<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2000 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ______________ to
_____________
Commission file number 0-22716
BOLLINGER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2502577
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
602 FOUNTAIN PARKWAY, GRAND PRAIRIE, TEXAS 75050
(Address of principal executive offices)
(Zip Code)
(972) 343-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
----- -----
As of August 2, 2000, 4,400,210 shares of the registrant's common
stock, $0.01 par value per share, were outstanding.
<PAGE> 2
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
June 30, 2000 (unaudited) and March 31, 2000 3
Consolidated Statements of Operations -
Quarters Ended June 30, 2000 and 1999 (unaudited) 5
Consolidated Statements of Cash Flows -
Quarters Ended June 30, 2000 and 1999 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE> 3
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, 2000 March 31, 2000
------------- --------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 125,092 $ 959,242
Accounts receivable - trade net allowance for doubtful accounts
of $560,654 and $543,387 and allowance for returns and allowances
of $1,239,100 and $1,748,847 and allowance for advertising
of $486,360 and $327,510 5,661,132 6,277,077
Prepaid expenses 111,235 129,613
Inventories, net 10,515,140 9,581,676
Other 17,091 47,788
------------ ------------
Total current assets 16,429,690 16,995,396
PROPERTY PLANT AND EQUIPMENT - NET 1,735,917 1,815,695
OTHER ASSETS
Goodwill, net of accumulated amortization of $621,775 and $532,950 2,931,225 3,020,050
License rights, net of accumulated amortization of $125,125
and $107,250 589,875 607,750
Notes receivable and other 104,985 106,254
Deferred marketing costs, net of accumulated amortization of $712,667
and $534,500 1,424,738 1,602,905
Deferred financing fees - net of accumulated amortization of $748,566
and $711,398 12,388 49,556
------------ ------------
Total other assets 5,063,211 5,386,515
------------ ------------
TOTAL ASSETS $ 23,228,818 $ 24,197,606
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2000 March 31, 2000
------------- --------------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 1,275,091 $ 1,336,426
Current portion of capital lease obligations 99,304 76,938
Accounts payable-trade 7,155,244 6,427,069
Taxes payable 51,304 53,104
Accrued liabilities 838,805 644,673
Accrued product liability 417,993 391,879
------------ ------------
Total current liabilities 9,837,741 8,930,089
LONG-TERM LIABILITIES
Long-term debt, less current portion 7,731,286 8,701,886
Capital lease obligations, less current portion 865,912 913,328
Contingency for legal settlement 2,970,000 3,000,000
Other 33,335 33,335
------------ ------------
Total long-term liabilities 11,600,533 12,648,549
------------ ------------
Total liabilities 21,438,274 21,578,638
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note F)
STOCKHOLDERS' EQUITY
Preferred stock -- $.01 par value;
1,000,000 shares authorized; none issued -- --
Common stock -- $.01 par value; 8,000,000 shares authorized;
4,400,210 shares issued and outstanding 44,002 44,002
Capital in excess of par 15,519,058 15,519,058
Treasury Stock (11,947) --
Accumulated deficit (13,760,569) (12,944,092)
------------ ------------
Total stockholders' equity 1,790,544 2,618,968
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,228,818 $ 24,197,606
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 8,989,403 $ 7,165,588
Cost of goods sold 6,225,100 4,797,924
------------ ------------
Gross profit 2,764,303 2,367,664
Selling expenses 1,062,303 726,886
Distribution, general and
administrative expenses 2,154,150 2,033,056
------------ ------------
3,216,453 2,759,942
------------ ------------
Operating loss (452,150) (392,278)
Other expense (income)
Interest expense 364,299 251,865
Gain on sale of assets -- (4,685)
Other 28 (774)
------------ ------------
364,327 246,406
------------ ------------
Loss before income tax expense (816,477) (638,684)
Income tax expense -- --
------------ ------------
Net loss $ (816,477) $ (638,684)
============ ============
Per share data (basic and diluted):
Basic loss per share $ (0.19) $ (0.15)
============ ============
Diluted loss per share $ (0.19) $ (0.15)
============ ============
Shares used in the calculation of per share amounts:
Basic common shares 4,400,210 4,400,210
Dilutive impact of stock options -- --
------------ ------------
Diluted common shares 4,400,210 4,400,210
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (816,477) $ (638,684)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities
Gain on sale of assets -- (4,685)
Contingency for legal settlement (30,000) --
Depreciation and amortization 488,574 307,848
Provision for returns and allowances 369,942 513,982
Provision for doubtful accounts 18,807 15,000
Provision for advertising 326,153 96,000
Provision for obsolete inventory 176,556 --
Changes in operating assets and liabilities
Accounts receivable-trade (98,957) 1,299,411
Other 30,697 (12,050)
Inventories (1,110,020) 136,680
Prepaid and other expenses 18,378 28,828
Notes receivable and other assets 572 1,008
Accounts payable-trade 728,175 1,121,948
Taxes payable (1,800) 18,180
Accrued liabilities 194,132 (229,258)
Accrued product liability 26,114 (33,344)
Other long-term liabilities -- 33,335
------------ ------------
Net cash provided by operating activities 320,846 2,654,199
Cash flows from investing activities
Reimbursements (purchases) of property and equipment (86,064) 12,000
Proceeds from sale of assets -- 6,103
------------ ------------
Net cash provided by (used in) investing activities (86,064) 18,103
Cash flows from financing activities
Net payments on long-term debt (1,031,935) (2,715,774)
Payments on capital lease obligations (25,050) (57,719)
Purchase of treasury stock (11,947) --
------------ ------------
Net cash used in financing activities (1,068,932) (2,773,493)
Net increase (decrease) in cash (834,150) (101,191)
Cash at beginning of period 959,242 125,719
------------ ------------
Cash at end of period $ 125,092 $ 24,528
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE> 7
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - GENERAL
The consolidated interim financial statements include the accounts of Bollinger
Industries, Inc., its wholly owned subsidiaries, and Bollinger Industries, L.P.,
a partnership wholly-owned by Bollinger's subsidiaries (collectively the
"Company").
The consolidated interim financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles ("GAAP") have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
financial statements should be read in conjunction with the consolidated
financial statements and notes for the fiscal year ended March 31, 2000
contained in the Company's Annual Report on Form 10-K.
In the opinion of management, the unaudited interim consolidated financial
statements of the Company contain all adjustments, consisting only of those of a
normal recurring nature, necessary to present fairly the Company's financial
position and the results of its operations and cash flows for the periods
presented. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions. Such estimates and assumptions
affect the reported amounts of assets and liabilities, as well as the disclosure
of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenue and expense during the reporting period.
Actual results could differ from these estimates.
Reclassifications
When necessary, certain prior year amounts have been reclassified to conform to
the current year presentation.
Revenue Recognition and Provisions for Chargebacks and Buybacks
The Company recognizes sales revenue at the time the products are shipped to its
customers. Provision is made currently for estimated product returns and
deductions which may occur. These returns are generally for products that are
salable with minor reworking of packaging or replacement of missing components.
The term "Chargebacks" refers to the action taken by the customer to withhold
from payments or to apply for credit amounts for items such as volume discounts
or rebates under marketing programs or pricing discrepancies, penalties, vendor
compliance issues, shipping shortages and any other similar item under vendor
compliance guidelines established by the customer. The provision for returns is
estimated based on current trends and historical
7
<PAGE> 8
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - CONTINUED)
NOTE A - GENERAL-CONTINUED
experience of returns. The provision for chargebacks is estimated based on the
marketing programs designed for the customer, and recent historical experience
based on volume.
In certain limited circumstances, the Company has followed a "buyback" policy
whereby the Company purchases competitors' product from a new customer in order
to obtain shelf space for the Company's product lines. The cost of such
buybacks is amortized over the life of the program, which typically has been
two to three years.
NOTE B - CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Interest paid $343,310 $205,957
</TABLE>
NOTE C - INVENTORIES
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
------------ ------------
<S> <C> <C>
Raw materials $ 311,539 $ 360,934
Finished goods 11,077,825 9,922,317
Reserve for obsolescence (874,224) (701,575)
------------ ------------
$ 10,515,140 $ 9,581,676
============ ============
</TABLE>
NOTE D - NOTES PAYABLE AND LONG TERM DEBT
The Company currently has a revolving credit facility with a financial
institution providing a maximum line of $15 million, subject to certain
borrowing base requirements and covenants, which expires in August 2002. In June
2000 the loan agreement was amended, primarily revising certain negative
performance covenants involving tangible net worth and debt to tangible net
worth ratios. The outstanding balance under the credit line is collateralized by
substantially all of the Company's assets, including accounts receivable and
inventory. As of June 30, 2000 there was $7,844,000 outstanding under the loan
agreement. Availability under the line was $37,000 at June 30, 2000. During the
quarter ending June 30, 2000 the Company received a waiver for noncompliance of
a certain negative performance covenant of the loan agreement involving the
tangible net worth ratio.
8
<PAGE> 9
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED-CONTINUED)
NOTE D - NOTES PAYABLE AND LONG TERM DEBT-CONTINUED
The Company has a convertible subordinated note payable for $1,400,000 and a
five-year term pursuant to the asset purchase agreement with The Step Company.
The note bears interest at the rate of prime plus one percent adjusted
quarterly. The holder has the right to convert the outstanding principal balance
into fully paid and non-assessable shares of the Company's unregistered common
stock subject to predefined ratios.
NOTE E - INCOME TAXES
The Company's effective income tax rates for the three months ended June 30,
1999 and 2000 was 0% because of the lack of taxable income. At June 30, 2000 the
Company had net operating losses available to offset future taxable income of
approximately $10 million which begin expiring in 2011.
NOTE F - COMMITMENTS AND CONTINGENCIES
Cause No. 96-02952; Suntrust Bank Atlanta, as Trustee for Suntrust Retirement
Sunbelt Equity Fund v. Bollinger Industries, Inc., Glenn D. Bollinger, Bobby D.
Bollinger, Michael J. Beck, John L. Maguire, and Grant Thornton, L.L.P.; in the
191st (originally filed in the 68th Judicial District Court) Judicial District
Court of Dallas County, Texas (the "Suntrust Lawsuit"):
The Company, Glenn D. Bollinger (Chairman and CEO), Bobby D. Bollinger
(President), Michael J. Beck (former CAO), John L. Maguire (Director), and Grant
Thornton, L.L.P. (former independent accountants) are defendants in a securities
fraud lawsuit filed on March 22, 1996 by shareholder Suntrust Bank Atlanta, as
Trustee for Suntrust Retirement Sunbelt Equity Fund, on behalf of themselves and
all persons similarly situated. This lawsuit was filed as a class action on
behalf of those who purchased securities through a public offering of the
Company's stock, alleging that the price of the stock was artificially inflated
and maintained in violation of the anti-fraud provisions of the securities law
as well as common law. Further, Grant Thornton has cross-claimed against the
underwriters, and against the Company, Glenn D. Bollinger and Bobby D.
Bollinger, generally seeking contribution.
The case has been transferred to the 191st Judicial District Court and the trial
is currently stayed, pending an appeal of the class certification filed by Grant
Thornton and the Bollinger parties. The Appellants' Briefs of Grant Thornton and
the Bollinger parties were filed on June 30, 2000. The Company believes that it
has several meritorious defenses to Plaintiffs' claims. This case continues to
be mediated through the ongoing efforts of a mediator.
9
<PAGE> 10
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED-CONTINUED)
NOTE F - COMMITMENTS AND CONTINGENCIES-CONTINUED
Civil Action No. 3:96C-V-0823-L; STI Classic Fund and STI Classic Sunbelt v.
Bollinger Industries, Inc., Glenn D. Bollinger, Bobby D. Bollinger, and Michael
J. Beck; in the United States District Court for the Northern District of Texas,
Dallas Division (the "STI Lawsuit"):
The Company, Glenn D. Bollinger, Bobby D. Bollinger, and Michael J. Beck are
defendants in a lawsuit filed on March 22, 1996 in the United States District
Court for the Northern District of Texas, Dallas Division, by shareholders STI
Classic Fund and STI Classic Sunbelt, on behalf of themselves and all persons
similarly situated. Like the Suntrust lawsuit, this lawsuit was also filed as a
class action on behalf of a class of persons who purchased securities issued by
the Company at prices which allegedly were artificially inflated and maintained
in violation of the anti-fraud provisions under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5
thereunder. A class certification has been granted by the court. The Defendants
dispute the claims and are contesting the claims vigorously. The Plaintiffs have
filed a Motion for Partial Summary Judgment against Bollinger Industries, Inc.,
which has been briefed and is currently pending. The case is currently not set
for trial, and through the efforts of a mediator, mediation is ongoing.
Civil Action No. 00-1842-J Curtis Logan v. Bollinger Industries, Inc.; in the
191st Judicial District Court, Dallas County, Texas ("the Logan Lawsuit"):
Logan's cross-claim for indemnity against the Company was severed after the
Court granted summary judgment as to liability on Logan's indemnity claims, plus
his attorneys' fees and expenses, and this case is the result. Settlement
negotiations have produced a Rule 11 Agreement which was executed during the
quarter ending June 30, 2000 for $150,000. The Company paid $30,000 during June
2000 and the remaining $120,000 is scheduled to be paid in October 2000. This
amount is included in the contingency for legal settlement in the accompanying
balance sheet.
At June 30, 2000 the Company has a $975,387 standby letter of credit with a
financial institution. The standby letter of credit collateralizes certain
capitalized leased equipment and related software.
In connection with an investigation by the Securities and Exchange Commission,
in September 1996 the Company consented to the entry of an order of permanent
injunction which enjoins the Company from violating the antifraud, periodic
reporting, record keeping and internal accounting controls provisions of the
Exchange Act and regulations promulgated thereunder in the future in the conduct
of its business. Glenn Bollinger consented to the entry of an order of permanent
injunction enjoining him from violations of the antifraud, record keeping,
periodic reporting and internal accounting controls provisions of the Exchange
Act and regulations promulgated thereunder in the future, and agreed to the
payment of a monetary penalty in the amount of $40,000. Ronald Bollinger
consented to the entry of an order of permanent injunction enjoining him from
violations of the antifraud, record keeping, periodic reporting and internal
accounting controls provisions of
10
<PAGE> 11
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED-CONTINUED)
NOTE F - COMMITMENTS AND CONTINGENCIES-CONTINUED
the Exchange Act and regulations promulgated thereunder, and agreed not to act
as a director or officer of a registered or reporting entity in the future.
From time to time, the Company is a party to various legal proceedings arising
in the ordinary course of business. The Company is not currently a party to any
other material litigation and is not aware of any litigation threatened against
the Company, arising in the ordinary course of business that could have a
material adverse effect on the Company.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's Annual
Reports on Form 10-K and consolidated financial statements for the fiscal years
ended March 31, 2000 and March 31, 1999; the Company's Form 10-Q for the quarter
ended June 30, 1999; and the consolidated financial statements and related notes
for the quarter ended June 30, 2000 found elsewhere in this report.
QUARTER ENDED JUNE 30, 2000 COMPARED WITH QUARTER ENDED JUNE 30, 1999
Net sales increased for the quarter ended June 30, 2000 by approximately
$1,824,000 on a comparative basis with the prior year, an increase of 25.5%. The
increase in net sales resulted from placement of product with a major mass
merchandiser in July 1999 and placement of product with a major television
shopping account.
Gross profits as a percent of net sales decreased for fitness accessory products
to 30.8% in the quarter ended June 30, 2000 from 33.0% in the quarter ended June
30, 1999. The decrease was primarily due to increased costs to service the major
mass merchandiser.
Selling expenses for the quarter ended June 30, 2000 increased by approximately
$335,000 as compared to the quarter ended June 30, 1999, and increased as a
percentage of net sales to 11.8% from 10.1%. The increase in selling expense was
primarily related to increased costs of advertising programs to support sales
increases.
Distribution, general and administrative expenses for the quarter ended June 30,
2000 increased by approximately $121,000 as compared to the quarter ended June
30, 1999, and decreased as a percentage of net sales to 24.0% in 2000 from 28.4%
in 1999. The increase in distribution, general and administrative expenses
resulted from increases in cost of providing "EDI" computer services to a major
mass merchandiser, increases in product liability insurance and increases in
legal expense to defend patents on licensed product.
The Company sustained an operating loss of $452,000 for the quarter ended June
30, 2000, as compared to an operating loss of $392,000 in the same quarter last
year or a change of $60,000. As a percentage of net sales, the operating loss
decreased from 5.5% in 1999 to 5.0% in 2000. The increase of the operating loss
was primarily from increases in costs listed above offset by increased gross
profit.
Interest expense for the quarter ended June 30, 2000 was approximately $364,000
compared to approximately $252,000 for the same quarter in the previous year.
The increase in interest expense was primarily due to an increase in the
borrowed balance and a 2% increase in the interest rate assessed by a financial
institution.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of outside financing in the past several years
has been short-term borrowings from an asset-based lender. Net cash provided by
operating activities for the quarter ended June 30, 2000 was $321,000 compared
to cash provided by operating activities for the same period in the prior year
of $2,654,000.
The Company has a revolving credit facility with a financial institution
providing a maximum line of $15 million, subject to certain borrowing base
requirements and covenants, which expires in August 2002. In June 2000 the loan
agreement was amended, primarily revising certain negative performance covenants
involving tangible net worth and debt to tangible net worth ratios. The
outstanding balance under the credit line is collateralized by substantially all
the Company's assets, including accounts receivable and inventory. As of June
30, 2000 there was $7,844,000 outstanding under the loan agreement. Availability
under the line was $37,000 at June 30, 2000. During the quarter ending June 30,
2000 the Company received a waiver for noncompliance of a certain negative
performance covenant of the loan agreement involving the tangible net worth
ratio.
The Company has a convertible subordinated note payable for $1,400,000 with a
five-year term pursuant to the asset purchase agreement with The Step Company.
The note bears interest at the rate of prime plus one percent adjusted
quarterly. The holder has the right to convert the outstanding principal balance
into fully paid and non-assessable shares of the Company's unregistered common
stock subject to predefined ratios.
Outstanding balances in the quarter ended June 30, 2000 bore interest at a rate
of 11.25% compared to an approximate rate of 9.25% for the quarter ended June
30, 1999.
In March 1999, the Company recorded a contingent liability of $3,000,000 in
anticipated settlement of both the STI and Suntrust Lawsuits. The plaintiffs
withdrew the negotiated settlement offer subsequent to the end of June 1999. A
$2,970,000 accrual for legal contingency remains on the balance sheet in
anticipation of continuing negotiations. Whether the Company will be successful
in securing a final settlement is uncertain.
FACTORS THAT COULD AFFECT FUTURE PERFORMANCE
Certain statements contained in this Report, including without limitation,
statements containing the words "believes," "anticipates," "intends," "expects,"
and words of similar import, constitute "forward-looking statements." Such
forward-looking statements involve numerous assumptions about known and unknown
risks, uncertainties and other factors which may ultimately prove to be
inaccurate. Certain of these factors are discussed in more detail elsewhere in
this Report, including without limitation under "Item 2. Management's Discussion
and Analysis of Financial Condition
13
<PAGE> 14
and Results of Operations" and include the Company's ability to continue to
improve gross margin, to maintain good relationships with its customers and
suppliers and to generate sufficient cash to fund operations. Actual results may
differ materially from any future results expressed or implied by such
forward-looking statements. The Company disclaims any obligation to update any
forward-looking statements or publicly revise any of the forward-looking
statements contained herein to reflect future events or developments.
Whether the STI and Suntrust Lawsuits will be settled or will proceed through
the judicial process is uncertain. There can be no assurances that the Company
and the plaintiffs will ultimately reach an acceptable settlement and there can
be no assurances that the Company could fund an extensive legal proceeding or
withstand an unfavorable judgment at trial.
The Company's ability to generate sufficient funding for operations, including
the resolution of the shareholder derivative lawsuits, depend on future
operating earnings, market conditions and lender forbearance.
Investors are cautioned that forward-looking statements involve certain risks
and uncertainties that could cause actual results of the Company to differ
materially from those contained in the forward-looking statements. In addition
to the factors mentioned above, other important factors include, but are not
limited to: seasonality, advertising and promotional efforts, availability and
terms of capital, future acquisitions, economic conditions, consumer
preferences, lack of success of new products, loss of customer loyalty,
heightened competition and other factors discussed in this Report. The Company
disclaims any obligation to update or to publicly revise any of the
forward-looking statements contained herein to reflect future events or
developments.
The Company continues to suffer operating losses. Nothing contained in these
financial statements or in Management's Discussion and Analysis of Financial
Condition and Results of Operations should be interpreted as a guarantee of
future earnings or a change in financial condition. The actual results of the
Company could differ materially from the statements found in this section and
elsewhere in this Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
Not applicable.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cause No. 96-02952; Suntrust Bank Atlanta, as Trustee for Suntrust Retirement
Sunbelt Equity Fund v. Bollinger Industries, Inc., Glenn D. Bollinger, Bobby D.
Bollinger, Michael J. Beck, John L. Maguire, and Grant Thornton, L.L.P.; in the
191st (originally filed in the 68th Judicial District Court) Judicial District
Court of Dallas County, Texas (the "Suntrust Lawsuit"):
The Company, Glenn D. Bollinger (Chairman and CEO), Bobby D. Bollinger
(President), Michael J. Beck (former CAO), John L. Maguire (Director), and Grant
Thornton, L.L.P. (former independent accountants) are defendants in a securities
fraud lawsuit filed on March 22, 1996 by shareholder Suntrust Bank Atlanta, as
Trustee for Suntrust Retirement Sunbelt Equity Fund, on behalf of themselves and
all persons similarly situated. This lawsuit was filed as a class action on
behalf of those who purchased securities through a public offering of the
Company's stock, alleging that the price of the stock was artificially inflated
and maintained in violation of the anti-fraud provisions of the securities law
as well as common law. Further, Grant Thornton has cross-claimed against the
underwriters, and against the Company, Glenn D. Bollinger and Bobby D.
Bollinger, generally seeking contribution.
The case has been transferred to the 191st Judicial District Court and the trial
is currently stayed, pending an appeal of the class certification filed by Grant
Thornton and the Bollinger parties. The Appellants' Briefs of Grant Thornton and
the Bollinger parties were filed on June 30, 2000. The Company believes that it
has several meritorious defenses to Plaintiffs' claims. This case continues to
be mediated through the ongoing efforts of a mediator.
Civil Action No. 3:96C-V-0823-L; STI Classic Fund and STI Classic Sunbelt v.
Bollinger Industries, Inc., Glenn D. Bollinger, Bobby D. Bollinger, and Michael
J. Beck; in the United States District Court for the Northern District of Texas,
Dallas Division (the "STI Lawsuit"):
The Company, Glenn D. Bollinger, Bobby D. Bollinger, and Michael J. Beck are
defendants in a lawsuit filed on March 22, 1996 in the United States District
Court for the Northern District of Texas, Dallas Division, by shareholders STI
Classic Fund and STI Classic Sunbelt, on behalf of themselves and all persons
similarly situated. Like the Suntrust lawsuit, this lawsuit was also filed as a
class action on behalf of a class of persons who purchased securities issued by
the Company at prices which allegedly were artificially inflated and maintained
in violation of the anti-fraud provisions under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5
thereunder. A class certification has been granted by the court. The Defendants
dispute the claims and are contesting the claims vigorously. The Plaintiffs have
filed a Motion for Partial Summary Judgment against Bollinger Industries, Inc.,
which has been briefed and is currently pending. The case is currently not set
for trial, and through the efforts of a mediator, mediation is ongoing.
Civil Action No. 00-1842-J Curtis Logan v. Bollinger Industries, Inc., In the
191st Judicial District Court, Dallas County Texas ("the Logan Lawsuit"):
15
<PAGE> 16
Logan's cross-claim for indemnity against the Company was severed after the
Court granted summary judgment as to liability on Logan's indemnity claims, plus
his attorneys' fees and expenses, and this case is the result. Settlement
negotiations have produced a Rule 11 Agreement which was executed during the
quarter ending June 30, 2000 for $150,000. The Company paid $30,000 during June
2000 and the remaining $120,000 is scheduled to be paid in October 2000. This
amount is included in the contingency for legal settlement in the accompanying
balance sheet.
At June 30, 2000 the Company has a $975,387 standby letter of credit with a
financial institution. The standby letter of credit collateralizes certain
capitalized leased equipment and related software.
In connection with an investigation by the Securities and Exchange Commission,
in September 1996 the Company consented to the entry of an order of permanent
injunction which enjoins the Company from violating the antifraud, periodic
reporting, record keeping and internal accounting controls provisions of the
Exchange Act and regulations promulgated thereunder in the future in the conduct
of its business. Glenn Bollinger consented to the entry of an order of permanent
injunction enjoining him from violations of the antifraud, record keeping,
periodic reporting and internal accounting controls provisions of the Exchange
Act and regulations promulgated thereunder in the future, and agreed to the
payment of a monetary penalty in the amount of $40,000. Ronald Bollinger
consented to the entry of an order of permanent injunction enjoining him from
violations of the antifraud, record keeping, periodic reporting and internal
accounting controls provisions of the Exchange Act and regulations promulgated
thereunder, and agreed not to act as a director or officer of a registered or
reporting entity in the future.
From time to time, the Company is a party to various legal proceedings arising
in the ordinary course of business. The Company is not currently a party to any
other material litigation and is not aware of any litigation threatened against
the Company, arising in the ordinary course of business that could have a
material adverse effect on the Company.
16
<PAGE> 17
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.72 Amendment No. 2 to Amended and Restated Loan and Security
Agreement dated June 6, 2000 between Bollinger Industries, Inc.,
Bollinger Industries, L.P. and NBF, Inc., and Foothill Capital
Corporation
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the three-month period ended
June 30, 2000.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOLLINGER INDUSTRIES, INC.
Date: August 10, 2000 /s/ Glenn D. Bollinger
-------------------------------------
Glenn D. Bollinger
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: August 10, 2000 /s/ Rose Turner
-------------------------------------
Rose Turner
Executive Vice President - Finance,
Chief Financial Officer, Chief
Operating Officer, Treasurer and
Secretary
(Principal Financial Officer)
Date: August 10, 2000 /s/ Floyd DePauw
-------------------------------------
Floyd DePauw
Controller and Chief Accounting
Officer (Principal Accounting
Officer)
18
<PAGE> 19
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.72 Amendment No. 2 to Amended and Restated Loan and Security
Agreement dated June 6, 2000 between Bollinger Industries,
Inc., Bollinger Industries, L.P. and NBF, Inc., and Foothill
Capital Corporation
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
