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
December 31, 1999 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, 2000 was 874,794.
Transitional Small Business Disclosure Format
(Check one): Yes ---- No --X--
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
(Unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 12,251
Marketable securities 998,326
Gas royalties receivable 43,178
Prepaid expenses and other 42,766
-----------
Total current assets 1,096,521
Property and Equipment:
Building 229,156
Furniture and equipment 69,980
-----------
299,136
Less accumulated depreciation (133,291)
-----------
Net property and equipment 165,845
-----------
Other Assets:
Land under development 807,425
Investment in limited partnership 221,208
Gas royalty interest, net of accumulated
amortization of $840,311 226,740
Deferred income taxes 112,600
Notes receivable 38,265
Other assets 4,514
-----------
Total other assets 1,410,752
-----------
Total Assets $ 2,673,118
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 184,996
Payable to broker 389,461
Deferred income taxes 69,000
Current maturities of long-term debt 9,800
-----------
Total current liabilities 653,257
Long-term debt, less current maturities 227,609
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, 3,561 shares (2,820)
Capital in excess of par value 2,217,599
Accumulated deficit (431,311)
-----------
Total stockholders' equity 1,792,252
-----------
Total Liabilities and Stockholders' Equity $ 2,673,118
===========
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,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
REVENUES -
<S> <C> <C> <C> <C>
Sales of real estate $ -- $ 36,939 $ 21,244 $ 536,505
COSTS AND EXPENSES:
Cost of real estate sold -- 24,552 18,270 310,805
General and administrative 161,720 121,104 385,209 339,208
Depreciation and amortization 2,409 6,325 13,762 19,082
--------- --------- --------- ---------
164,129 151,981 417,241 669,095
--------- --------- --------- ---------
LOSS FROM OPERATIONS (164,129) (115,042) (395,997) (132,590)
OTHER INCOME (EXPENSE):
Net gas royalties 47,947 16,158 123,781 57,468
Interest income 1,243 3,686 8,440 13,094
Dividend income 4,525 3,083 13,911 8,566
Rental income 9,760 7,492 21,980 12,712
Net gain (loss) on sale of marketable securities 5,307 930 (9,796) 8,714
Net unrealized gain on marketable securities 152,940 151,027 163,156 142,008
Net gain on sale of equipment -- -- 3,852 --
Equity in limited partnership income (loss) (1,500) 1,754 4,200 6,399
Minority interest in earnings of consolidated
subsidiary (9,955) (3,877) (22,781) (9,465)
Interest expense (12,051) (5,581) (33,223) (13,296)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 34,087 59,630 (122,477) 93,610
INCOME TAX BENEFIT (EXPENSE) (12,100) (22,000) 43,600 (33,000)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 21,987 $ 37,630 $ (78,877) $ 60,610
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE $ .03 $ .04 $ (.09) $ .07
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 875,305 850,840 876,669 842,484
========= ========= ========= =========
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,
-----------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (78,877) $ 60,610
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 23,770 29,091
Equity in limited partnership income (4,200) (6,399)
Net (gain) loss on sale of marketable securities 9,796 (8,714)
Net unrealized gain on marketable securities (163,156) (142,008)
Net gain on sale of equipment (3,852) --
Minority interest in earnings of consolidated subsidiary 22,781 9,465
Stock bonus compensation -- 4,000
Deferred income taxes (43,600) 33,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Restricted cash -- (34,695)
Marketable securities 7,705 (93,234)
Gas royalties receivable (10,034) (8,307)
Interest and other receivables 8,210 41,762
Prepaid expenses and other 3,217 2,410
Land under development (9,377) (72,477)
Increase (decrease) in:
Accounts payable and accrued expenses 56,926 (56,280)
Payable to broker 158,896 55,910
Deferred revenue -- 57,521
--------- ---------
Net cash used in operating activities (21,795) (128,345)
CASH FLOWS FROM INVESTING ACTIVITIES:
Funds advanced under notes receivable -- (15,000)
Proceeds from collection of notes receivable 3,956 2,987
Proceeds from sale of equipment 6,916 --
Purchase of property and equipment (8,761) (16,212)
--------- ---------
Net cash provided by (used in) investing activities 2,111 (28,225)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 24,000 140,000
Principal payments on borrowings (7,686) --
Treasury stock acquired (2,005) (825)
--------- ---------
Net cash provided by financing activities 14,309 139,175
--------- ---------
Net decrease in cash and equivalents (5,375) (17,395)
Cash and equivalents, beginning of period 17,626 35,516
--------- ---------
Cash and equivalents, end of period $ 12,251 $ 18,121
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 33,223 $ 13,296
========= =========
Non-cash equipment purchases $ 38,475 $ --
========= =========
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
The consolidated financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair presentation of financial
position at December 31, 1999 and results of operations for the interim
periods ended December 31, 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. The accompanying
consolidated financial statements should be read in conjunction with the
audited financial statements and related notes appearing in the Company's
March 31, 1999 Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission.
Certain previously reported amounts have been reclassified to conform to
the current financial statement presentation.
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 and nine months ended December 31, 1999 and
1998 as follows:
5
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
---------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales of real estate $ -- $ 20,000 $ 21,244 $ 594,026
Revenue previously deferred -- 16,939 -- --
Deferred revenue -- -- -- (57,521)
--------- --------- --------- ---------
-- 36,939 21,244 536,505
Cost of real estate sold -- 24,552 18,270 310,805
--------- --------- --------- ---------
Gross profit on sale of real estate $ -- $ 12,387 $ 2,974 $ 225,700
========= ========= ========= =========
</TABLE>
At December 31, 1999, all required development work for real estate sale
contracts closed had been completed and, accordingly, no profit was
required to be deferred.
3. Gas Royalty Income
Gas royalty income is net of amortization of $3,336 for the three months
ended December 31, 1999 and 1998 and $10,008 for the nine months ended
December 31, 1999 and 1998.
4. 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 a 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
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
Three Months Ended December 31, 1999 and 1998
The Company's net income for the three months ended December 31, 1999 was
$22,000 compared to net income of $37,600 for the comparable period in 1998. The
Company, in the current quarter, did not have any closings of real estate sale
contracts.
General and administrative expenses increased $40,600 or 34% for the three
months ended December 31, 1999 compared to the same period in 1998 and is
primarily attributable to an increase in property tax expense resulting from
higher assessed valuations on the land under development in Colorado Springs,
Colorado.
Net gas royalty income increased $31,800 in the current quarter compared to the
corresponding quarter in 1998. (Approximately $19,600 of the increase is
attributable to production sales prior to October 1999. The unit operator is
experiencing computer system problems and has been unable to make royalty
payments on a timely basis. As a result, the accruals for estimated gas royalty
income is based on prior months' production sales proceeds received by the
7
<PAGE>
Company.) Natural gas production for the three months ended December 31, 1999
was 24,300 mcf (11,600 mcf is attributable to production prior to October 1999)
compared to 16,000 mcf for the comparable period in 1998. The average sales
price of natural gas increased 59% ($2.37 per mcf compared to $1.49 per mcf).
Severance taxes and gas processing costs increased $3,000 or 68% due to
increased production.
Interest and dividend income decreased $1,000 or 15% for the three months ended
December 31, 1999 compared to the same period in 1998 primarily due to a
decrease in cash balances available for investment purposes.
Rental income increased $2,300 or 30% for the three months ended December 31,
1999 compared to the same period in 1998 due to the leasing of additional office
space.
The net unrealized gain on marketable securities of $152,900 for the three
months ended December 31, 1999 represents the net change from September 30, 1999
in the market value of the trading securities portfolio.
Equity in limited partnership loss of $1,500 for the three months ended December
31, 1999 represents the Company's share of losses in Z-H, Ltd.
Minority interest in earnings of consolidated subsidiary of $10,000 for the
three months ended December 31, 1999 represents the limited partner's share of
the net income in Bridger Creek Partnership.
Interest expense increased $6,500 for the three months ended December 31, 1999
compared to the comparable quarter in 1998 due to an increase in the balance
payable to broker.
Nine Months Ended December 31, 1999 and 1998
The Company had a net loss of $78,900 for the nine months ended December 31,
1999 compared to net income of $60,600 for the comparable period in 1998. During
the current period, the Company had only one lot sale closing which occurred in
its Wyoming residential subdivision.
General and administrative expenses increased $46,000 or 14% for the nine months
ended December 31, 1999 compared to the same period in 1998. The increase is
primarily attributable to an increase in property tax expense resulting from
higher assessed valuations on the land under development in Colorado Springs,
Colorado.
Net gas royalties increased $66,300 in the current nine months compared to the
corresponding nine months in 1998. (Approximately $12,000 of the increase is
attributable to production sales prior to April 1999. The unit operator is
8
<PAGE>
experiencing computer system problems and has been unable to make royalty
payments on a timely basis. As a result, the accruals for estimated gas royalty
income is based on prior months' production sales proceeds received by the
Company.) Natural gas production for the nine months ended December 31, 1999 was
72,100 mcf (8,100 mcf is attributable to production prior to April 1999)
compared to 46,600 mcf for the comparable period in 1998. The average sales
price of natural gas increased 21% ($2.03 per mcf compared to $1.68 per mcf).
Severance taxes and gas processing costs increased $4,500 or 39% for the nine
months ended December 31, 1999 compared to the same period in 1998 due to
increased production.
Interest and dividend income were comparable for the nine months ended December
31, 1999 compared to the same period in 1998.
Net unrealized gain on marketable securities of $163,200 for the nine months
ended December 31, 1999 represents the net change from March 31, 1999 in the
market value of the trading securities portfolio.
Equity in limited partnership income of $4,200 for the nine months ended
December 31, 1999 represents the Company's share of income in Z-H, Ltd.
Interest expense increased $19,900 for the nine months ended December 31, 1999
compared to the comparable period in 1998 due to bank borrowings under the line
of credit and an increase in the balance payable to broker.
Financial Condition
At December 31, 1999, the Company had working capital of $443,300.
The following summary table reflects comparative cash flows for the Company as
follows:
Nine Months Ended
December 31,
-----------------
1999 1998
---- ----
Net cash provided by (used in):
Operating activities $ (21,800) $(128,300)
Investing activities 2,100 (28,200)
Financing activities 14,300 139,200
Net cash used in operating activities for the nine months ended December 31,
1999 was $21,800 compared to $128,300 in the same period of 1998. The decrease
was due to increases in accounts payable and payable to broker offset by the net
loss adjusted for non-cash items.
Net cash provided by investing activities of $2,100 for the nine months ended
December 31, 1999 resulted from proceeds from collection of notes receivable of
$4,000 and from sale of equipment of $6,900 offset by the purchase of equipment.
9
<PAGE>
Net cash used in investing activities of $28,200 for the nine months ended
December 31, 1998 resulted primarily from funds advanced under notes receivable
of $15,000 and $16,200 relating to the purchase of equipment.
Net cash provided by financing activities of $14,300 for the nine months ended
December 31, 1999 resulted from bank borrowings of $24,000 offset by principal
payments of $7,700 and the acquisition of 2,561 shares of treasury stock for
$2,000. Net cash provided by financing activities of $139,200 for the nine
months ended December 31, 1998 resulted from bank borrowings of $140,000 offset
by the acquisition of 1,010 shares of treasury stock for $825.
The Company's material commitments for capital expenditures in the next twelve
months will 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 Phase I development of Creekside Center at Galley of
four 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 application which has been
approved by the appropriate governmental authorities 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. At December 31, 1999, the proposed project is in the preliminary concept
and design phase.
In connection with the Phase I development of the Creekside Center at Galley,
the Company has entered into sales agreements to sell the following retail pad
sites: (i) 1.45 acre to Dillon Real Estate Co., Inc. ("Dillon") for $658,892 for
a convenience store with retail gas installations; and (ii) .81 acre to JH
Foods, Ltd. ("JH") for $367,220 for a fast food hamburger establishment. The
closing of the sales will occur ten (10) business days following notice to the
purchasers by the Company that the City of Colorado Springs has approved the
Concept Plan and Plat, provided that the Plat has been recorded by the closing
date. The Company engaged outside consultants to work on the Concept Plan and
Plat. These have been submitted to the appropriate governmental authorities for
review and the Company anticipates receiving approval by March 1, 2000.
10
<PAGE>
The estimated costs for the Phase I site development work consisting of grading,
utilities, storm sewer, paving and curb and gutter are approximately $400,000.
Since none of the off-site and on-site development work is anticipated to be
completed by the closing date for the Dillon contract, the Company and Dillon
have agreed that at closing, and out of the net proceeds payable to the Company,
the Company will place in escrow an amount equal to 1.2 times the amount arrived
at by deducting from the estimated development costs of $400,000, the face
amount of any letters of credit the Company may be required to post with the
City. The Company and JH have agreed that at closing, the Company will place in
escrow an amount equal to 1.2 times the amount arrived at by deducting from
$400,000, (i) the face amount of any letters of credit the Company may be
required to post with the City and (ii) the amount deposited into escrow under
the Dillon agreement. The Company anticipates that the development work will be
substantially completed not later than seven (7) months after the date of
closings.
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 sale closings.
Year 2000 Issue
The Year 2000 issue is the result of computer programs using two digits rather
than four to define the applicable year. Computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
leading to disruptions in a company's operations.
The Company completed a 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 programs (primarily accounts payable, general ledger and payroll) in
its operations. The Company utilized both internal and external resources to
replace its current software for Year 2000 compliant software. All relevant
internal software remediation and testing were completed by December 31, 1999
without any adverse affect on the Company's operations. The total cost to the
Company of these Year 2000 issue activities was not material to its financial
position or results of operations. The hardware and software purchased was
capitalized in accordance with normal policy. Personnel and all other costs
related to the project were expensed as incurred.
As of February 10, 2000, the Company is not aware of any Year 2000 issues with
external entities that may affect the Company's operations. However, the Company
has no way of analyzing the probability of Year 2000 problems with the external
entities, and therefore, there can be no assurance that they will be Year 2000
compliant or, in any event, that the Company will not be negatively affected
from Year 2000 issues.
11
<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
12
<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, 2000 By: /s/ Robert E. Thrailkill
----------------------------
Robert E. Thrailkill
President
(Principal Executive Officer)
Date: February 10, 2000 By: /s/ John A. Alsko
---------------------
John A. Alsko
Treasurer and Chief Financial
Officer
(Principal Financial Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 12,251
<SECURITIES> 998,326
<RECEIVABLES> 43,178
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,096,521
<PP&E> 299,136
<DEPRECIATION> 133,291
<TOTAL-ASSETS> 2,673,118
<CURRENT-LIABILITIES> 653,257
<BONDS> 0
8,784
0
<COMMON> 0
<OTHER-SE> 1,783,468
<TOTAL-LIABILITY-AND-EQUITY> 2,673,118
<SALES> 21,244
<TOTAL-REVENUES> 21,244
<CGS> 18,270
<TOTAL-COSTS> 417,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,223
<INCOME-PRETAX> (122,477)
<INCOME-TAX> (43,600)
<INCOME-CONTINUING> (78,877)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,877)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
