's 8-K Entry Into a Material Definitive Agreement filed
November 13, 2008..
b) Company Description -
These financial statements include the accounts of BWI Holdings, Inc. (formerly
Gray Creek Mining, Inc.) (Formerly Cray Creek Mining, Inc. a Nevada Corporation)
(the "Company") and its wholly owned subsidiary Budget Waste Inc. (an Alberta
Corporation) "Alta". Alta is the successor corporation following the July 1,
2006 amalgamation of Alta and its wholly owned subsidiaries: Kosland Waste
Removal Ltd. (acquired February 15, 2006); DB Waste Disposal 2005 Ltd. (acquired
March 1, 2006); Strathmore Septic Services (1980) Ltd. (acquired March 1, 2006),
593250 Alberta Ltd. (operating as DB Port-a-Pod acquired March 1, 2006); All
Waste Systems Ltd. (acquired March 1, 2006); Rocky Mountain Waste Services Inc.
(acquired March 1, 2006); 882880 Alberta Ltd. (acquired April 30, 2006) and
Finnie Water Hauling Ltd. (acquired June 30, 2006). Subsequent to the
amalgamation, the Company also acquired Hydrovac Alberta Inc. (acquired December
1, 2006) and 4M Water Hauling Ltd. (acquired February 16, 2007). The Company
also acquired the assets only of 202287 Construction Services Ltd. (acquired
November 30, 2006), Muldowney Holdings Ltd. (acquired December 1, 2006) and PJ.s
Waste and Recycling Services Ltd. (acquired February 14, 2007).
The Company provides non-hazardous waste collection, transfer, recycling and
disposal services. Additionally, the Company provides support to the
construction industry such as fence rentals, sanitary facility rentals, bin
rentals, hydrovac and water hauling. The Company operates primarily, but not
exclusively, in Alberta, Canada. The Company evaluates principal operations
through three functional departments: Solid Waste, Liquid Waste and Water
Hauling. The Company has ceased its mineral exploration activities.
10
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
c) Consolidated Statements -
Effective November 10, 2008 the Company completed the acquisition of Budget
Waste Inc. (Alta). According to accounting principles generally accepted in the
United States, the above noted acquisition is considered to be a capital
transaction in substance, rather than a business combination. That is, the
acquisition is equivalent to the issuance of stock by Budget Waste Inc. (Alta)
for the net monetary assets of BWI Holdings, Inc. (formerly Gray Creek Mining,
Inc.) accompanied by a recapitalization and is accounted for as a change in
capital structure. Accordingly, the accounting for the acquisition is identical
to that resulting from a reverse acquisition. All material inter-company
balances and transaction have been eliminated in consolidation.
d) Comparative Figures -
The comparative figures are of Budget Waste, Inc. As discussed above, the
continuing operations are of Budget Waste Inc. and the operations of Gray Creek
ceased following the capital transaction described above. BWI Holdings, Inc.
(formerly Gray Creek Mining, Inc.) reported on an April 30 fiscal year end.
Prior to the acquisition, Budget Waste reported on a March 31 fiscal year end.
Effective December 3, 2008, the consolidated company adopted a March 31 fiscal
end. To reflect this change, the current figures are for the two and eight
months ended December 31, 2008 while the comparative figures are for the three
and nine months ended December 31, 2007. Comparative figures have been
reclassified, where applicable, in order to conform to the current periods'
presentation.
e) Going Concern -
The Company's ability to continue as a going concern is dependant upon achieving
profitable operations and upon the continued financial support of its lenders
and investors. The outcome of these matters cannot be predicted at this time.
Due to the recurring losses of the Company, the Company must continue to obtain
external investment capital and financing. On going operations will be dependant
upon the execution of the Company's business plan including achieving more
efficient operations and marketing initiatives and the successful listing of the
Company on a public market.
These financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that might be necessary should the
Company be unable to continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES:
a) Cash and Cash Equivalents -
Cash and cash equivalents consist of cash and deposit instruments with an
initial maturity of three months or less.
11
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
b) Accounts Receivable -
Receivables are recorded when invoiced or advanced and represent claims against
third parties that will be settled in cash. The carrying value of receivables,
net of the allowance for doubtful accounts, represents the estimated net
realizable value. The estimate for the allowance for doubtful accounts is based
upon historic collection trends, type of customer and age of receivables. If
events indicate that specific receivable balances may be impaired, further
consideration is given to those balances and the allowance is adjusted
accordingly. Accounts are written off when the Company's efforts to collect are
unsuccessful.
c) Income Taxes -
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Uncertainty in Income
Taxes". Under SFAS No. 109, deferred income tax assets and liabilities are
determined based on differences between the financial statement reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws in effect when the differences are expected to reverse. The measurement
of deferred income tax assets is reduced, if necessary, by a valuation allowance
for any tax assets and liabilities of a change in tax rates realized. The effect
on deferred income tax assets and liabilities of a change in tax rates is
recognized in the period that such tax rate changes are enacted. FIN No.48
prescribes a recognition threshold and measurement attribute for financial
statement recognition ad measurement of tax positions taken into in tax returns.
To the extent interest and penalties may be assessed by taxing authorities on
any underpayment of income tax, such amounts have been accrued and are
classified as a component of income tax expense in our Consolidated Statements
of Operations. The Company elected this accounting policy, which is a
continuation of our historical policy, in connection with our adoption of FIN
48.
12
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
d) Property and Equipment -
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized while major maintenance expenditures are
expensed as incurred. In accordance with SFAS 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets", the Company reviews its assets annually for
impairment. Depreciation is provided over the estimated useful lives of the
assets on a declining balance basis at the following annual rates:
Equipment 20%
Waste bins 10%
Automotive 20%
Port-a-Potties 20%
Trailers 20%
Assets under capital lease 20%
Office 20%
Heavy trucks and equipment 20%
Computer equipment 30%
Tools and equipment 20%
Leasehold developments 20%
Buildings 4%
Depreciation for property and equipment purchased during the year is calculated
at one-half of the above rates.
e) Leases -
The Company leases property and equipment in the ordinary course of business.
Significant lease obligations relate to trucks, waste bins, and compactors.
These leases have varying terms and may or may not include purchase or buyout
options and guaranteed residuals. The terms of these leases are considered when
determining whether a lease is classified as operating or capital.
The majority of the Company's leases are capital leases. Assets under capital
lease are capitalized using interest rates appropriate at the inception of each
lease and are amortized over their estimated useful lives, using the same method
as similar assets that the Company owns. The present value of the lease payments
is recorded as a debt obligation as disclosed in Note 11.
Other leases are classified as operating when lease terms are significantly
shorter than the assets' economic useful lives, or relatively low fixed minimum
lease payments. Management expects that in the normal course of business, these
leases will be renewed, replaced with new leases or replaced with fixed asset
expenditures.
13
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
f) Goodwill and Intangible Assets -
Through expansion by acquisition, the Company has acquired goodwill and
intangible assets - mainly customer lists. In accordance with SFAS 142
"Accounting for Goodwill and Intangible Assets", goodwill is recorded at cost
and is not subject to amortization. Customer lists are recorded at cost and
amortized over their estimate useful lives on a straight-line basis. The useful
lives of customer lists are estimated to be three years. These assets are
reviewed annually for impairment; more frequently if management has reason to
believe that conditions exist that may lead to impairment.
g) Impairment of Long-Lived Assets -
As described above, the Company assesses the recoverability of its long-lived
tangible and intangible assets at least annually. Management assesses if there
have been significant events or changes in circumstances that indicate an asset
or group of assets may have become impaired. A test of recoverability is
performed comparing the carrying value of a group of assets to its undiscounted
future cash flows. If carrying values are in excess undiscounted future cash
flows, impairment is measured by comparing the internal discounted cash flow
analysis or a third party valuation. Estimating future cash flows required
significant judgment and projections may vary from cash flows eventually
realized.
h) Foreign Currency Translation -
The functional currency for Budget Waste Inc. (Alta) is the Canadian dollar. The
reporting currency of BWI Holdings, Inc. (formerly Gray Creek Mining, Inc.) is
the US dollar.
Translation of foreign currency denominated transactions -
Transactions undertaken in foreign currencies are translated into the functional
currency at the actual exchange rates prevailing at the time of the transaction.
Exchange gains or losses are a result of exchange rate changes between the time
the transaction is recognized and the collection of funds and are included as a
component of net income.
Translation of account balances denominated in foreign currencies on
consolidation -
The Company follows FAS 52 "Foreign Currency Translation" and uses the current
rate method whereby assets and liabilities are translated at the rate of
exchange at the Balance Sheet date. Revenues and expenses are translated at the
weighted average rate of exchange for the period. Components of stockholders'
deficiency are translated at the appropriate historic rate of exchange. Exchange
gains or losses on transaction of foreign currency are included as a component
of comprehensive income.
14
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
i) Comprehensive Income -
Other comprehensive income refers to revenues, expenses, gains and losses that
under generally accepted accounting principles are included in comprehensive
income but are excluded from net income as these amounts are recorded directly
as an adjustment to stockholders' deficiency. The Company's other comprehensive
income is primarily comprised of unrealized foreign exchange gains and losses.
j) Revenue Recognition -
In accordance with SEC Staff Accounting Bulletin 104, the Company recognizes
revenue when there is persuasive evidence of an arrangement, delivery has
occurred, the fee is fixed or determinable, collectibility is reasonably assured
and there are no significant remaining performance obligations. For providing
services and short-term rentals, revenue is recognized when services or rentals
have been completed. For long-term rentals, revenue is recognized monthly over
the term of the contract. For special events, fencing, port-a-potties and other
assets that can be rented on a per diem basis, revenue is recognized when the
equipment is collected or returned.
k) Advertising -
Advertising costs are expensed as incurred and amounted to $39,836 and $219,885
for the two and eight months ended December 31, 2008 and $34,983 and $141,719
for the three and nine months ended December 31, 2007.
l) Share-Based Payment -
The Company has not issued any warrants or stock options, nor has it established
any compensation plan under which options or warrants may be issued. The Company
has adopted SFAS No. 123(r) "Share Based Payment" but it does not have any
effect on the financial statements. From time to time, employees and suppliers
have been issued stock as compensation for goods and services rendered to the
Company. These issuances of stock were valued at the value of goods and services
received in accordance with pre-established rates of pay and contractual
amounts.
m) Contingencies -
The potential exposure the Company has with respect to claims, assessments and
litigation has been estimated in accordance with SFAS No. 5. It is not always
possible to predict the outcome of litigation as it is subject to many
uncertainties. It is also not always possible for management to make a
meaningful estimate of the protection loss or range of loss associated with such
litigation.
15
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
n) Use of Estimates -
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying disclosures. Significant areas requiring the use of management
estimates relate to revenue recognition, the determination of impairment of
long-lived assets, the estimation of useful lives, rates and methods of
depreciation, income taxes, recognition of bad debts allowances, accounts
payable and accrued liabilities, recognition of capital leases and
contingencies. Management believes the estimates are reasonable. Actual results
could differ from these estimates and assumptions.
o) Supplemental Cash Flow Information -
Non-cash investing and financing activities are excluded from the statement of
cash flows. Non-cash transactions are disclosed throughout the notes to the
consolidated financial statements. Total amounts paid for income taxes and
interest are disclosed on the consolidated statement of cash flows.
p) Net loss per share before comprehensive income -
The Company computes net income (loss) per share in accordance with SFAS No.
128, "EARNINGS PER Share". SFAS No. 128 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic EPS
is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive (i.e. reducing loss per share).
16
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
q) Mineral Claims -
Mineral property acquisitions, exploration and development costs are expensed as
incurred until such time as economic reserves are quantified. To date, the
company has not established any probable or proven reserves on its mineral
properties. The Company has adopted the provisions of SFAS No. 143 "ACCOUNTING
FOR ASSET RETIREMENT OBLIGATIONS" which establishes standards for the initial
measurement and subsequent accounting for obligations associated with the sale,
abandonment, or other disposal of long-lived tangible assets arising from
acquisition, construction or development and for any development of such assets.
Effective November 10, 2008, the Company has abandoned these claims and
anticipates no further costs associated with these claims
3. RISK MANAGEMENT RELATED TO FINANCIAL INSTRUMENTS:
The company is exposed to various types of risks owing to the nature of the
business activities it carries on, including those related to the use of
financial instruments. In order to manage the risks associated with using
financial instruments, such as loan, deposit and securities, controls have been
implemented, such as risk management policies and various risk limits. These
measures aim to optimize the return/risk ratio in all its operations. The main
risks to which the company is exposed are set out below.
Fair Value -
In accordance with SFAS 107 "DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL
INSTRUMENTS", the Company's financial instruments include accounts receivable,
performance bonds, bank overdraft, revolving bank loan, accounts payable and
accrued liabilities, notes payable, amounts due to related parties, amounts due
to shareholders, long-term debt, and obligations under capital leases. The fair
value of financial instruments recognized in the balance sheet approximate their
carrying amounts.
Market Risk -
Market risk corresponds to the financial losses that the company could incur
because of unfavourable fluctuations in the value of financial instruments
following variations in the parameters underlying their evaluation, such as
interest rates. The policies and limits implemented are designed to mitigate
exposure to market risk arising from asset and liability management activities.
17
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
3. RISK MANAGEMENT RELATED TO FINANCIAL INSTRUMENTS:
Credit Risk -
Financial instruments that potentially subject the Company to a concentration of
credit risk consist of cash and accounts receivable. The Company deposits cash
with financial institutions it believes to be creditworthy. Cash balances at
these financial institutions may exceed the federally guaranteed amount.
The Company's accounts receivable are primarily derived from trade. The Company
will maintain an allowance for doubtful accounts receivable in those cases for
which the expected collectability of accounts receivable is in question.
Liquidity Risk -
Liquidity risk represents the possibility that the company may not be able to
gather sufficient cash resources, when required and under reasonable conditions,
to meet its financial obligations. The company's overall liquidity risk is
managed by the chief financial officer and supervised by the Board of Directors.
The company monitors cash resources daily and makes sure the liquidity
indicators are in compliance with limits established in the policies set by the
company.
Interest Risk -
The Company finances its property and equipment assets through short-term
borrowing, long-term borrowing and capital and operating leases. The Company's
greatest exposure to interest risk is from its short-term borrowings, as
long-term borrowings and leases have fixed interest rates or fixed minimum lease
payments.
4. PROVISION FOR DOUBTFUL ACCOUNTS:
The Company determines its provision for doubtful accounts based upon the
accounting policy described in Note 2(b). The Company's allowance for doubtful
accounts at October 31, 2008 is $74,457 and March 31, 2008 is $989,686. During
the period, the Company sold accounts receivable for proceeds of $144,655. These
receivables had a face value of approximately $750,000 and were fully allowed
for.
18
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
5. MINERAL INTERESTS:
On November 29, 2006, the Company entered into a purchase and sale agreement to
acquire a 100% interest in one mineral claim located in the Nicola Valley mining
division located approximately 17 kilometres north of Merritt, British Columbia,
Canada, for a total consideration of $8,000. The mineral interest was held in
trust for the Company by the vendor of the property. Effective November 10,
2008, the Company has abandoned this claim and has written the investment off.
6. REVOLVING BANK LOAN:
The revolving bank loan bears interest at prime plus 2 percent per annum and is
secured by a fixed and floating charge against the Company's assets. The maximum
amount available is $58,374.
7. DUE TO RELATED PARTIES:
Amounts due to related parties have no specific terms of repayment, are
non-interest bearing and are unsecured.
8. DUE TO SHAREHOLDERS:
Amounts due to shareholders are unsecured, non-interest bearing with no specific
terms of repayment.
9. STOCKHOLDERS' DEFICIENCY:
a) Warrants -
There are no warrants outstanding at December 31, 2008 or 2007 .
b) Stock Options -
There are no stock options outstanding at December 31, 2008 or 2007.
19
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
10. COMMITMENTS AND CONTINGENCIES:
a) The Company has entered into various operating leases for equipment and
premises. Minimum payments over the next five years are as follows:
2009 $408,555
2010 361,891
2011 314,537
2012 26,177
2013 400
b) The Company is involved in the following litigation -
Corey Finnie and Virginia Finnie are disputing the acquisition of Finnie Water
Hauling Ltd. by Budget and are requesting damages of $Cdn 1,000,000 ($US
867,000) and 1,000,000 (after adjusting for stock splits) shares of the Company.
Approximately $948,000 of the $Cdn 1,000,000 was purportedly related to the
assumption of liabilities related to capital leases. The plaintiff is claiming
that these obligations were not assumed by the company. The company has assumed
these obligations. The outcome of this lawsuit is indeterminable at this time.
c) Environmental -
The Company's operations are subject to federal, provincial and municipal laws
and regulations over the collection, transport, transfer and disposal of waste
products. The Company does not maintain its own landfill sites, so is not
subject to any remediation costs with respect to contaminated sites. The Company
does not transport hazardous wastes. The Company is not exposed to significant
environmental risk.
20
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
11. RELATED PARTY TRANSACTIONS:
The Company has transactions with various related parties, including the
Company's officers, directors and significant shareholders and companies
controlled by shareholders, directors or family members, and a company
controlled by the spouse of a shareholder. These transactions are in the normal
course of operations and are transacted at the exchange amount agreed to by the
related parties.
December 31, 2008 March 31, 2008
----------------- --------------
Included in accounts receivable $ -- $ --
Included in accounts payable 56,765 87,941
Transactions during the nine months ended December 31, 2008 and 2007
Revenue earned -- --
Rent 7,325 --
Repairs and supplies 97,131 104,640
Loan interest 107,643 159,787
During the nine months ended December 31, 2008, the company sold land and a
building to a Company controlled by a shareholder for $Cdn 736,000. The property
was appraised at $ Cdn 610,000. The Company recognized a gain of $Cdn 357,190 on
this transaction
During the year ended March 31, 2008 the company issued 25,000,000 common shares
to a director and officer of the Company in order to settle $250,000 of accounts
payable for management fees recorded in 2006 and 2007.
Additionally, during the year ended March 31, 2008 the Company sold property to
a related Company for proceeds of $CAD $1,200,000. The property was
independently appraised at $1,167,000. The proceeds were used to repay a
mortgage and to reduce debt owing to the related company. The company recognized
a gain of $511,876 on this sale.
21
Statement "E"
BWI HOLDINGS INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Notes to Financial Statements
(Unaudited - Prepared by Management)
(US Dollars)
12. SEGMENTED REPORTING:
The Company operates in four distinct business segments: Solid Waste,
Liquid Services, Water Hauling and Septic Services. Results of
operations for these segments for the six months ended October 31,
2008 and September 30, 2007 are as follows:
December, 2008 - US dollars
Operating Gross Administration Net
Revenue Expenses Profit Amortization & Other Income
------- -------- ------ ------------ ------- ------
Solid waste 5,985,096 4,196,820 1,788,276 617,266 1,056,132 114,877
Liquid Services 1,050,354 737,987 312,367 109,428 185,842 17,097
Water Hauling 1,006,615 707,256 299,359 104,221 178,153 16,985
Septic 297,198 208,813 88,384 30,623 53,244 4,517
--------- --------- --------- --------- --------- ---------
8,339,263 5,850,877 2,488,386 861,538 1,473,372 153,476
========= ========= ========= ========= ========= =========
December, 2007 - US dollars
Operating Gross Administration Net
Revenue Expenses Profit Amortization & Other Income
------- -------- ------ ------------ ------- ------
Solid waste 9,577,776 7,088,293 2,489,482 1,039,125 1,821,951 (371,593)
Liquid Services 625,707 463,072 162,636 67,885 119,026 (24,276)
Water Hauling 909,955 673,437 236,518 98,724 173,098 (35,304)
Septic 1,015,199 751,325 263,873 110,142 193,118 (39,387)
---------- ---------- ---------- ---------- ---------- ----------
12,128,636 8,976,127 3,152,509 1,315,876 2,307,193 (470,560)
========== ========== ========== ========== ========== ==========
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of our financial condition and results of operations
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto in Item I, and the Company's 10-K Annual Report, the Company's 8-K
Entry into a Material Definitive Agreement and other publicly available
financial information. This discussion contains forward-looking statements and
involves numerous risks and uncertainties. Our actual results may differ
materially from those contained in any forward-looking statements.
COMPANY OVERVIEW
The Company has been engaged in the acquisition of mining properties with a view
to exploit any mineral deposits discovered that demonstrate economic
feasibility. We have a 100% interest, held in trust by the vendor, in three
mineral claims known as the Swakum Mountain property located in the Nicola
Valley mining district located approximately 17 km north of Merritt, British
Columbia, Canada. The Company has decided to abandon these claims and pursue
other business interests through its wholly owned subsidiary Budget Waste Inc.
Budget Waste Inc. is a regional solid and liquid waste services company that
provides collection, disposal, fencing and recycling services to residential and
commercial customers in Alberta, Canada. Our Company was founded in 2001 (prior
to acquisition by BWI Holdings, Inc. (formerly Gray Creek Mining, Inc.), a
Nevada company) with one truck and 10 large roll off containers. The Company has
expanded steadily until February 2006 when it acquired the first of ten
companies through the next year.
SOURCES OF REVENUE
Our revenue consists primarily of fees charged to customers for solid and liquid
waste collection, landfill disposal and recycling services.
We derive our collection revenue from services provided to commercial and
residential customers. Services to commercial customers are generally performed
under service agreements or pursuant to contracts with municipalities. We
recognize revenue when services are rendered. Amounts billed to customers prior
to providing the related services are reflected as deferred revenue and reported
as revenue in the periods in which the services are rendered.
We determine the fees we charge our customers based on a variety of factors,
including collection frequency, level of service, route density, the type,
volume and weight of the waste collected, type of equipment and containers
furnished, the distance to the disposal, the cost of disposal and prices charged
by competitors for similar services. Our contracts with commercial customers
typically allow us to pass on increased costs resulting from variable items such
23
as disposal and fuel costs and surcharges. Our ability to pass on cost increases
is however, sometimes limited by the terms of our contracts.
EXPENSE STRUCTURE
Our cost of operations primarily includes tipping fees and related disposal
costs, labor and related benefit costs, equipment maintenance, fuel, liability
and workers compensation insurance and related leasing costs.
Selling, general and administrative expenses include managerial costs,
information systems, administrative expenses and professional fees.
Depreciation and amortization includes depreciation of fixed assets over their
estimated useful lives using the declining balance method and amortization of
customer lists over their estimated useful lives on a straight-line basis.
OPERATING RESULTS FOR THE TWO MONTHS ENDED DECEMBER 31, 2008
The company changed its fiscal year end from April 30 to March 31 in order to
conform to the same fiscal year end as its wholly owned subsidiary.
Consequently, this quarterly report is for the two and eight months ended
December 31, 2008.
For the two months ended December 31, 2008, the company reported revenues of
$1,739M ("M" representing thousands), compared to $4,160M for the three months
ended December 31, 2007. The company's revenues decreased for the following
reasons: the company reduced its fuel surcharge as the price of fuel declined
from its peak during June and July; the economy continued to slow, especially in
the construction industry; the weather in December was extremely cold, so that
many of our customers elected to shut down operations over the holiday season.
Additionally, the company reports in U.S. dollars while the company's functional
currency is the Canadian dollar which has declined against the U.S. dollar
during this period.
The gross margin for the two months ended December 31, 2008 of $682M represented
39.2% of revenue as compared to $1,418M for the three months ended December 31,
2007 or 34.0%. This improvement resulted from a concerted effort to stabilize
costs and to implement stronger systems of internal control.. Moving all vehicle
repairs and maintenance from outside vendors to an in house mechanical shop and
consolidation of operations also contributed to a more positive result.
Selling, general and administrative expenses decreased to $658M for the two
months ended December 31, 2008 from $1,478M for the three months ended December
31, 2007. This decrease is due in part from depreciation which decreased to
$224M in the current year's quarter from $479M in 2008. General administrative
and operating expenses decreased due to the company's commitment to stronger
systems of internal controls and internal reporting. Management is encouraged by
24
the results but believes there is still room to achieve better operational
efficiencies and will work to continue improving the company's operations,
especially with the future expected economic conditions.
The company's EBITDA for the quarter was $313M which has been used to retire
current and long-term debt compared to EBITDA of $1,065M for the previous year's
quarter which included the disposal of surplus assets at a gain of $524.
The Company experienced income from operations of $29M for the two months ended
December 31, 2008 compared to a loss from operations of $61M for 2007. This is a
significant improvement arising from improved gross margins and reduced general
and administrative expenses.
OPERATING RESULTS FOR THE EIGHT MONTHS ENDED DECEMBER 31, 2008
For the eight months ended December 31, 2008, the company reported revenues of
$8,339M ("M" representing thousands), compared to $12,129M for the nine months
ended December 31, 2008. The company adjusted fuel surcharges in response to the
volatility of the cost of fuel during the period, but was not 100% successful in
passing these increased costs on to our customers. The Calgary area incurred
severe weather in April, May and December and the slowing of the economy,
especially in the construction industry also negatively affected sales. The
company reports in U.S. dollars, but its functional currency is the Canadian
dollar which has declined 20% against the U.S. dollar during the period.
The gross margin for the eight months ended December 31, 2008 of $2,488M
represented 29.8% of revenue as compared to $3,152M for the nine months ended
December 31, 2007 or 25.9%. Although overall sales decreased, the gross margin
increased in percentage if not absolute dollar amount. This improvement resulted
from a concerted effort to stabilize costs and to implement stronger systems of
internal control. Moving all vehicle repairs and maintenance from outside
vendors to an in house mechanical shop and consolidation of operations also
contributed to a more positive result.
Selling, general and administrative expenses decreased to $2,769M for the eight
months ended December 31, 2008 from $4,164M for the nine months ended December
31, 2007. This decrease is due in part from depreciation which decreased to $862
in 2009 fiscal year to date from $1,316M in 2008 fiscal year to date.
Additionally, general administrative and operating expenses decreased due to the
company's commitment to stronger systems of internal controls which included the
completion of the company's 2008, 2007 and 2006 audits and ongoing communication
with the company's auditors. General and administrative expenses decreased
minimally to 33.1% of revenue in 2009 fiscal year to date compared to 34.3% in
2008 due to increases in salaries advertising and rents required to remain
competitive with other companies in the Calgary area. Additionally, costs were
incurred to implement a safety program that will result in lower costs and
potential new customers.
25
Management also entered into a factoring agreement where approximately $750M of
doubtful receivables were sold for proceeds of $242M. These receivables had all
previously been allowed for, so the factoring agreement resulted in a recovery
of bad debts of $242M. Management will continue to monitor these expenses to
determine where additional costs can be reduced.
The company disposed of surplus assets in the 2009 and 2008 fiscal years' to
date that resulted in gains of $442M and $541M. This made the company's EBITDA
for fiscal 2009 year to date $1,286M compared to $1,218M. For 2009, this cash
from operations has been used to retire current and long-term debt.
The Company experienced net income of $153M for the eight months ended December
31, 2008 compared to a loss of $(471M) for the nine months ended December 31,
2007. This is a significant improvement arising from improved gross margins and
reduced administrative spending.
LIQUIDITY AND CAPITAL RESOURCES FOR THE EIGHT MONTHS ENDED DECEMBER 31, 2008
For the eight months ended December 31, 2008 there was a cash surplus from
operations of 298M as even after the company retired 349M of current payables
the company ended the quarter with positive cash of $30M. In comparison, for the
nine months ended December 31, 2007, the $1,069M cash from operations was due to
an increase in trade payables of $1,131 for the nine months ended December 31,
2007. $498M was used to acquire additional equipment; $122M was raised on the
disposal of surplus equipment; and 882M was used to retire debt and obligations
under capital lease. This resulted in a cash deficiency that was provided
primarily by increases in amounts due to related parties and shareholders.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the 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. On an on-going basis, management evaluates its
estimates and judgments which are based on historical experience and on various
other factors that are believed to be reasonable under the circumstances. The
results of their evaluation form the basis for making judgments about the
carrying values of assets and liabilities. Actual results may differ from these
estimates under different assumptions and circumstances. Our significant
accounting policies are more fully discussed in the Notes to our Consolidated
Financial Statements.
BAD DEBT ALLOWANCE
Estimates are used in determining our allowance for bad debts and are based on
our historical collection experience, current trends, credit policy and a review
of our accounts receivable by aging category. Our reserve is evaluated and
revised on a quarterly basis. As discussed above, the company entered into a
factoring agreement to recover some funds from accounts which were fully allowed
for in prior years.
26
INFLATION AND PREVAILING ECONOMIC CONDITIONS
To date, inflation has not had a significant impact on our operations.
Consistent with industry practice, most of our contracts provide for a
pass-through of certain costs, including increases in landfill tipping fees and,
in some cases, fuel costs. We have implemented a fuel surcharge program, which
is designed to recover fuel price fluctuations. We therefore believe we should
be able to implement price increases sufficient to offset most cost increases
resulting from inflation. However, competitive factors may require us to absorb
at least a portion of these cost increases, particularly during periods of high
inflation.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has approximately 30 operating leases for vehicles and waste bins
used in the operations of the company. Approximate future lease payments over
the next five years are as follows:
2009, $408,000; 2010, $362,000; 2011, $314,000; 2012, $26,000; 2013, $500.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for a small issuer
ITEM 4T. CONROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES & CHANGES TO INTERNAL CONTROLS
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as of the end of the period
covered by this report. Based on this evaluation, our principal executive
officer and principal financial officer concluded as of the Evaluation Date that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
reports is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms relating to our company, particularly during
the period when this report was being prepared.
Additionally, there were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
evaluation date.
27
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting includes those policies and procedures
that: (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of its management and directors; and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness
of any system of internal control, and accordingly, even effective internal
control can provide only reasonable assurance with respect to financial
statement preparation and may not prevent or detect material misstatements. In
addition, effective internal control at a point in time may become ineffective
in future periods because of changes in conditions or due to deterioration in
the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in there being a more than remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected.
Under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, management conducted an evaluation of the
effectiveness of our internal control over financial reporting, as of the
Evaluation Date, based on the framework set forth in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on its evaluation under this framework, management
concluded that our internal control over financial reporting was not effective
as of the Evaluation Date.
Management assessed the effectiveness of the Company's internal control over
financial reporting as of Evaluation Date and identified the following material
weaknesses:
INSUFFICIENT RESOURCES: We have an inadequate number of personnel with requisite
expertise in the key functional areas of finance and accounting.
INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to
properly implement control procedures.
LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS: We do not have a functioning audit
committee and we have no outside directors serving on the Company's Board of
Directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures.
28
Management is committed to improving its internal controls and will (1) continue
to use third party specialists to address shortfalls in staffing and to assist
the Company with accounting and finance responsibilities, (2) increase the
frequency of independent reconciliations of significant accounts which will
mitigate the lack of segregation of duties until there are sufficient personnel
and (3) may consider appointing outside directors and audit committee members in
the future.
Management, including our Chief Executive Officer and Chief Financial Officer,
has discussed the material weakness noted above with our independent registered
public accounting firm. Due to the nature of this material weakness, there is a
more than remote likelihood that misstatements which could be material to the
annual or interim financial statements could occur that would not be prevented
or detected.
This Annual Report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this annual report.
PART 2 - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Corey Finnie and Virginia Finnie are disputing the acquisition of Finnie Water
Hauling Ltd. by Budget and are requesting damages of $Cdn 1,000,000 ($US
867,000) and 1,000,000 (after adjusting for stock splits) shares of the Company.
Approximately $948,000 of the $Cdn 1,000,000 was purportedly related to the
assumption of liabilities related to capital leases. The plaintiff is claiming
that these obligations were not assumed by the company. The company has assumed
these obligations. The outcome of this lawsuit is indeterminable at this time.
ITEM 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS
On October 1, 2008, certain shareholders of the company entered into an
agreement to sell 100% of the outstanding stock of the company to certain
purchasers for a cash price of $275,000. On November 10, 2008, the company
acquired 100% of the outstanding shares of Budget Waste Inc., an Alberta, Canada
corporation from Budget Waste, Inc. a Nevada corporation. The purchase price for
the stock of Budget waste Inc. was 5,496,054 newly issued and restricted shares
of the company's stock, representing approximately 52% of the outstanding shares
of the company post-acquisition
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
See ITEM 2
29
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Exhibits Description
- -------- -----------
31.1 Certification pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934
31.2 Certification pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant, BWI
Holdings, Inc., caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 16, 2009 /s/ Jim Can
-----------------------------------
Jim Can, CEO
30