SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 MARCH 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-935
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BELL NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94-1451828
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3600 RIO VISTA AVENUE, SUITE A, ORLANDO, FLORIDA 32805
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 849-0290
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(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 April 24, 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
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
Cash and cash equivalents $ 1,290 $ 1,300
Accounts receivable, net -- 41
Inventory, net -- --
Prepaid expenses and other current assets 7 7
----------- ------------
Total current assets 1,297 1,348
Property and equipment, net -- --
Goodwill, net -- --
Deferred sample books, net -- --
----------- ------------
$ 1,297 $ 1,348
=========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
Current Liabilities:
Accounts payable $ -- $ --
Accrued compensation and employee benefits 502 502
Accrued expenses 316 318
Reserve for Asset Sale 111 140
----------- ------------
Total current liabilities 929 960
Accrued stock appreciation rights -- --
Other liabilities -- --
----------- ------------
929 960
Stockholders' equity:
Common stock, no par value;
authorized 12,000,000 shares, issued and
outstanding 5,916,686 shares at March 31,
1998 and December 31, 1997 15,849 15,849
Additional paid-in capital 10 10
Accumulated deficit (15,491) (15,471)
----------- ------------
Total stockholders' equity 368 388
----------- ------------
$ 1,297 $ 1,348
=========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
----------------------------
1998 1997
----------- ------------
Net sales $ -- $ 2,574
Costs and expenses:
Cost of sales -- 1,359
Selling, general and administrative 46 1,342
---------- ------------
Operating loss (46) (127)
Other expense:
Interest expense -- (55)
Other 26 (10)
---------- ------------
Loss before income taxes (20) (192)
Provision for income taxes -- --
---------- ------------
Net loss $ (20) $ (192)
========== ============
Net loss per common share $ (0.00) $ (0.03)
========== ============
Weighted average number of common
shares outstanding 5,916,686 5,488,114
========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<TABLE>
<CAPTION>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
Common Stock Additional Accum- Total
----------------------- Paid-in ulated 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 loss -- -- -- (20) (20)
--------- --------- ---------- ---------- -------------
Balance at
March 31, 1998 5,916,686 $ 15,849 $ 10 $ (15,491) $ 368
========= ========= ========== ========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31,
-----------------------------
1998 1997
------------ -----------
OPERATING ACTIVITIES:
Net loss $ (20) $ (192)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation -- 14
Amortization of goodwill -- 4
Amortization of deferred sample books -- 303
Amortization of deferred debt commitment fee -- --
(Increase) decrease in assets:
Accounts receivable 41 (10)
Inventory -- 11
Prepaid expenses and other current assets -- 65
Increase (decrease) in liabilities:
Accounts payable -- (47)
Accrued compensation and employee benefits -- 53
Accrued expenses (2) (12)
Accrued Stock Appreciation Rights -- (20)
Reserve for Asset Sale (29) --
------------ -----------
Net cash provided by operating activities (10) 169
------------ -----------
INVESTING ACTIVITIES:
Acquisition of property and equipment -- --
Purchase of deferred sample books -- (164)
------------ -----------
Net cash used in investing activities (10) (164)
------------ -----------
FINANCING ACTIVITIES:
Net proceeds (repayments) on long-term debt -- (5)
------------ -----------
Net cash provided by financing activities $ -- $ (5)
------------ -----------
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
BELL NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------
1998 1997
--------- --------
Net decrease in cash and cash equivalents $ (10) $ --
Cash and cash equivalents at beginning of period 1,300 --
--------- --------
Cash and cash equivalents at end of period $ 1,290 $ --
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ -- $ 59
Income taxes -- --
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
BELL NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 months ended March 31, 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 quarter of 1997. With the sale of PFI on August
4, 1997 the first quarter 1998 results reflect the absence of an operating
business.
QUARTER ENDED MARCH 31, 1998 The Company's results for the first 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. 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
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<PAGE>
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.
QUARTER ENDED MARCH 31, 1997 The Company had net sales of $2,574,000, cost of
goods sold of $1,359,000, selling, general and administrative expenses of
$1,342,000 and an operating loss of $127,000 during the first quarter of 1997.
The operating loss together with interest expense of $55,000 and other expense
of $10,000 resulted in a net loss of $192,000.
COMPARISON OF FIRST QUARTER 1998 RESULTS TO 1997
A comparison of the 1997 first quarter results (which included the operations of
PFI) to 1998 first 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 quarter of 1998, the Company lost $10,000 of cash from
operations. The cash from operations derived from the net loss of $20,000,
payment of items related to the reserve for Asset Sale of $39,000, other
liabilities of $2,000 offset by receipts from accounts receivable of $41,000.
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 $1,290,000 at
March 31, 1998.
During the first quarter of 1997, the Company generated $169,000 of cash from
operations. Although the Company experienced a loss of $192,000 in the period,
there were $321,000 of non-cash expenses included in the loss, primarily
amortization of deferred sample books. These two items, together with decreased
current assets of $66,000 and decreased liabilities of $26,000 created the cash
from operations. These funds were used to purchase $164,000 of sample books and
to pay down bank debt by $5,000.
PART II. OTHER INFORMATION
-none-
9
<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: May 9, 1998 /s/ ALEXANDER M. MILLEY
--------------------------------
Alexander M. Milley,
Chairman of the Board
and Secretary
Date: May 9, 1998 /s/ THOMAS R. DRUGGISH
--------------------------------
Thomas R. Druggish,
Chief Financial Officer
(Principal Financial Officer
and Accounting Officer)
<TABLE> <S> <C>
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<CIK> 0000075439
<NAME> BELL NATIONAL CORPORATION
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,290,000
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15,849,000
0
<COMMON> 0
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<SALES> 0
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<CGS> 0
<TOTAL-COSTS> 46,000
<OTHER-EXPENSES> (26,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (20,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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