U.S. 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 December 31, 1997
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from __________ to _________
Commission file number 0-21867
BISHOP CAPITAL CORPORATION
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Wyoming 84-0901126
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
716 College View Drive, Riverton, Wyoming 82501
------------------------------------------ --------
(Address of principal executive offices) (Zip Code)
(307) 856-3800
-------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ----
The number of shares outstanding of the issuer's $.01 par value Common Stock as
of February 10, 1998 was 838,365.
Transitional Small Business Disclosure Format
(Check one):
Yes No X
----- -----
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1997
(Unaudited)
ASSETS
------
Current Assets:
Cash $ 84,430
Restricted cash 100,000
Marketable securities 621,961
Receivables:
Gas royalties 18,702
Interest and other 8,508
Prepaid expenses and other 9,716
-----------
Total current assets 843,317
Property and Equipment:
Building 212,157
Furniture and fixtures 63,162
Vehicles and equipment 91,380
-----------
366,699
Less accumulated depreciation (137,872)
-----------
Net property and equipment 228,827
Other Assets:
Land under development 639,032
Investment in limited partnership 206,470
Gas royalty interest, net of accumulated amortization
of $843,633 253,428
Notes receivable, including $25,000 to officers 61,673
Other assets, net 2,861
-----------
Total other assets 1,163,464
-----------
$ 2,235,608
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued expenses $ 97,595
Payable to broker 145,035
Customer deposit - related party 20,000
Income taxes payable 35,500
Deferred revenue 110,807
-----------
Total current liabilities 408,937
Stockholders' Equity:
Preferred stock, no par value; 5,000,000 shares
authorized; no shares issued --
Common stock, $.01 par value; 15,000,000 shares
authorized; 885,481 shares issued 8,855
Additional paid-in capital 2,245,995
Accumulated deficit (327,502)
Less treasury stock, at cost, 94,116 shares (100,677)
-----------
Total stockholders' equity 1,826,671
-----------
$ 2,235,608
===========
See accompanying notes to these consolidated financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
REVENUE:
<S> <C> <C> <C> <C>
Gross profit on real estate sold $ 75,546 $ -- $ 503,007 $ --
Gas royalties 34,460 18,854 71,496 48,497
--------- --------- --------- ---------
110,006 18,854 574,503 48,497
COSTS AND EXPENSES:
Gas processing and production taxes 4,239 4,331 16,604 14,142
General and administrative 134,877 165,895 378,156 383,925
Depreciation and amortization 10,102 37,659 29,652 113,689
--------- --------- --------- ---------
149,218 207,885 424,412 511,756
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (39,212) (189,031) 150,091 (463,259)
OTHER INCOME (EXPENSE):
Interest income 6,403 7,075 18,740 27,383
Dividend income 2,709 2,710 8,129 8,382
Rental income 5,236 4,158 12,106 10,228
Net gain on sale of marketable securities 17,193 25,747 23,712 51,340
Net unrealized gain on marketable securities 6,200 -- 103,720 --
Equity in limited partnership income (loss) 12,079 (18,381) (8,119) (29,746)
Interest expense (2,555) (3,074) (10,984) (8,551)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES 8,053 (170,796) 297,395 (404,223)
PROVISION FOR INCOME TAXES (1,000) -- (60,500) --
--------- --------- --------- ---------
NET INCOME (LOSS) $ 7,053 $(170,796) $ 236,895 $(404,223)
========= ========= ========= =========
NET INCOME (LOSS) PER SHARE $ .01 $ (.19) $ .28 $ (.46)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 791,402 885,481 839,621 885,481
========= ========= ========= =========
See accompanying notes to these consolidated financial statements.
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
December 31,
----------------------
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 236,895 $(404,223)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 29,652 113,689
Equity in limited partnership income (loss) 8,119 29,746
Net gain on sale of marketable securities (23,712) (51,340)
Net unrealized gain on marketable securities (103,720) --
Land development costs (73,696) --
Stock bonus compensation -- 50,173
Changes in operating assets and liabilities:
(Increase) decrease in:
Restricted cash (100,000) --
Marketable securities (44,614) --
Gas royalties receivable (3,213) (3,034)
Receivable from parent 2,055 21,809
Interest and other receivables 477 6,745
Prepaid expenses and other 610 9,460
Increase (decrease) in:
Accounts payable and accrued expenses 54,551 (22,856)
Payable to broker 59,929 --
Income taxes payable 35,500 --
Deferred revenue 110,807 --
--------- ---------
Net cash provided by (used in) operating activities 189,640 (249,831)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities -- (312,828)
Proceeds from sale of marketable securities -- 665,894
Funds advanced under notes receivable -- (120,000)
Proceeds from collection of notes receivable 1,046 121,309
Land development costs -- (128,425)
Purchase of property and equipment (52,314) (9,464)
--------- ---------
Net cash provided by (used in) investing activities (51,268) 216,486
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 110,000 --
Repayments of borrowings (110,000) --
Treasury stock acquired (100,677) --
--------- ---------
Net cash used in financing activities (100,677) --
--------- ---------
Net increase (decrease) in cash 37,695 (33,345)
Cash, beginning of period 46,735 66,770
--------- ---------
Cash, end of period $ 84,430 $ 33,425
========= =========
See accompanying notes to these consolidated financial statements.
-4-
</TABLE>
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management, all adjustments, consisting of normal
recurring accruals, have been made which are necessary for a fair
presentation of the financial position of the Company at December 31, 1997
and the results of operations and cash flows for the three and nine month
periods ended December 31, 1997 and 1996. For a more complete understanding
of the Company's operations and financial position, reference is made to
the consolidated financial statements of the Company, and related notes
thereto, filed with the Company's annual report on Form 10-KSB for the year
ended March 31, 1997, previously filed with the U. S. Securities and
Exchange Commission.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" which specifies new standards to simplify the
existing computational guidelines, revise the disclosure requirements and
increase the comparability of earnings per share data on an international
basis. Since SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, the provisions were adopted in the
current period. Since the Company does not have any outstanding common
stock equivalents, the adoption of SFAS No. 128 did not have any impact on
previously reported earnings per share information. Since the Company has
not issued any potentially dilutive securities, there is no difference
between basic and diluted earnings per share.
2. Change in Capital Structure and Spin-off
Prior to June 20, 1997, the Company was a wholly-owned subsidiary of
American Rivers Oil Company ("AROC"). In November 1996, the Board of
Directors of AROC (the Company's sole stockholder of 4,500,000 common
shares outstanding) agreed to make a pro rata distribution of 885,481
shares of the Company's common stock to AROC's common stockholders
(excluding holders of Class B common stock) of record on November 18, 1996.
The pro rata distribution of shares occurred on June 20, 1997, and the
remaining 3,614,519 shares of the Company's common stock owned by AROC were
canceled. Accordingly, all share and per share amounts in the accompanying
financial statements have been retroactively restated to give effect to the
change in capital structure.
3. Investment in Limited Partnership
The Company is a limited partner with a 19% partnership interest in Z-H,
Ltd. which constructed and operated a golf driving range, miniature golf
and batting cage facility in Colorado Springs, Colorado. In July 1997, the
general partner ("Seller") entered into an Agreement of Purchase and Sale
of Leasehold with an unrelated third-party ("Purchaser") for the sale of
all improvements, buildings and fixtures for $71,500 cash, $100,000 of
Purchaser's restricted common stock and assumption by Purchaser of
approximately $887,500 debt. The closing of the transaction occurred in
October 1997. In connection with the real property, the parties entered
into a 25 year Ground Lease (the " Lease") whereby the Purchaser will pay
annual rents aggregating $3,909,000 over the Lease term. The Lease provides
-5-
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
for a termination fee payable to the Purchaser if the Lease is cancelled by
the Seller after the expiration of the second lease year of $1,000,000 in
lease years 3 through 5 and declining thereafter to $-0- in lease year 21.
Based on the preliminary information received from the limited partnership,
the Company's share of the gain from the sale of the improvements is
approximately $50,000. The Company, however, will record the gain when it
receives additional information from the limited partnership which will
enable it to determine the proper method of accounting for the gain
recognition.
4. Sales of Real Estate
Sales of real estate generally are accounted for under the full accrual
method. Under that method, gain is not recognized until the collectibility
of the sales price is reasonably assured and the earnings process is
virtually complete. When a sale does not meet the requirements for income
recognition, gain is deferred until those requirements are met. Sales of
real estate are accounted for under the percentage-of-completion method
when the Company has material obligations under sales contracts to provide
improvements after the property is sold. Under the percentage-of-completion
method, the gain on sale is recognized as the related obligations are
fulfilled.
The Company developed five commercial pad sites on approximately 4.62 acres
("Phase I") of a 20 acre parcel. Three of the pad sites were sold and the
remaining two are currently under sale contracts. The Company was obligated
and entered into a contract for approximately $415,000 of Phase I site
development work consisting of grading, utilities, channel lining, storm
sewer, paving, curb and gutter. All of the improvements have been completed
except for the channel lining work which is scheduled for completion in
February 1998. As of December 31, 1997, approximately 82% of the contract
work had been completed.
The Company was required to furnish a bank letter of credit for $163,000 to
the City of Colorado Springs ("City") to provide assurance that the channel
work relating to the remaining acreage in the 20 acre parcel will be
completed when the land is developed. In addition, the Company furnished
two additional bank letters of credit to the City totaling $47,000 relating
to the paving, curb, gutter, and road improvements which the City released
subsequent to December 31, 1997. The Company also has available an unused
line of credit for $50,000 with the bank. The outstanding bank letters of
credit and the line of credit are collateralized by cash of $100,000 which
is reflected as restricted cash and $160,000 of U. S. government
securities.
-6-
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In connection with the real estate sales, the Company used the
percentage-of-completion method to determine the amount of gross profit to
be recognized for the three and nine months ended December 31, 1997 as
follows:
Three Months Nine Months
Ended Ended
December 31, December 31,
1997 1997
----------- -----------
Sales of real estate $ -- $ 1,068,554
Previously deferred revenue 154,220 --
Deferred revenue -- (110,807)
----------- -----------
154,220 957,747
Cost of real estate sold 78,674 454,740
----------- -----------
Gross profit on sale of real estate $ 75,546 $ 503,007
=========== ===========
The deferred revenue of $110,807 is reflected as a liability in the
Company's balance sheet at December 31, 1997. The revenue will be
recognized subsequent to December 31, 1997 as the remaining site
development work obligations are completed.
5. Income Taxes
The provision for income taxes is based on management's estimate of the
effective tax rate expected to be applicable for the fiscal year net of the
utilization of the net operating loss carryforward which is subject to
limitations under IRS Section 382. The tax rate may be revised at the end
of each successive interim period during the fiscal year to reflect
management's current estimate of the annual effective tax rate.
6. Supplemental Disclosures to Consolidated Statements of Cash Flows
Cash payments for interest and income taxes were as follows:
Nine Months Ended
December 31,
-----------------
1997 1996
------- -------
Interest paid $ 9,538 $ 8,551
Income taxes paid 25,000 --
-7-
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Subsequent Event
Subsequent to December 31, 1997, the Company sold 47,000 treasury shares to
an officer for $49,820 cash. The price per share in this transaction was
equal to the price paid by the Company when the treasury shares were
acquired in August 1997.
-8-
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's unaudited consolidated financial statements and notes thereto.
Forward-Looking Statements
- --------------------------
The Company believes that this report contains certain forward-looking
statements, as defined in the Private Securities Litigation Reform Act of 1995,
including, without limitation, statements containing the words "believes,"
"anticipates," "estimates," "expects," "may" and words of similar import, or
statements of management's opinion. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
Results of Operations
- ---------------------
Three Months Ended December 31, 1997 and 1996
---------------------------------------------
The Company's net income for the three months ended December 31, 1997 was $7,053
compared to a net loss of $170,796 for the comparable period in 1996. The
improved results for the 1997 period were attributable primarily to the
recognition of additional gross profit from prior real estate sales.
Since the Company had obligations to complete certain site improvements at
December 31, 1997, the gross profit on real estate sold of $75,546 recognized by
the Company was accounted for under the percentage-of-completion method (see
Note 4).
The Company's gas royalty revenue increased $15,600 or 83% for the three months
ended December 31, 1997 compared to the same period in 1996. Natural gas
production for the three months ended December 31, 1997 was 14,795 mcf compared
to 9,737 mcf for the comparable period in 1996. The average sales price of
natural gas increased 20% ($2.29 per mcf compared to $1.91 per mcf ) for the
three months ended December 31, 1997 over the comparable period in 1996.
General and administrative expenses decreased by $31,000 or 19% and is primarily
attributable to no stock compensation expense in the 1997 period compared to
approximately $50,000 for the comparable period in 1996.
Depreciation and amortization expense decreased $28,200 or 74% in the current
quarter compared to the corresponding quarter in 1996 primarily due to a change
in the estimated remaining life of the gas royalty interest effective January 1,
1997.
-9-
<PAGE>
The net unrealized gain on marketable securities of $6,200 for the three months
ended December 31, 1997 represents the net change in the market value of the
trading securities portfolio.
The net gain on sale of marketable securities decreased $8,600 or 33% in the
current period compared to the 1996 period due to a decrease in portfolio
trading activity.
Equity in limited partnership income of $12,000 for the three months ended
December 31, 1997 resulted from miscellaneous income in connection with the sale
of certain improvements (see Note 3) compared to a loss from operations in the
1996 period.
Interest expense remained comparable for the three months ended December 31,
1997 and 1996.
Nine Months Ended December 31, 1997 and 1996
--------------------------------------------
The Company's net income for the nine months ended December 31, 1997 was
$236,895 compared to a net loss of $404,223 for the comparable period in 1996.
The improved results for the nine months ended December 31, 1997 were
attributable primarily to sales of real estate.
The Company closed on three lot sales related to the development of five
commercial pad sites consisting of approximately 5 acres in a 20 acre parcel in
Colorado Springs, Colorado. Since the Company had obligations to complete
certain site improvements at December 31, 1997, the gross profit of $503,007
recognized by the Company on the sales was accounted for under the
percentage-of-completion method (see Note 4).
The Company's gas royalty revenue increased $23,000 or 47% for the nine months
ended December 31, 1997 compared to the same period in 1996. Natural gas
production for the nine months ended December 31, 1997 was 38,950 mcf compared
to 32,724 mcf for the comparable period in 1996. The average sales price of
natural gas increased 23% ($1.79 per mcf compared to $1.45 per mcf) for the 1997
period over the 1996 period.
Gas processing and production taxes increased $2,500 or 17% in the 1997 period
compared to the 1996 period due to the gas processing plant being shut-down in
the 1996 period for repairs and maintenance.
General and administrative expenses decreased $5,800 or 2% for the nine months
ended December 31, 1997 compared to the same period in 1996. The net decrease
was attributable to a reduction in stock compensation expense offset by
increases in legal, accounting and other expenses incurred in connection with
the spin-off from American Rivers Oil Company in June 1997.
Depreciation and amortization expense decreased $84,000 or 74% in the current
nine months compared to the 1996 period primarily due to a change in the
estimated remaining life of the gas royalty interest effective January 1, 1997.
Interest and dividend income decreased $8,900 or 25% for the nine months ended
December 31, 1997 compared to the 1996 period due to the sale of marketable
securities in the prior fiscal year.
-10-
<PAGE>
The net gain on sale of marketable securities decreased $28,800 or 56% for the
current period compared to the 1996 period due to a decrease in portfolio
trading activity.
The net unrealized gain on marketable securities of $103,700 for the current
period represents the net change in the market value of the trading securities
portfolio.
Equity in limited partnership loss decreased $21,600 in the current period
compared to the 1996 period due to the partnership selling certain improvements
as discussed in Note 3 to the consolidated financial statements.
Interest expense increased $2,400 or 28% in the 1997 period compared to the 1996
period due to a higher average amount of debt outstanding.
Financial Condition
- -------------------
At December 31, 1997, the Company had working capital of $434,000.
The following summary table reflects the Company's cash flows for the nine
months ended December 31, 1997 and 1996:
Nine Months Ended
December 31,
----------------------
1997 1996
--------- ---------
Net cash provided by (used in) operating activities $ 189,600 $(249,800)
Net cash provided by (used in) investing activities (51,300) 216,500
Net cash used in financing activities (100,700) --
Net cash provided by operating activities increased to $189,600 for the nine
months ended December 31, 1997 compared to a net use of cash for operating
activities of $249,800 for the comparable period in 1996 due primarily to sales
of real estate.
Net cash used in investing activities of $51,300 for the nine months ended
December 31, 1997 resulted primarily from the purchase of equipment. Net cash
provided by investing activities of $216,500 for the nine months ended December
31, 1996 resulted primarily from net cash proceeds of $353,100 from marketable
securities being utilized for land development costs of $128,400 and funding of
operating activities.
Net cash used in financing activities of $100,700 for the nine months ended
December 31, 1997 resulted from the Company acquiring 94,116 shares of treasury
stock. The Company also had borrowings of $110,000 and repayment of borrowings
of $110,000 for the 1997 period. There were no cash flows from financing
activities for the comparable period in 1996.
The Company's material commitments for capital expenditures in the next twelve
months will be in conjunction with Phase II of the development of a 20 acre
-11-
<PAGE>
parcel in Colorado Springs, Colorado. Phase I consisted of five commercial pad
sites (approximately 4.62 acres) and the related costs for the on-site and
off-site improvements were approximately $415,000. The Company entered into and
closed sales contracts for three of the five lots and presently has the
remaining two lots under contract for sale. The Company utilized the net
proceeds from the closings to fund the Phase I improvements. At December 31,
1997, the Company has approximately $110,000 of obligations (including
retainages of $34,000) remaining under the contract for site development costs.
The Company will not commence development of Phase II (approximately 7 acres)
until sales agreements are entered into for the sale of commercial pad sites.
The estimated capital expenditures of $500,000 for Phase II site improvements
are anticipated to be funded from working capital and net proceeds from the sale
of commercial pad sites. The Company is presently negotiating a contract with
one purchaser and is having preliminary discussions with another prospective
purchaser for the sale of lots in Phase II.
The Company has also engaged two independent consultants to perform economic and
financial feasibility studies for a 300 unit apartment complex to be developed
on a 35 acre parcel owned by the Company and located south of the 20 acre parcel
presently being developed. The Company estimates that the project cost will be
in the range of $18 - $20 million. Until the feasibility studies are completed,
management is unable to provide any additional information on the feasibility of
the contemplated project.
The future profitability and operating cash flows of the Company may be volatile
due to the significance and nature of real estate activities.
-12-
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule (submitted only in electronic
format)
b. Reports on Form 8-K
None
-13-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BISHOP CAPITAL CORPORATION
(Registrant)
Date: February 10, 1998 By: /s/ Robert E. Thrailkill
-------------------------
Robert E. Thrailkill
President
(Principal Executive Officer)
Date: February 10, 1998 By: /s/ John A. Alsko
------------------
John A. Alsko
Treasurer and Chief
Financial Officer
(Principal Financial Officer)
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 184,430
<SECURITIES> 621,961
<RECEIVABLES> 27,210
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 843,317
<PP&E> 366,699
<DEPRECIATION> 137,872
<TOTAL-ASSETS> 2,235,608
<CURRENT-LIABILITIES> 408,937
<BONDS> 0
0
0
<COMMON> 8,855
<OTHER-SE> 1,817,816
<TOTAL-LIABILITY-AND-EQUITY> 2,235,608
<SALES> 574,503
<TOTAL-REVENUES> 574,503
<CGS> 16,604
<TOTAL-COSTS> 424,412
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,984
<INCOME-PRETAX> 297,395
<INCOME-TAX> 60,500
<INCOME-CONTINUING> 236,895
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236,895
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
