U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission File No. 0-10519
Bingo & Gaming International, Inc.
(Name of Small Business Issuer in its Charter)
OKLAHOMA 73-1092118
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
13581 Pond Springs Rd. Ste 105
Austin, Texas 78729
(Address of Principal Executive Offices)
11006 Metric Boulevard
Austin, Texas 78758
(Former Address of Principal Executive Offices)
(512) 335-0065
(Issuer's Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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.
(1) Yes X No (2) Yes X No
There were 8,417,600 shares of common stock, $.001 par value, outstanding as
of September 30, 1997.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
BINGO & GAMING INTERNATIONAL, INC.
BALANCE SHEETS
(unaudited)
<CAPTION>
September 30, December 31
1997 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 42,837 $ 53,307
Accounts Receivables 243,887 175,804
Inventory 23,300 54,327
Prepaid Expenses 26,487 420
Note Receivable 8,188 40,813
Total current assets 344,699 324,671
Property and equipment, net 113,858 115,524
Deferreds, intangibles, and 25,495 37,505
Other assets, net 67,260 63,549
Total Assets $551,312 $541,249
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables $117,668 $110,866
Other accrued expenses 396
Current maturities of long-term debt 56,313 122,363
Total current liabilities 174,377 233,229
Long-term debt 219,401 176,002
Common stock, $.001 par value:
Authorized - 70,000,000 shares
Issued and outstanding - 8,417,600 shares 8,418 8,415
Additional paid-in capital 393,187 391,539
Retained income (deficit) (244,071) (267,936)
Total stockholders' equity 157,534 132,018
Total Liabilities
and Stockholders' Equity $551,312 $541,249
</TABLE>
See notes to financial statements.
<TABLE>
BINGO & GAMING INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Phone Card Sales $ 323,458 $ 150,748 $1,110,766 $185,247
Management Fee Income 0 0 0 18,000
Rental Income 125,844 125,844 377,132 377,944
Concession Income 20,285 15,880 47,855 51,887
Total Revenue 469,587 292,472 1,535,753 633,078
Cost of Revenue:
Cost of Goods-Phone Cards 147,487 30,909 402,165 49,374
Machine and Location Rental 50,908 24,896 253,964 31,146
Prizes Paid 54,838 61,578 186,127 62,552
Hall Rental 61,565 43,080 154,143 134,241
Total Cost of Revenue: 314,798 160,463 996,399 277,313
Gross Margin: 154,789 132,009 539,354 355,765
Operating Expenses 106,950 49,364 279,836 153,385
Salaries 61,693 46,221 181,277 146,266
General andAdministrative Expenses 5,835 27,383 27,469 86,785
Total Expenses 174,478 122,968 488,582 386,436
Operating Income(Loss) (19,689) 9,041 50,771 (30,671)
Other Income 0 10 1,198 250
Interest 10,010 6,478 28,104 13,577
Net Income (Loss) before Taxes (29,699) 2,573 23,865 (43,998)
Taxes on Income 0 0 0 0
Net Income (Loss) $(29,699) $2,573 $23,865 $(43,998)
Net Income (Loss) per share * * * *
</TABLE>
(* = less than $.01)
See notes to financial statements.
<TABLE>
BINGO & GAMING INTERNATIONAL, INC,
STATEMENTS OF CASH FLOW
(unaudited)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income $23,865 $ 2,574
Adjustments to net income:
Depreciation and amortization 44,113 45,119
Changes to current assets and liabilities:
Receivables (68,083) (39,352)
Prepaid expenses (26,067) 440
Payables and accrued expenses 7,198 6,989
Inventory 31,027 (23,796)
Net cash provided by (used for)
operating activities 12,053 (8,026)
INVESTING ACTIVITIES
Increase in property and equipment (30,437) (10,050)
Increase in deferreds and other assets (3,711) (5,770)
Decrease in notes receivables 32,625 22,137
Net cash provided by (used for)
investing activities (1,523) 6,317
FINANCING ACTIVITIES
Issuance of common stock 1,651 0
Proceeds from long term debt 31,997 154,400
Payments on long term debt (54,648) (72,831)
Net cash provided by (used for)
financing activities (21,000) 84,569
CASH AND CASH EQUIVALENTS
Net increase (decrease) (10,470) 39,225
Balances at beginning of period 53,307 74,062
Balances at end of period $ 42,837 $ 113,287
</TABLE>
See notes to financial statements.
BINGO & GAMING INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
Note 1. BASIS OF PRESENTATION
The Company's consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Such financial statements as of September 30, 1997 and for the three months
ended September 30, 1997 and September 30, 1996 and for the nine months ended
September 30, 1997 and September 30, 1996 are unaudited, but, in management's
opinion, they include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results from such
interim periods. The results from interim periods are not necessarily
indicative of results from full years.
Such interim period financial statements, including the notes thereto, are
condensed and do not include all disclosures required by generally accepted
accounting principles. They should, therefore, be read in conjunction
with the Company's consolidated financial statements which were included in
the Company's Form 10-KSB for the year ended December 31, 1996.
Note 2. INCOME TAXES
At September 30, 1997 and 1996, the Company had, for tax reporting purposes,
net operating loss carryfowards of approximately $200,000 and $245,000,
respectively, available to offset future taxable income. The statutory
federal tax rate was 34% for nine months ended September 30, 1997 and 1996.
The effective tax rate was zero due to the Company's net operating loss
carryfowards as mentioned above.
Note 3. EARNINGS PER SHARE
Net Income (loss) per share is based upon the weighted average number of
shares outstanding during the periods (8,417,600 shares outstanding during the
nine months ended September 30, 1997 and 8,349,200 during the nine months
ended September 30, 1996).
Note 4. RECLASSIFICATION
Certain amounts previously reported have been reclassified to conform to
current year presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction:
During the three months ended March 31, 1996, the Company, through its wholly
owned subsidiaries Tupelo Industries, Inc., Meridian Enterprises, Inc.,
Monitored Investments, Inc., and Red River Bingo, Inc. operated three charity
bingo facilities for itself (Iuka, Mississippi, Tupelo, Mississippi, and
Meridian, Mississippi) and managed two other such facilities (McAllen, Texas
and Columbus, Mississippi) for two other corporations which share some common
stockholders with the Company
During the three months ended June 30, 1996, an officer and director of the
Company indicated an intent to divest himself of over 1,000,000 shares of
stock, thereby reducing his holdings in the Company to less than 10% and
relinquished his management and director's position in the Company. In return
for services rendered and release of the director's employment contract, the
Company issued stock options to purchase 225,000 shares of its of its common
stock and transferred the two management agreements (McAllen, Texas and
Columbus, Mississippi) to the him. During the three months ended September
30, 1997 the Company operated only the three charity Furthermore, in April
1996, the Company executed an exclusive Distribution Agreement for the State
of Texas for a video-enhanced dispenser to market one-minute emergency phone
cards. The Company began placing the dispensers in June 30, 1996 and by
September 30, 1996; approximately 50 had been placed and were in operation.
During the three months ended September 30, 1997, the following events
occurred with regard to the Company's distribution of pre-paid phone card
dispensers. The Company increased the number of dispensers on location from
110 to 134, as the result of placing them in various locations through a
vending route operator. During this quarter, the Company's exclusive
Distribution Agreement for the State of Texas with Diamond Game Enterprises
("Diamond") for their prepaid phone card dispensers was changed to a
non-exclusive distribution agreement by Diamond. As a result, the Company
sought to secure an exclusive Distribution Agreement with another manufacturer
of similar prepaid phone card dispensers. Effective September 18, 1997, the
Company executed an Exclusive Distribution Agreement with Cyberdyne Systems,
Inc., to distribute their phone card dispensers. The new agreement grants
exclusivity for the United States and Canada. Consequently, the Company began
returning Diamond's dispensers in anticipation of replacing them with those of
Cyberdyne as of September 30, 1997. Initial distribution of the new dispenser
will not begin until October 1, 1997.
The Company intends to further develop and substantially expand its business,
principally by continuing its operation and expansion of the distribution of
the video enhanced phone card dispensers; and to a lessor extent by acquiring
existing bingo facilities (for cash or for notes or for its own stock or in
combination thereof) or by establishing new bingo facilities. Its ability to
do so will be limited by its available liquidity and other capital resources
as to which no assurances can be given.
Results of Operations:
Three Months Ended September 30, 1997
Compared with Three Months Ended September 30, 1996
Revenues include rental income from the charitable organizations which lease
the Company's bingo facilities, management fees from managing similar
facilities for others, related concession and vending income, and beginning in
1996, phone card sales related to the video enhanced dispensers. In total,
such revenue was $469,587 and $292,472 for the three months ended September
30, 1997 and 1996, respectively. Phone Card sales from the distribution of
approximately 134 phone card dispensers were $323,458 for the three months
ended September 30, 1997 compared to $150,748 for the same three month period
in 1996.
Costs of revenue represent expenses directly attributable to the operation of
facilities, and operation of the phone card dispensers. In total, such cost
was $314,798 and $160,463 for the three months ended September 30, 1997 and
1996, respectively. Cost of revenue specifically related to the phone card
dispensers includes phone cards and royalties cost, machine and location
rental and prizes paid. Such costs were $253,234 and $117,383 for the three
months ended September 30, 1997 and 1996, respectively. This increase was
because the initial distribution of the phone dispensers did not begin until
June of 1996, as previously mentioned. Cost of revenue specifically related
to the operations of the bingo facilities represents rental costs of such
facilities, such cost were $61,564 and $43,080, for the three months ended
September 30, 1997 and 1996, respectively.
Other expenses include salaries and wages, indirect operating cost, and other
general and administrative expenses. Such expenses were $174,478 and $122,968
for the three months ended September 30, 1997 and 1996, respectively. The 42%
increase was principally the result of the increase in operations with regards
to the distribution of phone card dispensers and an increase in salaries due
to additional personnel.
Principally for the reasons set forth in the five preceding paragraphs, the
Company had a net loss of $29,699 for the three month ended September 30, 1997
compared with a net income of $2,573 three months ended September 30, 1996.
Nine Months Ended September 30, 1997
Compared with Nine Months Ended September 30, 1996
Revenues were $1,535,753 for the nine months ended September 30, 1997 and
$633,078 for the nine months ended September 30, 1996. The 143% increase was
principally the result of the matters more fully described in the above "Three
Months Compared with the Three months" discussion.
Cost of revenue represents $996,399 and $277,313 for the nine months ended
September 30, 1997, and 1996, respectively. This 259.3% increase was
principally the result of the increase in cost associated with the
distribution of the phone card dispensers as more fully described in the above
"Three Months Compared with Three Months" discussion.
Other expenses were $488,582 and $386,436 for the nine months ended September
30, 1997 and 1996, respectively. The 26.4% increase was principally the
result of the matters more fully described in the above "three months compared
with three months" discussion.
The Company had a net income of $23,865 for the nine months ended September
30, 1997 compared with a net loss of $43,998 for the nine months ended
September 30, 1996.
The significant changes in revenue and related expenses are explained in the
above paragraphs under the three month ended analysis.
Financial Position:
During the nine months ended September 30, 1997, the Company's equity
increased by $25,516, such increase being principally the result of the net
income for the nine months. In addition, in February of 1997, a former officer
and director of the Company exercised options to purchase 3,000 shares of
common stock. These options were originally issued in return for services
rendered and release of the employment contract as previously mentioned.
Liquidity:
The Company's net cash position at September 30, 1997 decreased by
approximately $10,500 from what it was at December 31, 1996, primarily from
the Company's costs related in the increase in distribution of phone cards.
The Company's plans to further develop its business by continuing to expand
the distribution of the phone card dispensers inside and outside of Texas.
The Company will, however, need to obtain additional financing to achieve
substantial profitability and there is no assurance that the Company will be
able to obtain such additional financing.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
No further developments
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
On September 24, 1997, the Company held its Annual Meeting of
Stockholders in Austin, Texas. Stockholders of record at the close of
business on September 2, 1997 were entitled to vote at the meeting. By a
unanimous vote of the stockholders present in person and by proxy, the
following individuals were elected to the Board of Directors to serve until
the next Annual Meeting: W. Reid Funderburk, George Majewski, R. E. Wilkin,
Rick Redmond, and Robert H. Hughes. At a Board of Directors Meeting
immediately following the Annual Stockholders Meeting, the Directors
unanimously elected the following individuals to serve as officers of the
corporation: W. Reid Funderburk, Chairman and C.E.O.; George Majewski,
President and C.O.O.; Clay McCalla, Vice-President; and Robert Chappell,
Secretary and Treasurer.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBIT
None
(b) Reports on Form 8-K
None
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.
BINGO & GAMING INTERNATIONAL, INC.
Dated as of November 19, 1997 By:/s/Reid Funderburk
-----------------------------
Reid Funderburk
C.E.O., Chairman, Director
By:/s/George Majewski
-----------------------------
George Majewski
President, Director
By:/s/R. E. Wilkin
-----------------------------
R. E. Wilkin
Director
By:/s/Rick Redmond
-----------------------------
Rick Redmond
Director
By:/s/Robert Chappell
-----------------------------
Robert Chappell
Secretary, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 42837
<SECURITIES> 0
<RECEIVABLES> 243887
<ALLOWANCES> 0
<INVENTORY> 23300
<CURRENT-ASSETS> 344699
<PP&E> 113858
<DEPRECIATION> 0
<TOTAL-ASSETS> 551312
<CURRENT-LIABILITIES> 174377
<BONDS> 0
0
0
<COMMON> 8418
<OTHER-SE> 149116
<TOTAL-LIABILITY-AND-EQUITY> 551312
<SALES> 1110766
<TOTAL-REVENUES> 1535753
<CGS> 402165
<TOTAL-COSTS> 996399
<OTHER-EXPENSES> 488582
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28104
<INCOME-PRETAX> 23865
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23865
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
