<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 Number: 0-21633
BRISTOL TECHNOLOGY SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
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<CAPTION>
<S> <C>
Delaware 58-2235556
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
18201 Von Karman Avenue, Suite 305, Irvine, California 92612
(Address of principal executive offices) (Zip code)
</TABLE>
(714) 475-0800
(Issuer's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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
------ -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock, $.001 par value - 4,757,068 shares as of April 25, 1997
Class A Redeemable Common Stock Purchase Warrants - 718,750 as of April 25,
1997
Transitional Small Business Disclosure Format (Check One): Yes No X
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Page 1 of 15
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BRISTOL TECHNOLOGY SYSTEMS, INC.
Index
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Page
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Part I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
BRISTOL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES (SUCCESSOR):
CASH REGISTERS, INCORPORATED (PREDECESSOR):
Consolidated Balance Sheet as of March 31, 1997 (Successor) 3
Consolidated Statements of Operations for the three months ended
March 31, 1997 (Successor) and for the three months ended March 31,
1996 (Predecessor) 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 (Successor) and for the three months ended March 31,
1996 (Predecessor) 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
Part II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signature 13
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Page 2 of 15
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
BRISTOL TECHNOLOGY SYSTEMS, INC.
Consolidated Balance Sheet (Successor)
(Unaudited)
March 31, 1997
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<CAPTION>
ASSETS
<S> <C>
Current assets
Cash and cash equivalents $ 4,519,770
Accounts receivable, net of allowance for doubtful accounts of $48,252 1,257,386
Inventories 2,204,577
Prepaid expenses and other current assets 59,238
Amounts due from related parties 75,114
-----------
Total current assets 8,116,085
Property and equipment, at cost:
Furniture and equipment 184,015
Automobiles 40,955
Leasehold improvements 90,571
-----------
315,541
Less accumulated depreciation and amortization 50,853
-----------
Property and equipment, net 264,688
Intangible assets, net of accumulated amortization of $47,111 1,664,878
Prepaid license fees 102,750
Other assets 88,228
-----------
Total assets $10,236,629
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 50,000
Accounts payable 840,281
Accrued salaries, wages and related benefits 272,081
Accrued expenses 293,974
Deferred revenue 491,203
Customer advances 412,635
Note payable to related party 40,000
Current portion of capital lease obligations 19,193
-----------
Total current liabilities 2,419,367
Capital lease obligations - noncurrent portion 32,485
Other long-term liabilities 36,749
Commitments and contingencies
Stockholders' equity
Preferred stock, $.001 par value:
Authorized shares -- 4,000,000 --
None issued and outstanding
Common stock, $.001 par value:
Authorized shares -- 20,000,000
Issued and outstanding shares -- 4,745,654 4,746
Additional paid-in capital 8,284,893
Accumulated deficit (541,611)
-----------
Total stockholders' equity 7,748,028
-----------
Total liabilities and stockholders' equity $10,236,629
===========
</TABLE>
See accompanying notes.
Page 3 of 15
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BRISTOL TECHNOLOGY SYSTEMS, INC.
Consolidated Statements of Operations
(Unaudited)
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(Successor) (Predecessor)
Three Months Ended March 31
1997 1996
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Revenue:
System sales and installation $1,748,821 $1,296,588
Service and supplies sales 911,477 469,480
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Net revenue 2,660,298 1,766,068
Costs and expenses:
Cost of system sales and installation 1,171,596 951,718
Cost of service and supplies sales 689,335 318,136
Selling, general and administrative expenses 1,284,821 528,165
---------- ----------
Total costs and expenses 3,145,752 1,798,019
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Operating loss (485,454) (31,951)
Other (income) expense:
Interest income (64,252) (9,547)
Interest expense 12,734 3,509
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Total other income (51,518) (6,038)
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Loss before income taxes (433,936) (25,913)
Income tax provision (benefit) 1,050 (9,087)
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Net loss $ (434,986) $ (16,826)
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Net loss per common share $ (0.09) $ (16.81)
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Common shares used in computing per share amounts 4,745,654 1,001
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</TABLE>
See accompanying notes.
Page 4 of 15
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BRISTOL TECHNOLOGY SYSTEMS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
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<CAPTION>
(Successor) (Predecessor)
Three Months Ended March 31
1997 1996
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Operating activities
Net loss $ (434,986) $ (16,826)
Adjustments to reconcile net loss to net cash and cash
equivalents provided by (used in) operating activities:
Depreciation 21,301 7,500
Amortization 28,522 --
Provision for doubtful accounts 9,162 8,026
Reserve for excess and obsolete inventories 25,500 --
Compensation expense 8,021 --
Deferred income taxes -- (955)
Changes in operating assets and liabilities
Accounts receivable 30,408 (65,330)
Inventories (82,350) 246,904
Prepaid expenses and other assets (42,018) (19,300)
Accounts payable (124,344) 89,465
Other accrued expenses (54,401) 44,691
Deferred revenue 64,144 (58,000)
Customer advances (13,082) (154,919)
Other long-term liabilities 12,249 --
----------- -----------
Net cash and cash equivalents provided by
(used in) operating activities (551,874) 81,256
Investing activities
Capital Expenditures (13,359) (12,186)
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Net cash and cash equivalents used in
investing activities (13,359) (12,186)
Financing activities
Capital lease payments (2,230) --
Net repayments on line of credit (388,441) (68,890)
----------- -----------
Net cash and cash equivalents used in
financing activities (390,671) (68,890)
Net increase (decrease) in cash and cash equivalents (955,904) 180
Cash and cash equivalents at beginning of period 5,475,674 2,269
----------- -----------
Cash and cash equivalents at end of period $ 4,519,770 $ 2,449
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest $ 12,734 $ 3,509
=========== ===========
Cash paid for income taxes, net $ 96,459 $ 7,250
=========== ===========
</TABLE>
See accompanying notes.
Page 5 of 15
<PAGE> 6
BRISTOL TECHNOLOGY SYSTEMS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
Organization
Bristol Technology Systems, Inc. (the Company) was incorporated on
April 3, 1996 in the state of Delaware for the purpose of acquiring and
operating a national network of full service point-of-sale (POS) dealers. On
June 28, 1996, the Company completed an acquisition of Cash Registers,
Incorporated (CRI), a POS dealer with operations in Kentucky and southern Ohio.
On December 31, 1996, the Company completed an acquisition of Automated Register
Systems, Inc. (ARS), a POS dealer based in Washington.
Basis of Presentation
The accompanying consolidated financial statements have been prepared
by the Company without audit in accordance with generally accepted accounting
principles for interim financial information and with instructions to Form
10-QSB and Item 310 of Regulation S-B. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included.
The accompanying consolidated financial statements do not include
certain footnotes and financial presentations normally required under generally
accepted accounting principles (GAAP) and, therefore, should be read in
conjunction with the audited financial statements included in the Company's
Annual Report on Form 10-KSB for the period from inception (April 3, 1996) to
December 31, 1996. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
Since the Company did not exist before April 3, 1996, but its
wholly-owned subsidiary CRI did exist before that date, GAAP defines CRI as the
Predecessor to the Company. As such, GAAP requires that the statements of
operations and cash flows of CRI for the three months ended March 31, 1996 be
presented herein. The Company's consolidated financial statements for the three
months ended March 31, 1997 include the accounts of the Company and its
wholly-owned subsidiaries, CRI and ARS. Accordingly, the statements of
operations and cash flows presented for the period subsequent to the acquisition
of CRI (Successor) are not comparable to the statements of operations and cash
flows for the period prior to the acquisition of CRI (Predecessor).
Acquisitions
On June 28, 1996, the Company acquired all of the outstanding common
stock of CRI for cash consideration of $954,962, including acquisition costs of
$71,961. On December 31, 1996, the Company acquired all of the outstanding
common stock of ARS for consideration of $1,025,023 in cash and 58,154 shares of
non-registered, restricted common stock of the Company which were valued at
$683,349 at December 31, 1996. In addition, $78,145 of acquisition costs were
incurred.
The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based upon the fair values at the date of
acquisition. The excess of the purchase price over the fair values of the net
assets acquired of $1,711,989 has been recorded as intangible assets (goodwill)
and is being amortized on a straight-line basis over 15 years. The Company's
consolidated statements of operations include the revenues and expenses of the
acquired businesses subsequent to the transactions' effective dates.
Income Taxes
The Company provides for income taxes in interim periods based on the
estimated effective income tax rate for the complete fiscal year. For the
three-month period ended March 31, 1997, the estimated effective income tax rate
is less than the U.S. statutory rate primarily due to a 100% valuation allowance
provided against the deferred tax assets that arose from the current operating
loss.
Per Share Information
Net loss per share is based on the weighted average number of common
shares outstanding. Common stock equivalents, which consist of stock options and
warrants, were antidilutive for the three months ended March 31, 1997. No common
stock equivalents were outstanding during the three months ended March 31, 1996.
Page 6 of 15
<PAGE> 7
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods to conform to the new method. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options and warrants
will be excluded from the calculation. The new requirements do not significantly
change the calculation of fully diluted earnings per share. Statement No. 128 is
not expected to impact the Company's net loss per share for the quarters ended
March 31, 1997 and 1996, as no dilutive stock options and warrants were included
in those calculations.
Contingencies
The Company is subject to legal proceedings and claims which arise in
the normal course of its business. Management believes that the resolution of
such matters will not have a material effect on the Company's financial position
or future results of operations.
At March 31, 1997, the Company had $83,000 accrued in connection with a
lawsuit wherein CRI is being sued by a former employee. In accordance with the
purchase agreement between the Company and the former owners of CRI, the
Company's liability is limited to $83,000 in connection with this suit. Any
amounts in excess of $83,000 are recoverable from amounts due to the former
owners under certain lease and employment agreements.
Debt
CRI has a line of credit with a commercial bank which does not have a
termination date, but which is reviewed annually for renewal. At March 31, 1997,
the line permitted borrowings up to $350,000. Borrowings under the line bear
interest at a rate which the Company and the bank mutually agree upon and are
secured by CRI's accounts receivable. The line prohibits the reduction or
depletion of CRI's capital, without 30 days prior written notice to the bank. At
March 31, 1997, no amounts were outstanding under the line.
At March 31, 1997, ARS had borrowings outstanding of $50,000 at an
interest rate of 9.5% under an interim borrowing arrangement with a commercial
bank. The interim arrangement was terminated and the outstanding balance was
fully paid as of April 30, 1997. ARS is currently negotiating a new line of
credit agreement with the bank.
Subsequent Events
On April 1, 1997, the Company, though its wholly-owned subsidiary CRI,
acquired all of the outstanding common stock of MicroData, Inc., a POS dealer
with operations in Illinois and Kentucky, for consideration of $79,000 in cash
and 11,414 shares of non-registered, restricted common stock of the Company
valued at approximately $136,000 at April 1, 1997. The transaction was recorded
under the purchase method of accounting.
On April 3, 1997, the Company entered into a definitive agreement
providing for the merger of Smyth Systems, Inc. (Smyth) into a wholly-owned
subsidiary of the Company in a tax-free reorganization. Smyth operates through
two divisions which (i) provide automated, integrated turnkey systems to
customers throughout the United States and (ii) provide POS systems to customers
in Southern California and Ohio. In connection with the merger, Smyth's
shareholders will exchange all of the outstanding capital stock of Smyth for
shares of non-registered, restricted common stock of the Company worth
approximately $5,338,200, subject to adjustment as defined in the agreement. The
transaction will be accounted for as a pooling of interests. The merger is
expected to close on May 31, 1997, and is subject to certain terms and
conditions as set forth in the agreement.
On April 14, 1997, the Company entered into a definitive agreement
providing for the merger of Electronic Business Machines (EBM), a POS dealer
with operations in Indiana and Kentucky, into CRI in a tax-free reorganization.
In connection with the merger, EBM's shareholder will exchange all of the
outstanding capital stock of EBM for $400,000 in cash and shares of
non-registered, restricted common stock of the Company worth approximately
$550,000, subject to adjustment as defined in the agreement. The transaction
will be accounted for under the purchase method of accounting. The merger is
expected to close on May 31, 1997, and is subject to certain terms and
conditions as set forth in the agreement.
On May 9, 1997, the Company, though its wholly-owned subsidiary Bristol
Merger Corporation, acquired all of the outstanding common stock of
International Systems & Electronics Corporation (ISE), a POS dealer with
operations in Florida. As consideration for the merger, ISE's shareholder
received cash of $1,100,000 and 130,434 shares of non-registered, restricted
common stock of the Company valued at approximately $734,000 on the closing
date. The transaction was recorded under the purchase method of accounting.
Page 7 of 15
<PAGE> 8
On April 24, 1997, the Company's Board of Directors authorized the
Company, over a 20 month period, to repurchase its common stock, from time to
time and in such amounts as are believed by management to be in the best
interests of the Company and its shareholders. As of May 13, 1997, the Company
had repurchased 5,000 shares of common stock for total consideration of $24,625.
Page 8 of 15
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information includes forward-looking statements which
involve risks and uncertainties. When used herein, the words "anticipate",
"believe", "estimate" and "expect" and similar expressions as they relate to the
Company or its management are intended to identify such forward-looking
statements. The Company's actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these
forward-looking statements. The realization of these forward-looking statements
may be impacted by certain important factors discussed in the "Risk Factors"
section of the Company's final prospectus dated November 12, 1996, including,
but not limited to, limited operating history, risks related to the Company's
acquisition strategy, need for additional financing to implement acquisition
strategy, substantial competition, reliance on key personnel, integration of
acquired companies, dependence on manufacturers, reliance on major customers and
vendors, fixed fee contracts, potential conflicts of interest, control by
management, potential inability to market newly developed products,
anti-takeover effects of certain charter and bylaw provisions, possible
volatility of stock price, maintenance criteria for NASDAQ; risks of low-priced
securities, possible environmental liabilities and absence of dividends.
OVERVIEW
The Company was formed on April 3, 1996 to establish a national network
of full service POS dealers through the selective acquisition of targeted POS
dealers.
From April 3, 1996 to March 31, 1997, management of the Company devoted
substantially all of its efforts to the raising of capital, the identification
of dealership acquisition candidates and the acquisition of two dealerships, CRI
on June 28, 1996 and ARS on December 31, 1996. The following discussion and
analysis of the results of operations relates to 1) the consolidated financial
statements of the Company as of and for the three months ended March 31, 1997
and 2) the stand-alone statements of operations and cash flows of CRI for the
three months ended March 31, 1996. Because the consolidated results of
operations of the Company for the three months ended March 31, 1997 include the
results of CRI, ARS and corporate headquarters, whereas the results of
operations of CRI for the three months ended March 31, 1996 include only the
results of CRI, the results of operations for the three month periods ended
March 31, 1997 and March 31, 1996 are not comparable. Accordingly, the
discussion of the results of operations stated below does not compare the three
month periods ended March 31, 1997 and March 31, 1996, but instead discusses
each period separately. The discussion and analysis of financial condition
relates to the consolidated balance sheet of the Company at March 31, 1997.
RESULTS OF OPERATIONS OF THE COMPANY
Quarter ended March 31, 1997
Net revenue
The Company's net revenue is comprised of two components: (i) revenue
derived from the sale and installation of hardware and software (Systems
Revenue) and (ii) revenue derived from the sale of services and supplies
(Service Revenue). Net revenue for the quarter ended March 31, 1997 was
$2,660,000 and was comprised of net revenue from the Company's wholly-owned
subsidiaries, CRI and ARS. Net revenue was comprised of $1,749,000, or 66%, of
Systems Revenue and $911,000, or 34%, of Service Revenue. This compares to a
composition of net revenue for the period from inception (April 3, 1996) to
December 31, 1996 of 74% Systems Revenue and 26% Service Revenue. The Company
believes that the mix of revenue changed in the first quarter of 1997 due to a
decline in systems sales to Seed Restaurant Group, the Company's largest
customer during 1996 and due to an increase in Service Revenue derived from
additional maintenance contracts obtained as a result of a high volume of
systems sold during the last half of 1996.
One customer, Cub Foods, accounted for approximately 10% of the
Company's net revenue for the quarter ended March 31, 1997. No other customer
accounted for more than 10% of sales for the period. Sales of products from the
Company's three main hardware vendors, Panasonic, ERC Parts, Inc. (ERC), a
distributor of Panasonic products, and NCR Corporation (NCR), accounted for
approximately 60% of net revenue for the quarter ended March 31, 1997. The
Company has supply agreements with these manufacturers. The agreements
are non-exclusive, have geographic limitations and have renewable one-year
terms. A change in the Company's relationships with this key customer or these
principal vendors could have a material adverse effect on the Company's
financial and operating results.
Page 9 of 15
<PAGE> 10
Gross Margin
Gross margin for the quarter ended March 31, 1997 was 30% of net
revenue and was comprised of gross margin from the Company's wholly-owned
subsidiaries, CRI and ARS. Total gross margin was comprised of gross margin for
Systems Revenue of 33% and gross margin for Service Revenue of 24%. This
compares to gross margin for the period from inception (April 3, 1996) to
December 31, 1996 of 32%. Gross margin decreased due to lower gross margins from
ARS, a company acquired on December 31, 1996. These lower margins were partially
offset by higher gross margins from CRI due to changes in product mix and lower
discounts.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter ended
March 31, 1997 were $1,285,000, or 48% of net revenue. Selling, general and
administrative expenses consist of expenses incurred at the corporate office, as
well as expenses incurred by the Company's wholly-owned subsidiaries, CRI and
ARS. Selling, general and administrative expenses increased during the quarter
and are expected to increase further during 1997 due to planned staffing
additions at corporate headquarters believed to be necessary to integrate
acquired companies and to support future growth.
Interest Income and Interest Expense
Interest income of $64,000 was derived primarily from interest earned
on the investment of the Company's proceeds from its initial public offering.
The proceeds are invested in a short-term, interest-bearing money market fund.
Interest expense of $13,000 consisted primarily of interest on
outstanding balances on the Company's lines of credit.
Income Tax Provision
The Company recorded an effective income tax provision of 0.3% for the
quarter ended March 31, 1997. Income tax expense consisted solely of state taxes
as the Company had a taxable loss for federal income tax purposes.
RESULTS OF OPERATIONS OF CRI
Quarter ended March 31, 1996
Net revenue
Net revenue for the quarter ended March 31, 1996 was $1,766,000,
comprised of $1,297,000, or 73%, of Systems Revenue and $469,000, or 27%, of
Service Revenue.
CRI's largest customer, Seed Restaurant Group, accounted for
approximately 43% of net revenue for the quarter ended March 31, 1996. No other
customer accounted for more than 10% of CRI's net revenue for the quarter ended
March 31, 1996. Sales of products from CRI's two main hardware vendors, ERC and
NCR, accounted for approximately 48% of net revenue for the quarter ended March
31, 1996.
Gross Margin
Gross margin for the quarter ended March 31, 1996 was $496,000, or 28%,
and was comprised of gross margin for Systems Revenue of 27% and gross margin
for Service Revenue of 32%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter ended
March 31, 1996 were $528,000, or 30% of net revenue.
Income Tax Benefit
CRI recorded an effective income tax benefit of 35% for the quarter
ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
The Company's cash and cash equivalents totaled $4,520,000 at March 31,
1997 compared to $5,476,000 at December 31, 1996. During the quarter ended March
31, 1997, the Company utilized $552,000 for operations; utilized $13,000 for the
Page 10 of 15
<PAGE> 11
purchase of property and equipment; and utilized $391,000 for financing
activities, primarily representing net repayments under the Company's line of
credit facilities.
CRI has a line of credit with a commercial bank which does not have a
termination date, but which is reviewed annually for renewal. At March 31, 1997,
the line permitted borrowings up to $350,000. Borrowings under the line bear
interest at a rate which the Company and the bank mutually agree upon and are
secured by CRI's accounts receivable. The line prohibits the reduction or
depletion of CRI's capital, without 30 days prior written notice to the bank. At
March 31, 1997, no amounts were outstanding under the line, however, the line is
still available for future borrowings and thus provides a source of liquidity.
At March 31, 1997, ARS had borrowings outstanding of $50,000 at an
interest rate of 9.5% under an interim borrowing arrangement with a commercial
bank. The interim arrangement was terminated and the outstanding balance was
fully paid as of April 30, 1997. ARS is currently negotiating a new line of
credit agreement with the bank.
On April 1, 1997, the Company, though its wholly-owned subsidiary CRI,
acquired all of the outstanding common stock of MicroData for consideration of
$79,000 in cash and 11,414 shares of non-registered, restricted common stock of
the Company valued at approximately $136,000 at April 1, 1997. The transaction
was recorded under the purchase method of accounting. MicroData is a POS dealer
with operations in Illinois and Kentucky.
On April 3, 1997, the Company entered into a definitive agreement
providing for the merger of Smyth into a wholly-owned subsidiary of the Company
in a tax-free reorganization. Smyth operates through two divisions which (i)
provide automated, integrated turnkey systems to customers throughout the United
States and (ii) provide POS systems to customers in Southern California and
Ohio. In connection with the merger, Smyth's shareholders will exchange all of
the outstanding capital stock of Smyth for shares of non-registered, restricted
common stock of the Company worth approximately $5,338,200, subject to
adjustment as defined in the agreement. The transaction will be recorded as a
pooling-of-interests. The merger is expected to close on May 31, 1997, and is
subject to certain terms and conditions as set forth in the agreement.
On April 14, 1997, the Company entered into a definitive agreement
providing for the merger of EBM into CRI in a tax-free reorganization. In
connection with the merger, EBM's shareholder will exchange all of the
outstanding capital stock of EBM for $400,000 in cash and shares of
non-registered, restricted common stock of the Company worth approximately
$550,000, subject to adjustment as defined in the agreement. The transaction
will be accounted for under the purchase method of accounting. The merger is
expected to close on May 31, 1997, and is subject to certain terms and
conditions as set forth in the agreement. EBM is a POS dealer with operations in
Indiana.
On May 9, 1997, the Company, though its wholly-owned subsidiary Bristol
Merger Corporation, acquired all of the outstanding common stock of ISE, a POS
dealer with operations in Florida. As consideration for the merger, ISE's
shareholder received cash of $1,100,000 and 130,434 shares of non-registered,
restricted common stock of the Company worth approximately $734,000 on the
closing date. The transaction was recorded under the purchase method of
accounting.
Should the Company not acquire any additional dealerships other than
the acquisitions of MicroData, ISE, Smyth and EBM discussed above, management
believes that operating cash flow, available cash and available cash resources
will be adequate to meet the working capital cash needs of the Company and to
meet anticipated capital expenditure needs during the remainder of the calendar
year. However, it is the Company's intention to identify, evaluate and acquire
additional POS dealerships within the remainder of the calendar year. The
Company is currently engaged in discussions with several other POS dealerships
regarding possible acquisitions, some of which could be material. However, the
Company currently has not entered into any definitive agreements with respect to
any acquisitions that are, individually or in the aggregate, material to the
Company, other than the acquisitions discussed above. Because the Company's cash
requirements in the future are heavily dependent upon the frequency and cost of
future acquisitions, as well as the combination of cash, promissory notes and
stocks used in executing acquisitions, it is impossible to determine at this
time the effect of the Company's acquisition strategy on its future cash
requirements. If additional acquisition opportunities arise, the Company may
need to seek additional capital to complete them. There can be no assurance that
additional sources of financing will not be required during the next twelve
months or thereafter, and, if required, will be available on terms acceptable to
the Company.
Fluctuations in Quarterly Results of Operations
The Company's business can be subject to seasonal influences. The POS
dealers for which the Company has acquired to date have typically had lower net
revenues in the first quarter of the fiscal year primarily due to the lower
level of new store openings by customers during January through March. As the
Company grows through acquisition, this pattern of seasonality may or may not
continue.
Page 11 of 15
<PAGE> 12
Quarterly results in the future may be materially affected by the
timing and magnitude of acquisitions, the timing and magnitude of costs related
to such acquisitions, the timing and extent of staffing additions at corporate
headquarters necessary to integrate acquired companies and support future
growth, general economic conditions and the retroactive restatement of the
Company's consolidated financial statements for acquisitions accounted for under
the pooling-of-interests method. Therefore, results for any quarter are not
necessarily indicative of the results that the Company may achieve for any
subsequent fiscal quarter or for a full fiscal year.
Inflation
The Company does not believe that inflation has had a material impact
on its results of operations during 1996 or the first quarter of fiscal 1997.
Factors Affecting the Company's Business
The future operating results of the Company may be affected by a number
of factors, including the matters discussed below:
The Company has an aggressive acquisition strategy that is expected to
involve the acquisition of a significant number of additional POS dealers. From
its inception through April 30, 1997, the Company completed three such
acquisitions and has entered into definitive agreements for the purchase of an
additional three POS dealers.
The Company depends upon acquisitions and internal growth to increase
its revenues and earnings. The failure to complete acquisitions on a timely
basis could have a material adverse effect on the Company's quarterly results.
Likewise, delays in implementing planned integration strategies and activities
also could adversely affect the Company's quarterly earnings. In addition, there
can be no assurance that acquisitions will occur at the same pace as in prior
periods or be available to the Company on favorable terms, if at all. For
example, if the price of a share of the Company's common stock declines for a
prolonged period, the owners of potential acquisition targets may not be willing
to receive shares of common stock in exchange for their buinesses, thereby
adversely affecting the pace of the Company's acquisition program. Such an
effect on the pace of the Company's acquisition program could further reduce the
price of a share of common stock, to the further detriment of the Company's
acquisition strategy. The failure to acquire additional businesses or to acquire
such businesses on favorable terms in accordance with the Company's growth
strategy could have a material adverse impact on future sales and profitability.
While the Company's decentralized management strategy, together with
operating efficiencies resulting from the elimination of duplicative functions
and economies of scale may present opportunities to reduce costs, such
strategies may initially necessitate costs and expenditures to expand
operational and financial systems and corporate management and administration.
These various costs and possible cost-savings strategies may make historical
operating results not indicative of future performance. In addition, there can
be no assurance that the pace of the Company's acquisitions will not adversely
affect the Company's efforts to implement its cost-savings and integration
strategies and to manage its acquisitions profitability.
Page 12 of 15
<PAGE> 13
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Calculation of Earnings per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
During the three months ended March 31, 1997, the Company filed
the following Current Reports on Form 8-K:
Form 8-K dated December 31, 1996 filed with the Commission on
January 15, 1997 reporting information under Items 2 and 7.
Form 8-K/A dated December 31, 1996 filed with the Commission
on March 14, 1997 reporting information under Item 7.
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.
<TABLE>
<S> <C>
BRISTOL TECHNOLOGY SYSTEMS, INC.
-------------------------------------------------
(Registrant)
May 13, 1997 By: /s/ RICHARD H. WALKER
- --------------------------------------------- -------------------------------------------------
Date Richard H. Walker
President, Chief Executive Officer and Director
May 13, 1997 By: /s/ KELLY KAUFMAN
- --------------------------------------------- -------------------------------------------------
Date Kelly Kaufman
Vice President of Finance
(Principal financial and accounting officer)
</TABLE>
Page 13 of 15
<PAGE> 1
EXHIBIT 11
BRISTOL TECHNOLOGY SYSTEMS, INC.
Computation of Loss per Share
<TABLE>
<CAPTION>
(Successor) (Predecessor)
Three Months Ended March 31
----------------------------------
1997 1996
------------ -------------
<S> <C> <C>
PRIMARY LOSS PER SHARE
Net loss $ (434,986) $ (16,826)
=========== ===========
Weighted average number of common shares outstanding
during the period 4,745,654 1,001
Effect of stock options and warrants treated as common
stock equivalents under the treasury stock method -- --
----------- -----------
Total shares 4,745,654 1,001
=========== ===========
Primary loss per share $ (0.09) $ (16.81)
=========== ===========
FULLY DILUTED EARNINGS PER SHARE
Net loss $ (434,986) $ (16,826)
=========== ===========
Weighted average number of common shares outstanding
during the period 4,745,654 1,001
Effect of stock options and warrants treated as common
stock equivalents under the treasury stock method -- --
----------- -----------
Total shares 4,745,654 1,001
=========== ===========
Fully diluted loss per share $ (0.09) $ (16.81)
=========== ===========
</TABLE>
Page 14 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE UNAUDITED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 IN THE REPORT
ON FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31, 1997 OF BRISTOL TECHNOLOGY
SYSTEMS, INC. AND IS QUALIFIED IN IS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENT.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,519,770
<SECURITIES> 0
<RECEIVABLES> 1,305,638
<ALLOWANCES> 48,252
<INVENTORY> 2,204,577
<CURRENT-ASSETS> 8,116,085
<PP&E> 315,541
<DEPRECIATION> 50,853
<TOTAL-ASSETS> 10,236,629
<CURRENT-LIABILITIES> 2,419,367
<BONDS> 0
0
0
<COMMON> 4,746
<OTHER-SE> 7,743,282
<TOTAL-LIABILITY-AND-EQUITY> 10,236,629
<SALES> 2,660,298
<TOTAL-REVENUES> 2,724,550
<CGS> 1,860,931
<TOTAL-COSTS> 3,145,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,734
<INCOME-PRETAX> (433,936)
<INCOME-TAX> 1,050
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (434,986)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
