SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 1998
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- ---------------------
Commission file number 0-935
-----
BELL NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-1451828
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3600 RIO VISTA AVENUE, SUITE A, ORLANDO, FLORIDA 32805
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 849-0290
-----------------------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
As of August 9, 1998, the number of shares of the registrant's common stock
outstanding is 5,916,686.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BELL NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
June 30, December 31,
1998 1997
----------- ----------
(Unaudited)
Cash and cash equivalents $ 1,256 $ 1,300
Accounts receivable, net -- 41
Inventory, net -- --
Prepaid expenses and other current assets 7 7
----------- ----------
Total current assets 1,263 1,348
Property and equipment, net -- --
Goodwill, net -- --
Deferred sample books, net -- --
----------- ----------
$ 1,263 $ 1,348
=========== ==========
2
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1998 1997
----------- ----------
(Unaudited)
Current Liabilities:
Accounts payable $ -- $ --
Accrued compensation and employee benefits 502 502
Accrued expenses 335 318
Reserve for asset sale 86 140
----------- ----------
Total current liabilities 923 960
Accrued stock appreciation rights -- --
Other liabilities -- --
----------- ----------
923 960
Stockholders' equity:
Common stock, no par value;
authorized 12,000,000 shares, issued and
outstanding 5,916,686 shares at June 30,
1998 and December 31, 1997 15,849 15,849
Additional paid-in capital 10 10
Accumulated deficit (15,519) (15,471)
----------- ----------
Total stockholders' equity 340 388
----------- ----------
$ 1,263 $ 1,348
=========== ==========
3
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1998 1997 1998 1997
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales $ -- $ 2,860 $ -- $ 5,434
Costs and expenses:
Cost of sales -- 1,649 -- 3,008
Selling, general and administrative 42 1,242 88 2,585
--------- -------- --------- --------
Operating income (loss) (42) (31) (88) (159)
Other expense:
Interest expense -- (79) -- (133)
Other 14 18 40 8
--------- -------- --------- --------
Income (loss) before income taxes (28) (92) (48) (284)
Provision for income taxes -- -- -- --
--------- -------- --------- --------
Net income (loss) $ (28) $ (92) $ (48) $ (284)
========= ========= ========= =========
Net income (loss) per
common share, basic and diluted $ (0.01) $ (0.02) $ (0.01) $ (0.05)
========= ========= ========= =========
Weighted average number of common
shares outstanding, basic and diluted 5,916,686 5,561,701 5,916,686 5,525,111
========= ========= ========= =========
</TABLE>
4
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
Common Stock Additional Total
--------------------------------- Paid-in Accumulated Stockholders'
Shares Dollars Capital Deficit Equity
---------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 5,916,686 $ 15,849 $ 10 $ (15,471) $ 388
Net income (loss) -- -- -- (48) (48)
---------------- ------------- ----------- ----------- -----------
Balance at
June 30, 1998 5,916,686 $ 15,849 $ 10 $ (15,519) $ 340
================ ============= =========== =========== ===========
</TABLE>
5
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended June 30,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (48) $ (284)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation -- 27
Amortization of goodwill -- 10
Amortization of deferred sample books -- 520
Amortization of deferred debt commitment fee -- --
(Increase) decrease in assets:
Accounts receivable 41 (37)
Inventory -- 71
Prepaid expenses and other current assets -- (11)
Increase (decrease) in liabilities:
Accounts payable -- 65
Accrued compensation and employee benefits -- 89
Accrued expenses 17 (24)
Accrued stock appreciation rights -- (109)
Reserve for asset sale (54) --
-------- --------
Net cash provided by operating activities (44) 317
-------- --------
INVESTING ACTIVITIES:
Acquisition of property and equipment -- --
Purchase of deferred sample books -- (346)
-------- --------
Net cash used in investing activities -- (346)
-------- --------
FINANCING ACTIVITIES:
Net (payments) borrowings on bank debt -- (5)
Issuance of common stock from SAR's -- 34
Principal payments on capital lease obligations -- --
-------- --------
Net cash (used for) provided by financing activities $ -- $ 29
-------- --------
</TABLE>
6
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
Six Months Ended June 30,
--------------------------------
1998 1997
---------- ---------
<S> <C> <C>
Net decrease in cash and cash equivalents $ (44) $ --
Cash and cash equivalents at beginning of period 1,300 --
---------- ---------
Cash and cash equivalents at end of period $ 1,256 $ --
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ -- $ 132
Income taxes -- --
</TABLE>
7
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BELL NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1. THE COMPANY
GENERAL. The information contained in this report is unaudited but, in
management's opinion, all adjustments necessary for a fair presentation have
been included and were of a normal and recurring nature. The results for the
three and six months ended June 30, 1998 are not necessarily indicative of
results to be expected for the entire year. These financial statements and notes
should be read in conjunction with Bell National Corporation's (the "Company")
Annual Report on Form 10-K for the year ended December 31, 1997.
Bell National Corporation's wholly owned subsidiary Payne Fabrics, Inc.
("Payne") is a designer and distributor of decorative drapery and upholstery
fabrics. Payne was acquired by Bell National Corporation on June 15, 1990. On
August 4, 1997 Payne Fabrics, Inc. sold substantially all of its assets and most
of its liabilities related to the business of designing and distributing
decorative drapery and upholstery fabrics to an unaffiliated third party (the
"Asset Sale"). The Asset Sale included the transfer to the buyer of the use and
rights to the Payne Fabrics name, accordingly, Payne Fabrics, Inc., changed its
name to PFI National Corporation ("PFI"). The Asset Sale left PFI without any
substantial assets and on August 4, 1997 all operations were ceased.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS The Company's revenues and expenses result from the
operations of PFI in the first six months of 1997. With the sale of PFI on
August 4, 1997 the first six months 1998 results reflect the absence of an
operating business.
SIX MONTHS ENDED JUNE 30, 1998 The Company's results for the first six months of
1998 consisted entirely of administrative costs offset by interest income on the
cash balances remaining after the Asset Sale of PFI on August 4, 1997.
Administrative functions include the ongoing payment of PFI liabilities
(previously reserved for) and investigation of the investment alternatives being
considered by the Company. Among alternatives are the possible sale of stock or
debt to raise additional capital to either fund the acquisition of an operating
company or to fund a start-up company (either from inception or in an early
development phase). It is highly likely that in order to fund an acquisition of
a meaningful size significant additional funds would be required, and no
assurance can be given that such funds could be obtained on terms deemed
favorable by management. Among other options are the possibility of a
liquidating dividend. The discussion contained in this section is not intended
to be an exhaustive review of alternatives available to the Company, nor does
inclusion or omission of any alternative provide any indication of what course
of action may finally be decided upon. However, the Company is not, nor does it
intend to engage in, the business of investing, reinvesting, owning, holding or
trading securities.
8
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 The Company had net sales of $5,434,000, cost of
goods sold of $3,008,000, selling, general and administrative expenses of
$2,585,000 and an operating loss of $159,000 during the first six months of
1997. The operating loss was increased by interest expense of $133,000, offset
by other income of $8,000 resulting in a net loss of $284,000.
COMPARISON OF SIX MONTHS 1998 RESULTS TO 1997 A comparison of the 1997 first six
months results (which included the operations of PFI) to 1998 first six months
results (which have no operating business included in them) is not meaningful.
QUARTER ENDED JUNE 30, 1998 As discussed above, the Company's results for the
second quarter of 1998 consisted entirely of administrative costs offset by
interest income on the cash balances remaining after the Asset Sale of PFI on
August 4, 1997. Administrative functions include the ongoing payment of PFI
liabilities (previously reserved for) and investigation of the investment
alternatives being considered by the Company.
QUARTER ENDED JUNE 30, 1997 The Company had net sales of $2,860,000, cost of
goods sold of $1,649,000, selling, general and administrative expenses of
$1,242,000 and an operating loss of $31,000 during the second quarter of 1997.
The operating loss was increased by interest expense of $79,000, offset by other
income of $18,000 resulting in a net loss of $92,000.
COMPARISON OF SECOND QUARTER 1998 RESULTS TO 1997 A comparison of the 1997
second quarter results (which included the operations of PFI) to 1998 second
quarter results (which have no operating business included in them) is not
meaningful.
LIQUIDITY AND CAPITAL RESOURCES
AVAILABLE RESOURCES Absent an acquisition, the Company can survive as a
non-operating entity on its current cash balances for the foreseeable future as
it investigates investment alternatives.
FUTURE NEEDS FOR AND SOURCES OF CAPITAL
During the first six months of 1998, the Company lost $44,000 of cash from
operations. The cash from operations derived from the net loss of $48,000,
payment of items related to the reserve for Asset Sale of $54,000, offset by
collection of receivables of $41,000 and increased accrued expenses of $17,000.
9
<PAGE>
These items represent the entire change from the beginning cash balance of
$1,300,000 at December 31, 1997 to the ending cash balance of $1,256,000 at June
30, 1998.
During the first six months of 1997, the Company generated $317,000 of cash from
operation. The cash from operations derived from the net loss of $284,000,
offset by amortization of deferred sample books and other items. The operating
cash generated in 1997 was used to purchase $346,000 of sample books and repay
bank principal of $5,000.
PART II. OTHER INFORMATION
-none-
10
<PAGE>
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.
BELL NATIONAL CORPORATION
-------------------------
(Registrant)
Date: August 12, 1998 /s/ Alexander M. Milley
-------------------------------------
Alexander M. Milley,
Chairman of the Board
and Secretary
Date: August 12, 1998 /s/ Thomas R. Druggish
-------------------------------------
Thomas R. Druggish,
Chief Financial Officer
(Principal Financial Officer
and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000075439
<NAME> BELL NATIONAL CORPORATION
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,256,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,263,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,263,000
<CURRENT-LIABILITIES> 923,000
<BONDS> 0
15,849,000
0
<COMMON> 0
<OTHER-SE> (15,509,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,263,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 88,000
<OTHER-EXPENSES> 40,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (48,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (48,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,000)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
