U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File Number
June 30, 1999 0-21867
BISHOP CAPITAL CORPORATION
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Wyoming 84-0901126
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
716 College View Drive, Riverton, Wyoming 82501
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(Address of principal executive offices) (Zip Code)
(307) 856-3800
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(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 August 10, 1999 was 877,355.
Transitional Small Business Disclosure Format
(Check one): Yes No X
----- -----
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(Unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 13,814
Marketable securities 1,062,910
Receivables:
Gas royalties 16,157
Interest and other 7,553
Prepaid expenses and other 5,005
-----------
Total current assets 1,105,439
Property and Equipment:
Building 224,644
Furniture 66,887
Vehicles and equipment 91,380
-----------
382,911
Less accumulated depreciation (177,070)
-----------
Net property and equipment 205,841
-----------
Other Assets:
Land under development 765,345
Investment in limited partnership 219,668
Gas royalty interest, net of accumulated
amortization of $833,639 233,412
Deferred income taxes 69,000
Notes receivable 40,964
Other assets, net 4,039
-----------
Total other assets 1,332,428
-----------
Total Assets $ 2,643,708
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 107,032
Current maturities of long-term debt 10,511
Deferred income taxes 72,300
Payable to broker 354,796
-----------
Total current liabilities 544,639
Long-term debt, less current maturities 219,970
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; 878,355 shares issued 8,784
Treasury stock, 1,000 shares (815)
Capital in excess of par value 2,217,599
Accumulated deficit (346,469)
-----------
Total stockholders' equity 1,879,099
-----------
Total Liabilities and Stockholders' Equity $ 2,643,708
===========
See accompanying notes to these consolidated financial statements.
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended June 30
1999 1998
--------- ---------
REVENUES
Sales of real estate $ 21,244 $ 274,026
COSTS AND EXPENSES:
Cost of real estate sold 18,270 167,883
General and administrative 110,785 115,683
Depreciation and amortization 6,545 6,488
--------- ---------
135,600 290,054
LOSS FROM OPERATIONS (114,356) (16,028)
OTHER INCOME (EXPENSE):
Gas royalties, net of amortization of $3,336
and $3,336, respectively 12,662 23,338
Interest income 4,241 4,925
Dividend income 5,010 2,710
Rental income 5,760 2,610
Net gain on sale of marketable securities 16,649 --
Net unrealized gain on marketable securities 86,355 29,725
Equity in limited partnership income 2,660 2,590
Interest expense (9,716) (4,653)
--------- ---------
INCOME BEFORE INCOME TAXES 9,265 45,217
PROVISION FOR INCOME TAXES (3,300) (15,000)
--------- ---------
NET INCOME $ 5,965 $ 30,217
========= =========
EARNINGS PER SHARE $ .01 $ .04
========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 877,355 838,365
========= =========
See accompanying notes to these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
--------------------------------
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,965 $ 30,217
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,881 9,824
Deferred income taxes 3,300 10,000
Equity in limited partnership income (2,660) (2,590)
Net gain on sale of marketable securities (16,649) --
Net unrealized gain on marketable securities (86,355) (29,725)
Changes in operating assets and liabilities:
(Increase) decrease in:
Restricted cash -- (145,690)
Marketable securities (107,235) (37,630)
Gas royalties receivable 16,986 (3,973)
Interest and other receivables 657 42,527
Prepaid expenses and other 2,503 1,805
Land under development 33,178 70,591
Notes receivable -- (15,000)
Increase (decrease) in:
Accounts payable and accrued expenses 1,743 (120,764)
Income taxes payable -- 5,000
Payable to broker 124,231 1,632
Deferred revenue -- 300,000
--------- ---------
Net cash provided by (used in) operating activities (14,455) 116,224
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from collection of notes receivable 1,257 783
Purchase of property and equipment -- (3,725)
--------- ---------
Net cash provided by (used in) investing activities 1,257 (2,942)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 12,000 62,000
Principal payments on borrowings (2,614) (62,000)
--------- ---------
Net cash provided by financing activities 9,386 --
--------- ---------
Net increase (decrease) in cash and equivalents (3,812) 113,282
Cash and equivalents, beginning of period 17,626 35,516
--------- ---------
Cash and equivalents, end of period $ 13,814 $ 148,798
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 9,716 $ 4,653
========= =========
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair presentation of financial
position at June 30, 1999 and results of operations for the interim periods
ended June 30, 1999 and 1998. Such adjustments are of a normal and
recurring nature. The interim results presented are not necessarily
indicative of results that can be expected for a full year. Although the
Company believes that the disclosures in the accompanying financial
statements are adequate to make the information presented not misleading,
certain information and footnote information normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, and these financial
statements should be read in conjunction with the Company's audited
consolidated financial statements included in the Company's Form 10-KSB for
the year ended March 31, 1999.
2. Revenue Recognition
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.
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 months ended June 30, 1999 and 1998 as follows:
Three Months Ended
June 30,
----------------------
1999 1998
---- ----
Sales of real estate $ 21,244 $ 574,026
Deferred revenue -- (300,000)
--------- ----------
21,244 274,026
Cost of real estate sold 18,270 167,883
--------- ----------
Gross profit on sale of real estate $ 2,974 $ 106,143
========== ==========
At June 30, 1999, all required development work had been completed and,
accordingly, no profit was required to be deferred.
<PAGE>
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 following discussion of this report may contain certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, and is subject to the
safe harbors created by those sections. Such forward-looking statements are
subject to risks, uncertainties and other factors, which could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. The forward-looking statements within this report
are identified by words such as "believes," "anticipates," "expects," "intends,"
"may" and other similar expressions. However, these words are not the exclusive
means of identifying such statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. The following discussion and
analysis should be read in conjunction with the Company's unaudited consolidated
financial statements and notes included elsewhere herein.
Results of Operations
The Company's results of operations are dependent primarily on the sale of real
estate which is affected by national and local economic and competitive
conditions, including interest rates, construction costs, governmental
regulations and legislation, availability of financing and other factors. In
addition, the Company competes with other owners and developers with greater
resources and experience.
The Company's net income for the three months ended June 30, 1999 was $6,000
compared to $30,200 for the comparable period in 1998. The decrease in the
current quarter is primarily attributable to a decrease in real estate sales.
The Company, in the current quarter, sold one lot in its Wyoming residential
subdivision.
General and administrative expenses decreased $4,900 or 4% for the three months
ended June 30, 1999 compared to the same period in 1998. The decrease is due to
a general reduction in overhead expenses.
Net gas royalty income decreased $10,700 or 45% for the three months ended June
30, 1999 compared to the same period in 1998. Natural gas production for the
three months ended June 30, 1999 was 12,378 mcf compared to 15,281 mcf for the
comparable period in 1998. The 19% decrease in production is primarily due to
operational problems in the gas processing plant. The average sales price of
natural gas decreased 14% ($1.69 per mcf compared to $1.96 mcf) for the three
months ended June 30, 1999 compared to the same period in 1998. Gas processing
costs and production taxes increased 42% ($5,100 for the current quarter
compared to $3,600 in the comparable 1998 quarter).
<PAGE>
Interest and dividend income increased $1,600 or 21% for the three months ended
June 30, 1999 compared to the same period in 1998 due to additional investments
in redeemable preferred securities.
Rental income increased $3,100 in the current quarter compared to the same
period in 1998 due to a new tenant leasing available space in the Company's
office building.
The net unrealized gain on marketable securities of $86,400 for the three months
ended June 30, 1999 represents the net change in the market value of the trading
securities portfolio from March 31, 1999.
Equity in limited partnership income of $2,700 and $2,600 for the three months
ended June 30, 1999 and 1998, respectively, primarily represents the Company's
share of the net rental income from a ground lease.
Interest expense increased $5,100 for the three months ended June 30, 1999
compared to the same period in 1998 due to additional borrowings under the bank
line of credit and an increase in the margin balance payable to a broker.
Financial Condition
At June 30, 1999, the Company had working capital of $560,800.
The following summary table reflects comparative quarterly cash flows for the
Company as follows:
Three Months Ended
June 30,
-------------------------
1999 1998
---- ----
Net cash provided by (used in):
Operating activities $ (14,500) $ 116,200
Investing activities 1,300 (2,900)
Financing activities 9,400 --
The Company had negative cash flows from operating activities of $14,500 for the
three months ended June 30, 1999 compared to net cash provided by operating
activities of $116,200 for the comparable period in 1998. The decrease in
operating cash flows was due primarily to a lower sales volume of improved real
estate in the current period.
Net cash provided from investing activities of $1,300 for the three months ended
June 30, 1999 resulted from proceeds from collection of notes receivable. For
the three months ended June 30, 1998, net cash used in investing activities of
$2,900 resulted primarily from the purchase of equipment.
<PAGE>
The Company had bank borrowings of $12,000 and repayment of bank borrowings of
$2,600 from financing activities for the three months ended June 30, 1999. For
the three months ended June 30, 1998, the Company had bank borrowings of $62,000
and repayment of bank borrowings of $62,000.
The Company's material commitments for capital expenditures in the next twelve
months may be in conjunction with undeveloped land in Colorado Springs, Colorado
related to (1) the Phase III development of approximately 9 acres in The
Crossings at Palmer Park Center, (2) a proposed 350 unit apartment complex on 18
acres and (3) the initial development of several retail pad sites on
approximately 5 acres of a 17 acre parcel.
When the Company develops Phase III in The Crossing at Palmer Park Center, it
will incur development costs for utilities, storm sewer, paving and additional
drainage channel improvements. The Company will not commence this development
until it has closed on a Phase III lot sale to fund the estimated on-site and
off-site development costs of approximately $250,000.
In connection with the proposed apartment complex, the Company may have to loan
Creekside Apartments, LLLP, under terms of the partnership agreement, up to
$85,000 for costs associated with the rezoning process and other partnership
matters. The Company anticipates that the loan advances, if any, will be funded
from either working capital or cash proceeds that may be available from lot
sales.
The Company is negotiating with two prospective retail pad site purchasers on
the undeveloped 17 acre parcel. The Company will not commence any site
development of approximately 5 acres until it has closed on at least one lot
sale to fund the off-site and on-site improvements (grading, utilities, storm
sewer and paving) of approximately $250,000.
The Company believes that existing working capital will be sufficient to fund
the Company's operations, exclusive of real estate development expenditures,
during the next twelve months. Real estate development expenditures will be
funded by proceeds from retail lot sales.
Year 2000 Issue
In general, the Year 2000 issue relates to computers and other systems being
unable to distinguish between the years 1900 and 2000 because they use two
digits, rather than four, to define the applicable year. This may result in
system failures or miscalculations leading to disruptions in a company's
operations.
The Company is continuing the review of its computer system to assess the
potential costs and scope of the Year 2000 issue. The Company utilizes a minimal
number of computer software programs (primarily accounts payable, general ledger
and payroll) in its operations. The Company is utilizing both internal and
<PAGE>
external resources to replace its current software for Year 2000 compliant
software. The Company's goal is to complete all relevant internal software
remediation and testing by October 1999. The total cost to the Company of these
Year 2000 issue activities has not been and is not anticipated to be material to
its financial position or results of operations. Any hardware and/or software
purchased will be capitalized and depreciated in accordance with normal Company
policy. Personnel and all other costs related to the project are being expensed
as incurred.
In addition to the Year 2000 compliance issues we face with respect to our own
system, we face risks that our vendors' and customers' systems, which are not
directly under our control, may not become compliant prior to January 1, 2000.
In addition, if certain public infrastructure interruptions in areas such as
utilities (electricity, water or telephone), banking or government, result in
disruption of our service, our operations could be impacted for the duration of
the disruption. No assurance can be given that the Company will not be
materially adversely affected by the failure of third parties to timely address
their Year 2000 issues.
A contingency plan has not yet been developed for dealing with the most
reasonably likely worst case scenario with respect to our Year 2000 compliance,
and such scenario has not yet been clearly identified. It is impossible to fully
assess the potential consequences in the event service interruptions from
suppliers occur or in the event there are disruptions in such infrastructure
areas as utilities, communications, banking and government.
The foregoing discussion of the Company's Year 2000 issues is based upon
management's best estimates, which were derived utilizing various assumptions of
future events, including, but not limited to, the ability of the Company to
identify and correct all relevant computer code and the success of third parties
with whom the Company does business in addressing their Year 2000 issues.
<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
27 Financial Data Schedule (submitted only in electronic format)
b. Reports on Form 8-K
None
<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: August 10, 1999 By: /s/ Robert E. Thrailkill
-------------------------------
Robert E. Thrailkill
President
(Principal Executive Officer)
Date: August 10, 1999 By: /s/ John A. Alsko
----------------------------
John A. Alsko
Treasurer and Chief Financial
Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 13,814
<SECURITIES> 1,062,910
<RECEIVABLES> 23,710
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,105,439
<PP&E> 382,911
<DEPRECIATION> 177,070
<TOTAL-ASSETS> 2,643,708
<CURRENT-LIABILITIES> 544,639
<BONDS> 0
0
0
<COMMON> 8,784
<OTHER-SE> 1,870,315
<TOTAL-LIABILITY-AND-EQUITY> 2,643,708
<SALES> 21,244
<TOTAL-REVENUES> 21,244
<CGS> 18,270
<TOTAL-COSTS> 135,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,716
<INCOME-PRETAX> 9,265
<INCOME-TAX> 3,300
<INCOME-CONTINUING> 5,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,965
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
