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 September 30, 2000 or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-25561
BEDFORD HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
NEW JERSEY 13-3901466
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
300 Blaisedell Road
Orangeburg, New York 10962
(Address of Principal Executive Offices) (Zip Code)
(845) 398-1844
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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 |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 21,263,500 shares of the
Company's Common Stock, no par value, were outstanding as of November 10, 2000.
<PAGE>
ITEM I - FINANCIAL STATEMENTS
Bedford Holdings Inc.
Unaudited Consolidated Balance Sheet
As of September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
9/30/00 12/31/99
<S> <C> <C>
ASSETS
Current assets:
Cash $ 10,878 $ 63,062
Deposits with clearing broker 32,281 1,001
----------- -----------
Total Current Assets 43,159 64,063
Other assets:
Fixed assets (net of accumulated depreciation) 21,990 0
Security deposit 10,000 10,000
----------- -----------
Total Assets $ 75,149 $ 74,063
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short term loans payable 864,177 869,177
Interest payable 158,175 43,819
Deferred income 94,520 0
Accrued expenses & accounts payable 11,315 12,058
----------- -----------
Total Current Liabilities 1,128,187 925,054
Shareholders' Equity:
Common stock, $.001 par value; authorized
40,000,000 shares, issued, and outstanding
21,263,500 at December 31, 1999 and September 30, 2000 21,263 21,263
Additional paid in capital 1,044,468 1,044,468
Treasury stock, 6,500 shares at cost (6,500) (6,500)
----------- -----------
Retained deficit (2,112,269) (1,910,222)
----------- -----------
Total stockholders deficit (1,053,038) (850,991)
----------- -----------
Total Liabilities & Shareholders' Equity $ 75,149 $ 74,063
=========== ===========
</TABLE>
Please see the accompanying notes to the financial statements.
<PAGE>
Bedford Holdings Inc.
Unaudited Consolidated Statement of Operations
For the Nine and Three months ended September 30th
<TABLE>
<CAPTION>
Nine months Three months
9/30/00 9/30/99 9/30/00 9/30/99
<S> <C> <C> <C> <C>
Franchise revenue $ 155,480 $ 314 $ 62,329 $ 0
Commission revenue 6,779 0 6,779 0
Trading loss (7,968) (164,133) (2,983) (9,732)
------------ ------------ ------------ ------------
Total revenues 154,291 (163,819) 66,125 (9,732)
Less administrative expenses (201,795) (205,115) (74,096) (74,351)
Less depreciation expense (1,972) (8,880) (373) (2,961)
------------ ------------ ------------ ------------
Loss from operations (49,476) (377,814) (8,344) (87,044)
Other Income (expenses):
Interest income 573 167 267 0
Interest expense (153,144) (124,750) (75,036) (62,514)
------------ ------------ ------------ ------------
Net loss before income tax provision (202,047) (502,397) (83,113) (149,558)
Provision for income tax 0 0 0 0
------------ ------------ ------------ ------------
============ ============ ============ ============
Net Loss ($202,047) ($502,397) ($83,113) ($149,558)
============ ============ ============ ============
Loss per common share:
Basic ($0.01) ($0.02) ($0.01) ($0.01)
Weighted average of common shares:
Basic 21,263,500 27,243,500 21,263,500 27,243,500
</TABLE>
Please see the accompanying notes to the financial statements.
<PAGE>
Bedford Holdings Inc.
Unaudited Consolidated Statement of Cash Flows
For the Nine Months Ending September 30th
<TABLE>
<CAPTION>
9/30/00 9/30/99
<S> <C> <C>
Operating Activities:
Net loss ($202,047) ($502,397)
Adjustments to reconcile net income items
not requiring the use of cash:
Depreciation and amortization 1,972 8,880
Changes in other operating assets and liabilities:
Deposits with clearing broker (31,280) 53,859
Deferred income 94,520 0
Short term loans payable (5,000) (1,350,254)
Interest payable 114,356 0
Accrued expenses & accounts payable (743) (7,655)
----------- -----------
Net cash provided by (used by) operations (28,222) (1,797,567)
Investing activities
New office construction (11,580) 0
Purchase of office equipment & furniture (12,382) 0
----------- -----------
Net cash used by investing activities (23,962) 0
----------- -----------
Net increase (decrease) in cash during period (52,184) (1,797,567)
Cash balance at beginning of period 63,062 1,760,372
----------- -----------
Cash balance at end of period $ 10,878 ($37,195)
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid during the fiscal year $ 0 $ 0
Income taxes paid during the fiscal year $ 0 $ 0
</TABLE>
Please see the accompanying notes to the financial statements.
<PAGE>
Bedford Holdings Inc.
Unaudited Consolidated Statement of Stockholders' Equity
For the Nine Months Ended June 30, 2000
<TABLE>
<CAPTION>
Common Stock Paid in Treasury Retained
Shares Amount Capital Stock Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 21,263,500 $ 21,263 $ 1,044,468 ($6,500) ($1,910,222) ($850,991)
----------- ----------- ----------- ----------- ----------- -----------
Net loss for the period (202,047) (202,047)
----------- ----------- ----------- ----------- ----------- -----------
=========== =========== =========== =========== =========== ===========
Balance at September 30, 2000 21,263,500 $ 21,263 $ 1,044,468 ($6,500) ($2,112,269) ($1,053,038)
=========== =========== =========== =========== =========== ===========
</TABLE>
Please see the accompanying notes to the financial statements.
<PAGE>
BEDFORD HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Organization of the Company
Bedford Holdings, Inc. (the Company) is a New Jersey State Corporation formed in
July, 1996 for the purpose of purchasing and holding the common stock of various
companies for investment. The consolidated financial statements includes the
accounts of the Company's wholly owned subsidiary, Allen & Pierce Securities
Inc.
Allen & Pierce Securities, Inc. (the subsidiary) is a New York State Corporation
formed on January 5, 1989 for the purpose of conducting business as a broker
dealer in securities and as an introducing broker in futures and options. The
Company purchased 100% of the issued and outstanding stock of Allen & Pierce
Securities Inc. in August 1996 by issuing common stock.
The subsidiary operates under the provisions of paragraph (k)(2)(ii) of Rule
15c3-3 of the Securities and Exchange Commission and accordingly, is exempt from
the remaining provision of the rule. Essentially, the requirements of paragraph
(k)(2)(ii) provide that the subsidiary clear all transactions on behalf of
customers on a fully disclosed basis with a clearing broker dealer. The clearing
broker dealer carries the accounts of the Company's customers and maintains all
related books and records required to service the Company's customers. Likewise,
as an introducing broker in futures and options, the Company is required to
carry all customer accounts on a fully disclosed basis with a clearing futures
commission merchant. The clearing futures commission merchant is required to
maintain the books and records that are required to service these customers.
Note 2: Summary of Significant Accounting Principles
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All significant
inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principals requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and 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. Actual results may differ from these estimates.
Revenue Recognition: All transactions are recorded on a settlement date basis
which is generally five business days for security transactions and same day for
commodity transactions. Deferred franchise fee deposits are amortized on a
straight-line basis over the period of the underlying franchise agreement.
<PAGE>
Fixed assets: Firm assets are stated at costs and depreciation is computed on a
straight line basis over the estimated useful life of the underlying asset
ranging from 3 to 10 years.
Treasury Stock. The Company uses the cost method in the recording of the
purchase of treasury stock. During 1997 and 1998, the Company purchased 6,500
shares of its common stock for $6,500.
Short term loans payable: Short-term loans payable include unsecured promissory
notes due to individuals. The notes mature in fiscal years 2000 and 2001 with
interest rates ranging from 8.5% to 25% payable at maturity. Interest payable
includes the amount of accrued interest payable on the short-term notes as of
September 30, 2000.
Reclassifications: Certain prior year amounts have been reclassified to conform
to the September 30, 2000 presentation.
Note 3: Net Capital Requirements
The following note applies to the Company's wholly owned subsidiary, Allen &
Pierce Securities, Inc.
As a broker dealer, the Company is subject to the Securities and Exchange
Commission's Uniform Net Capital Rule 15c3-1, which requires that the ratio of
aggregate indebtedness to the excess net capital, as defined, shall not exceed
15 to 1. In addition, the Company is required to maintain net capital, as
defined, in excess of the greater of $5,000 or 6 2/3% of aggregate indebtedness.
As of September 30, 2000, the Company in excess of net capital requirements by
$115,028.
As an introducing broker, the Company is subject to the Commodities Futures
Trading Commission's Net Capital Rule 1.17 which requires the Company to
maintain net capital, as defined, of the greater of $30,000 or $3,000 per
associated person, as defined. As of September 30, 2000, the Company was in
excess of these net capital requirements by $90,028.
Note 4: Deferred Fees
During February 2000, the Company received $250,000 in franchise fees. The
Company has entered into an agreement with an individual whereby the individual
has agreed to open several branch offices in the subsidiary's name for the
purpose developing brokerage commission revenues for the Company. The agreement
expires in February 2001.
<PAGE>
Note 5: Earnings per Share
The Company applies SFAS No. 128, Earnings per Share. In accordance with SFAS
No. 128, basic net income per share has been computed based upon the weighted
average of common shares outstanding during the year. All net losses reported in
the financial statements are available to common stockholders. The Company has
no other financial instruments convertible into common shares.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Quarterly Report on Form 10-QSB contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions and the actual
events or results may differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed in other
filings made by the Company with the Securities and Exchange Commission,
including the Company's Registration Statement on Form 10SB, Registration No.
000-25561.
The following discussion regarding the financial statements of the Company
should be read in conjunction with the financial statements and notes thereto.
OVERVIEW
The Company is a holding company for Allen & Pierce, a securities and
commodities broker established in 1989. Allen & Pierce recently completed
installation of an online trading system directed toward a certain niche markets
in the securities and commodities brokerage field where the Company believes it
has a competitive advantage. The online trading system became fully operational
during the third quarter of 2000. The Company has also begun a cautious
extension of its brokerage activities. During the quarter ended March 31, 2000,
the Company entered into an agreement under which an individual agreed to open
several branch offices in the name of the Company's Allen & Pierce brokerage
subsidiary for the purpose of developing brokerage commission revenues. This
agreement has not yet been reduced to writing. It will require that the Company
provide various support services, including a hiring the necessary supervisors
with appropriate securities licenses to permit operations of the branches in
accordance with the requirements of the National Association of Securities
Dealers, Inc. At the beginning of the current quarter, the Company established a
new subsidiary Bedford Holdings Club Inc., which will provide club members with
discounts on the purchase of goods and services on presentation of a club
membership card. Club membership is available for a fee through a web site
created for Bedford Holdings Club. Plans are currently underway to convert the
membership card into a credit card through a major credit card Company. The
Company is also actively pursuing the possibility of a merger with one or more
other business entities.
RESULTS OF OPERATIONS
The Company's online brokerage service became fully operational during the
quarter ended September 30, 2000, and the Company began to accept trades through
that service. Total revenue for the three months ended September 30, 2000 was
$66,125, compared to a negative $9,732 for the corresponding period of the
preceding year. During the quarter the Company derived $6,779 from commissions
generated through its online brokerage service. The Company received $250,000
during first quarter of 2000 as advance payment for the privilege of opening
several branch offices under the Company's name, and for certain support
services which the Company is to provide to those offices. Of the $250,000 the
Company recognized $62,329 in revenue during the quarter ended September 30,
2000, all of which was related to this transaction. There were no significant
related expenses, since the services provided by the Company consisted primarily
of training furnished by regular Company employees at the Company's offices on
operation of its online trading system.
Following relocation to its new offices, the Company invested $11,580 in
new office construction and purchased $12,382 in office equipment and furniture,
resulting depreciation expense of $373 for the quarter,
<PAGE>
compared to $2,961 in the quarter ended September 30, 1999. 1999 depreciation
related to equipment and furniture which was entirely written off at the time of
the Company's move to its new location. The increase in interest expense from
$62,514 in the 1999 quarter to $75,036 in the 2000 quarter reflects an increase
in the amount of the Company's short-term borrowings and a slightly higher
average interest rate on those borrowings. Administrative expense remained
essentially unchanged at $74,096 for the September 30, 2000 quarter compared to
$74,351 for the corresponding 1999 quarter.
LIQUIDITY AND CAPITAL RESOURCES
Total assets as of the close of the quarter were $75,149, compared to
$74,063 as of December 31, 1999. Of the total, only $43,159 represents current
assets, whereas total current liabilities exceed $1 million.
To meet its cash requirements, the Company has found it necessary to
resort to short-term borrowing from a limited number of accredited investors. As
of September 30, 2000, the amount outstanding on these borrowings aggregated
$964,177, with interest rates ranging from 8.5% to 25%, payable at maturity.
These notes mature during the years 2000 and 2001.
The Company's liquidity position remained precarious as of September 30,
2000, but management continues to be cautiously optimistic. The Company has at
least begun to realize revenue from its online trading operations during the
third quarter of 2000, and the expected expansion of its other brokerage
operations through the opening of new offices will generate additional revenue.
In addition, revenue is expected commencing in the fourth quarter from
subscriptions for its Bedford Holdings Club card. If the Company is successful
in adding a credit card feature to this club card, the related fees will furnish
an additional source of revenue. In the absence of substantial additional
revenues, or the raising of additional capital, the Company's ability to
continue operations is dependent upon the willingness of its short-term lenders
to continue rolling over their loans to the Company. Based on conversations with
these lenders, the Company believes that they will continue to roll this debt
over for at least the next 12 months while the Company completes implementation
of its online trading system and opens its initial additional offices. However,
they are not legally obligated to do so and there can be no assurance that these
lenders will continue to renew their loans. Any such termination would severely
impact the Company's ability to carry out its plan of operations and to continue
as a going concern.
The Company's Allen & Pierce subsidiary is a $5,000 broker-dealer.
Provided its short-term lenders remain willing to roll over their notes as they
mature, and anticipated revenues are received from the online brokerage service
and operations of Bedford Holding Club, the Company believes it will be able to
maintain Allen & Pierce's capital requirements for at least the next 12 months
without any additional infusion of capital.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
<PAGE>
27 Financial Data Schedule.
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.
BEDFORD HOLDINGS, INC.
(Registrant)
Date: November 11, 2000
/s/ Leon Zapoll
--------------------------------------------
Leon Zapoll
President
Date: November 11, 2000
/s/ Robert Samila
--------------------------------------------
Robert Samila
Chief Financial Officer
(Principal Financial and Accounting Officer)
