SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------
FORM 10-KSB/A
Amended Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 Commission File Number 0-19503
BENTLEY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 0-19503 43-1325291
(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of 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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value: $.18
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein and will not 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-KSB or any amendment to
this Form 10-KSB. [ ]
The Registrant's revenues from continuing operations for the 1998 fiscal year
were $215,443.
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: approximately $890,285 as of January 13, 1999. (Approximately
890,285 shares held by approximately 470 non-affiliates at $1.00 per share).
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: As of March 11, 1999,
3,083,285 shares of Common Stock, par value $0.18, were outstanding.
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TABLE OF CONTENTS
Item 1. Description of Business ............................................1
Item 2. Properties..........................................................3
Item 3. Legal Proceedings...................................................3
Item 4. Submission of Matters to a Vote of Security Holders.................5
Item 5. Market for Common Equity and Related Shareholder Matters............5
Item 6. Management's Discussion and Analysis or Plan of Operation...........6
Item 7. Financial Statements and Supplementary Data.........................9
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................27
Item 9. Directors and Executive Officers of the Registrant..................27
Item 10. Executive Compensation..............................................28
Item 11. Security Ownership of Certain Beneficial Owners and Management......29
Item 12. Certain Relationships and Related Transactions......................30
Item 13. Exhibits and Reports on Form 8-K....................................31
SIGNATURE ...................................................................33
FINANCIAL DATA SCHEDULE
This Form 10-KSB/A includes all of the text of the Form 10-KSB filed on March
31, 1999, and Items 6, 7, 8 and 10, the auditor's consent, the Financial
Data Schedule and the completed cover page which were not included in the
Form 10-KSB filed on March 31, 1999.
<PAGE>
Note: This report contains certain forward looking statements of the type
described in the "Safe Harbor" provisions of the Private Securities
Litigation Reform Act of 1995 ("PSLR Act of 1995"). The results of
management's plans are beyond the ability of the Company to control. Economic
conditions, service demand, competitive pricing and other factors could cause
materially different results from those planned by management. Additional
discussions of certain forward looking statements can be found at the end of
Items 1, 3 and 6.
PART I
Item 1. Description of Business
Business
Bentley International, Inc. (formerly Megacards, Inc.), a Missouri
corporation ("Bentley," the "Registrant" or the "Company"), through its
operating subsidiary, Residential Mortgage Credit Reporting, Inc. f/k/a Bentley
Information Services, Inc., a Missouri corporation incorporated in 1998
("RMCR"), operates a credit reporting service which provides mortgage lenders
with consolidated credit reports drawn from reports generated by several
single-source credit reporting bureaus. Currently, RMCR has sales
representatives in Arizona, California, Missouri, Illinois and Florida and is
expanding into additional territories, with a plan of expanding nationwide.
RMCR's headquarters is in Phoenix, Arizona. RMCR acquired substantially all of
the assets of a consolidated credit reporting bureau located in Arizona in March
1999. Bentley is in the process of starting a division selling background
reports and pre-employment screening to businesses.
The Company is currently investigating other acquisition opportunities in
specialty marketing and information management and certain other industries. No
opportunities under consideration as of the date of this report have developed
to the stage where any acquisition appears likely. Management is researching
acquisitions of speciality marketing and information management firms, because
management believes that such businesses produce a very high return on equity,
require little debt, generate substantial cash flow and possess significant
growth potential.
Products
RMCR operates a credit reporting service which provides mortgage lenders with
consolidated credit reports drawn from reports generated by several
single-source credit reporting bureaus. The new Bentley division will sell
background reports and pre-employment screening to businesses.
Marketing and Distribution
RMCR markets its products through employee sales representatives who travel
throughout their territories.
New Services
The consolidated residential mortgage credit reporting business is a new line
of business for Bentley. Management plans to expand this business.
Competition
RMCR faces substantial competition. Little capital is needed to enter the
industry, the needed software is readily available and reports from several
single-source credit reporting bureaus are readily available. Management expects
that the competitive position of RMCR is strong due to its superior marketing
and readily available capital, which management expects will allow the business
to expand.
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Sources of Supply
RMCR generates consolidated credit reports from single-source credit reports.
Management believes that RMCR has good relationships with its suppliers.
Violation of agreements with suppliers could, however, even if inadvertent,
result in cancellation of vendor agreements.
Customers
RMCR provides its services to residential mortgage lenders. Six customers
account for forty percent (40%) of the business of RMCR. The division currently
being created to sell background reports and pre-employment screening will have
businesses as customers.
Licenses
RMCR has software licenses from Innovative Software Solutions and Synergistic
Software. The license agreement with Synergistic Software provides for
transaction fees. The Company and its subsidiary have no trademarks, franchises,
labor contracts or royalty agreements. Technology relating to the consolidated
residential mortgage credit reporting business is rapidly changing. RMCR's
investment in software could become obsolete in a very short time.
Government Approvals and Regulations
No government approvals are needed for the operation of the Company's
businesses. The Company's credit reporting business is subject to the Fair
Credit Reporting Act (the "FCRA") and the regulations promulgated thereunder.
The Company believes that neither the FCRA nor any other government regulations
now materially adversely affect the business of Bentley and its subsidiary. It
is possible, however, that law changes, either in the FCRA or other laws, could
require changes in the credit reporting business of the Company that could
materially adversely affect the Company.
Environmental Costs and Compliance
The businesses of Bentley and its subsidiary do not have any environmental
costs and are not subject to any environmental regulation requirements.
Employees
As of March 11, 1999, the Company employed approximately twenty (20) persons
on a full-time basis. There are no collective bargaining agreements with
employees. The Company believes that its relations with the RMCR employees are
good.
History
RMCR, under its former name, Bentley Information Services, Inc., was formed
on May 27, 1998 to acquire the assets of a Florida credit reporting service.
RMCR merged with a former Bentley subsidiary, an Arizona corporation which was
also called Residential Mortgage Credit Reporting, Inc., on February 10, 1999.
Pursuant to the merger, the Missouri corporation, RMCR, was the surviving
corporation and took the name of the Arizona corporation. The Arizona
corporation had been acquired by Bentley on November 12, 1998. On July 30, 1998,
the Company sold its Windsor Art, Inc. subsidiary, a Missouri corporation
("Windsor"), which was incorporated in 1993 and which operated a framed art and
mirror business. This business began in November, 1993, when Windsor purchased
certain assets of Windsor Art Products, Inc., a Delaware corporation, which was
then subject to a bankruptcy proceeding. In a business combination in July, 1995
the Company, which was incorporated in 1983 with the name Megacards, Inc.,
acquired Windsor in a reverse acquisition. The other businesses of the Company
have been discontinued. The other businesses consisted of a sports picture card
business, which had been in business since 1984 and operated under the name
"Megacards," and the framed art and mirror business of Janco
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Designs, Inc., a Missouri corporation which was incorporated in 1990 ("Janco"),
which also was acquired in the reverse acquisition. Janco was administratively
dissolved in 1997. The sports picture card business was liquidated in 1996 and
the remaining assets contributed to a joint venture, Legends, L.P., a New York
limited partnership organized in 1996 ("Legends"), with Quality Baseball Cards,
Inc.("Quality"). The Company is a limited partner in Legends, and owns 30% of
the limited partnership. Janco was the subject of an involuntary bankruptcy
petition brought in January, 1997 by three creditors. All claims of the
bankruptcy trustee against the Company and Windsor were settled with the
bankruptcy trustee in January, 1998 and a final judgment approving the
settlement was entered on February 27, 1998. The Company's business now consists
of the RMCR credit reporting business, the developing division selling
background reports and pre-employment screening to businesses and the 30%
limited partnership interest in Legends.
Forward Looking Statements
Certain of the foregoing statements in this Item 1 make references to plans,
beliefs and expectations of management, including, without limitation, that
expansion nationwide of the credit reporting business is planned and that
acquisitions of other information services, specialty marketing and possibly
certain other businesses are planned. These statements are forward looking
statements of the type governed by the PSLR Act of 1995. There can be no
assurance that results will be what management plans, believes or expects.
General economic conditions, demand for credit reporting services, ability to
acquire businesses on acceptable terms and industry specific competitive
conditions, which include the small amount of capital needed to enter the
consolidated credit reporting industry and the availability of needed software
and one source credit reports, could produce results materially different from
those expected by management.
Item 2. Properties
The Company's subsidiary RMCR leases an office in Phoenix, Arizona for its
headquarters. This lease expires in December, 2001.
Item 3. Legal Proceedings
On September 29, 1998, Bentley was sued by three shareholders. One of the
shareholders was an officer of Janco Designs, Inc., the subsidiary of the
Company which was the subject of an involuntary bankruptcy proceeding and has
now been dissolved. The other two shareholders are former officers and directors
of the Company who acted as such when the Company's sole business consisted of
the sports picture card business known as Megacards. That business segment was
discontinued in 1996.
Leo M. Rodgers, III, a shareholder of the Company, filed a lawsuit against
the Company on September 29, 1998 in the Circuit Court of St. Louis County,
Missouri, asking for a judgement in his favor against the Company in the amount
of the "fair value" as of July 1, 1998, of 30,420 shares allegedly owned
individually by Mr. Rodgers and 423,500 shares allegedly held in the name of
Lloyd R. Abrams, Trustee under a Voting Trust Agreement dated July 17, 1995 (the
"Voting Trust"), of which Mr. Rodgers alleges he is the beneficial owner. Mr.
Rodgers alleges that he is entitled to such a judgement pursuant to Mo. Rev.
Stat. Section 351.405 in connection with the sale of the Company's subsidiary,
Windsor Art, Inc. ("Windsor"), which represented substantially all of the assets
of the Company. The sale of Windsor was approved at the annual meeting of the
Company's shareholders on July 2, 1998. Section 351.405 requires a company to
purchase the shares of any shareholder who, at or prior to the meeting at which
the sale of substantially all of the assets of the company was approved, filed
with the company written objection to the sale, did not vote in favor of the
sale and subsequently made a timely demand for purchase of such shares by the
company. Management of the Company believes that the Company is not required to
purchase the 423,500 shares allegedly held in the Voting Trust because such
shares were voted in favor of the sale. The Company will defend vigorously the
Company's position in court.
Two other shareholders, Andrew Wolfson and Stephan Juskewycz, also filed suit
against Bentley on September 29, 1998 in the Circuit Court of St. Louis County,
Missouri, to require the Company to purchase their shares for the "fair value"
of the shares in connection with the sale of Windsor under Section 351.405,
alleging that they
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own 98,115 and 86,335 shares, respectively. The Company believes that the
respective claims of the two shareholders are separate and distinct. The notice
required by ss.351.405 objecting to the sale with respect to Mr. Wolfson's
alleged 98,115 shares was not received until after the meeting at which the vote
on the sale of Windsor was held. Therefore, management believes that the Company
is not required to repurchase Mr. Wolfson's shares and will defend vigorously
the Company's position in court.
As part of the same suit, Messrs. Wolfson and Juskewycz also brought a
shareholders' derivative suit against the three directors of the Company, Mr.
Abrams, Ramakant Agarwal and Janet L. Salk. The plaintiffs claim that the
Directors breached their fiduciary obligations to the shareholders, including
the plaintiffs, by causing the Company to repay notes of Janco Designs, Inc., a
subsidiary of the Company, in the amount of $450,000 to certain trusts of which
Mr. Abrams, Richard B. Rothman and Patricia Rothman are trustees. The plaintiffs
also claim that the trusts were unjustly enriched by the repayment of the notes
and that it would be inequitable for the trusts to retain the $450,000 repaid to
them. The derivative suit demands that the $450,000 be returned to the Company.
Management of the Company believes that the notes were properly repaid because
they were secured by Windsor's assets and guaranteed by Windsor and the Company.
The Company will defend vigorously the Company's position in court.
Messrs. Wolfson and Juskewycz's suit also alleges a derivative claim that Mr.
Abrams breached a fiduciary duty to the shareholders in connection with the sale
of the Company's wholly owned subsidiary, Windsor, to Interiors, Inc.
("Interiors") by entering into a consulting agreement with Windsor and
Interiors. The derivative suit demands that the payments made under the
consulting agreement be paid over to the Company. The consulting agreement is
described in detail in the Company's Form 8-K dated July 30, 1998 which is
hereby incorporated by reference. Management believes that the consideration Mr.
Abrams is entitled to receive pursuant to the terms of the consulting agreement
is appropriate in exchange for the services which Mr. Abrams has agreed to
provide to both Windsor and Interiors and for the covenants regarding
noncompetition and other matters made by Mr. Abrams in the agreement. The
Company will defend vigorously the Company's position in court.
Messrs. Wolfson and Juskewycz's amended their suit on January 21, 1999. As
amended, the suit further alleges that salary and benefits paid to Mr. Abrams
from the Company was $265,000 in 1996 and $284,423 in 1997, that in addition to
these amounts Mr. Abrams also received over $50,000 per year in additional
benefits from the Company, and that this compensation was excessive. The suit
demands that such salary and benefits be repaid to Bentley. Management believes
that the consideration Mr. Abrams received in 1996 and 1997 was a reasonable
payment in exchange for the services which Mr. Abrams provided to the Company as
President and Chief Executive Officer. The Company will defend vigorously the
Company's position in court.
The Wolfson and Juskewycz amended suit further alleges that bonuses in the
amount of $1,000,000 were paid or will be paid improperly in connection with the
sale of Windsor to Windsor employees and directors by the Company and demands
that these moneys be repaid to the Company. Management notes that the sole
director of Windsor, Lloyd R. Abrams, was not paid any bonus as a result of the
sale of Windsor. Management believes that any and all bonuses paid in connection
with the sale of Windsor were paid properly for past services and for the future
benefit of the Company. The Company will defend vigorously the Company's
position in court.
Finally, the amended suit of Messrs. Wolfson and Juskewycz alleges that the
conduct of the directors and control persons of Bentley in managing the Company
supports a claim for judicial dissolution of the Company pursuant to Mo. Rev.
Stat. Section 351.494, which provides in paragraph (b) that a company may be
dissolved if its directors have acted, are acting, or will act in a manner that
is illegal, oppressive, or fraudulent. Messrs. Wolfson and Juskewycz allege that
the conduct of the directors and control persons of the Company satisfies this
test, due to the actions alleged in the previously described counts of the
lawsuit, and a claim that professional fees, alleged to be $150,000, paid by
Bentley in connection with the Windsor transactions were excessive, and demand
that the Company be judicially liquidated and dissolved, with Bentley's assets
converted to cash and distributed to the shareholders on a pro rata basis after
adjustment for the claims previously alleged, and that a receiver be appointed
for the Company. Management believes that this claim is totally unsupported by
the facts, as discussed in relation to the other claims in the lawsuit that are
discussed in the preceding paragraphs, and believes that any professional
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service payments made in connection with the Windsor transactions were
reasonable given the services provided. The Company will defend vigorously the
Company's position in court.
Currently, the Company is not a party to any other legal proceedings, other
than routine proceedings in the ordinary course of business. The ordinary course
proceedings are not anticipated to have a material adverse effect on the
Company's results of operation or financial condition.
Forward Looking Statements
The beliefs and expectations of management described in this Item 3 with
regard to the shareholder litigation are forward looking statements of the type
described in the PSLR Act of 1995. The ultimate resolutions of the lawsuits are
not within Bentley's control. The court's decision with regard to the validity
of the claims made by the three shareholders and the valuation of their claims
could cause materially different results from those believed likely by
management.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of the year ended
December 31, 1998 to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
PART II
Item. 5 Market for Common Equity and Related Shareholder Matters
In July, 1996, the Company's name was changed to Bentley International, Inc.
from Megacards, Inc. and the Company's common stock symbol was changed to "BNTL"
from "MEGX". The Company's Common Stock is traded on the OTC Bulletin Board. As
of January 13, 1999, the number of shareholders of Common Stock was
approximately 470. Set forth below are the high and low transaction prices as
reported by the OTC Bulletin Board. Such prices reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
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<TABLE>
Year Ended December 31,
<CAPTION>
1998 1997
--------------------------------------------------
High(1) Low(1) High(1) Low(1)
<S> <C> <C> <C> <C>
First Quarter........ $2.38 $0.88 $0.50 $0.16
Second Quarter....... 2.13 1.25 0.50 0.16
Third Quarter........ 1.56 0.75 0.75 0.25
Fourth Quarter....... 1.25 0.75 1.25 0.70
- ------------------
(1)Share prices have been adjusted to reflect a four-for-one stock dividend
payable October 22, 1997 to shareholders of record on September 24, 1997.
</TABLE>
There are no restrictions on dividends in the Company's corporate authority
documents or any loan or other contractual agreements.
Item 6. Management's Discussion and Analysis or Plan of Operation
OVERVIEW
Bentley has aggressively pursued a transition from the framed art and mirror
business to the marketing and information services businesses, of which the
credit reporting business is one, and is continuing to explore other acquisition
possibilities in the information services and specialty marketing businesses and
certain other businesses. The Company continues to be in a strong liquidity
position, with no debt other than trade credit and no preferred stock
outstanding. Bentley plans to use most of the proceeds of its sale of Windsor
Art, Inc., its previous framed art and mirror business, to expand the credit
reporting business and to make acquisitions in the specialty marketing,
information services and certain other businesses.
Bentley plans to expand nationwide the consolidated, residential mortgage
credit reporting business of its operating subsidiary, RMCR. In December 1998
RMCR replaced its old computer hardware and software with new hardware and
software. In March 1999, RMCR acquired substantially all of the assets of a
consolidated credit reporting business located in Arizona. Currently, RMCR has
sales representatives in Arizona, California, Illinois, Missouri and Florida.
Management plans to expand the business nationwide.
The Company is currently investigating other acquisition opportunities in
specialty marketing, information services and certain other industries. No other
opportunities currently under consideration have developed to the stage where
any acquisition appears likely. Management is researching acquisitions of
speciality marketing and information services firms because management believes
that such businesses produce a very high return on equity, require little debt,
generate substantial cash flow and possess significant growth potential.
Management expects these acquisitions and the expansion of the current
businesses to produce a trend toward increased net sales, revenue and income and
that there will be a high return on the Company's capital.
On July 30, 1998, the Company sold its framed art and mirror business,
Windsor Art, Inc. ("Windsor"), which represented substantially all of its
assets, to Interiors, Inc. ("Interiors"). On December 1, 1998, Bentley
entered into a Repurchase Agreement and Mutual General Release with Interiors,
Inc., Windsor Art, Inc., Lloyd R. Abrams and Max Munn, which is attached as
Exhibit 2 to Bentley's Form 8-K dated December 1, 1998. The
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transactions between Interiors and Bentley are more fully described in the
following prior securities filings of Bentley and the portions of the following
documents that pertain to the transactions with Interiors, Inc. are hereby
incorporated by reference: Form 8-K dated December 1, 1998, Form 10-QSB dated
September 30, 1998, Form 8-K dated July 30, 1998 and Form 10-QSB dated June 30,
1998.
The Board of Directors of Bentley has also approved a repurchase program with
respect to the Company's common stock, which currently trades on the OTC
Bulletin Board. The company will repurchase no more than 100,000 shares in the
open market over a period of no more than twelve months, subject to the further
limitation that the number of shareholders will not be decreased below 300. The
price for the common stock was $1.00 per share as of March 11, 1999. The book
value of such stock as of December 31, 1998, was $2.17 per share.
On September 29, 1998, Bentley was sued by three shareholders. One of the
shareholders was an officer of Janco Designs, Inc., the subsidiary of the
Company which was the subject of an involuntary bankruptcy proceeding and has
now been dissolved. The other two shareholders are former officers and directors
of the Company who acted as such when the Company's sole business consisted of
the sports picture card business known as Megacards. That business segment was
discontinued in 1996. The litigation is described in more detail in footnote 9
to the financial statements and in Part I, Item 3 regarding litigation. It is
currently not possible to give a reasonable estimate of the Company's exposure
in these lawsuits. The Company anticipates that any judgment against it
regarding the shareholder litigation will be satisfied out of a non-material
portion of the proceeds of the sale of Windsor. Management does not believe that
the litigation will significantly interfere with its plans to expand the credit
reporting business or with its liquidity, net sales, revenue or income.
Forward Looking Statements
Certain of the foregoing statements in this Item 6 make references to plans,
beliefs and expectations of management, including, without limitation, that
expansion nationwide of the credit reporting business is planned and that
acquisitions of other information services, specialty marketing and possibly
certain other businesses are planned. These statements are forward looking
statements of the type governed by the PSLR Act of 1995. There can be no
assurance that results will be what management plans, believes or expects.
General economic conditions, demand for credit reporting services, ability to
acquire businesses on acceptable terms and industry specific competitive
conditions, which include the small amount of capital needed to enter the
consolidated credit reporting industry and the availability of needed software
and one source credit reports, could produce results materially different from
those expected by management. With regard to the shareholder litigation,
management beliefs and expectations are also forward looking statements of the
type described in the PSLR Act of 1995. The ultimate resolutions of the
lawsuits, however, are not within the Company's control. The court's decision
with regard to the validity of the claims made by the three shareholders and the
valuation of their claims could cause materially different results from those
believed likely by management.
Results of Operations
On July 30, 1998 the Company sold its main operating subsidiary, Windsor Art,
Inc., which represented substantially all of the operations of the Company, for
$6,481,000 in cash. All of Windsor's operations have been presented as
discontinued operations for all periods presented in the accompanying
consolidated financial statements.
Continuing Operations
Continuing operations consists of the activities of the credit-reporting
business segment.
Two subsidiaries of the Company merged subsequent to the close of the fiscal
year; consequently, their revenues are reported separately below. These
subsidiaries were RMCR under its former name, Bentley Information Services,
Inc., a Missouri corporation, and an Arizona corporation named Residential
Mortgage Credit Reporting, Inc. which merged into RMCR. RMCR was acquired May
27, 1998 and revenues for the year ended December 31, 1998 were $79,800. RMCR
was not part of the Company in 1997. Residential Mortgage Credit
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Reporting, Inc., an Arizona corporation, was acquired October 31, 1998 and
revenues for the two months ended December 31, 1998 were $135,639. The Arizona
corporation was not part of the Company in 1997.
Operating expenses increased from $266,860 to $790,724 for the year ended
December 31, 1998 as compared to the same period in 1997. This increase was due
to the acquisitions in 1998 of the credit reporting businesses which did not
exist in 1997 and increases in professional fees and costs associated with the
potential acquisitions of other business.
Other income increased for the year ended December 31, 1998 as compared to
the same period in 1997 due to investment earnings from the proceeds of the sale
of Windsor and the reduction of liabilities related to a canceled lease
obligation.
Discontinued Operations
Income from discontinued operations decreased for the year ended December 31,
1998 as compared to the same periods in 1997. This decrease was caused since
1998 activity ended on July 30, 1998, the date of the sale of Windsor.
Discontinued operations also include, for 1998, a gain on the sale of Windsor
after expenses and income taxes of $3,075,481.
Liquidity and Capital Resources
As a result of the sale of Windsor, the Company's cash and cash equivalents
at December 31, 1998 was $6,350,884. Cash generated from the sale of Windsor was
$6,481,000. In addition, cash generated from all operations decreased from
$1,251,145 to $222,084 for the year ended December 31, 1998 as compared to the
same time period in 1997. This decrease was caused by significant increases in
inventories and accounts receivable of the Company's discontinued operations at
July 30, 1998 as compared to December 31, 1997.
Derivatives
The Company does not invest in any derivative securities.
Year 2000
Bentley has taken steps to investigate whether it has a "Year 2000 Problem,"
that is, whether any of the computer software and hardware that affect its
business can use only the last two digits to refer to a year, which limitation
causes inability to recognize properly a year that begins with "20" instead of
"19," which in turn could result in applications failures or erroneous results.
In order to determine whether the Company has no Year 2000 Problem (is "Year
2000 Compliant;" is in "Year 2000 Compliance"), Bentley is (i) in the process of
investigating whether its hardware and software are Year 2000 Compliant; (ii)
contacting suppliers and customers regarding any possible Year 2000 Problems at
their facilities that might affect the Company; (iii) analyzing the costs of
Year 2000 Compliance; and (iv) exploring the possible worst case scenarios and
contingency plans if there were to be a Year 2000 Problem that affected the
Company's business. In evaluating the Company's business, it is important to
recognize that the credit reporting business of its subsidiary, RMCR, is a
computer based business that could be seriously adversely affected by a Year
2000 Problem, either at RMCR's facility or at its suppliers' or major customers'
facilities. The Company has no control over whether its suppliers and customers
remedy a Year 2000 Problem or whether its vendors of hardware, software and Year
2000 Compliance testing software accurately represent the Year 2000 Compliance
status of their products.
The Company has taken the following steps with respect to its own computer
hardware and software to determine whether such hardware and software is Year
2000 compliant: (i) purchased new computer hardware and software late in 1998
and early in 1999 which the Company believes to be Year 2000 Compliant; (ii) is
in the process of testing this hardware with Year 2000 Compliance software to
verify that it is Year 2000 Compliant; and (iii) is in the process of verifying
with vendors of its software for processing credit reports, accounting, record
keeping and word processing and of its phone system that these systems are Year
2000 Compliant.
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Bentley has contacted its suppliers of single source credit reports to
determine whether they might have Year 2000 Problems that could affect the
Company, has had some preliminary responses and is in the process of keeping in
touch with all credit report suppliers on an ongoing basis to evaluate the Year
2000 Compliance of such suppliers. The Company has sent out letters to its
customers to query whether they are Year 2000 Compliant.
The Company has not incurred any material costs in addressing the Year 2000
Problem. The new hardware and software referenced above was purchased for
business reasons separate from Year 2000 Compliance issues. The Company does not
anticipate that it will incur any material costs in testing software and
hardware and communicating with suppliers and customers.
The worst case scenario of a Year 2000 Problem would be a failure of RMCR's
credit reporting software or its hardware, which could shut down the business,
resulting in lost revenues and possibly lost customers. The contingency plan
that the Company has developed to address the possible worst case scenario is to
obtain a "patch" for the Year 2000 Problem from the vendor of the affected
hardware or software or to obtain hardware or software from another vendor.
Going to another vendor of credit reporting software would require converting
the customers' systems to be compatible with such new software. The possible
lost revenue, if such a worst case scenario were to occur, has not been
estimated. The Company would draw on its strong liquidity position to enable it
to withstand such a worst case scenario.
Forward Looking Statements
Certain of the foregoing statements in the discussion of the Year 2000
Problem make references to plans, beliefs and expectations of management,
including, without limitation, that the RMCR hardware will be Year 2000
Compliant. These statements are forward looking statements of the type governed
by the PSLR Act of 1995. There can be no assurance that results will be what
management plans, believes or expects. The steps taken by such vendors,
suppliers and customers as well as by the Company could produce results
materially different from those expected by management.
Item 7. Financial Statements and Supplementary Data
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Independent Auditors' Report
Board of Directors
Bentley International, Inc.
St. Louis, Missouri
We have audited the accompanying consolidated balance sheet of Bentley
International, Inc. and subsidiaries as of December 31, 1998 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the two years in the period ended December 31, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Bentley
International, Inc. and subsidiaries as of December 31, 1998 and the results of
their operations and their cash flows for the two years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Rubin, Brown, Gornstein & Co. LLP
RUBIN, BROWN, GORNSTEIN & CO. LLP
St. Louis, Missouri
April 12, 1999
10
<PAGE>
<TABLE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
December 31, 1998
<CAPTION>
Assets
<S> <C>
Current Assets
Cash and cash equivalents $ 6,350,884
Accounts receivable 136,644
Other current assets 46,978
------------
Total Current Assets 6,534,506
Furniture And Equipment (Net Of Accumulated
Depreciation Of $393,112) 127,014
Goodwill (Net Of Accumulated Amortization Of $8,120) 479,050
Investment 300,028
Other Assets 74,900
------------
$ 7,515,498
============
Liabilities And Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 828,117
-------------
Stockholders' Equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized,
none issued or outstanding --
Common stock, $0.18 par value; 10,000,000 shares authorized;
3,083,285 shares issued and outstanding 554,991
Additional paid-in capital 2,656,578
Retained earnings 3,475,812
-------------
Total Stockholders' Equity 6,687,381
-------------
$ 7,515,498
=============
See the accompanying notes to consolidated financial statements.
</TABLE>
11
<PAGE>
<TABLE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Years Ended December 31, 1998 And 1997
<CAPTION>
Total
Common Stock Additional Retained Stockholders'
------------------ Paid-In Earnings Equity
Shares Amount Capital (Deficit) (Deficit)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1997 562,624 $101,272 $1,905,297 $(2,835,611) $ (829,042)
Common Stock Dividend 2,250,661 405,119 (405,119) -- --
Net Income -- -- -- 2,427,146 2,427,146
- -------------------------------------------------------------------------------------
Balance -December 31, 1997 2,813,285 506,391 1,500,178 (408,465) 1,598,104
Issuance Of Common Stock 270,000 48,600 1,156,400 -- 1,205,000
Net Income -- -- -- 3,884,277 3,884,277
- -------------------------------------------------------------------------------------
Balance -December 31, 1998 3,083,285 $554,991 $2,656,578 $ 3,475,812 $6,687,381
=====================================================================================
See the accompanying notes to consolidated financial statements.
</TABLE>
12
<PAGE>
<TABLE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
For The Years
Ended December 31,
---------------------------
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Net Sales $ 215,443 --
Cost Of Sales 52,183 --
---------------------------
Gross Margin 163,260 --
Selling, General And Administrative Expenses 790,724 266,860
---------------------------
Loss From Operations (627,464) (266,860)
Interest Income (Expense) 136,748 (49,628)
Other Income 177,824 42,974
---------------------------
Loss From Continuing Operations (312,892) (273,514)
Discontinued Operations (Note 3)
Income from discontinued operations 1,121,688 1,526,611
Gain on sale of discontinued segment
(net of tax of $63,884) 3,075,481 --
Gain on extinguishment of debt -- 1,174,049
---------------------------
Net Income $ 3,884,277 $ 2,427,146
===========================
Earnings (Loss) Per Common Share - Basic (Note 10)
Continuing operations $ (0.11) $ (0.10)
Discontinued operations 1.46 0.97
---------------------------
$ 1.35 $ 0.87
===========================
Earnings (Loss) Per Common Share -
Assuming Dilution (Note 10)
Continuing operations $ (0.11) $ (0.10)
Discontinued operations 1.44 0.95
---------------------------
$ 1.33 $ 0.85
===========================
See the accompanying notes to consolidated financial statements.
</TABLE>
13
<PAGE>
<TABLE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Years
Ended December 31,
--------------------------
<CAPTION>
1998 1997
--------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 3,884,277 $ 2,427,146
Adjustments to reconcile net income to net cash
used in operating activities of continuing operations:
Income from discontinued operations (1,121,688) (1,526,611)
Gain on sale of discontinued segment (3,075,481) --
Gain on extinguishment of debt -- (1,174,049)
Depreciation and amortization 83,351 --
Net changes in assets and liabilities:
(Increase) decrease in accounts receivable (136,644) 48,175
(Increase) decrease in other current assets (46,978) 50,505
(Increase) decrease in accounts payable and
accrued expenses (240,312) 101,954
--------------------------
Net Cash Used In Operating Activities Of Continuing
Operations (653,475) (72,880)
Net cash provided by discontinued operations 503,264 1,324,025
--------------------------
Net Cash Provided By (Used In) Operating Activities (150,211) 1,251,145
--------------------------
Cash Flows From Investing Activities
Purchase of investments (300,028) --
Capital expenditures (66,422) --
Proceeds from notes receivable -- 110,000
Payments for acquisition of subsidiaries (362,772) --
Proceeds from sale of discontinued segment 6,481,000 --
Net cash used in investing activities
of discontinued operations (114,545) (55,352)
Proceeds from repurchase of investment in common
stock (Note 3) 905,000 --
--------------------------
Net Cash Provided By Investing Activities 6,542,233 54,648
--------------------------
Cash Flows From Financing Activities
Net proceeds from (payments on) lines of credit-
discontinued operations 269,535 (1,164,435)
Repayments of long-term debt- discontinued operations -- (66,867)
Payments on notes payable (320,005) (158,061)
--------------------------
Net Cash Used In Financing Activities (50,470) (1,389,363)
--------------------------
Net Increase (Decrease) In Cash And Cash Equivalents 6,341,552 (83,570)
Cash And Cash Equivalents - Beginning Of Year 9,332 92,902
--------------------------
Cash And Cash Equivalents - End Of Year $ 6,350,884 $ 9,332
==========================
Supplemental Disclosure Of Cash Flow Information
Interest paid $ 64,833 $ 170,039
--------------------------
Noncash investing and financing activities (Note 8)
See the accompanying notes to consolidated financial statements.
</TABLE>
14
<PAGE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 And 1997
1. Summary Of Significant Accounting Policies
Basis Of Consolidation
The consolidated financial statements include the accounts of Bentley
International, Inc. (the "Company") and its wholly-owned subsidiaries,
Windsor Art, Inc. ("Windsor"), Janco Designs, Inc. ("Janco") (see Note
3), Bentley Information Services, Inc. ("BIS") and Residential
Mortgage Credit Reporting, Inc. ("RMCR"). All significant intercompany
transactions have been eliminated from the consolidated financial
statements.
Use Of Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make certain
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. The reported amounts of revenues and
expenses during the reporting period may also be affected by the estimates
and assumptions management is required to make. Actual results may differ
from those estimates.
Cash And Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The Company's
cash accounts are primarily held at one bank.
Accounts Receivable
The Company follows the practice of writing off uncollectible accounts as
they are incurred. There is no allowance for uncollectible accounts
reflected in the balance sheet. Company management is of the opinion that
no allowance is necessary.
Furniture And Equipment
Furniture and equipment are carried at cost, less accumulated depreciation
and amortization computed using the straight-line and accelerated methods.
The assets are depreciated over periods ranging from five to seven years.
Investment
Investment consists of a municipal bond. The investment is stated at cost,
which approximates the market value. The investment is classified as
available for sale and matures in February 2015.
Investment In Partnership
The Company has a 30% interest in Legends, L.P., a New York limited
partnership. The investment is accounted for using the equity method and
carried at cost adjusted for a permanent impairment and the Company's
share of undistributed earnings or losses.
Goodwill
Excess of cost over acquired assets in connection with the acquisition of
RMCR is treated as goodwill and is amortized on the straight-line basis
over ten years.
15
<PAGE>
Income Taxes
Deferred tax assets and liabilities are recorded for the expected
future tax consequences of events that have been included in either the
financial statements or tax returns of the Company. Under this asset and
liability approach, deferred tax assets and liabilities are determined
based on temporary differences between the financial statement and tax
bases of assets and liabilities by applying enacted statutory tax rates
applicable to future years in which the differences are expected to
reverse. As more fully discussed in Note 6, the Company has established a
full valuation allowance for its net deferred tax assets.
Earnings (Loss) Per Common Share
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share. Statement 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share and includes the dilutive
effects of options, warrants and convertible securities by making the
assumption that all of these options, warrants and convertible securities
had been exercised. All earnings per share amounts for all periods have
been presented and, where appropriate, restated to conform to the
Statement 128 requirements.
Stock-Based Compensation
The Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), in 1996. Under the
provisions of SFAS 123, companies can elect to account for stock-based
compensation plans using a fair-value based method or continue measuring
compensation expense for those plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25) and related Interpretations. The
Company elected to continue using the intrinsic value method to account
for the stock-based compensation plan. SFAS 123 requires companies
electing to continue to use the intrinsic value method to make certain pro
forma disclosures (see Note 11).
2. Operations
Nature Of Operations
Bentley International, Inc., ("Bentley"), formerly Megacards, Inc.,
designed, repackaged and marketed sports picture cards produced by
major sports picture card manufacturers and marketed sports picture
card accessories. Megacards, Inc. became Bentley in June 1996 as the
Board of Directors believed that the change of the Corporate name
would better reflect the broadening of the scope of the businesses of
the Company.
Windsor manufactured and distributed decorative mirrors and framed prints
to furniture stores, mass merchants, hotels and designers throughout the
United States. During 1996, the Company discontinued its Janco product
line and sold its sports picture card business segment in order to reduce
costs and to improve its liquidity position. On July 30, 1998, the Company
sold all of the outstanding shares of stock of Windsor (see Note 3).
The Company, through its operating subsidiaries acquired in 1998, operates
a credit reporting service which provides mortgage lenders with
consolidated credit reports drawn from reports generated by several
single-source credit reporting bureaus.
Business Combinations
Pursuant to an agreement dated May 28, 1998, the Company purchased certain
assets of a credit reporting company for $75,000 and formed Bentley
Information Services, Inc. The acquisition was accounted for as a
purchase.
16
<PAGE>
Pursuant to an agreement dated November 12, 1998, the Company acquired all
the outstanding shares of Residential Mortgage Credit Reporting, Inc., a
credit reporting company, for $300,000 in cash, plus 120,000 shares of
Bentley's common stock. The acquisition was accounted for as a purchase.
Subsequent to the balance sheet date, BIS and RMCR merged. Pursuant to the
merger, BIS was the surviving corporation and changed its name to RMCR.
Stock Dividend
On September 3, 1997, the Company's Board of Directors authorized a
four-for-one stock dividend, to be distributed October 22, 1997, to
shareholders of record as of September 24, 1997, which had the effect of a
five-for- one stock split, except that the par value remained $0.18 per
share. All share and per share amounts have been adjusted retroactively to
reflect the stock dividend.
3. Discontinued Operations
On December 27, 1996, Janco discontinued its operations due to historical
losses and in an effort to reduce costs and improve overall liquidity of
the Company. Certain assets of Janco, consisting of inventory and
equipment, were sold to a third party prior to December 31, 1996.
On January 24, 1997, an involuntary bankruptcy case was filed against
Janco, and on February 18, 1997, Janco consented to the involuntary
filing, as a Chapter 7 debtor. As reported on Form 8-K, filed by the
Company January 26, 1998, the Bankruptcy Trustee, Bentley, certain
shareholders who held promissory notes of which Janco was the maker (and
Bentley and Windsor were the guarantors) ("Noteholders") and other parties
related to such shareholders entered into a stipulation for settlement
agreement pursuant to which Bentley agreed to pay, subject to court
approval of the stipulation agreement to the bankruptcy estate, $85,000 in
exchange for a full release of Bentley, Windsor, certain of Bentley's
shareholders and certain present and past officers and directors from all
claims of the Trustee. In addition, the bankruptcy estate agreed to pay to
the Noteholders one-half of the proceeds from the liquidation of certain
assets of Janco, approximately $45,000. The court approved the stipulation
agreement on February 27, 1998. The release of liability of the Company by
the Trustee resulted in a $1,258,838 reduction of the Company's general
liabilities. As a result of the reduction in liabilities and the
elimination of the reserves established to cover potential liability
resulting from the termination of Janco, an extraordinary gain was
recognized at December 31, 1997.
On July 30, 1998, the Company sold its Windsor subsidiary to Interiors,
Inc. ("Interiors"). Accordingly, Windsor's and Janco's decorative mirror
and framed art business segment are accounted for as discontinued
operations in the accompanying consolidated financial statements.
Windsor revenues were $8,262,934 and $12,713,313 for the year ended
December 31, 1998 and 1997, respectively. Revenues for Windsor for the
year ended December 31, 1998 include activity through the date of sale of
July 30, 1998. Janco had no operating activity in the aforementioned
periods.
The net operating activity of Windsor after the measurement date through
July 30, 1998 was not significant.
Originally, the consideration for the stock of Windsor was: a) $1,700,000
in cash, b) a $2,000,000 secured promissory note, payable over four years
with interest at 8% per annum, and a discount of $500,000 if paid by
September 30, 1998, and c) a $3,300,000 secured, short-term promissory
note, due September 30, 1998 with interest at 8% per annum. The short-term
note required a $300,000 payment on July 30, 1998. The short-term note was
repaid as scheduled on September 30, 1998.
17
<PAGE>
In connection with the purchase of Windsor, Interiors also purchased
150,000 shares of common stock of the Company for 750,000 shares of its
common stock and purchased a warrant to purchase 300,000 shares of common
stock of the Company for an additional 750,000 shares of its common stock.
If certain events occurred prior to December 31, 1998, Interiors had the
option, but not the obligation, to reacquire its shares from the Company
for $1,625,000 by December 31, 1998. In addition, if prior to December 31,
1998, Interiors consummated an underwritten public offering of Interiors
stock pursuant to a registration statement declared effective under the
Securities Act of 1933, as amended, in which the aggregate gross proceeds
(before underwriting fees, commissions and discounts) were at least
$15,000,000, then Interiors had the obligation, and not the option, to
repurchase the shares of Interiors for $1,625,000.
On December 1, 1998, the Company, Interiors, Windsor, Lloyd R. Abrams,
President of Bentley ("Mr. Abrams") and Max Munn, President of Interiors
("Mr. Munn") entered into a Repurchase Agreement and Mutual General
Release (the "Repurchase Agreement") with respect to (i) certain rights
and obligations arising under the Stock Purchase Agreement dated July 7,
1998 between Bentley and Interiors (the "Stock Purchase Agreement") and
all related documents executed in connection with the sale of Windsor by
Bentley to Interiors and (ii) rights and obligations pertaining to stock
of Bentley and of Interiors pursuant to a Securities Purchase and
Registration Rights Agreement dated July 30, 1998 (the "Securities
Purchase Agreement"). Pursuant to the Repurchase Agreement, Interiors,
Windsor and Munn released Bentley and Abrams and Bentley and Abrams
released Interiors, Windsor and Mr. Munn from any claims other than with
respect to the rights and obligations arising under the Repurchase
Agreement.
Pursuant to the Repurchase Agreement Bentley released from a voting trust
and pledge agreement all of the capital stock of Windsor to Interiors,
canceled and delivered to Interiors the $2,000,000 note made by Interiors
in favor of Bentley on July 30, 1998 (the "Note"), paid Windsor $100.00 in
connection with the purchase by Bentley from Windsor of certain
furnishings and furniture and transferred to Windsor 1,500,000 shares of
Interiors Class A Common Stock (the "Interiors Shares") previously
acquired from Interiors pursuant to the Securities Purchase Agreement,
which shares had been subject to an escrow agreement among Interiors,
Bentley and U.S. Bank Trust dated July 30, 1998 (the "Escrow Agreement")
to secure certain warranties and representations Bentley had made to
Interiors in connection with the sale of Windsor. In exchange Interiors
paid to Bentley $2,440,000 in cash plus interest from November 29, 1998 at
13% per annum, agreed to transfer 110,000 shares of Bentley Common Stock
to the President of Windsor and unconditionally assumed the obligation of
Bentley to convey 100,000 shares of Interiors Class A Common Stock to the
President of Windsor in satisfaction of certain obligations Bentley had
incurred to the President of Windsor pursuant to a bonus agreement.
Pursuant to the Repurchase Agreement Mr. Abrams also agreed to cancel his
future rights and was released from his obligations under the Consulting
Agreement. In exchange for the cancellation and release Mr. Abrams
received from Interiors $125,000.00 in cash plus interest from November
29, 1998 at 13% per annum, 40,000 shares of Bentley Common Stock and the
warrant for up to 300,000 shares of Bentley Common Stock, which warrant
Interiors had purchased from Bentley pursuant to the Securities Purchase
Agreement.
4. Investment In Partnership
In September 1996, as part of the Company's plan to restructure its sports
picture card business, Bentley transferred certain net assets of Megacards
to Legends, L.P., a newly-organized New York limited partnership
("Legends"). Such transfer was partly a sale and partly a contribution to
capital. As partial consideration for the transfer, Bentley received a 30%
limited partnership interest. This investment is accounted for on the
equity method of accounting.
The investment was originally recorded at $286,936. At December 31, 1996,
the asset was considered to be permanently impaired due to the financial
position of Legends. The impairment was estimated to be $236,936 based on
an estimate of net realizable value, less disposition costs. Unaudited
condensed financial information of Legends, L.P. is as follows:
18
<PAGE>
<TABLE>
CONDENSED BALANCE SHEET
December 31, 1998
<S> <C>
Current assets $ 1,695,693
Fixed assets (net of accumulated depreciation) 236,951
Other long-term assets 13,260
---------------
$ 1,945,904
===============
Current liabilities $ 758,162
Long-term debt 648,631
Partners' capital 539,111
---------------
$ 1,945,904
===============
</TABLE>
<TABLE>
CONDENSED STATEMENT OF INCOME
For The Year Ended December 31, 1998
<S> <C>
Net sales $ 3,555,413
Cost of sales 2,075,952
---------------
Gross profit 1,479,461
General and administrative expenses 1,336,144
---------------
Income from operations 143,317
Other expenses 106,384
---------------
Net income $ 36,933
===============
</TABLE>
The investment in Legends has not been adjusted for its share of
income since the amounts are insignificant.
The investment in Legends, amounting to $50,000 at December 31, 1998, is
included in other assets on the consolidated balance sheet.
5. Fair Value Of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Cash Equivalents
The carrying amount approximates fair value because of the short maturity
of those instruments.
Investments
The fair value of an investment in a municipal bond is estimated based on
quoted market prices for those or similar investments. The carrying
amount approximates fair value.
19
<PAGE>
Investment In Partnership
The Company owns a 30% interest in a limited partnership. There is no
market for the partnership interest. Because of the financial position of
the partnership, the investment is carried at original cost less a
permanent impairment to reflect its fair value. The fair value was based
upon an estimate of the investment's net realizable value.
6. Income Taxes
As discussed more fully below, the Company was in a net operating loss
position at December 31, 1997 and had established a full valuation
allowance for any net operating loss carryforward benefits, as well as
any other net deferred tax assets. Consequently, there was no provision
for income taxes for 1997.
Deferred income taxes represented the effect of temporary differences
between the tax basis of assets and liabilities and the amounts of those
assets and liabilities for financial reporting purposes. Deferred income
taxes also include the value of net operating loss carryforwards.
Management had determined that based on the Company's history of prior
operations and its expectations for the future, the net deferred tax
assets of the Company may not be realizable, and consequently, a
valuation allowance has been recognized to offset the otherwise
recognizable net deferred tax assets. As a result of the sale of Windsor,
there are no temporary differences which give rise to a significant
portion of deferred tax assets and liabilities and the corresponding
valuation allowance at December 31, 1998 except for the net operating
loss carryforward discussed below. The deferred tax asset related to this
is $358,000 and a valuation allowance for the full amount has been
provided.
At December 31, 1998, the Company used its available net operating loss
carryforwards of approximately $4,326,000 to reduce taxable income.
Certain of the available net operating loss carryforwards relate to
operations prior to a business combination in 1995 and are limited as to
their use by the separate return limitation regulations. As of December
31, 1998, approximately $895,000 of net operating loss carryforwards are
limited by such regulations. As a result of the ownership change in
connection with the business combination, these net operating loss
carryforwards are also limited in their use on an annual basis pursuant
to section 382 of the Internal Revenue Code of 1986, as amended.
7. Related Party Transactions
Sublease Retail Space
The Company leased retail space under an operating lease which expires on
February 28, 2001. In October 1995, the Company sold its inventory
related to this retail store operation and entered into a sublease for
the space with a corporation whose stockholders include a family member
of a former Director of the Company. The sublease ran from January 1,
1996 through June 30, 1998 and all rents were paid directly to the lessor
by the sublessee. The lease obligation was canceled during the third
quarter of 1998 and the remaining liability was taken into income.
Other
Prior to the sale of Windsor, the Company paid a trust, of which a
stockholder/officer is a trustee, $2,000 per month, beginning December
1996, for use of a condominium located in Newport Beach, California,
within a short drive from Windsor's production facility, by certain
company employees, customers and sales representatives. The arrangement
was terminated upon the sale of Windsor.
20
<PAGE>
8. Supplemental Statement Of Cash Flow Information
During 1998, the Company acquired the stock of RMCR for cash of $282,000
and the issuance of 120,000 shares of common stock valued at $300,000.
Also in 1998, the Company issued 150,000 shares of common stock, in
exchange for 750,000 shares of common stock of the acquiring company of
Windsor. The Company received an additional 750,000 shares of the
acquiring company's common stock for the issuance of warrants to purchase
300,000 shares of common stock of the Company. The 1.5 million shares of
the acquiring company's common stock was valued at $905,000.
The Company had no significant noncash investing or financing activities
for the year ended December 31, 1997.
9. Commitments And Contingencies
Lease Commitments
The Company leases office space under an operating lease which expires on
December 31, 2001. The Company also leased office, production facility,
showroom facility and retail space under operating leases which were
transferred upon the sale of Windsor. Total rent expense under all
operating leases was $248,198 in 1998 and $419,311 in 1997.
The future minimum annual rentals under the remaining lease is as
follows:
<TABLE>
Total Lease
Year Commitments
---------------------------------------
<S> <C>
1999 $ 21,600
2000 28,800
2001 28,800
</TABLE>
Legal Proceedings
On September 29, 1998, Bentley was sued by three shareholders. One
of the shareholders was an officer of Janco Designs, Inc., the subsidiary
of the Company which was the subject of an involuntary bankruptcy
proceeding and has now been dissolved. The other two shareholders are
former officers and directors of the Company who acted as such when the
Company's sole business consisted of the sports picture card business
known as Megacards. That business segment was discontinued in 1996.
Leo M. Rodgers, III, a shareholder of the Company, filed a lawsuit
against the Company on September 29, 1998 in the Circuit Court of St.
Louis County, Missouri, asking for a judgement in his favor against the
Company in the amount of the "fair value" as of July 1, 1998, of 30,420
shares allegedly owned individually by Mr. Rodgers and 423,500 shares
allegedly held in the name of Lloyd R. Abrams, Trustee under a Voting
Trust Agreement dated July 17, 1995 (the "Voting Trust"), of which Mr.
Rodgers alleges he is the beneficial owner. Mr. Rodgers alleges that he
is entitled to such a judgement pursuant to Mo. Rev. Stat.Sec.351.405 in
connection with the sale of the Company's subsidiary, Windsor Art, Inc.
("Windsor"), which represented substantially all of the assets of the
Company. The sale of Windsor was approved at the annual meeting of the
Company's shareholders on July 2, 1998. Section 351.405 requires a
company to purchase the shares of any shareholder who, at or prior to the
meeting at which the sale of substantially all of the assets of the
company was approved, filed with the company written objection to the
sale, did not vote in favor of the sale and subsequently made a timely
demand for purchase of such shares by the company. Management of the
Company believes that the Company is not required to purchase the 423,500
shares allegedly held in the Voting Trust because such shares were voted
in favor of the sale. The Company will defend vigorously the Company's
position in court.
21
<PAGE>
Two other shareholders, Andrew Wolfson and Stephan Juskewycz, also
filed suit against Bentley on September 29, 1998 in the Circuit Court of
St. Louis County, Mo., to require the Company to purchase their shares
for the "fair value" of the shares in connection with the sale of
Windsor under Section 351.405, alleging that they own 98,115 and
86,335 shares, respectively. The Company believes that the respective
claims of the two shareholders are separate and distinct. The notice
required by Section 351.405 objecting to the sale with respect to Mr.
Wolfson's alleged 98,115 shares was not received until after the
meeting at which the vote on the sale of Windsor was held. Therefore,
management believes that the Company is not required to repurchase Mr.
Wolfson's shares and will defend vigorously the Company's position in
court.
As part of the same suit, Messrs. Wolfson and Juskewycz also brought a
shareholders' derivative suit against the three directors of the Company,
Mr. Abrams, Ramakant Agarwal and Janet L. Salk. The plaintiffs claim that
the Directors breached their fiduciary obligations to the shareholders,
including the plaintiffs, by causing the Company to repay notes of Janco
Designs, Inc., a subsidiary of the Company, in the amount of $450,000 to
certain trusts of which Mr. Abrams, Richard B. Rothman and Patricia
Rothman are trustees. The plaintiffs also claim that the trusts were
unjustly enriched by the repayment of the notes and that it would be
inequitable for the trusts to retain the $450,000 repaid to them. The
derivative suit demands that the $450,000 be returned to the Company.
Management of the Company believes that the notes were properly repaid
because they were secured by Windsor's assets and guaranteed by Windsor
and the Company. The Company will defend vigorously the Company's
position in court.
Messrs. Wolfson and Juskewycz's suit also alleges a derivative claim that
Mr. Abrams breached a fiduciary duty to the shareholders in connection
with the sale of the Company's wholly owned subsidiary, Windsor, to
Interiors by entering into a consulting agreement with Windsor and
Interiors. The derivative suit demands that the payments made under the
consulting agreement be paid over to the Company. Management believes
that the consideration Mr. Abrams is entitled to receive pursuant to the
terms of the consulting agreement is appropriate in exchange for the
services which Mr. Abrams has agreed to provide to both Windsor and
Interiors and for the covenants regarding noncompetition and other
matters made by Mr. Abrams in the agreement. The Company will defend
vigorously the Company's position in court.
Messrs. Wolfson and Juskewycz's amended their suit on January 21, 1999.
As amended, the suit further alleges that salary and benefits paid to Mr.
Abrams from the Company was $265,000 in 1996 and $284,423 in 1997, that
in addition to these amounts Mr. Abrams also received over $50,000 per
year in additional benefits from the Company, and that this compensation
was excessive. The suit demands that such salary and benefits be repaid
to Bentley. Management believes that the consideration Mr. Abrams
received in 1996 and 1997 was a reasonable payment in exchange for the
services which Mr. Abrams provided to the Company as President and Chief
Executive Officer. The Company will defend vigorously the Company's
position in court.
The Wolfson and Juskewycz amended suit further alleges that bonuses in
the amount of $1,000,000 were paid or will be paid improperly in
connection with the sale of Windsor to Windsor employees and directors by
the Company and demands that these moneys be repaid to the Company.
Management notes that the sole director of Windsor, Lloyd R. Abrams, was
not paid any bonus as a result of the sale of Windsor. Management
believes that any and all bonuses paid in connection with the sale of
Windsor were paid properly for past services and for the future benefit
of the Company. The Company will defend vigorously the Company's position
in court.
22
<PAGE>
Finally, the amended suit of Messrs. Wolfson and Juskewycz alleges that
the conduct of the directors and control persons of Bentley in managing
the Company supports a claim for judicial dissolution of the Company
pursuant to Mo.Rev.Stat. Section 351.494, which provides in paragraph (b)
that a company may be dissolved if its directors have acted, are acting,
or will act in a manner that is illegal, oppressive, or fraudulent.
Messrs. Wolfson and Juskewycz allege that the conduct of the directors
and control persons of the Company satisfies this test, due to the
actions alleged in the previously described counts of the lawsuit, and a
claim that professional fees, alleged to be $150,000, paid by Bentley in
connection with the Windsor transactions were excessive, and demand that
the Company be judicially liquidated and dissolved, with Bentley's assets
converted to cash and distributed to the shareholders on a pro rata basis
after adjustment for the claims previously alleged, and that a receiver
be appointed for the Company. Management believes that this claim is
totally unsupported by the facts, as discussed in relation to the other
claims in the lawsuit that are discussed in the preceding paragraphs, and
believes that any professional service payments made in connection with
the Windsor transactions were reasonable given the services provided. The
Company will defend vigorously the Company's position in court.
The ultimate resolutions of the lawsuits are not within the Company's
control. The court's decision with regard to the validity of the claims
made by the three shareholders and the valuation of their claims could
cause materially different results from those believed likely by
management.
The Company is not currently a party to any other legal proceedings,
other than routine proceedings in the ordinary course of business. The
ordinary course proceedings are not anticipated to have a material
adverse effect on the Company's results of operation or financial
condition.
10. Earnings Per Common Share
<TABLE>
For 1998 and 1997, the computation of basic and diluted earnings per
common share is as follows:
1998 1997
---------------------------
<S> <C> <C>
Numerator for basic and diluted earnings
per share - income available
to common shareholders $ 3,884,277 $ 2,427,146
===========================
Denominator:
Weighted average number of common
shares used in basic EPS 2,876,162 2,813,285
Effect of dilutive securities:
Common stock options 29,345 41,169
---------------------------
Weighted number of common shares and
dilutive potential common stock used
in diluted EPS 2,905,507 2,854,454
===========================
For additional disclosures regarding stock options, see Note 11.
</TABLE>
23
<PAGE>
11. Stock Option Plans
The Company's 1991 Stock Option Plan (the "1991 Plan") provides for
granting to eligible employees, officers and consultants of the Company,
options to purchase a maximum of 87,500 shares of the Company's common
stock. The Plan provides for the granting of options which qualify as
incentive stock options, within the meaning of Section 422 of the Internal
Revenue Code, as well as the granting of nonqualified stock options. All
options granted under the Plan must have an exercise price of not less
than 100% of the fair market value of the common stock on the date of
grant and a maximum term of ten years.
The Board of Directors of the Company may, in its sole discretion, amend
or terminate the Plan at any time, provided, however, that it may not,
without stockholder approval, change (a) the maximum number of shares for
which options may be granted under the Plan; (b) the minimum option price;
(c) the maximum period during which an option may be granted or exercised;
or (d) the eligibility provisions regarding employees to whom options may
be granted.
The Company also has a non-qualified stock option plan (the "1995 Plan")
which provides for granting to eligible employees of the Company or its
subsidiaries, options to purchase a maximum of 300,000 shares of the
Company's common stock. The purchase price of the stock subject to each
option granted should not be less than the par value of such stock subject
to the option. The term of each option granted pursuant to the 1995 Plan
shall not be more than ten years from the date of grant.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for the Option Plans. Accordingly, no compensation cost has
been recognized. Had compensation cost been determined based on the fair
value at the grant dates for awards under the Plans, consistent with the
alternative method set forth under SFAS 123, the Company's net income
(loss) and net income (loss) per common and common equivalent share would
have been reduced. The pro forma amounts are indicated below:
<TABLE>
1998 1997
--------------------------------
<S> <C> <C>
Net Income
As reported $ 3,884,277 $ 2,427,146
Pro forma $ 3,837,531 $ 2,348,690
Net Income Per Common Share
As reported $ 1.35 $ 0.87
Pro forma $ 1.33 $ 0.84
Net Income Per Common Share -
Assuming Dilution
As reported $ 1.33 $ 0.85
Proforma $ 1.31 $ 0.82
</TABLE>
24
<PAGE>
The weighted-average fair value of options granted was $0.39 and $0.16 for
the years ended December 31, 1998 and 1997, respectively. The fair value of
each option granted is estimated on the date of grant using the Black- Scholes
option-pricing model with the following weighted-average assumptions:
<TABLE>
1998 1997
---------------------------
<S> <C> <C>
Expected life 3.0 3.0
Interest rate 8.5% 8.5%
Volatility 144.46% 194.38%
Dividend yield 0 0
</TABLE>
A summary of stock option activity for 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number Price Exercise
Of Shares Per Share Price
------------------------------------------------
<S> <C> <C> <C>
Balance - January 1, 1997 161,940 $0.25 - $2.40 $0.64
Granted 68,000 $0.25 - $0.30 $0.30
Forfeited/expired (28,607) $0.60 - $2.40 $1.35
------------------------------------------------
Balance - December 31, 1997 201,333 $0.25 - $1.20 $0.42
Granted 20,000 $0.90 $0.90
Forfeited/expired (150,000) $0.25 - $0.90 $0.31
-------------------------------------------------
Balance - December 31, 1998 71,333 $0.30 - $1.20 $0.80
=================================================
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Weighted
Number of Average
Options Remaining Weighted
Range Of Outstanding And Years Of Average
Exercise Prices Exercisable Contractual Life Exercise Price
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
$0.30 - $1.20 71,333 5 $0.80
=====================================================================
</TABLE>
12. Significant Customers And Suppliers
During 1997, sales to one customer approximated 21% of total consolidated
net sales. Accounts receivable from the customer amounted to approximately
$251,000 at December 31, 1997. Purchases from two suppliers represented
26% of total purchases and accounts payable to the two suppliers amounted
to $42,397 at December 31, 1997.
There were no significant customers or suppliers for 1998.
25
<PAGE>
13. Subsequent Events
Pursuant to an agreement dated February 23, 1999, RMCR acquired
substantially all of the assets of Mortgage Credit Service ("M.C.S."), a
credit reporting company for $76,000. RMCR signed a promissory note for
$36,000, to be paid at the rate of 10% per month of the collected monthly
billings from existing customers of M.C.S. The remainder of the purchase
price was paid in cash.
26
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There were no changes in or disagreements with accountants during the
1997 and 1998 fiscal years.
PART III
Item 9. Directors and Executive Officers of the Registrant.
The name, age, principal occupation or position and other directorships
held by the directors and executive officers of the Company are set forth below.
All of the directors and officers are elected for one year terms.
Lloyd R. Abrams, 45, has served as President, Chief Executive Officer and
Director of the Company since July 1995 and as Assistant Secretary since
September 1997. From November, 1993 until July, 1998 he served as sole Director
of Windsor, from November 1993 until September, 1997, he served as President of
Windsor, and from August 1997 to July 1998 as Assistant Secretary. For more than
one year prior to joining Windsor, he was President of Abrams, Rothman &
Company, a real estate development firm. Mr. Abrams has a Bachelors of Science
in Civil Engineering, a Masters of Business Administration and a Juris
Doctorate.
Janet L. Salk, 41, has served as a Director of the Company since
July 1995. Ms. Salk principally has engaged in family, civic and charitable
activities for more than the past five years. Ms. Salk is the spouse of Lloyd R.
Abrams. Ms. Salk has Bachelor of Arts, Masters in Social Work and Masters in
Counseling degrees.
Ramakant Agarwal, 43, was appointed to the Board of the Company on January
15, 1998, and has served as Chief Financial Officer and Vice President of the
Company since January 1997, and Secretary since September 1997. He has served as
Chief Financial Officer and Vice President of Windsor since January 1997, and
Secretary since August 1997. From April 1996 to July 1996, Mr. Agarwal served as
a consultant to Retix, Inc., an Internet hardware, software and
telecommunications company. From January 1993 to February 1996, Mr. Agarwal
served as Vice President of Finance and Corporate Planning for Sun West Mortgage
Company, Inc., a non-supervised mortgage company. Mr. Agarwal is a CPA.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than ten
percent of the Company's outstanding stock ("Reporting Persons") to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. During 1998, to the best of the Company's knowledge, all Section
16(a) filing requirements applicable to Reporting Persons were complied with.
[Remainder of page intentionally left blank.]
27
<PAGE>
Item 10. Executive Compensation.
The following table sets forth the compensation of the named executive of
the Company for each of the last three years:
<TABLE>
Summary Compensation Table
Annual Compensation Long-Term Compensation
----------------------------------- -----------------------------------------------
<CAPTION>
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Salary Bonus Compensation Awards SARs Pay- Compensation
Name & Principal Year ($) ($) ($) ($) (#) outs ($)
Position
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lloyd R. Abrams (1) 1998 193,385 --
President and 1997 284,423 10,000 -- --
Chief Executive Officer 1996 265,000 -- -- -- -- --
Ramakant Agarwal 1998 60,193 233,500
(2)(3) 1997 101,923 20,000 28,000
Chief Financial -- --
Officer, Vice
President and
Secretary
--------------------
(1) Mr. Abrams became an executive officer of the Company in July 1995.
(2) Mr. Agarwal became an executive officer of the Company in January 1997.
(3) Mr. Agarwal received a cash bonus of $233,500 in lieu of the bonus of cash
and securities of Interiors, Inc. described in the Summary of Unwritten Bonus
Agreement between the Company and Mr. Agarwal which is Exhibit 10.9 hereto.
</TABLE>
<TABLE>
Aggregate Option/SAR Exercises in
FY-98 and FY-98 Option/SAR Values
<CAPTION>
# of Securities Value of
Underlying Unexercised In-the-
Unexercised Money
Shares Acquired Options/SARs at Options/SARs at
Name on Exercise ($) Value Realized($) FY-End FY-End
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ramakant Agarwal 0 N/A 28,000 (options) None
</TABLE>
28
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the beneficial ownership of shares of the
Company's Common Stock as of January 13, 1999 held by: (i) each person who is
known to the Company to beneficially own more than 5% of the outstanding shares
of the Company's Common Stock; (ii) each person who is a Director or named
Executive Officer; and (iii) all the Company's Directors and officers as a
group. Unless otherwise indicated, all shares are held with sole voting and
investment power.
<TABLE>
<CAPTION>
Name and Address Shares Owned(1) Percent of Class(1)
<S> <C> <C>
Group comprised of Lloyd R. Abrams, Richard B.
Rothman and Leo M. Rogers (the
"Voting Trust Group")
9719 Conway Road
St. Louis, Missouri 63124..... 2,117,500 (2) 68.68%
Lloyd R. Abrams as Voting Trustee of the Voting
Trust, dated July 17, 1995
9719 Conway Road
St. Louis, Missouri 63124..... 2,117,500 (2)(3) 68.68
Lloyd R. Abrams
9719 Conway Road
St. Louis, Missouri 63124..... 1,321,000 (2)(3) 42.84
Richard B. Rothman
7700 Bonhomme, 7th Floor
St. Louis, Missouri 63105..... 423,500 (4) 13.74
Leo M. Rodgers
7167 Westmoreland Drive
St. Louis, Missouri 63130..... 448,915 (4)(5) 14.56
Janet L. Salk
9719 Conway Road
St. Louis, Missouri 63124..... -- --
Ramakant Agarwal
4444 Ayers Avenue
Vernon, California 90023...... 25,000 (6) 0.81
All Directors and executive officers as a group 2,193,000 71.13%
- -----------------------
(1) Each beneficial owner's percentage ownership is based upon 3,083,285
shares of the Company's Common Stock issued and outstanding as of
March 11, 1999.
(2) In a Statement on Schedule 13D (the "Schedule 13D") filed with the
Securities and Exchange Commission (the "SEC") by the Voting Trust Group
and its members, the Voting Trust Group has reported that 2,117,500 shares
of the Company's Common Stock were issued to the Voting Trustee under the
Voting Trust Agreement. Under the Voting Trust Agreement, Mr. Abrams
retains voting power over shares of the Company's Common Stock deposited
therein.
(3) In a Form 4 dated January 11, 1999, Mr. Abrams reported that he acquired
40,000 shares of Company Common Stock and a warrant for 300,000 shares of
Company Common Stock with an exercise price of $10 per share and
29
<PAGE>
which is presently exercisable. In a Form 5 dated January 27, 1997, Mr.
Abrams reported that certain shares of the Company's Common Stock
attributed to him are beneficially owned by him as trustee of each of The
Abrams Family Trust, The Stacey, Kevin and Meredith Trust dated 12/1/91
and The Janet L. Salk Children's Trust in the amounts of 847,000 shares,
222,250 shares and 211,750 shares, respectively. Mr. Abrams has sole
investment power over all such shares of the Company's Common Stock.
(4) In the Schedule 13D, Mr. Rothman and Mr. Rodgers reported that 423,500
shares each of the Company's Common Stock that are attributable to
Mr. Rothman and Mr. Rodgers were issued in the name of the Voting
Trustee. Under the Voting Trust Agreement, the Voting Trustee retains
voting power of shares of the Company's Common Stock deposited
therein. Mr. Rothman and Mr. Rodgers retain investment power with
regard to the number of shares of the Company's Common Stock
attributed to each of them.
(5) In a Form 5 dated February 14, 1997, Mr. Rodgers reported that he
beneficially owns 448,915 shares of the Company's Common Stock.
(6) Mr. Agarwal also has an option for 28,000 shares of the Company's Common
Stock which is presently exercisable.
</TABLE>
Item 12. Certain Relationships and Related Transactions.
The Company's executive compensation program is administered under the
direction of the Board of Directors. Mr. Abrams and Mr. Agarwal are members of
the Board of Directors and serve as executive officers of the Company.
Janco borrowed money from certain trusts of which Mr. Abrams, Richard B.
Rothman and his spouse, Patricia Rothman are trustees. The borrowings were
guaranteed by Bentley and Windsor. As of March 13, 1998, the Company repaid all
such borrowings in the aggregate amount of $450,000.
[Remainder of page intentionally left blank on this draft.]
30
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Ex. No. Description
2.1 Stock Purchase Agreement between Bentley International, Inc.
and Interiors, Inc. dated July 7, 1998, incorporated herein
by this reference from Exhibit 10.1 to Form 8-K of the Registrant
dated effective July 30, 1998.
2.2 Securities Purchase and Registration Rights Agreement between
Bentley International, Inc. and Interiors, Inc. dated July 30, 1998,
incorporated herein by this reference from Exhibit 10.2 to Form 8-K
of the Registrant dated effective July 30, 1998.
2.3 Repurchase Agreement and Mutual General Release between the
Registrant, Interiors, Inc., Windsor Art, Inc., Lloyd R. Abrams and
Max Munn dated December 1, 1998 is incorporated herein by this
reference from Exhibit 2 to Form 8-K of the Registrant dated
effective December 1, 1998.
3.1 Restated Articles of Incorporation of Registrant filed as Exhibit
No. 3.1 to Registrant's Registration Statement on Form S-18 (Reg.
No. 33-42393C) are incorporated herein by this reference.
3.2 Amended and Restated By-laws of Registrant as currently in effect
filed as Exhibit No. 3 to Registrant's Form 10-QSB dated March 31,
1998 is incorporated herein by this reference.
3.3 Amendment to Restated Articles of Incorporation filed as Exhibit
3.3 to Registrant's Form 10-K for the year ended December 31, 1995
is incorporated herein by this reference.
9.1 Voting Trust Agreement, dated July 17, 1995, by and among Lloyd
Abrams, as Voting Trustee, Richard B. Rothman, Lloyd R. Abrams as
Trustee of each of the Abrams Family Trust, The Stacey Kevin and
Meredith Trust dated 12/1/91 and The Janet L. Salk Children's Trust
filed as Exhibit 9.1 to Registrant's Form 10-K for the year ended
December 31, 1995 is incorporated herein by this reference.
10.1 Megacards Stock Option Plan filed as Exhibit No. 10 to Registrant's
Form 10-K for the year ended December 31, 1991 is incorporated
herein by this reference.
10.2 Agreement to Form Joint Venture Dated September 13, 1996, by and
among Excell Recycling, Inc.; Quality Baseball Cards, Inc. and
Bentley International, Inc. filed as Exhibit 2.1 to the Registrant's
Current Report on Form 8-K dated September 27, 1996 is incorporated
by this reference.
10.3 Limited Partnership Agreement Legends, LP dated September 12, 1996,
by and among Excell Recycling, Inc.; Quality Baseball Cards, Inc.
and Bentley International, Inc. filed as Exhibit 2.2 to the
Registrant's Current Report on Form 8-K dated September 27, 1996 is
incorporated by this reference.
10.4 Eighth Amendment to Revolving Credit Loan Agreement, dated as of
April 1, 1997, by and between Registrant and Mark Twain Bank filed
as Exhibit 10.34 to the Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1996 is incorporated by this
reference.
10.5 Tenth Amendment to Revolving Credit Loan Agreement, dated as of
September 13, 1997, by and between Registrant and Mark Twain Bank
filed as Exhibit 10.35 to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1996 is incorporated by this
reference.
10.6 Megacards, Inc. 1995 Stock Option Plan filed as Exhibit 10.37 to the
Registrant's Form 10-KSB for 1997 is incorporated herein by this
reference.
31
<PAGE>
10.7 Annexes A-1 through P below are contracts or addenda to contracts
dated July 30, 1998, to the Stock Purchase Agreement between Bentley
International, Inc. and Interiors, Inc., which were listed on the
Form 8-K of Bentley dated effective July 30, 1998, and are
incorporated by reference from Exhibits 10.1 through 10.11 of the
Form 10- QSB of Bentley International, Inc. dated June 30, 1998.
Certificates of Authority from officers of Bentley and Interiors
which were also addenda to the Stock Purchase Agreement are omitted.
Annexes A-1 through P listed below are contracts between Bentley
International, Inc. and Interiors, Inc. except where noted:
Annex A-1 -- $2,000,000 Promissory Note
Annex A-2 -- $3,300,000 Promissory Note
Annex B -- Escrow Agreement between U. S. Bank Trust, Bentley
International, Inc. and Interiors, Inc.
Annex F -- Non-Competition Agreement between Windsor Art, Inc. and
Lloyd R. Abrams
Annex I -- Consulting Agreement between Windsor Art, Inc.,
Interiors, Inc. and Lloyd R. Abrams
Annex J -- Pledge Agreement
Annex K -- Continuing Guaranty between Max and Laurie Munn and
Bentley International, Inc.
Annex M -- Subordination Language
Annex N -- Windsor Voting Trust Agreement between Lloyd R. Abrams
and Max Munn as Voting Trustees, Interiors, Inc. and
Bentley International, Inc.
Annex O -- Bentley Voting Trust Agreement between Lloyd R. Abrams
as Voting Trustee, Interiors, Inc. and Bentley
International, Inc.
Annex P -- Interiors Voting Trust Agreement between Max Munn as
Voting Trustee, Interiors, Inc. and Bentley
International, Inc.
10.8 Bonus Agreement between the Registrant and Pauline Raschella dated
October 26, 1998 attached to Form 10-QSB of the Registrant dated
September 30, 1998 as Exhibit 10.12 is incorporated herein by this
reference.
10.9 Summary of unwritten bonus agreement between the Registrant and
Ramakant Agarwal attached to Form 10-QSB of the Registrant dated
September 30, 1998 as Exhibit 10.13 is incorporated herein by this
reference.
10.10 Stock Purchase Agreement between Sandra L. James and the Registrant
dated November 12, 1998 attached hereto is incorporated by this
reference.
10.11 Escrow Agreement between Sandra L. James and the Registrant dated
November 12, 1998 attached hereto is incorporated by this reference.
13.1 Portions of Form 10-QSB of the Registrant dated June 30, 1998
referenced in the text are incorporated herein by this reference.
13.2 Portions of Form 10-QSB of the Registrant dated September 30, 1998
referenced in the text are incorporated herein by this reference.
21.1 A list of the subsidiary of the Registrant is filed herewith.
23.1 Consent of Rubin, Brown, Gornstein & Co. LLP is filed herewith.
27 Financial Data Schedule
(b)
Reports on Form 8-K.
On December 16, 1998, the Registrant filed a Current Report on Form 8-K
dated December 1, 1998 reporting entry into a repurchase agreement and mutual
general release with Windsor, Lloyd R. Abrams, Max Munn and Interiors which is
incorporated herein by this reference. In addition, on August 14, 1998, the
Registrant filed a Current Report on Form 8-K dated July 30, 1998 reporting the
sale of the Registrant's former Windsor Art, Inc. subsidiary to Interiors, Inc.
which is incorporated herein by this reference.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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)
Date: April 15, 1999 By /s/ Lloyd R. Abrams
Lloyd R. Abrams, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Lloyd R. Abrams Director and Chief April 15, 1999
Lloyd R. Abrams Executive Officer
/s/Ramakant Agarwal Director and Chief April 15, 1999
Ramakant Agarwal Financial Officer
33
EXHIBIT 21.1
The subsidiary of the Registrant is:
1. Residential Mortgage Credit Reporting, Inc., a Missouri
corporation, doing business under the Arizona trade names
"RMCR Services" and "RMCR."
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Bentley International, Inc.
St. Louis, Missouri
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File Number 33-47456) of our report dated April 12, 1999
relating to the consolidated financial statements of Bentley International, Inc.
appearing in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
/s/ Rubin, Brown, Gornstein & Co. LLP
RUBIN, BROWN, GORNSTEIN & CO., LLP
St. Louis, Missouri
April 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1998, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 6,350,884
<SECURITIES> 300,028
<RECEIVABLES> 136,644
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,534,506
<PP&E> 520,126
<DEPRECIATION> 393,112
<TOTAL-ASSETS> 7,515,498
<CURRENT-LIABILITIES> 828,117
<BONDS> 0
0
0
<COMMON> 554,991
<OTHER-SE> 2,656,578
<TOTAL-LIABILITY-AND-EQUITY> 7,515,498
<SALES> 215,443
<TOTAL-REVENUES> 393,267
<CGS> 52,183
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64,833
<INCOME-PRETAX> (312,892)
<INCOME-TAX> 0
<INCOME-CONTINUING> (312,892)
<DISCONTINUED> 4,197,169
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,884,277
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.33
</TABLE>
