U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
|X|Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the Quarterly Period Ended March 31, 1999
|_|Transition Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the Transition Period from ________________ to _________________
Commission file number: 0-19503
BENTLEY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MEGACARDS, INC.
(Former name of registrant)
Missouri 43-1325291
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
9719 Conway Road 63124
St. Louis, Missouri (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (314) 569-1659
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes |X| No |_|.
On May 10, 1999 the registrant had 3,083,285 outstanding shares of Common Stock,
$.18 par value.
Transitional Small Business Disclosure Format (Mark one): Yes |_| No|X|.
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BENTLEY INTERNATIONAL, INC.
FORM 10-QSB
INDEX
Page
PART I -- CONSOLIDATED FINANCIAL INFORMATION
Note: This Form 10-QSB includes only Part II. Part I will be included in the
amended Form 10-QSB which will be submitted within 5 days. A Form 12b-25
Notification of Late Filing is filed concurrently herewith.
PART II -- OTHER INFORMATION
ITEM 1. Legal Proceedings................................................... 1
ITEM 2. Changes in Securities and Use of Proceeds........................... 2
ITEM 4. Submission of Matters to a Vote of Security Holders................. 3
ITEM 6. Exhibits and Reports on Form 8-K.................................... 3
SIGNATURE................................................................... 6
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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 Part II, Item 1.
PART II
Item 1. 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. ss.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 ss.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 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.
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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 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 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
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 2. Changes in Securities and Use of Proceeds
Part II Item 2 of the Company's Form 10-QSB for the quarter ended September
30, 1998 is hereby incorporated by reference. This Item addresses issuances of
exempted securities, including the issuances of
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securities in connection with the acquisition of RMCR. There have been no
further issuances of exempted securities.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted during the first quarter of 1999 to a vote of
the Company's shareholders, through the solicitation of proxies or otherwise.
Item 6. 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.
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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.
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 Stock Purchase Agreement between Sandra L. James and the Registrant dated
November 12, 1998 attached to Form 10-KSB of the Registrant dated December
31, 1998 as Exhibit 10.10 is incorporated by this reference.
10.10Escrow Agreement between Sandra L. James and the Registrant dated November
12, 1998 attached to Form 10-KSB of the Registrant dated December 31, 1998
as Exhibit 10.11 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.
(b) Reports on Form 8-K.
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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.
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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)
By /s/ Lloyd R. Abrams
Lloyd R. Abrams, President and
Chief Executive Officer
By /s/Ramakant Agarwal
Ramakant Agarwal, Chief
Financial Officer
May 17, 1999
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