<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the
--- Securities Exchange Act of 1934.
For the quarter ended: JUNE 30, 1995 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: 2-98277-C
BRAINERD INTERNATIONAL, INC.
(Exact name of registrant as specified in it charter)
MINNESOTA 41-1428861
(State or other jurisdiction (IRS Employer Identification
of incorporation) No.)
17113 MINNETONKA BOULEVARD, SUITE 214, MINNETONKA, MN 55345
(Address of principal executive offices) (zip code)
(612) 475-1500
(Registrant's telephone number, including area code)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
677,830 COMMON SHARES AS OF AUGUST 4, 1995.
<PAGE>
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements
BRAINERD INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
------
June 30, December 31,
1995 1994
---- ----
(Not Audited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 377,534 $ 115,496
Prepaid Expenses 31,435 41,559
------ ------
Total current assets $ 408,969 $ 157,055
PROPERTY & EQUIPMENT, AT COST:
Buildings $ 1,043,826 $ 1,005,276
Race Track 790,127 790,127
Bleachers 761,297 761,297
Site improvements 691,462 588,560
Equipment 300,688 277,416
Automotive 207,807 194,691
Furniture & fixtures 18,403 18,403
------ ------
$ 3,813,610 $ 3,635,770
Less accumulated depreciation 1,738,002 1,663,002
--------- ---------
$ 2,075,608 $ 1,972,768
Land 130,791 130,791
Total Property & Equipment $ 2,206,399 $ 2,103,559
TOTAL ASSETS $ 2,615,368 $ 2,260,614
--------- ---------
--------- ---------
</TABLE>
1
<PAGE>
Item 1.Financial statements (continued)
BRAINERD INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
June 30, December 31,
1995 1994
---- ----
(Not Audited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 149,185 $ 6,037
Accrued expenses 7,153 8,226
Deferred income 544,267 32,297
Current Maturities of Long-term
obligations 76,021 76,021
------ ------
Total Current Liabilities $ 776,626 $ 122,581
Long-Term Obligations:
Installment Obligation $ 525,738 $ 531,845
------- -------
TOTAL LIABILITIES $ 1,302,364 $ 654,426
Stockholders' Equity
Common stock- $.01 par value:
10,000,000 shares authorized;
677,830 shares issued and outstanding $ 6,778 $ 6,778
Paid in capital 3,432,303 3,429,978
Accumulated deficit (2,126,077) (1,830,568)
--------- ---------
Total Stockholders' Equity $ 1,313,004 $ 1,606,188
--------- ---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 2,615,368 $ 2,260,614
--------- ---------
--------- ---------
</TABLE>
2
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Item 1.Financial Statements (continued)
BRAINERD INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1995 1994 1995 1994
---- ---- ---- ----
(Not Audited) (Not Audited) (Not Audited) (Not Audited)
<S> <C> <C> <C> <C>
Revenues $ 395,726 $ 377,199 $ 481,616 $ 444,099
Cost of Operations 267,774 416,281 311,966 438,298
------- ------- ------- -------
Gross Profit $ 127,952 $ (39,082) $ 169,650 $ 5,801
General and Administrative 280,094 245,392 458,038 414,434
------- ------- ------- -------
Operating (Loss) $ (152,142) $ (284,474) $ (288,388) $ (408,633)
Other Income (Expense):
Miscellaneous Income 10,363 30,287 25,862 35,229
Interest Expense (16,626) (11,286) (32,983) (19,584)
------ ------ ------ ------
Total Other (Expense) (6,263) 19,001 (7,121) 15,375
----- ------ ----- ------
(Loss) Before Taxes $ (158,405) $ (265,473) $ (295,509) $ (393,258)
Net (Loss) $ (158,405) $ (265,473) $ (295,509) $ (393,258)
Retained Earnings (Deficit)
Beginning of
Period $ (1,830,568) $ (2,000,749) $ (1,830,568) $ (2,000,749)
----------- ---------- ----------- -----------
Retained Earnings
(Deficit)
End of
Period $ (1,988,973) $ (2,266,222) $ (2,126,077) $ (2,394,007)
------------ ----------- ----------- -----------
(Loss) per
Common Share $ ( .23) $ (.39) $ (.43) $ (.58)
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
3
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Item 1.Financial Statements (continued)
BRAINERD INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30, Ended June 30,
1995 1994
---- ----
(Not Audited) (Not Audited)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) $ (295,509) $ (393,258)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation $ 75,000 $ 75,000
(Increase) Decrease in prepaid
expense 10,124 6,672
Increase in accounts payable 143,148 (15,311)
Increase (Decrease) in
accrued expenses (1,073) (6,589)
Increase (Decrease) in
deferred income 511,970 410,104
------- -------
Net Cash provided by (Used in)
Operating Activities: $ 443,660 $ 76,618
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Property & Equip. $ (177,840) $ (49,733)
------- -------
Net Cash provided by (Used in)
Investing Activities: $ (177,840) $ (49,733)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Issuance of Long-
Term Obligations $ $ 550,000
Repayment of Long-Term Obligations (6,107) (438,535)
--------
Funds received from shareholders for short-
swing profit earned on their stock sales 2,325
-----
Net Cash Provided by (Used in)
Financing Activities $ (3,782) $ 111,465
Net Increase (Decrease) in Cash $ 262,038 $ 138,350
Cash at Beginning of Period 115,496 18,113
------- ------
Cash at End of Period $ 377,534 $ 156,463
------- -------
------- -------
</TABLE>
4
<PAGE>
BRAINERD INTERNATIONAL, INC.
Notes to Condensed Financial Statements
June 30, 1995
(Unaudited)
NOTE 1. FINANCIAL STATEMENTS
The condensed balance sheet as of June 30, 1994, the condensed statements of
operations for the three and six month periods ended June 30, 1995 and 1994 and
the statement of cash flows for the six months ended June 30, 1995 and 1994 have
been prepared by Brainerd International, Inc. (the "Company") without audit. In
the opinion of management, all adjustments necessary to present fairly the
financial position of the Company as of the June 30, 1995 and the results of
operation and cash flows for the periods presented have been made and that such
financial statements are not misleading. The results of operations for interim
periods are not indicative of the results for the year due to the seasonal
nature of the Company's business The Financial Statements should be read in
conjunction with the Financial Statements and notes thereto included in the
Company's December 31, 1994, Annual Report on Form 10-KSB.
NOTE 2. EARNINGS PER SHARE
Earnings per share was computed by dividing the net income for the period by
the weighted average common shares outstanding during the period. For the six
months period ended June 30, 1995, the weighted averaged were 677,830 and
677,830.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
-------------------------------
At June 30, 1995, the company had current assets of $408,969 compared to
current assets of $157,055 at December 31, 1994. During the first six months of
1995, the Company generated $443,660 of net cash flow from operations compared
to $76,618 of net cash flow from operations during the first six months of 1994.
The significant improvement is attributable to (I) an approximately $107,000
reduction in the operating loss incurred in the second quarter of 1995 from that
incurred in the second quarter of 1994; (ii) an approximately $102,000 increase
in advance ticket sales during the first six months of 1995 over those made in
the same period in 1994; and (iii) an increase in accounts payable in 1995
compared to a decrease in payables during the first six months of 1994.
As of June 30, 1995, the Company's current liabilities, which primarily
consist of accounts payable and deferred income from advance ticket sales,
exceeded current assets by $367,657. This compares to a working capital deficit
of $454,365 as of June 30, 1994. The Company has historically experienced
operating losses and deficits in its working capital during the first six months
of each year due to the seasonal nature of the Company's operations. Four of
the six principal spectator events to be held in 1995 are scheduled for the
third quarter, including the NHRA Champion Auto Stores Nationals which has
accounted for more than half of the Company's revenues in each of the previous
three years.
The Company spent $177,840 during the first six months of 1995 and intends
to expend approximately an additional $60,000 during the remainder of 1995 on
capital improvements and equipment purchases for the Brainerd International
Raceway. The improvements were a significant contributing factor to the
increase in accounts payable of the Company during the second quarter of 1995.
The improvements made and to be made include approximately $100,000 for
additional restrooms, approximately $60,000 for the installation of a privacy
fencing and landscaping on a portion of the perimeter of the raceway property in
compliance with requirements imposed by the local governmental authorities,
approximately $25,000 for a pedestrian bridge over the raceway road course and
approximately $25,000 for the installation of an above-ground gasoline storage
tank. In connection with these expenditures, the Company expects to receive
contributions of approximately $30,000 each over the next three years from the
NHRA under arrangements between the Company and the NHRA for the NHRA Champion
Auto Stores Nationals event.
RESULTS OF OPERATIONS
---------------------
Revenues increased $18,527 or 5 percent to $395,726 in the second quarter
of 1995 compared to $377,199 in the second quarter of 1994. Operating expenses
decreased $148,507 or 35.7 percent to $267,774 in the second quarter of 1995
compared to $416,281 in the second quarter of 1994. In the second quarter of
each of 1995 and 1994, the Company held two spectator events at the Brainerd
International Raceway, the Pontiac Excitement 300 race and the Champion Auto
Stores Winston Drag Race Series event, which events generated substantial
portions of the Company's revenues and operating expenses for those quarters.
In 1994, the Company acted as the promoter of the Pontiac Excitement 300 event
in which capacity it was solely responsible for payment of all the expenses of
the event including the sanction fee paid to the American Speed Association (the
"ASA") and the prize awards and appearance fees paid to the participants. In
1995, the ASA acted as a promoter of the event and paid to the Company a track
rental fee and allowed the Company to retain compensation with respect to
concession sales at the event. The revenues for the second quarter of 1995
include the approximately $123,500 from ticket sales and sponsorship fees
received by the Company on
6
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behalf of the ASA for the event. The operating expenses for the quarter include
approximately $43,000 of event expenses paid by the Company on behalf of the ASA
and the approximately $65,000 which the company remitted to the ASA from the
event revenues after the company retained approximately $15,000 as its track
rental fee and concession revenue compensation.
In addition to the reduction of operating expenses as a result of having the
ASA act as the promoter of the Pontiac Excitement 300 event in 1995, the
company's operating profit for the first six months of 1995 improved over those
for the first half of 1994 due to the increased profitability from the Champion
Auto Stores Winston Drag Race Series event and from increased rentals of the
Brainerd International Raceway during the second quarter of 1995. Management
attributes the improved profitability of the drag race series event to an
increase in the number of participants which resulted from a lack of events
being scheduled at other drag racing facilities on the weekend in which the
event was held at Brainerd International Raceway in 1995.
General and administrative expenses increased $34,702 or 14.1 percent to
$280,094 in the second quarter of 1995 over the $245,392 incurred for the same
period in 1994. The increase is attributable to increased employment costs of
approximately $23,000 which resulted from the creation of the new position of
assistant track manager and to increased hours worked by seasonal employees.
The Company also paid approximately $9,000 more to professionals in the second
quarter of 1995 than it did in the same quarter of 1994. The substantial
reduction in operating expenses and the limited increase in general and
administrative expenses resulted in a $132,332 or 46.5 percent reduction in the
Company's operating loss in the second quarter of 1995 compared to the operating
loss for the same quarter in 1994 and a $120,245 or 29.4 percent reduction in
the operating loss for the first half of 1995 compared to the operating loss for
the first half of 1994.
The Company's interest expense for 1995 was greater than that incurred in
1994. This reflects an increase in the prime rate which determines the interest
rate of the Company's bank debt and the February 1994 increase in the principal
balance of the bank debt. The Company's other income for the second quarter of
1995 was substantially less than that received in the second quarter of 1994.
The Company's other income, which consists principally of payments for signage
at the Brainerd International Raceway and to a lesser extent miscellaneous
equipment rental income, is subject to variation from quarter to quarter due to
the timing of signage payments and the changes in frequency of equipment
rentals.
The Company had net losses of $155,405 and $295,509 or 23 CENTS and 43
CENTS per share, respectively, for the second quarter and first half of 1995
which represent reductions of 40.3% and 24.9% from the net losses for the second
quarter and first half of 1994. As discussed above, the reduced losses in 1995
are principally attributable to the elimination of the operating loss incurred
from the 1994 Pontiac Excitement 300 event.
7
<PAGE>
PART II
-------
ITEM 1. LEGAL PROCEEDINGS
--------------------------
On June 30, 1995, the Minnesota Supreme Court reversed the decision of the
Court of Appeals and reinstated the trial court's grant of summary judgment in
favor of the Company in the action brought against the Company and its security
service contractor in September 1990 in the District Court for Hennepin County,
Minnesota (JANE DOE V. BRAINERD INTERNATIONAL, INC. AND NORTH COUNTRY SECURITY,
INC.). In the action, the plaintiff sought compensatory damages in an
unspecified amount in excess of $50,000 for injuries arising from an alleged
sexual assault upon the plaintiff while participating in a wet T-Shirt contest
held at the Brained International Raceway in August 1988. In granting the
Company's motion for summary judgment, the trail court found that the contest
was organized by individuals not associated with the Company, that the Company
had not consented to the contest, that the plaintiff had entered the contest
voluntarily and that the plaintiff had assumed the risks of injuries resulting
from her conduct. In reversing the April 1994 decision of the Court of Appeals
and reinstating the summary judgment, the Minnesota Supreme Court found that,
contrary to the decision of the Court of Appeals, the company had no duty under
common law or criminal statutes to have protected the plaintiff from her
injuries.
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
-----------------------------------------
None
8
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SIGNATURES
Persuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BRAINERD INTERNATIONAL, INC.
By /s/ Gary Moore
---------------------------------
Gary Moore
Chairman of the Board and
Chief Executive Officer
By /s/ J. Daniel Frisina
----------------------------------
J. Daniel Frisina
Treasurer
Dated: August 7, 1995
