UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 1-14168
_____________Bell Technology Group Ltd.______________
(Exact name of registrant as specified in its charter)
____________Delaware____________
(State or other jurisdiction of
incorporation or organization)
____________13-3781263_________________
(I.R.S. Employer Identification Number)
611 Broadway, Suite 415, New York, New York
(Address of principal executive offices)
10012
(Zip Code)
________________(212) 982-0800____________________
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former fiscal Year if changed since last
report) Indicate by a check mark whether the registrant: (1) has filed all
annual, quarterly and other reports required to be filed by Section 13 of
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or shorter period that the registrant was required to file such reports);
and (2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No ___
__________________3,040,352__________________
(Shares of Common Stock as of March 31, 1996)
Bell Technology Group Ltd.
and Subsidiaries
Table of Contents
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets 2
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996 and 1995 3
Consolidated Statements of Operations
For the Six Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows
For the Six Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II - OTHER INFORMATION 11
Bell Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, September 30,
1996 1995
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 5,333,958 $ 222,367
Accounts receivable, net of allowance
for doubtful accounts of $11,493 and
$29,049 as of March 31, 1996 and
September 30, 1995, respectively 1,455,432 1,423,548
Inventories 576,791 843,904
Prepaid expenses and other current assets 55,244 12,061
__________ __________
Total current assets 7,421,425 2,501,880
Property and equipment, net 551,783 413,306
Deferred stock offering costs 0 25,000
Other assets 114,806 21,364
__________ __________
Total assets $ 8,088,014 $ 2,961,550
Liabilities and Stockholders' Equity
Current liabilities:
Accounts receivable credit line $ 0 $ 711,952
Current portion of notes payable 68,368 75,865
Accounts payable 415,379 1,319,532
Accrued expenses 94,660 118,414
Deferred revenues 88,801 75,562
Deferred income taxes 20,816 20,816
__________ __________
Total current liabilities 688,024 2,322,141
Long term notes payable, net of curr portion 8,765 47,050
Note payable stockholder 0 287,000
Deferred income taxes 6,235 6,562
__________ __________
Total liabilities 703,024 2,662,753
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value; 500,000 shares
authorized; no shares issued and outstanding 0 0
Common Stock, $.01 par value; 10,000,000 shares
authorized; 3,040,352 and 1,725,000 shares
issued and outstanding 30,404 17,250
Additional paid-in capital 8,055,498 362,333
Accumulated deficit (700,912) (80,786)
__________ _________
Total stockholders' equity 7,384,990 298,797
Total liabilities and stockholders' equity $ 8,088,014 $ 2,961,550
========== ==========
See accompanying notes)
Page - 2 -
Bell Technology Group Ltd. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
1996 1995
Revenues $ 2,342,616 $ 3,509,767
Costs and expenses:
Cost of revenues 1,877,463 2,976,047
Selling, general and administrative 605,720 404,448
Depreciation and amortization 37,436 33,363
__________ __________
Total costs and expenses 2,520,619 3,413,858
__________ __________
Income (loss) from operations (178,003) 95,909
Interest income (expense), net 4,856 (20,817)
Write-off of Debt Issuance Costs (256,351)
__________ __________
Income (loss) before taxes (429,498) 75,092
Provision for taxes 0 24,986
__________ __________
Net income (loss) $ (429,498) $ 50,106
========== ==========
Net earnings (loss) per share ($0.16) $0.03
Weighted average shares outstanding 2,605,483 1,725,000
(See accompanying notes)
Page - 3 -
Bell Technology Group Ltd. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Six Months Ended
March 31,
1996 1995
Revenues $ 4,764,877 $ 5,703,606
Costs and expenses:
Cost of revenues 3,890,703 4,646,101
Selling, general and administrative 1,126,707 814,858
Depreciation and amortization 67,181 61,726
__________ __________
Total costs and expenses 5,084,591 5,522,685
__________ __________
Income (loss) from operations (319,714) 180,921
Interest income (expense), net (44,061) (47,265)
Write-off of Debt Issuance Costs (256,351) 0
__________ __________
Income (loss) before taxes (620,126) 133,656
Provision for taxes 0 50,427
__________ __________
Net income (loss) $ (620,126) $ 83,229
========== ==========
Net earnings (loss) per share ($0.28) $0.05
Weighted average shares outstanding 2,176,097 1,725,000
(See accompanying notes)
Page - 4 -
Bell Technology Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended March 31,
1996 1995
Cash flows from operating activities:
Net (loss) income $ (620,126) $ 83,229
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities
Depreciation 67,181 61,726
Write-off and amort. of debt issuance costs 293,500 0
Provision for deferred taxes (327) 11,712
Changes in operating assets and liabilities:
(Increase) in accounts receivable (31,884) (540,809)
Decrease (increase) in inventories 267,113 (487,760)
(Increase) in prepaid exp & other curr assets (43,183) (11,899)
(Increase) in other assets (68,442) (29,041)
(Decrease) increase in accounts payable (904,153) 761,527
(Decrease) in accrued expenses (23,754) (24,736)
Increase in deferred revenues 13,239 40,010
___________ ___________
Net cash (used in) operations (1,050,836) (136,041)
___________ ___________
Cash flows from investing activities:
Purchases of property and equipment. (205,658) (61,009)
___________ ___________
Net cash (used in) investing activities (205,658) (61,009)
___________ ___________
Cash flows from financing activities:
Repayment of accounts receivable credit line (711,952) 436,066
Repayments of notes payable (332,782) (33,623)
Proceeds from initial public offering, net
of offering costs of $1,602,175 7,412,819 0
___________ ___________
Net cash provided by financing activities 6,368,085 402,443
___________ ___________
Net increase in cash and cash equivalents 5,111,591 205,393
Cash and cash equivalents, beginning of period 222,367 68,150
___________ __________
Cash and cash equivalents, end of period $ 5,333,958 $ 273,543
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest 44,612 47,265
Cash paid for income taxes 0 1,807
Noncash financing activity:
Issuance of common stock in connection
with bridge financing 250,000 0
(See accompanying notes)
Page - 5 -
BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheets as of March 31, 1996 and statements of
operations and statements of cash flows for the six months ended and for
the three months ended March 31, 1996 and 1995 have been prepared by Bell
Technology Group Ltd. (the "Company") without audit. All material
intercompany accounts and transactions have been eliminated. The
consolidated results should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Form SB-2 registation
statement, declared effective on January 24, 1996, on file with the
Securities and Exchange Commission. Results of operations for the six and
three month periods are not necessarily indicative of the operating results
for the full year. Interim statements are prepared on a basis consistent
with year end statements.
In the opinion of management, the unaudited interim financial statements
furnished herein include all adjustments necessary for a fair presentation
of the results of operations of the Company. All such adjustments are of
a normal recurring nature, except for the write-off of debt issuance costs.
2. BRIDGE FINANCING
In October 1995, the Company borrowed $250,000 in a Bridge Financing. The
Bridge Notes issued in connection with the Bridge Financing bore interest at
9% per annum and were due on the earlier of two years from the date of the
receipt of the proceeds of the Bridge Financing by the Company, or the
closing of the public offering. In connection with the Bridge Financing,
the Company issued 35,710 shares of Common Stock to the Bridge Lenders at no
cost which has been valued at $7.00 per share when calculating debt issuance
costs and incurred approximately $43,500 of other debt issuance costs, for a
total of approximately $293,500. As of March 31,1996 the entire $293,500 has
been expensed, $37,149 was amortized over the duration of the debt obligation
and the remaining $256,351 was written off in January 1996 as Debt Issuance
Costs upon the full repayment of the Bridge Notes.
Page - 6 -
BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INITIAL PUBLIC OFFERING
In January 1996, the Company sold, in an initial public offering, 1,150,000
shares of Common Stock for $7.00 per share and 575,000 Redeemable Purchase
Warrants for $.10 per warrant. Each warrant entitles the holder to purchase
one share of the Company's stock for $7.70. The warrants are redeemable by
the Company at $.10 per warrant any time after January 24, 1997 if certain
conditions are met. The net proceeds, which the Company received from the
offering, amounted to approximately $6.6 million.
In March 1996, the underwriter of the initial public offering exercised its
over allotment option to purchase 129,642 common shares from the Company for
$7.00 per share. The net proceeds amounted to approximately $800,000.
4. COMMITMENTS AND CONTINGENCIES
In February 1996 the Company entered into a lease for its corporate
headquarters to take effect 90 days after the approval of certain designs.
Approval was obtained April 24, 1996. The lease is for eleven years and six
months starting with an initial annual rental of $309,250 and escalating to
$563,547 in the final year.
Page - 7 -
MANAGEMENTOS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES OF HARDWARE AND SOFTWARE
Sales of Apple and other computer products declined during the second quarter
(ended March 31, 1996), primarily as a result of the reorganization of the
Company's sales force following the closing of the public offering and
continued competition from mass marketing channels in which price cutting is
the dominant form of competition.
In response, during the second quarter, the Company began to diversify its
offering of hardware and software products in an effort to generate higher
profit margins, decrease its dependency on Apple products, and to establish
itself as a diversified computer products and services company. It is the
intention of the Company to focus its future development on the marketing of
more sophisticated hardware and software and related Internet solutions for
the graphic arts, publishing and financial industries, and the growth of
earnings rather than the growth of sales. This required a shift in the
Company's sales effort (see Selling, General and Administrative Expenses,
below). Specifically, the Company: (a) began to develop a stronger
relationship with Sun Microcomputer Systems and Silicon Graphics; (b)
increased the sale of direct access Internet connections; and (c) made a
decision to establish an interactive media group to focus on CD-ROM
development and 3-D animation.
The Company's reorganized sales force began to produce improved sales in
April, 1996.
TRAINING
The Company is expanding all of its training operations, including training
in the areas of multimedia and 3-D. The Company is in the process of
constructing larger training facilities (see "New Facilities") and hiring
additional training sales personnel.
INTERNET OPERATIONS
The Company has hired several Internet engineers in order to expand its
direct access Internet operations. The Company has now begun to aggressively
market its Internet services and capabilities to the real estate, advertising
and financial communities.
NEW FACILITIES
In February, 1996, the Company entered into a lease for 25,000 square feet of
space in the Puck Building at 295 Lafayette Street, New York, New York 10012.
The Company will relocate its operation to such facility upon completion of
construction in the summer of 1996. Rent will commence on or about July 1,
1996. The Company anticipates that its cost of construction, furnishing and
relocation will be approximately $250,000, which will be capitalized and
amortized over the life of the lease.
The Puck lease is for a term of 11 years, 6 months at an initial annual base
rental of $309,250. The Company also has an option to acquire an additional
7,000 square feet of space at an annual rent of approximately $28,000 which
the Company intends to use for shipping and receiving.
Page - 8 -
REVENUES FOR THE THREE AND SIX MONTH PERIODS ENDED MARCH 31, 1996
Consolidated revenues for the three months ended March 31, 1996 decreased 33%
from $3.51 million to $2.34 million.
For the six months ended March 31, 1996, consolidated revenues decreased 16%
to $4.76 million from the comparable period in 1995/1996. The six month
decrease was primarily due to a decline in sales in the second quarter ended
March 31, 1996.
COST OF REVENUES FOR THE THREE AND SIX MONTH PERIODS ENDED MARCH 31, 1996
Cost of Revenues for the three months ended March 31, 1996 were $1.88 million
or approximately 80% of revenues, as compared to $2.98 million or
approximately 85% of revenues for the comparable period in 1995. The increase
in gross profit margin was due to the fact that although profit margins on
Apple products declined, the Company was able to improve its existing gross
profit margins by the sale of more profitable products, services and training.
Cost of Revenues for the six months ended March 31, 1996 were $3.89 million or
approximately 82% of revenues, as compared to $4.65 million or approximately
81% or revenues for the comparable period in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FOR THE
THREE AND SIX MONTH PERIODS ENDED MARCH 31, 1996
The Company received the proceeds of its initial public offering at the
beginning of February, 1996. During the first quarter (which ended December
31, 1995), the Company made a decision to diversify its operations, with an
emphasis on Internet operations and a reduction of its reliance upon Apple.
For the three months ended March 31, 1996, Selling, General and Administrative
expenses increased from approximately $640,000 (or 14% of Revenues) to $1.16
million (or 24% of Revenues). This increase was due in a large part to an
increase in payroll beginning on February 1, 1996 resulting from the:
(a) hiring of additional sales people in an effort to diversify product lines
and an attempt to increase margins on product sales; (b) hiring engineers to
complete system development and sales people to market the systems; (c)
promotion by the Company of its Shared Direct Access Internet program; and
(d) creation of a marketing department and the organization of an aggressive
selling effort. The Company anticipates that revenues from sales of its
expanded product line, and Shared Direct Access Internet connections will
begin to develop in the third and fourth quarters.
NET (LOSS) INCOME FOR THE THREE AND SIX MONTH PERIODS ENDED MARCH 31, 1996
For the three month period ended March 31, 1996, the Company incurred a net
loss of approximately $429,000 compared to net income of approximately
$50,000 for the corresponding three month period ending March 31, 1995.
For the six month period ended March 31, 1996, the Company incurred a net loss
of approximately $620,000 compared to net income of approximately $83,000 for
the corresponding six month period ending March 31, 1995. Included in the loss
for the three month period ended March 31, 1996 is approximately $293,500 of
debt issuance costs, ($256,351 of which has been expensed written-off during
the three month period ended March 31, 1996, and the balance amortized as
interest expense.) The balance of the operating loss is primarily
attributable to the Company's change of direction in product sales and the
increase in staffing necessary to carry out its current sales and Internet
development programs.
Page - 9 -
LIQUIDITY AND CAPITAL RESOURCES
The Company (through its NAFT subsidiary) presently has a total of
approximately $1.5 million available to it pursuant to a Business Financing
Agreement (to finance its accounts receivable), and an Agreement for Wholesale
Financing (to finance its inventory) with Deutsche Financial Services ("DFS").
As of March 31, 1996, the Company had a net outstanding of approximately
$233,000 under these agreements. These obligations are secured by a
continuing security interest in substantially all of the assets of the
Company's NAFT subsidiary and the guarantees of the Company and Marc H. Bell.
The borrowings bear interest at the prime rate plus 1.5%. Pursuant to the
terms of these agreements, NAFT is required to obtain prior written consent
from DFS before it (but not the Company) engages in certain transactions
outside of NAFT's ordinary course of business and comply with certain
financial covenants.
The Company generated a positive cash flow of approximately $5.1 million for
the six months ended March 31, 1996. This was generated primarily from the
net proceeds of the Initial Public Offering of approximately $7.74 million,
offset by the decrease in accounts payable of $904,153, purchases of fixed
assets of $205,658 and the payment write-off of debt issuance and stock
offering costs of $293,500. In addition, inventories decreased by $267,113.
In total, operations generated a negative cash flow of $1,050,836.
In January 1996, the Company repaid the sum of $250,000 pursuant to the terms
of the Bridge Financing and wrote off the remaining unamortized debt issuance
costs. The Bridge Lenders received prior to the Offering an aggregate of
35,710 fully-paid and non-assessable shares of the Common Stock of the
Company. These 35,710 shares represent a debt financing cost. The remaining
deferred stock offering costs incurred in connection with the initial public
offering have been recorded in equity as a reduction of the proceeds received
from the public offering.
Page - 10 -
PART II - OTHER INFORMATION
- -----------------------------
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a) - Exhibits
27) - Financial Data Schedule
b) - Reports on Form 8-K
Not applicable
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Bell Technology Group Ltd.
Date: May 14, 1996 By: /s/ Marc H. Bell
------------------------------
Marc H. Bell, President & CEO
Date: May 14, 1996 By: /s/ Robert B. Bell
-------------------------------------------
Robert B. Bell, Exec. Vice President & CFO
Page - 11 -
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,333,958
<SECURITIES> 0
<RECEIVABLES> 1,466,925
<ALLOWANCES> 11,493
<INVENTORY> 576,791
<CURRENT-ASSETS> 55,244
<PP&E> 810,710
<DEPRECIATION> 258,927
<TOTAL-ASSETS> 8,088,014
<CURRENT-LIABILITIES> 688,024
<BONDS> 0
0
0
<COMMON> 30,404
<OTHER-SE> 7,354,586
<TOTAL-LIABILITY-AND-EQUITY> 7,384,990
<SALES> 4,764,877
<TOTAL-REVENUES> 4,764,877
<CGS> 3,890,703
<TOTAL-COSTS> 5,084,591
<OTHER-EXPENSES> 300,412
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (620,126)
<INCOME-TAX> 0
<INCOME-CONTINUING> (620,126)
<DISCONTINUED> 0
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