UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 1-14168
Bell Technology Group Ltd.
(Exact name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3781263
(IRS Employer Identification No.)
295 Lafayette Street, 3rd. Floor, New York, NY 10012
(Address of principal executive offices)
(212)334-8500
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
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. Yes [x] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes or common
equity, as of the latest practicable date:
3,487,911 shares of Common Stock as of May 7, 1998
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [x]
<PAGE>
Bell Technology Group Ltd.
and Subsidiaries
Table of Contents
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheet as of March 31, 1998 and
September 30, 1997 2
Consolidated Statements of Operations
For the Three Months Ended March 31, 1998 and 1997 3
Consolidated Statements of Operations
For the Six Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows
For the Six Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition 9-13
and Results of Operations
PART II - OTHER INFORMATION 14
<PAGE>
Bell Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, Sept 30,
Assets 1998 1997
(Unaudited)
Current assets:
Cash and cash equivalents $ 984,625 $ 2,401,446
Accounts receivable, net of allowance for
doubtful accounts of $272,986 and $194,684
as of March 31, 1998 and September 30, 1997,
respectively 2,857,387 3,259,548
Inventories 478,942 487,542
Prepaid expenses and other current assets 324,199 727,765
---------- -----------
Total current assets 4,645,153 6,876,301
Property and equipment, net 4,593,760 3,548,838
Long-term investment 325,000 325,000
Other assets 363,702 274,849
---------- -----------
Total assets $9,927,615 $11,024,988
========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $1,587,984 $ 2,001,157
Current portion of notes payable 373,297 335,021
Accounts payable 2,554,362 2,010,507
Accrued expenses 184,623 425,852
Deferred revenues 87,599 123,046
---------- -----------
Total current liabilities 4,787,865 4,895,583
---------- -----------
Notes payable, less current portion 807,407 923,217
Other long term liabilities 266,397 191,928
---------- -----------
Total liabilities 5,861,669 6,010,728
---------- -----------
Commitments and contingencies
Stockholders' equity :
Preferred Stock, $.01 par value; 500,000
shares authorized; no shares issued and
outstanding -- --
Common Stock, $.01 par value; 10,000,000
shares authorized; 3,448,450
shares issued and outstanding 34,485 34,485
Additional paid-in capital 9,991,836 10,069,474
Accumulated deficit (5,960,375) (5,089,699)
---------- -----------
Total stockholders' equity 4,065,946 5,014,260
---------- -----------
Total liabilities and stockholders'
equity $9,927,615 $11,024,988
========== ===========
The accompanying notes are an integral part of these consolidated balance
sheets.
Page - 2 -
<PAGE>
Bell Technology Group Ltd.
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
1998 1997
Revenues $ 4,351,607 $ 5,229,452
Costs and expenses:
Cost of revenues (exclusive of
depreciation expense shown below) 2,744,070 4,101,810
Selling, general and administrative 1,869,915 1,392,533
Depreciation and amortization 264,359 139,624
----------- -----------
Total costs and expenses 4,878,344 5,633,967
----------- -----------
Loss from operations (526,737) (404,515)
Interest income (expense), net (62,326) 11,313
----------- -----------
Loss before taxes (589,063) (393,202)
Provision for taxes -- --
----------- -----------
Net loss $ (589,063) $ (393,202)
=========== ===========
Basic net loss per share ($0.17) ($0.13)
Basic weighted average shares outstanding 3,448,450 3,043,280
The accompanying notes are an integral part of these consolidated
statements.
Page - 3 -
<PAGE>
Bell Technology Group Ltd.
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Six Months Ended
March 31,
1998 1997
Revenues $ 9,091,174 $ 8,925,851
Costs and expenses:
Cost of revenues (exclusive of
depreciation expense shown below) 5,857,968 6,847,094
Selling, general and administrative 3,479,353 2,882,344
Depreciation and amortization 506,219 296,090
----------- -----------
Total costs and expenses 9,843,540 10,025,528
----------- -----------
Loss from operations (752,366) (1,099,677)
Interest income (expense), net (118,310) 25,669
----------- -----------
Loss before taxes (870,676) (1,074,008)
Provision for taxes -- --
----------- -----------
Net loss $ (870,676) $(1,074,008)
=========== ===========
Basic net loss per share ($0.25) ($0.35)
Basic weighted average shares outstanding 3,448,450 3,042,248
The accompanying notes are an integral part of these consolidated
statements.
Page - 4 -
<PAGE>
Bell Technology Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net loss $ (870,676) $(1,074,008)
Adjustments to reconcile net (loss)
to net cash used in operating activities
Depreciation and amortization 506,219 296,090
Provision for bad debt 78,302 86,833
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 323,859 (2,149,268)
Decrease (increase) in inventories 8,600 (40,720)
Decrease (increase) in prepaid expenses
and other current assets 403,566 73,275
Decrease (increase) in other assets (88,853) 7,668
Increase (decrease) in accounts payable 543,855 1,002,598
(Decrease) in accrued expenses (241,229) (31,293)
Increase (decrease) in deferred revenues (35,447) 44,252
Increase in other long-term liabilities 74,469 --
---------- -----------
Net cash used in operations 702,665 (1,784,573)
---------- -----------
Cash flows from investing activities:
Purchases of property and equipment,
net of landlord reimbursement (1,551,141) (1,221,666)
---------- -----------
Net cash used in investing activities (1,551,141) (1,221,666)
---------- -----------
Cash flows from financing activities:
Net proceeds from short term borrowings (413,173) 1,526,062
Net proceeds of notes payable (77,534) 321,711
Additional costs incurred with private
placement from September 1997 (77,638) --
Proceeds from exercise of stock options -- 23,760
---------- -----------
Net cash provided by financing activities (568,345) 1,871,533
---------- -----------
Net increase (decrease) in cash and
cash equivalents (1,416,821) (1,134,706)
Cash and cash equivalents,
beginning of period 2,401,446 2,342,011
---------- -----------
Cash and cash equivalents,
end of period $ 984,625 $ 1,207,305
========== ===========
The accompanying notes are an integral part of these consolidated
statements
Page - 5 -
<PAGE>
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, 1998, statements of operations
for the three and six months ended March 31, 1998 and 1997 and the statements of
cash flows for the six months ended March 31, 1998 and 1997 have been prepared
by Bell Technology Group Ltd. (the "Company") without audit. All material
inter-company 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 10KSB on file with the Securities
and Exchange Commission. Results of operations for the three month and six month
period 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 statement
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.
2. REVOLVING CREDIT AGREEMENT
The Company and its subsidiaries have entered into a Restated Security Agreement
with NationsCredit Distribution Finance, Inc. ("Nations") pursuant to which
Nations will make certain advances to the Company to be used to finance its
accounts receivable and inventory. The amount available under this arrangement
is based upon the balance of collateral available that is 80% of its current
qualifying accounts receivable and 50% of its inventory. As of March 31, 1998,
the Company had available $2.0 million of which $1.9 million was outstanding.
Such obligation is secured by a continuing security interest in the assets of
the Company and its subsidiaries. The borrowings bear interest at the prime rate
plus 1.75%. On April 30, 1998, the Company repaid approximately $1.9 million of
the $2.0 million currently outstanding with Nations with proceeds of its
offering described in Note 5 below.
Page - 6 -
<PAGE>
3. NOTES PAYABLE
The Company has entered into leases for various items of its office furniture
and equipment as well as for its telephone system accounted for as capital
leases. The terms on these leases vary from 36 to 60 month terms.
The Company financed certain of its furniture and computer equipment in April
1997 in the amount of approximately $874,000 with FINOVA Capital Corporation.
Such loan is for a term of three years, bears interest at 12.19% per annum and
is self-liquidating over its term.
4. COMMITMENTS AND CONTINGENCIES
In February 1996, the Company entered into a lease for its corporate
headquarters effective July 1996. The lease is for eleven years and six months
starting with an initial annual base rental of $309,250 escalating to $563,547
in the final year. Under the lease, the landlord reimbursed the Company $500,000
for leasehold improvements. The Company is required by the terms of the lease to
maintain a security deposit in the form of a letter of credit in the amount of
$400,000. In order to obtain a standby letter of credit, the Company maintains a
restricted certificate of deposit presently in the amount of $400,000. As of
March 1998, this amount was reduced to $325,000 based on the Company not being
in default under the terms of the lease. Therefore $75,000 of this deposit is
classified as other current assets and $325,000 is included in "Long-term
Investment" of the Company's consolidated balance sheets as of March 31, 1998
and September 30, 1997, respectively. The Company received the $75,000 in April
1998.
5. SUBSEQUENT EVENTS
In April 1998, the Company successfully completed an underwritten private
offering for $160,000,000 consisting of 160,000 units, each unit consisting of
$1,000 principal amount of 13% Senior Notes due 2005 and one warrant to purchase
3.52 shares of common stock at a purchase price of $14.03 per share. The Notes
will mature on May 1, 2005. Interest on the notes will be payable semi-annually
in arrears on May 1 and November 1 of each year, commencing November 1, 1998.
The Company has deposited with an escrow agent $57,000,000, that together with
the interest received thereon, will be sufficient to pay, when due, the first
six interest payments. The Notes are collateralized by a first priority security
interest in the Escrow Account. The Notes are senior unsecured obligations of
the Company and rank pari passu in right of payment with all existing and future
unsecured and unsubordinated indebtedness and rank senior in right of payment to
any future subordinated indebtedness
Page - 7 -
<PAGE>
6. DEPRECIATION AND AMORTIZATION
Depreciation expense relating to cost of revenues is $68,640 and $48,783 for the
three months ended March 31, 1998 and 1997, and $131,906 and $93,799 for the six
months ended March 31, 1998 and 1997, respectively.
7. RECENTLY ISSUED ACCOUNTING STANDARDS
In the first quarter of fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share," which requires
the presentation of both basic and diluted earnings per share on the face of the
Consolidated Statements of Operations. Options and warrants are not included in
the calculation of diluted earnings per share if the effect would be
antidilutive. Accordingly, basic and diluted net loss per share do not differ
for any period presented.
Net loss per share under the provisions of SFAS 128 for periods prior to the
first quarter of fiscal 1998 did not differ from the net loss per share as
reported in those prior periods.
The following table summarizes securities that were outstanding as of March 31,
1998 and 1997, but not included in the calculation of diluted net loss per share
because such shares are antidilutive.
March 31,
----------------
1998 1997
---- ----
Options 926,564 257,564
Warrants 695,933 661,150
Page - 8 -
<PAGE>
PART I MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company was founded in 1989 by Marc H. Bell as NAFT International Ltd.
("NAFT"). From 1989 to 1994 the Company acted as a Value-Added Reseller
primarily providing custom computer hardware and software solutions for desktop
publishing. The Company specialized in Atex to Mac conversions and worked with
most major publishing houses and advertising agencies including Time Warner and
Olgivy & Mather. In July 1994, PFM Technologies Corp., a company organized by
Mr. Bell, acquired the assets and liabilities of NAFT and its affiliated
corporations in a tax-free exchange of common stock. By 1995 the Company's
management recognized information delivery to the desktop as an attractive
business opportunity and began to re-shape its business strategy for the future.
In September 1995, the Company was reincorporated by merger into Bell Technology
Group Ltd., a Delaware corporation, with a focus on entering Internet and
Internet-related businesses. The Company began to offer Internet access to
business customers by the end of 1996. In 1997 the Company began to capitalize
on its expertise in cutting-edge Internet technologies to provide one-stop
Internet solutions for large enterprises and as of March 31, 1998 has grown its
Internet services customer base of medium and large businesses to over 490
clients.
Prior to 1996, the Company's revenues consisted almost exclusively of sales of
computer hardware and software and desktop publishing services. Since 1996, the
Company has reshaped its sales of computer hardware and software from
mass-marketed computer desktop solutions to higher-end workstation, web and
database servers and software for sophisticated commercial Internet solutions.
In addition, the Company has significantly grown several new components of
revenue including Internet access, interactive development and instructor-led
training. Commencing in the fiscal year ended September 30, 1996, the Company
began segment reporting of revenue. The Company divided its operations for
segment reporting services into two divisions: (i) the "Computer Products Sales
and Services Division," which provides value-added systems and network
integration and (ii) the "Internet and Media Development Division," which
provides high bandwidth dedicated Internet access, web hosting and co-location
facilities, interactive development - digital web design, web implementation and
3-dimensional computer animation, and instructor-led training. The Company
expects that the Internet and Media Development Division will continue to grow
as a percentage of revenues. At the same time, the Company intends to continue
to emphasize hardware and software sales of the higher-margin workstation, web
and database server and software components complementary to its sophisticated
Internet solutions.
The Company historically has experienced negative cash flow from operations and
incurred net losses. The Company's ability to continue to grow its revenue base
and achieve further operating efficiencies. For the fiscal years ended September
30, 1996 and 1997, the Company generated negative operating cash flows of
approximately $1.9 million and approximately $2.5 million, respectively, and
incurred net losses of approximately $1.9 million and approximately $3.1
million, respectively. For the six months ended March 31, 1998, the Company
generated a positive operating cash flow of approximately $703,000 and incurred
a net loss of approximately $871,000. The Company believes its SuperPOP
Page - 9 -
<PAGE>
infrastructure will enable it to achieve further economies of scale as it
continues to expand its customer base. However, there can be no assurance that
the Company will be able to achieve or sustain revenue growth, positive cash
flow or profitability in the future. As of March 31, 1998, the Company had
generated an accumulated deficit or approximately $6.0 million.
Results of Operations
For the Three Months Ended March 31, 1998 and 1997
Revenues. Consolidated revenues for the three months ended March 31, 1998
compared to the same period in 1997, decreased approximately 17% from
approximately $5,239,000 to approximately $4,352,000. This decrease was due
primarily to a decrease in sales from the Computer Products Sales and Service
segment which had sales for the three months ended March 31, 1998 of
approximately $2,899,000 in comparison to $4,618,000 in sales for the three
months ended March 31, 1997. The Company has changed its revenue mix. For the
three months ended March 31, 1998, 33% of revenues were from the Internet and
Media Development Segment as compared to 12% for the comparable period in fiscal
1997. As previously stated, the Company is actively de-emphasizing sales of
lower-end and the more popular brands of hardware where price competition is
intense and profit margins are low, in favor of software and Internet related
sales which tend to produce better profit margins. This trend should continue.
The Company intends to focus its future operations primarily in the areas of
Internet related activities such as web hosting, co-location, sales of high-end
computer products and systems, specialized computer programs (such as Alias,
Softimage, etc.), training, interactive development and web site development.
Sales from the Internet and Media Development segment increased sales from
approximately $621,000 for the three months ended March 31, 1997 to
approximately $1,441,000 for the three months ended March 31, 1998 for an
increase of 132%.
Cost of Revenues. Cost of Revenues for the three months ended March 31, 1998
were approximately $2,744,000, or approximately 63% of revenues, as compared to
approximately $4,151,000 or approximately 79% of revenues for the comparable
period in fiscal 1997. Cost of Revenues for the Computer Products and Service
Segment for the three months ended March 31, 1998 were approximately $2,344,000,
or approximately 81% of revenues , as compared to approximately $3,882,000 or
approximately 84% of revenues for the comparable period in fiscal 1997. Cost of
Revenues for the Internet and Media Development Segment for the three months
ended March 31, 1998 were approximately $401,000 or approximately 28% of
revenues, as compared to approximately $220,000 or approximately 35% of revenues
for the comparable period in fiscal 1997. The increase in gross profit margin
was due to the fact that an increased percentage of sales came from sales of
services (including Internet services) and computer programs that generate
higher profit margins, rather than sales of products. In addition, sales of more
sophisticated computer systems that required greater pre-sales and after market
customer assistance generated higher gross profit margins.
Selling, General and Administrative. For the three months ended March 31, 1998,
Selling, General and Administrative expenses increased from approximately
$1,392,000 or 27% of sales to approximately $1,870,000 or approximately 43% of
sales. The increase in 1998 is due to an increase in payroll, primarily for
corporate management personnel and Internet and computer program sales
personnel, and technicians and engineers in anticipation of the Company's future
expansion. In addition, in the second quarter of 1998, the Company recorded a
reserve of $150,000 for a possible additional New York State Sales and Use tax
liability. The Company is diligently working with New York State Taxation and
Finance to resolve the matter.
Page - 10 -
<PAGE>
Net Loss. For the three month period ended March 31, 1998, the Company incurred
a net loss of approximately $589,000 or $.17 per share as compared to a net loss
of approximately $393,000 or $.13 for the corresponding three month period
ending March 31, 1997.
For the Six Months Ended March 31, 1998 and 1997
Revenues. Consolidated revenues for the six months ended March 31, 1998
increased approximately 2% from approximately $8,936,000 to approximately
$9,091,000. Revenues from the Computer Products Sales and Service segment for
the six months ended March 31, 1998 decreased approximately 21% from
approximately $7,981,000 to approximately $6,308,000. Sales from the Internet
and Media Development segment for the six months ended March 31, 1998 increased
approximately 190% from approximately $955,000 to approximately $2,768,000.
Cost of Revenues. Cost of Revenues for the six months ended March 31, 1998 were
approximately $5,858,000 or 64% of revenues, as compared to approximately
$6,941,000, or approximately 78% of revenues for the comparable period in fiscal
1997. Cost of Revenues from the Computer Products and Services Segment for the
six months ended March 31, 1998 were approximately $5,122,000 or approximately
81% of revenues, as compared to approximately $6,487,000 or approximately 81% of
revenues for the comparable period in fiscal 1997. Cost of Revenues for the
Internet and Media Development Segment for the six months ended March 31, 1998
were approximately $736,000 or approximately 27% of revenues, as compared to
approximately $360,000 or approximately 38% revenues for the comparable period
in fiscal 1997.
Selling, General and Administrative. For the six months ended March 31, 1998,
Selling, General and Administrative expenses increased from approximately
$2,882,000 or approximately 32% of sales to approximately $3,479,000 or 38% of
sales.
Net Loss. For the six months ended March 31, 1998, the Company incurred a net
loss of approximately $871,000 or $.25 per share as compared to a net loss of
approximately $1,074,000 or $.35 per share.
Liquidity and Capital Resources
The Company and its subsidiaries have entered into a Restated Security Agreement
with NationsCredit Distribution Finance, Inc. ("Nations") pursuant to which
Nations will make certain advances to the Company to be used to finance its
accounts receivable and inventory. The amount available under this arrangement
is based upon the balance of collateral available that is 80% of its current
qualifying accounts receivable and 50% of its inventory. As of March 31, 1998,
the Company had a credit line available $2.0 million, of which $1.9 million was
outstanding. Such obligation is secured by a continuing security interest in the
assets of the company and its subsidiaries. The borrowings bear interest at the
prime rate plus 1.75%. On April 30, 1998, the Company repaid approximately $1.9
million of the $2.0 million currently outstanding with Nations with proceeds of
its offering described in "Subsequent Events" below.
Page - 11 -
<PAGE>
In December 1997, the Company received a $1,000,000 credit line from Cisco
Systems Capital Corporation ("CSC") to lease Cisco Systems products and
associated peripherals. The credit line is available to the Company for a period
of 180 days, is to be repaid over a 36-month period and is subject to quarterly
financial review by CSC. The Company may not purchase more than $500,000 on the
credit line during any three-month period. As of March 31, 1998, the Company had
used approximately $65,000 of this credit line. At the end of the lease term,
the Company has the option of purchasing the equipment for $1.
The Company had a negative cash flow of approximately $1,419,000 for the six
months ended March 31, 1998. This resulted in part from cash provided by
operations of approximately $703,000 which represents the net loss of
approximately $871,000, the decrease in accounts receivable of approximately
$324,000 (offset by the increase in accounts payable of approximately $544,000
and the decrease of accrued expenses of $241,000). In addition, the Company
purchased property and equipment in the amount of approximately $1,551,000. The
significant increase in capital expenditures resulted from the Company's
continuing focus on the development of its Internet related activities which
included the purchase of servers, routers, cabinets, monitors and other
equipment necessary to create and expand the equipment used to host web sites.
The negative cash flow and purchases of property and equipment resulted in a
decrease in working capital from approximately $1,981,000 at September 30, 1997
to approximately ($143,000) at March 31, 1998 and a decrease in the current
ratio from 1.40 to 1 at September 30, 1997 to .97 to 1 at March 31, 1998. The
decrease in prepaid expenses and other current assets is mainly the result of
the Company's private placement in September 1997 of which $600,000 which was
included as of September 30, 1997 as a receivable and which was received in
October 1997.
Recently Issued Accounting Standards
In the first quarter of fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share," which requires
the presentation of both basic and diluted earnings per share on the face of the
Consolidated Statements of Operations. Options and warrants are not included in
the calculation of diluted earnings per share if the effect would be
antidilutive. Accordingly, basic and diluted net loss per share do not differ
for any period presented.
Net loss per share under the provisions of SFAS 128 for periods prior to the
first quarter of fiscal 1998 did not differ from the net loss per share as
reported in those prior periods.
The following table summarizes securities that were outstanding as of March 31,
1998 and 1997, but not included in the calculation of diluted net loss per share
because such shares are antidilutive.
March 31,
----------------
1998 1997
---- ----
Options 926,564 257,564
Warrants 695,933 661,150
Page - 12 -
<PAGE>
Subsequent Events
In April 1998, the Company successfully completed an underwritten private
offering for $160,000,000 consisting of 160,000 units, each unit consisting of
$1,000 principal amount of 13% Senior Notes due 2005 and one warrant to purchase
3.52 shares of common stock at a purchase price of $14.03 per share. The Notes
will mature on May 1, 2005. Interest on the notes will be payable semi-annually
in arrears on May 1 and November 1 of each year, commencing November 1, 1998.
The Company has deposited with an escrow agent $57,000,000, that together with
the interest received thereon, will be sufficient to pay, when due, the first
six interest payments. The Notes are collateralized by a first priority security
interest in the Escrow Account. The Notes are senior unsecured obligations of
the Company and rank pari passu in right of payment with all existing and future
unsecured and unsubordinated indebtedness and rank senior in right of payment to
any future subordinated indebtedness. The Company currently plans to use the net
proceeds from the offering to expand its New York facilities and construct
similar facilities in both London and San Francisco and in addition, increase
its sales, marketing, technical and administrative personnel associated with
this expansion strategy. The Company is also looking to acquire other Internet
service providers in its target markets.
Forward Looking Statements
The foregoing management discussion and analysis contains certain
forward-looking statements. Due to the fact that the Company faces intense
competition in a business characterized by rapidly changing technology, and must
raise additional capital in order to continue with its existing capital
expenditure program, actual results and outcomes may differ materially from any
such forward looking statements. Future results of operations are, in general,
difficult to forecast due to the fast moving pace of the industry. Additional
information concerning factors that could cause actual results to differ
materially from those in the forward looking statements is contained under the
heading "Risk Factors" listed from time to time in the Company's filings with
the Securities and Exchange Commission.
Page - 13 -
<PAGE>
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
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 15, 1998 By: /s / Marc H. Bell
----------------------------------------------------
Marc H. Bell, President & CEO
Date: May 15, 1998 By: /s / Robert B. Bell
----------------------------------------------------
Robert B. Bell, Exec. Vice President & CFO
Date: May 15, 1998 By: /s / Alan Levy
----------------------------------------------------
Alan Levy, Treasurer and Chief Accounting Officer
Page - 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 984,625
<SECURITIES> 0
<RECEIVABLES> 2,857,387
<ALLOWANCES> 272,986
<INVENTORY> 478,942
<CURRENT-ASSETS> 4,645,153
<PP&E> 6,200,462
<DEPRECIATION> 1,606,702
<TOTAL-ASSETS> 9,927,615
<CURRENT-LIABILITIES> 4,787,865
<BONDS> 0
0
0
<COMMON> 34,485
<OTHER-SE> 4,031,461
<TOTAL-LIABILITY-AND-EQUITY> 9,927,615
<SALES> 4,351,607
<TOTAL-REVENUES> 4,351,607
<CGS> 2,744,070
<TOTAL-COSTS> 4,878,344
<OTHER-EXPENSES> 0
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