U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
|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 number: 0-19503
BENTLEY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MEGACARDS, INC.
(Former name of registrant)
Missouri 43-1325291
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
9719 Conway Road 63124
St. Louis, Missouri (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (314) 569-1659
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 |_|.
On November 14, 1997, the registrant had 2,813,285 outstanding shares of Common
Stock, $.18 par value.
Transitional Small Business Disclosure Format (Mark one): Yes |_| No|X|.
1
<PAGE>
BENTLEY INTERNATIONAL, INC.
FORM 10-QSB
INDEX
Page
PART I -- CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements....................................3
Consolidated Balance Sheets -- September 30, 1997
and December 31, 1996................................................3
Consolidated Statements of Operations -- Three Months Ended
September 30, 1997 and 1996 and Nine Months Ended
September 30, 1997 and 1996..........................................5
Consolidated Statements of Cash Flows -- Nine Months Ended
September 30, 1997 and 1996..........................................6
Notes to Consolidated Financial Statements...........................7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation.............................................10
PART II -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K...........................16
SIGNATURE....................................................................17
2
<PAGE>
PART I -- CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
September 30, December
1997 (unaudited) 31, 1996
Assets
<S> <C> <C>
Current Assets
Cash $234,037 $349,799
Accounts receivable (net of allowance for returns
and doubtful accounts of $238,870 as of September
30, 1997 and $300,120 as of December 31, 1996) 1,642,169 2,499,570
Note receivable -- 110,000
Inventories 1,730,888 1,407,144
Other current assets 101,938 130,168
---------- ----------
Total Current Assets 3,709,032 4,496,681
Equipment And Leasehold Improvements (net of
accumulated depreciation) 214,920 196,392
Other Assets 69,800 69,800
Total Assets $3,993,752 $4,762,873
========== ==========
</TABLE>
3
<PAGE>
Consolidated Balance Sheet (continued)
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
September 30, December
1997 (unaudited) 31, 1996
Liabilities and Shareholders' Equity
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses $2,441,659 $2,519,654
Notes payable 328,975 2,382,036
Current maturities of long-term debt -- 30,232
----------- -----------
Total Current Liabilities 2,770,634 4,931,922
Long-Term Debt 772,867 36,635
Excess of Acquired Assets Over Cost 379,436 623,358
Shareholders' Equity (Deficit)
Preferred stock, $0.01 par value;
1,000,00 shares authorized, none issued or
outstanding. -- --
Common stock, $0.18 par value; 10,000,000
shares authorized, 562,624 shares issued
and outstanding 101,272 101,272
Common Stock to be issued; 2,250,661 shares 405,119 --
Additional Paid in Capital 1,500,178 1,905,297
Accumulated Deficit (1,935,754) (2,835,611)
----------- -----------
Total Shareholders' Equity (Deficit) 70,815 (829,042)
----------- ---------
Total Liabilities & Shareholders Equity $3,993,752 $4,762,873
========== ==========
</TABLE>
See notes to financial statements.
4
<PAGE>
BENTLEY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Net Sales $3,293,785 $4,497,763 $9,433,692 $15,535,441
Cost of Sales 2,249,468 3,685,805 6,267,642 12,944,202
----------- ----------- ----------- ----------
Gross Margin 1,044,317 811,958 3,166,050 2,591,239
Selling, General &
Administrative Expenses 756,280 1,134,432 2,420,472 3,939,429
----------- ----------- ----------- -----------
Income (Loss) From
Operations 288,037 (322,474) 745,578 (1,348,190)
Interest Expense 39,718 86,107 146,669 372,458
Other Expense (Income) (81,307) (325,313) (300,948) (462,145)
Income Taxes -- 2,486 -- 2,486
---------- ---------- ----------- ----------
Net Income (Loss) $329,626 ($85,754) $899,857 ($1,260,989)
========== ========= ========== ============
Net Income (Loss) Per
Common Share $0.12 ($0.03) $0.32 ($0.45)
Weighted Average Number
of Common Shares
Outstanding 2,813,285 2,813,285 2,813,285 2,813,285
</TABLE>
See notes to financial statements.
5
<PAGE>
BENTLEY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------ -----
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $899,857 ($1,260,989)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation and amortization 42,615 406,208
Amortization of excess of acquired assets
over cost (243,922) (243,922)
Net gain on sale of assets -- (28,579)
Net change in assets and liabilities:
Accounts receivable 857,401 897,121
Inventories (323,744) 3,325,702
Other assets 28,230 845
Accounts payable and other liabilities (77,995) (760,440)
----------- ---------
Net Cash Provided By Operating Activities 1,182,442 2,335,946
----------- ---------
Cash Flows from Investing Activities
Capital expenditures (61,143) (363,452)
Proceeds from sale of assets -- 2,000,816
Proceeds from notes receivable 110,000 --
Net Cash Provided By Investing Activities 48,857 1,637,364
----------- ----------
Cash Flows From Financing Activities
Net payments on lines of credit (1,122,212) (1,809,754)
Payments on long-term debt (66,867) (161,797)
Proceeds from (payments on) notes payable (157,982) (36,000)
Repayment of capital lease obligation -- (1,889,007)
Net Cash Used in Financing Activities (1,347,061) (3,896,558)
----------- -----------
Net Increase (Decrease) in Cash (115,762) 76,752
Cash-Beginning Of Period 349,799 245,911
----------- -----------
Cash-End of Period $234,037 $322,663
=========== ==========
</TABLE>
See notes to financial statements.
6
<PAGE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 and 1996
1. Going Concern Basis
The financial statements of Bentley International, Inc. (the "Company"
formerly known as Megacards, Inc.) for the year ended December 31, 1996, were
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. Windsor
Art, Inc. ("Windsor"), the Company's sole operating subsidiary, is currently
operating profitably and generating a positive cash flow. Janco Designs, Inc.
("Janco"), a subsidiary of the Company whose operations were terminated in
December 1996, is presently in Chapter 7 bankruptcy proceedings, which commenced
in January 1997. The Company and Windsor have guaranteed certain Notes payable
by Janco, the aggregate outstanding principal balances of which are $328,975. In
addition, the Company has incurred certain expenses and may incur additional
expenses and costs in connection with such proceeding. The Company has pursued a
strategy of enhancing liquidity by reducing and closely monitoring expenses,
downsizing where feasible, and combining or eliminating certain businesses. The
operations of the unprofitable subsidiaries and divisions have been terminated.
Because of the aforementioned efforts, and the profitable operations at Windsor,
as of November 18, 1997, management does not anticipate that the foregoing
liabilities associated with the bankruptcy proceedings of Janco will result in
the Company being unable to continue as a going concern for a reasonable period
of time.
The accompanying interim consolidated financial statements are
unaudited, but, in the opinion of management, reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation. Reference is hereby made to the consolidated financial statements,
including the notes thereto, contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996. The results of operations for the
three-month and nine-month periods ended September 30, 1997 are not necessarily
indicative of the results to be expected for the year ending December 31, 1997.
2. Basis of Consolidation
The consolidated financial statements include the accounts of Bentley
and its wholly-owned subsidiaries, Windsor and Janco. All significant
intercompany transactions have been eliminated from the consolidated financial
statements.
3. Operations
Nature of Operations
Megacards, Inc. designed, repackaged and marketed sports picture cards
produced by major sports picture card manufacturers and marketed sports picture
card accessories. In June
7
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1996, Megacards, Inc. became Bentley as the Board of Directors believed that the
change of the corporate name would better reflect the broadening of the scope of
the Company's businesses. Windsor and Janco, which prior to the Business
Combination (as defined below) were affiliated through common ownership,
manufactured and distributed decorative mirrors and framed art to furniture
stores, mass merchants, hotels and designers throughout the United States.
During 1996, the Company discontinued its Janco product line and its sports
picture business segment to reduce costs and improve its liquidity position (see
Note 6).
Business Combinations
The Company's former Megacards operations used a facility leased from
an affiliated corporation Alnick Realty Co. ("Alnick") pursuant to a capitalized
lease. In connection with efforts to reduce overhead, the Company arranged for
the sale of such facility which eliminated the corresponding liability. Pursuant
to an agreement dated April 29, 1996, the Company acquired all the outstanding
shares of Alnick for $85,000 and sold Alnick's interest in the property to an
unrelated party. The acquisition was accounted for as a purchase.
Pursuant to an agreement dated July 17, 1995, Bentley acquired all of
the outstanding common stock of Windsor in exchange for 2,117,500 shares of
Bentley's common stock and acquired all of the outstanding common stock of Janco
for a nominal amount of cash (the "Business Combination").
The Business Combination was accounted for as a reverse acquisition
under the purchase method of accounting. Under this approach, the accounting for
the transaction differs from the legal form of the transaction as described
above. Therefore, Bentley is not assumed to be the acquiror in the Business
Combination, but rather Windsor and Janco are. The historical financial
statements have been restated for all periods prior to the Business Combination
to include the combined results of operations and financial position of both
Windsor and Janco due to the common ownership of Windsor and Janco prior the
Business Combination. Adjustments have been made to eliminate the impact of
intercompany transactions. The components of shareholders' equity were stated in
terms of Windsor's and Janco's shareholders' equity on a combined basis prior to
the Business Combination with an adjustment to reflect the effects of the
Business Combination on the equity components.
4. Reverse Stock Split
On July 8, 1996, the Company's Board of Directors authorized a
one-for-six reverse stock split of the Company's common shares and an increase
in the par value, from $0.03 to $0.18.
5. Stock Dividend
On September 3, 1997, the Company's Board of Directors authorized a
five-for-one stock split (effected in the form of a stock dividend) to be
distributed October 22, 1997, to shareholders of record September 24, 1997. All
share and per share amounts have been adjusted retroactively to reflect the
stock dividend.
8
<PAGE>
6. Sale of Business Segment and Discontinued Line of Business
Sale of Business Segment
In August 1996, the Board of Directors of the Company adopted a plan to
restructure the sports picture cards business segment (Megacards). In September
1996, certain assets and liabilities, consisting primarily of inventory and
equipment, were transferred to Legends, L.P. ("Legends") for a 30% limited
partnership interest and a note in the principal amount of $110,000, which has
been repaid. Such transfer was partly a sale and partly a contribution to
capital. There was no gain or loss on disposal, as net assets were either sold
or transferred to Legends at their net book value, which approximated fair
value. Legends is in the sports picture card business, and since the Company has
a 30% equity interest in the limited partnership, the activity of the sports
picture card business segment is part of the continuing operations of the
Company.
Discontinued Line of Business
On December 27, 1996, Janco discontinued its operations due to
historical losses, and in an effort to reduce costs and improve overall
corporate liquidity. Janco's line of business was within the decorative mirrors
and framed picture segment, and as such, the termination of operations is not
considered discontinued operations of a business segment. Certain assets
consisting of inventory and equipment were sold to a third party prior to
December 31, 1996. In January 1997, an involuntary bankruptcy petition was filed
against Janco by unsecured creditors.
In February 1997, Janco consented to the involuntary bankruptcy.
9
<PAGE>
7. Notes Payable and Long-Term Debt
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Notes payable and long-term debt consist of:
As of September 30, 1997, borrowings
under line of credit, secured by
inventories, accounts receivable,
equipment and personal guarantee of
officer/shareholder, bearing interest at
prime plus 1.5%, expiring December 1998.
Borrowings under various lines of credit
existing at December 31, 1996,
have been paid in full..................... $772,867 $1,134,903
Notes payable--shareholders, secured by collateral
agreement subordinate to third party debt,
bearing interest at the prime rate plus 2% due
March 31, 1998, pursuant to Standstill Agreement
dated September 9, 1997 328,975 1,314,000
---------- ----------
$1,101,842 $2,448,903
</TABLE>
The Company's borrowings are collateralized by substantially all of the
Company's assets. Certain of the Company's shareholders have guaranteed a
portion of the Company's obligations. Bentley's and Windsor's assets have been
pledged to cross-collateralize Janco's debt to certain principal shareholders of
Bentley. In September, 1997 the Company purchased from such shareholders debt
owed by Janco amounting to $103,500.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
Pursuant to an agreement dated July 17, 1995, Bentley International,
Inc. ("Bentley" or the "Company") acquired all of the outstanding common stock
of Windsor Art, Inc. ("Windsor") in exchange for 2,117,500 shares of Bentley's
Common Stock and acquired all of the outstanding common stock of Janco Designs,
Inc. ("Janco") for a nominal amount of cash (the acquisition by Bentley of all
of the outstanding capital stock of Windsor and Janco is referred to as the
"Business Combination"). The consolidated financial statements include the
accounts of Bentley, Windsor
10
<PAGE>
and Janco. All significant intercompany transactions have been eliminated from
the consolidated financial statements.
In 1996, the Company consolidated operations by closing Megacards' Iowa
sales offices and its Erie, Pennsylvania manufacturing facility, and moved all
manufacturing and administrative functions of Megacards into the Janco facility
located in St. Louis, Missouri. Efforts to reduce inventory continued through
Megacards' focus on selling products that used existing raw materials. The
effort to convert non-productive assets into cash resulted in a substantial
reduction in Megacards' debts.
In 1996, the Company purchased all of the outstanding common stock of
Alnick Realty, Co. ("Alnick"), the lessor of the Company's Erie facility.
Simultaneously with the acquisition of the Alnick common stock, the Company
terminated its lease of the Erie facility and sold the real estate owned by
Alnick to a third party.
During the summer of 1996 it became evident to Megacards' management
that overhead and inventories had been reduced to the extent practicable. For
the business to survive, investment in new product development, inventory and
sales personnel would be necessary. Due to the desire of Megacards' primary
secured lender to have its loan repaid and the Company's commitment to the home
furnishings industry, additional investment in the sports picture card business
did not seem consistent with long-term Company goals. Therefore, management
began to explore opportunities to divest itself of Megacards. A business
combination was negotiated with Quality Baseball Cards, Inc., a New York
corporation ("Quality"), in which a limited partnership, Legends, L.P.
("Legends") was formed. Quality became the general partner, and owned 70% of the
partnership, while the Company became a limited partner, owning 30% of the
partnership. Substantially all of the assets of Megacards, other than accounts
receivable, and all of the assets of Quality were contributed to Legends. The
accounts receivable of Megacards were collected and applied towards the
repayment of the Megacards' secured debt. As of December 31, 1996, secured debt
related to Megacards' operations and assets was $73,036. As of April 16, 1997,
the secured debt has been repaid.
Janco experienced operating difficulties in 1996, commencing with its
relocation to a new facility in St. Louis, Missouri. Delays in obtaining
occupancy permits in connection with improvements made to the manufacturing
facility resulted in Janco's inability to produce and ship merchandise during
the first two months of 1996. Due to the cost of the relocation and lower than
expected sales during the first quarter of 1996, Janco experienced reduced cash
flow in the second quarter of 1996. Personnel turnover at Janco exacerbated the
financial problems. Anticipated sales were repeatedly delayed, postponing a
recovery. Lower than expected sales and profit margins resulted in operating
losses throughout the year. In the third quarter of 1996, Janco's management
recognized that a restructuring was necessary to save the business. Suppliers of
Janco were contacted in an attempt to negotiate accommodations of debts. Certain
of Janco's creditors accepted the proposal, but the response was not sufficient
to allow the restructuring to proceed. In December 1996, Janco's management
decided that financial resources were not available to continue the operation of
Janco. Management commenced negotiations with Janco's secured lenders and its
landlord to develop a plan of liquidation that
11
<PAGE>
would maximize disposition proceeds and minimize losses to Janco's creditors.
Janco's secured creditors and its landlord agreed to a plan of orderly
liquidation of Janco's assets and all of the tangible assets of Janco were sold
to unrelated parties. Janco's accounts receivable were collected through the
first quarter of 1997 and the net proceeds applied to the repayment of Janco's
secured debt. On January 24, 1997, three unsecured creditors of Janco filed a
petition for involuntary bankruptcy. On February 18, 1997, Janco consented to
the involuntary bankruptcy. Pursuant to certain agreements entered into in
connection with the financing of Janco by principal shareholders of Bentley,
Bentley and Windsor are liable for certain unpaid secured debts of Janco. The
bankruptcy trustee has informally indicated that he may attempt to impose
liability on Bentley for certain unsecured debts of Janco.
Windsor continued to operate without substantial changes throughout the
first nine months of 1997. During 1996, Windsor hired a new financial officer
and sales manager. In 1997, Windsor's financial officer was appointed to the
position of chief financial officer of Bentley. Windsor's new sales manager's
employment was terminated in August, 1997. It is not anticipated that his
absence will have a material impact on Windsor's operations.
During the fourth quarter of 1996, Windsor negotiated new financing
with Norwest Business Credit, Inc. ("Norwest"). Norwest provided Windsor with an
asset based lending facility of up to $2.0 million. Management believes that
this facility should provide Windsor with the financial resources needed to
facilitate a reasonable growth in sales. In December 1996, Windsor's management
decided to concentrate its design and marketing efforts on its wall decor
products and to suspend introduction of new table top accessories under the
Dolbi Cashier name.
As a result of substantial losses reported for 1996 and the filing of
the bankruptcy petition against Janco in January 1997, the opinion of the
Company's auditors as of December 31, 1996, indicated that the Company may not
be able to continue to operate as a going concern for a reasonable period of
time. The Company has incurred certain expenses and may incur additional
expenses and costs in connection with the bankruptcy proceeding. The Company has
been able to negotiate extensions of certain secured debts of Janco, for which
Bentley or Windsor are liable, until March 31, 1998. It is not possible to
ascertain whether Bentley or Windsor may be liable for any obligations of Janco,
other than Janco's secured debts, as a result of the Janco bankruptcy filing.
Management does believe, however, as a result of efforts to enhance liquidity,
the elimination of an unprofitable division and subsidiary and the profitable
operations at Windsor, that as of November 18, 1997, the liabilities associated
with the bankruptcy proceedings of Janco will not result in the Company being
unable to continue as a going concern for a reasonable period of time. In the
event that Bentley is unable to retire the Janco secured debt through the use of
internally generated funds, Bentley intends to seek to raise through a private
offering of debt and/or equity, or a sale of certain Company assets, funds
sufficient to retire the maturing Janco secured debt, as well as funds necessary
for other corporate purposes. The Company is not pursuing any of these
strategies at this time.
12
<PAGE>
Results of Operations
The following tables present the results of operation for the nine and
three months ended September 30, 1997 and 1996, respectively, by the Company's
business segments, sports picture cards (Megacards) and decorative mirror/framed
pictures (Windsor/Janco):
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997 and 1996
---------------------------------------------------------------------------------------------
(In thousands, except per share data)
1997 1996
------------------------------------------ ----------------------------------------------
Windsor/ General Windsor/ General
Janco(1) Megacards Corporate Total Janco(1) Megacards Corporate Total
-------- --------- --------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales........... $ 9,434 $ -- $ -- $ 9,434 $ 12,258 $ 3,277 $ -- $ 15,535
Cost of Sales....... 6,268 -- -- 6,268 9,945 2,999 -- 12,994
-------- -------- ------- -------- -------- -------- ------- --------
Gross Margin........ 3,166 -- -- 3,166 2,313 278 -- 2,591
Selling, general
and administrative
expenses............ 2,158 10 252 2,420 2,749 1,190 -- 3,939
-------- ------- ------- -------- -------- -------- ------- --------
Income (loss) from
operations.......... 1,008 (10) (252) 746 (436) (912) -- (1,348)
Interest expense.... 103 -- 44 147 231 141 -- 372
Other expenses
(income)............ (244) (54) (3) (301) 2 (461) -- (459)
-------- ------- ------- ------- --------- --------
Net income.......... $ 1,149 $ 44 $ (293) $ 900 $ (669) $ (592) $ -- $ 1,261
======== ======= ======= ======== ========= ======== ======= ========
Net income (loss)
per common share.... $ 0.32 $ (0.45)
- -------------------
<FN>
(1) Janco's operations were terminated in December 1996.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1997 and 1996
---------------------------------------------------------------------------------------------
(In thousands, except per share data)
1997 1996
------------------------------------------ ----------------------------------------------
Windsor/ General Windsor/ General
Janco(1) Megacards Corporate Total Janco(1) Megacards Corporate Total
-------- --------- --------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales........... $ 3,294 $ -- $ -- $ 3,294 $ 3,918 $ 580 $ -- $ 4,498
Cost of Sales....... 2,249 -- -- 2,249 3,134 552 -- 3,686
-------- -------- ------- -------- -------- -------- ------- --------
Gross Margin........ 1,045 -- -- 1,045 784 28 -- 812
Selling, general
and administrative
expenses............ 691 -- 65 756 846 288 -- 1,134
-------- ------- ------- -------- -------- -------- ------- --------
Income (loss) from
operations.......... 354 -- (65) 289 (62) (260) -- (322)
Interest expense.... 30 -- 10 40 76 10 -- 86
Other expenses
(income)............ (81) -- -- (81) 2 (324) -- (322)
-------- ------- ------- ------- --------- --------
Net income.......... $ 405 $ -- $ (75) $ 330 $ (140) $ 54 $ -- $ (86)
======== ======= ======= ======== ========= ======== ======= ========
Net income (loss)
per common share.... $ 0.12 $ (0.03)
- -------------------
<FN>
(1) Janco's operations were terminated in December 1996.
</FN>
</TABLE>
13
<PAGE>
Windsor's and Janco's combined net sales decreased from $12.3 million
for the first nine months during 1996 to $9.4 million for the comparable period
in 1997. Windsor's sales increased during the first nine months of 1997 verses
1996 due to improved marketing and availability of products. The combined sales
of Windsor/Janco, however, decreased as a result of the discontinuance of
Janco's operations.
The cost of sales for the combined Windsor/Janco operations decreased
from $9.9 million for the first nine months of 1996 to $6.3 million for the
comparable period in 1997. The reduction in cost of sales is a result of the
discontinuance of the operations of Janco. The increase in Windsor's cost of
sales in the first nine months of 1997 over the same period in 1996 was
attributable to an increase in net sales. Gross margin for the combined
Windsor/Janco increased $853,000 to $3.2 million for the nine months ended
September 30, 1997 from $2.3 million for the same period in 1996. As a
percentage of net sales, the gross margin increased to 34% in the first nine
months of 1997 from 19% for the comparable period in 1996.
Selling, general and administrative expenses for Windsor and Janco
decreased from $2.7 million for the first nine months of 1996 to $2.2 million
for the same period in 1997. The decrease was the result of the discontinuance
of Janco's operations. The increase in Windsor's selling, general and
administrative expenses was due primarily to increased sales.
Interest expense for Windsor and Janco decreased from $231,000 for the
first nine months of 1996 to $103,000 for the corresponding period in 1997. The
reduced interest expense was due to the repayment of a substantial part of
Janco's debts from the discontinuance of its operations, plus a reduction in the
outstanding balances on Windsor's line of credit.
As a result of the foregoing, Windsor and Janco reported net income of
$1,149,000 for the first nine months of 1997, compared to a net loss of $670,000
for the same period of 1996.
Megacards reported no sales in the first nine months of 1997 as a
result of the business combination with Legends. A profit of $44,000 was
recorded during the first nine months of 1997 due to the collection of accounts
previously thought to be uncollectible. This compares to a net loss of $592,000
in the first nine months of 1996.
Liquidity and Capital Resources
During the first nine months of 1997, the Company's operating and
investing activities provided approximately $1,200,000 of cash to the business.
The cash was used to pay off existing debt.
Capital expenditures of $61,000 were made by Windsor in the first nine
months of 1997.
14
<PAGE>
As of September 30, 1997, the primary secured debt of Megacards and
Janco was repaid in full from collection of accounts receivable and sales of
assets. The secured debt of Windsor was refinanced with Norwest in 1997. As
of September 30, 1997, Windsor had available borrowing capacity sufficient to
operate its business for a reasonable period of time.
Management will explore courses of action to retire the Janco secured
debts for which Bentley and Windsor are liable as the loans approach maturity.
The Company extended the maturity of the Janco secured debt to March 31, 1998.
The Company was released from any future liability on the Janco lease. The
Company anticipates that additional working capital of approximately $325,000
will be required during 1998 to repay the Janco secured debt if the maturity of
such debt is not extended beyond March, 1998. The Company will seek to obtain
such capital pursuant to the private placement of debt or equity securities or
the sale of certain assets of the Company, if required. There can be no
assurance that such financing or asset sales will be available to the Company on
favorable terms or at all.
The Company is currently negotiating with the court appointed trustee
in the Janco bankruptcy in an attempt to reduce any liability that the Company
may have.
As of September 30, 1997, the Company reported an allowance for
doubtful accounts of approximately $240,000. Management of the Company believes
such amount was appropriate in light of the amount and anticipated
collectibility of the Company's accounts receivable at that time. In order to
maximize the payment of its receivables, the Company employs a person,
full-time, whose responsibility is to seek payment of past due accounts. If such
efforts are unsuccessful, the Company engages a commercial collection agency to
pursue persons with past due accounts.
15
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the quarter ended
September 30, 1997.
16
<PAGE>
SIGNATURE
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.
BENTLEY INTERNATIONAL, INC.
(Registrant)
November 19, 1997 By: /s/Lloyd R. Abrams
-----------------------------------
Lloyd R. Abrams, President
and Chief Executive Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 234,037
<SECURITIES> 0
<RECEIVABLES> 1,642,169
<ALLOWANCES> 238,870
<INVENTORY> 1,730,888
<CURRENT-ASSETS> 3,709,032
<PP&E> 214,920
<DEPRECIATION> 162,398
<TOTAL-ASSETS> 3,993,752
<CURRENT-LIABILITIES> 2,770,634
<BONDS> 0
0
0
<COMMON> 101,272
<OTHER-SE> 405,119
<TOTAL-LIABILITY-AND-EQUITY> 3,993,752
<SALES> 3,293,785
<TOTAL-REVENUES> 3,293,785
<CGS> 2,249,468
<TOTAL-COSTS> 2,249,468
<OTHER-EXPENSES> 756,280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,718
<INCOME-PRETAX> 329,626
<INCOME-TAX> 0
<INCOME-CONTINUING> 329,626
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 329,626
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
