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 MARCH 31, 2000
--------------
[ ] 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
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BGI, INC.
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OKLAHOMA 73-1092118
---------------- --------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER I.D. NO.)
INCORPORATION OR ORGANIZATION)
13581 Pond Springs Rd. Suite 105
Austin, Texas 78729
--------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER: (512) 335-0065
---------------
Indicate by 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-QSB
or any amendment to this Form 10-QSB. [ ]
There were 9,073,087 shares of common stock, $.001 par value, outstanding as of
May 19, 2000.
<PAGE>
TABLE OF CONTENTS
Page
Number
------
PART I:
- --------
Item 1. Financial Statements 1
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Item 2. Management's Discussion and Analysis 7
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PART II:
- ---------
Item 1. Legal Proceedings 8
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Item 2. Changes in Securities 8
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Item 3. Defaults Upon Senior Securities 8
---------------------------------
Item 4. Submission of Matters to a Vote of Security Holders 8
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Item 5. Other Information 8
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Item 6. Exhibits and Reports on Form 8-K 8
------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BGI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 DECEMBER 31, 1999
2000 1999
---------------- -------------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 111,394 $ 89,636
Accounts receivable - trade, net 198,471 174,868
Inventories 122,050 123,458
Prepaid expenses 21,673 18,173
---------------- -------------------
Total current assets 453,588 406,135
---------------- -------------------
Property and equipment, at cost - net 992,661 1,060,922
---------------- -------------------
Other assets:
Organizational costs and intangible assets - net 54,732 61,721
Deferred financing costs 67,315 83,366
Deposits 35,803 33,803
---------------- -------------------
Total other assets 157,850 178,890
---------------- -------------------
Total assets $ 1,604,099 $ 1,645,947
================ ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Accounts payable - trade and accrued expenses $ 294,959 $ 299,826
Current maturities of long-term debt 221,828 237,083
Current maturities of lease obligations 515,274 494,889
---------------- -------------------
Total current liabilities 1,032,061 1,031,798
Long-term debt, net of current maturities 32,951 43,835
Long-term portion of lease obligations 4,721 73,705
---------------- -------------------
Total liabilities 1,069,733 1,149,338
================ ===================
Stockholders' equity:
Preferred stock, non-voting; $.001 par; 10,000,000
shares authorized; no shares issued and outstanding - -
Common stock, $.001 par; 70,000,000 shares authorized;
9,058,155 and 8,862,389 issued and outstanding 9,058 8,862
Additional paid-in capital 903,955 808,348
Retained earnings (deficit) (378,647) (320,601)
---------------- -------------------
Total stockholders' equity 534,366 496,609
---------------- -------------------
Total liabilities and stockholders' equity $ 1,604,099 $ 1,645,947
================ ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
1
<PAGE>
<TABLE>
<CAPTION>
BGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31
2000 1999
----------- --------------
<S> <C> <C>
Revenue:
Phone card sales $ 778,582 $ 1,157,341
Hall rental and concession income 83,084 143,237
Machine sales 24,991 14,500
Other 11,437 40,515
----------- --------------
Total revenue 898,094 1,355,593
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Cost of revenue:
Phone cards and royalties 181,754 292,533
Machine and location rental 36,000 11,138
Prizes paid 247,958 488,883
Hall rental 38,860 67,743
Machine depreciation 71,369 71,656
Machines sold 16,080 12,496
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Total cost of revenue 592,021 944,449
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Gross margin 306,073 411,144
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Expenses:
Operating expenses 26,028 40,215
Salaries 164,018 142,176
Bad debt expense (58,571) (38,676)
Other general and administrative expenses 163,051 109,974
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Total expenses 294,526 253,689
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Operating income 11,574 157,455
Other income (expense):
Interest expense (69,593) (91,607)
----------- --------------
Net income (loss) before federal income tax (58,046) 65,848
Deferred federal income tax - -
----------- --------------
Net income (loss) (58,046) 65,848
Retained earnings:
Beginning (deficit) (320,601) (97,858)
----------- --------------
Ending (deficit) $ (378,647) $ (32,010)
=========== ==============
Basic and diluted income per common share $ (0.01) $ 0.01
=========== ==============
Weighted average shares outstanding 8,805,863 8,551,819
=========== ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
<PAGE>
<TABLE>
<CAPTION>
BGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net income (loss) $ (58,046) $ 65,848
djustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 92,485 88,070
Provision for bad debts (19,669) (38,676)
Recovery from bad debts (38,902) -
Common stock issued for services 24,303 -
Deferred financing cost 16,051 16,051
Changes in current assets and liabilities:
Accounts receivable - trade 40,295 (37,468)
Inventories 1,408 (67,701)
Prepaid expenses (3,500) 3,603
Accounts payable - trade and accrued expenses (5,581) 41,689
----------- -----------
Net cash from operating activities 48,844 71,416
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Investing activities:
Purchase of property and equipment (15,360) (5,111)
Increase (decrease) in other assets (4,989) -
Proceeds from sale of equipment 3,000 -
----------- -----------
Cash used by investing activities (17,349) (5,111)
----------- -----------
Financing activities:
Payments on long-term debt (26,139) (25,104)
Payments on long-term leases (48,598) (123,532)
Proceeds from issuance of common stock 65,000 -
----------- -----------
Cash provided (used) by financing activities (9,737) (148,636)
----------- -----------
Net increase (decrease) in cash and cash equivalents 21,758 (82,331)
Cash and cash equivalents at beginning of year 89,636 133,184
----------- -----------
Cash and cash equivalents at end of year $ 111,394 $ 50,853
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 69,593 $ 91,607
=========== ===========
Taxes paid $ 5,169 $ 6,304
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------------
NATURE OF BUSINESS AND BASIS OF PRESENTATION:
Bingo & Gaming International, Inc. ("Bingo") was formed in 1981 and was dormant
from 1984 to November 1994. In December 1994, the Company acquired Monitored
Investment, Inc., and Affiliates (Monitored Investment, Inc., Red River Bingo,
Inc., Tupelo Industries, Inc., and Meridian Enterprises, Inc., hereinafter
referred to collectively as ("Monitored"). Monitored's principal operations
consisted of developing, managing and operating charity bingo entertainment
centers. Monitored became a commercial lessor of bingo facilities to charity
lessees which utilize bingo events as a means of fund raising. The stockholders
of Monitored became the controlling stockholders of Bingo in a "reverse
acquisition," whereby each of the corporations comprising Monitored became
wholly-owned subsidiaries of Bingo. As a result, the merger was accounted for
as an "equity restructuring" of Bingo. On September 29, 1999, the shareholders
of Bingo & Gaming International, Inc. voted to change its name to BGI, Inc.
In October 1997, PrePaid Plus, Inc. ("PPI"), a Texas corporation, was acquired
under the purchase method. PPI is a wholly owned subsidiary of BGI, Inc. PPI
was formed for the purpose of transacting the prepaid telephone card dispenser
operations. PPI began distributing and selling the Lucky Strike Phone Card
Dispenser, a video enhanced prepaid phone card dispenser, under an exclusive
distribution agreement for five years with two successive five-year options to
renew with Cyberdyne Systems, Inc.
The consolidated financial statements include the accounts of BGI, Inc. and its
wholly-owned subsidiaries (the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
GOING CONCERN:
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. Numerous factors could affect
the Company's operating results, including, but not limited to, general economic
conditions, competition, and changing technologies. A change in any of these
factors could have an adverse effect on the Company's consolidated financial
position or results of operations. The Company had an operating loss for the
year ended December 31, 1999. In addition, the Company's working capital
position deteriorated due to a loss from operations. At March 31, 2000, current
liabilities exceeded current assets by $578,473. The Company has a deficit
retained earnings of $378,647. Payments under a master lease agreement for
equipment were delinquent but such delinquency was with the permission of the
lessor.
In view of these matters, realization of a major portion of the assets in the
accompanying consolidated balance sheet is dependent upon continuing operations
of the Company. Also, management has engaged a consultant to make
recommendations to restructure the Company and recommend cost containment
measures to regain profitability. In addition, management is negotiating the
restructure of debt.
4
<PAGE>
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
- --------------------------------------------------------------------
CASH EQUIVALENTS:
Cash equivalents consist primarily of funds invested in short-term
interest-bearing accounts. The Company considers all highly liquid investments
purchased with initial maturities of three months or less to be cash
equivalents.
INVENTORIES:
Inventories, which consist of phone cards, prepaid vending machines, and small
equipment is valued at the lower of cost or market using the first-in,
first-out method.
PROPERTY, EQUIPMENT AND DEPRECIATION AND AMORTIZATION:
Property and equipment are stated at cost, net of accumulated depreciation and
amortization. For financial statement purposes, depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the related assets. Amortization of leasehold improvements is computed using
the straight-line method over the shorter of the term of the related lease or
the useful life of the leasehold improvements. Accelerated depreciation methods
are used for tax purposes.
Maintenance and repairs are charged to expense as incurred. The cost of
betterments and renewals are capitalized. Gains or losses upon disposal of
assets are recognized in the period during which the transaction occurs.
ORGANIZATIONAL COSTS AND INTANGIBLE ASSETS:
Organizational costs and intangible assets include significant expenses of
bringing new locations into operation, goodwill and the cost of a non compete
agreement. Organizational costs and goodwill are amortized over five years and
the cost of the non compete agreement is being amortized over two years.
REVENUE RECOGNITION:
Phone card and machine sales as well as rental income is recognized when
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the price to the customer is fixed and determinable and
collectibility is reasonably assured. An allowance for doubtful accounts is
provided based on periodic reviews of the accounts.
TAXES ON INCOME:
The Company accounts for income taxes under the asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than possible enactments of changes in the tax laws or rates. The Company
provides a valuation allowance against its deferred tax assets to the extent
that management estimates that it is not "more likely than not" that such
deferred tax assets will be realized.
5
<PAGE>
BGI, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
- --------------------------------------------------------------------
ACCOUNTING ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make 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 could differ from those estimates.
6
<PAGE>
Item 2. Management's Discussion and Analysis
- -------------------------------------------------
Results of Operations
- -----------------------
Quarter Ended March 31, 2000
Compared with Quarter Ended March 31, 1999
------------------------------------------
Total revenues decreased by 34% for the quarter ended March 31, 2000, as
compared to the prior quarter ended March 31, 1999. This was the result of a
33% decrease in phone card sales primarily due to increased competition in the
Texas. This was offset by a 72% increase in machine sales.
The total cost of revenues represents expenses directly related to the
operations of the Machines and bingo facilities. Such costs decreased by 37%
which includes a 49% reduction in sweepstakes prizes paid as a result of a
reduced payout structure at some route operated Company owned machines and a 33%
reduction in phone card sales. Secondly, a 223% increase in machine and
location rental costs related to some route locations resulted from the
replacement of commission-based system (per phone card sold) to a monthly rental
charge per machine installed. Third, a decrease of 38% in cost of phone cards
was the result of lower phone card sales and diminished long distance costs
resulting from unit cost savings and changes in usage patterns. Finally, the
hall rental and concession income category decreased 43% due to the non-renewal
of a lease in Meridian, the elimination of the lessor tax on bingo hall
revenues, and lower building maintenance costs.
Operating expenses represent expenses indirectly related to the operations of
the Machines and the bingo halls. Such costs decreased by 35% principally due
to reduction in costs of advertising and travel related expenses for the period
ended March 31, 2000, as compared to March 31, 1999.
Salaries increased by 15% during the quarter ended March 31, 2000, as compared
to the previous fiscal quarter. This was principally the result of an increase
in the number of support staff positions and increases in other salaries. Other
general and administrative expenses increased by 48.9% during the quarter ended
March 31, 2000, as a result of consultant costs and other expenses incurred in
connection with the development of the virtual sweepstakes site.
As a result of the above, the Company sustained a net loss for the quarter ended
March 31, 2000, of $58,046 as compared to net income of $65,848 for the quarter
ended March 31, 1999.
Liquidity
- ---------
At March 31, 2000 and 1999, the Company's total assets were $1,604,099 and
$1,645,947, respectively, with total liabilities of $1,069,733 and $1,149,338,
respectively. Current assets of $453,588 at March 31, 2000, represent 43.9% of
current liabilities in the amount of $1,032,061 as compared to current assets of
$406,135 at March 31, 1999, which represent 39.4% of current liabilities
amounting to $1,031,798. Deterioration of the Company's cash position during
the first quarter of 2000 is primarily the result of decreased revenue from
phone card sales. In addition, as of March 31, 2000, the Company is delinquent
on $208,410 of monthly installments due under a master lease for equipment
included in capitalized leases with the permission of lessor. The delinquent
payments have been included in current liabilities.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
-------------------
Except as set forth in the following paragraphs, the Company is not the subject
if any pending legal proceedings, and to the knowledge of management, no
proceedings are presently contemplated against the Company by any federal,
state, or local governmental agency. Further, to the knowledge of management,
no director or executive officer is party to any action that has an interest
adverse to the Company.
ITEM 2. CHANGES IN SECURITIES.
------------------------
None
ITEM 3. DEFAULTS 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) EXHIBIT
-------
Annual Report on Form 10 - KSB for the year
ended December 31, filed April 15, 2000 **
**This document and related exhibits have been previously filed with te
Securities and Exchange Commission and by this reference are incorporated
herein.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: 5/20/00 By /S/ Reid Funderburk
------- ---------------------------------
Reid Funderburk, CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: 5/20/00 By /S/ Reid Funderburk,
------- ---------------------------------
Reid Funderburk,
Chairman, C.E.O. & Director
Date: 5/20/00 By /S/ George Majewski
------- ---------------------------------
George Majewski, Director
Date: 5/20/00 By /S/ Rhonda McClellan
------- ---------------------------------
Rhonda McClellan,
Chief Financial Officer
Date: 5/20/00 By /S/ R. E. Wilkin
------- ---------------------------------
R. E. Wilkin, Director
Date: 5/20/00 By /S/ Robert H. Hughes
------- ---------------------------------
Robert H. Hughes, Director
Date: 5/20/00 By /S/ Rick Redmond
------- ---------------------------------
Rick Redmond, Director
Date: 5/20/00 By /S/ Thomas B. Murphy
------- ---------------------------------
Thomas B. Murphy, President
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 111394
<SECURITIES> 0
<RECEIVABLES> 260819
<ALLOWANCES> 62348
<INVENTORY> 122050
<CURRENT-ASSETS> 453588
<PP&E> 1079221
<DEPRECIATION> 86560
<TOTAL-ASSETS> 1604099
<CURRENT-LIABILITIES> 1032061
<BONDS> 0
<COMMON> 9058
0
0
<OTHER-SE> 903955
<TOTAL-LIABILITY-AND-EQUITY> 1604099
<SALES> 898094
<TOTAL-REVENUES> 898094
<CGS> 592021
<TOTAL-COSTS> 294526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69593
<INCOME-PRETAX> 65854
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,046)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
