-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HKVF8SeiDhbgXzd8luCfbYyDbJ2ejJdQAzPL1t5IkWM0FPAiLp9rKcKtea0svQD8 +MTqL9tEJPdCqOrWxplTWg== 0001003111-97-000005.txt : 19970222 0001003111-97-000005.hdr.sgml : 19970222 ACCESSION NUMBER: 0001003111-97-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: BSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELL TECHNOLOGY GROUP LTD CENTRAL INDEX KEY: 0001003111 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 133781263 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-14168 FILM NUMBER: 97532503 BUSINESS ADDRESS: STREET 1: 611 BROADWAY STREET 2: STE 415 CITY: NEW YORK STATE: NY ZIP: 10012 BUSINESS PHONE: 2125945300 MAIL ADDRESS: STREET 1: ONE PENNSYLVANIA PLAZA STREET 2: C/O MILBERG WEISS BERSBAD HYNES & LERACH CITY: NEW YORK STATE: NY ZIP: 10119 10QSB 1 UNITED STATES 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: December 31, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission file number _____1-14168______________ Bell Technology Group Ltd. (Exact name of small business issuer as specified in its charter) Delaware 13-3781263 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 295 Lafayette Street, 3rd. Floor, New York, NY 10012 (Address of principal executive offices) (212) 334-8500 (Issuer's telephone number) 611 Broadway, Suite 415, New York, NY 10012 (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes or common equity, as of the latest practicable date: 3,084,877 shares of Common Stock as of December 31, 1996 Transitional Small Business Disclosure Format (Check One): Yes [ ] No [x] SEC 2334 (3/94-) Bell Technology Group Ltd. and Subsidiaries Table of Contents Page No. PART I - FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets 2 Consolidated Statements of Operations For the Three Months Ended December 31, 1996 and 1995 3 Consolidated Statements of Cash Flows For the Three Months Ended December 31, 1996 and 1995 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition 6-9 and Results of Operations PART II - OTHER INFORMATION 10 Bell Technology Group Ltd. and Subsidiaries Consolidated Balance Sheets December 31, September 30, Assets 1996 1995 (Unaudited) Current assets: Cash and cash equivalents $ 1,463,889 $ 2,742,011 Accounts receivable, net of allowance for doubtful accounts of $127,842 and $64,842 as of December 31, 1996 and September 30, 1996, respectively 3,125,395 1,847,918 Inventories 1,005,581 758,353 Prepaid expenses and other current assets 127,334 195,113 __________ __________ Total current assets 5,722,199 5,543,395 Property and equipment, net 2,686,098 2,151,294 Other assets 71,196 115,093 __________ __________ Total assets $ 8,479,493 $ 7,809,782 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Short term borrowings $ 779,392 $ -- Current portion of notes payable 27,351 39,152 Accounts payable 1,794,594 1,274,197 Accrued expenses 258,257 240,116 Deferred revenues 199,343 166,617 __________ __________ Total current liabilities 3,058,937 1,720,082 __________ __________ Commitments and contingencies Stockholders' equity : Preferred Stock, $.01 par value; 500,000 shares authorized; no shares issued and outstanding -- -- Common Stock, $.01 par value; 10,000,000 shares authorized; 3,084,877 and 3,083,210 shares issued and outstanding 30,849 30,832 Additional paid-in capital 8,044,779 8,033,134 Accumulated deficit (2,655,072) (1,974,266) __________ __________ Total stockholders' equity 5,420,556 6,089,700 __________ __________ Total liabilities and stockholders' equity $ 8,479,493 $ 7,809,782 ========== ========== The accompanying notes are an integral part of these consolidated balance sheets. Page - 2 - Bell Technology Group Ltd. and Subsidiaries Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, 1996 1995 Revenues $ 3,696,399 $ 2,422,261 Costs and expenses: Cost of revenues 2,835,316 2,013,240 Selling, general and administrative 1,444,795 520,987 Depreciation and amortization (net of $45,016 included in cost of revenues) 111,450 54,245 __________ __________ Total costs and expenses 4,391,561 2,588,472 __________ __________ Loss from operations (695,162) (166,211) Interest income 18,055 -- Interest expense (3,699) (24,417) __________ __________ Loss before taxes (680,806) (190,628) (Benefit from) provision for taxes -- -- __________ __________ Net loss $ (680,806) $ (190,628) ========== ========== Net loss per share ($0.22) ($0.11) Weighted average shares outstanding 3,084,339 1,742,855 The accompanying notes are an integral part of these consolidated statements. Page - 3 - Bell Technology Group Ltd. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Three Months Ended December 31, 1996 1995 Cash flows from operating activities: Net loss $(680,806) $ (190,628) Adjustments to reconcile net (loss) income to net cash used in operating activities Depreciation and amortization 156,466 54,245 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (1,277,477) 225,485 (Increase) in inventories (247,228) (128,226) Decrease (increase) in prepaid expenses and other current assets 67,779 (8,244) Decrease (increase) in other assets 43,897 (12,844) Increase in accounts payable 520,397 85,709 Increase (decrease) in accrued expenses 29,803 (15,842) Increase (decrease) in deferred revenues 32,726 (19,596) ___________ __________ Net cash used in operations (1,354,443) (9,941) ___________ __________ Cash flows from investing activities: Purchases of property and equipment, net of landlord reimbursement (691,270) (59,363) ___________ __________ Net cash used in investing activities (691,270) (59,363) ___________ __________ Cash flows from financing activities: Net proceeds from short term borrowings (779,392) 20,052 Repayments of notes payable (11,801) (27,813) Proceeds from bridge financing -- 250,000 Payment of debt issuance and stock offering costs -- (113,404) ___________ __________ Net cash provided by financing activities 767,591 128,835 ___________ __________ Net increase (decrease) in cash and cash equivalents (1,278,122) 59,531 Cash and cash equivalents, beginning of period 2,742,011 222,367 ___________ __________ Cash and cash equivalents, end of period $ 1,463,889 $ 281,898 =========== ========== Supplemental disclosure of cash flow information: Cash paid for interest 395 25,041 Noncash investing and financing activities: Issuance of common stock in connection with bridge financing -- 250,000 The accompanying notes are an integral part of these consolidated statements Page - 4 - BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES The consolidated balance sheets as of December 31, 1996 and 1995 and statements of operations and statements of cash flows for the three months ended December 31, 1996 and 1995 have been prepared by Bell Technology Group Ltd. (the "Company") without audit. All material inter-company accounts and transactions have been eliminated. The consolidated results should be read in conjunction with the audited financial statements and notes thereto included in the Company's Form 10KSB on file with the Securities and Exchange Commission. Results of operations for the three month period are not necessarily indicative of the operating results for the full year. Interim statements are prepared on a basis consistent with year end statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of the results of operations of the Company. All such adjustments are of a normal recurring nature. 2. REVOLVING CREDIT AGREEMENT The Company (through its NAFT subsidiary) presently has approximately $3.0 million available to it pursuant to a Revolving Credit Agreement (to finance its accounts receivable and inventory) with NationsCredit ("Nations"). As of December 31, 1996, the Company had a net outstanding of approximately $1.2 million under this agreement. Such obligation is secured by a continuing security interest in substantially all of the assets of the Company. The borrowings bear interest at the prime rate plus 1.75%. Pursuant to the terms of these agreements, NAFT is required to maintain certain liquidity ratios which the Company is currently maintaining. 3. COMMITMENTS AND CONTINGENCIES In February 1996 the Company entered into a lease for its corporate headquarters effective July 1996. The lease is for eleven years and six months starting with an initial annual base rental of $309,250 escalating to $563,547 in the final year. Under the lease, the landlord is to reimburse the Company $500,000 for leasehold improvements. As of December 31, 1996 $50,000 has been recorded as Due from landlord. The Company was required by the terms of the lease to maintain a letter of credit in the amount of $400,000 for the duration of the lease. In order to meet such requirement, the Company maintains a restricted certificate of deposit in the amount of $400,000. This amount is included in "Cash and cash equivalents" of the Company's consolidated balance sheets at December 31, and September 30, 1996. Page - 5 - PART I MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS General The Company is a diversified, full service Internet solutions company and computer systems integrator, providing a wide range of Internet and Intranet products, services and solutions. In addition, the Company provides pre-press, video and 3-D animation, and motion capture solutions to its commercial clients. The Company's goal is to become a business-to-business, one-stop provider of all things related to the Internet, whose business is based upon on-going, long term, broad based relationships with its customers. Internet Operations. During the past six months following the date of its initial public offering, the Company has hired a staff of Internet engineers, technicians, programming specialists and sales personnel to work on developing its Internet network and support facility. During this period, the Company has substantially completed the basic engineering and programming activities necessary to provide dedicated Internet access, web hosting services and Internet consulting and facilitation services. The Company has now begun to aggressively market its Internet services and capabilities to the publishing, advertising, and media communities. Revenues from Internet related activities have been steadily increasing. Currently, the major sources of revenue for the Company's Internet related activities are: a) The sale and installation of dedicated, high bandwidth, Internet connections b) Web hosting and co-location services The Company has suspended its Internet Wired program due to a lack of interest at the user level, the difficulty of dealing with New York City landlords in wiring buildings, and better opportunities toward which it can direct its efforts. Page - 6 - Sales of Hardware and Software: The Company has continued to diversify its offering of hardware and software products and to emphasize those products which: (a) are related to its Internet services operation; (b) generate higher profit margins; (c) are of a type which require greater after market support, and (d) experience less competition from mail order houses. Specifically, the Company: a) provides business solutions and desktop computer integration to the media and publishing industries including solutions involving interactive media, CD ROM and World Wide Web servers and installation of computer networks (LANs and WANs) b) is a value added reseller or value added dealer in computer hardware. The principal manufacturers which it represents are: Silicon Graphics, Integraph, Sun Microsystems, Compaq, Apple, Cisco, and Bay networks. c) in conjunction with the sale of hardware, sells, installs and supports software programs such as Alias/Wavefront, SoftImage Quark, Adobe, Macromedia, Avid. The Company is also a Netscape Commercial Applications Partner and a Microsoft solutions provider. Training : The Company completed construction of its new training center at 295 Lafayette Street, New York, New York in October 1996. It now has 5 classrooms which seat a total of 66 people and a seminar room which can accommodate 125 people. Each classroom is outfitted with a different hardware and software capability such as Alias, Photoshop, etc. Instruction is provided by both its in-house staff and independent contractors who are specialists in a particular area. Training classes are held either on the Company's premises or at the clients' premises, depending upon the client's needs and desires. The Company's clients include major banks, financial institutions and advertising and graphic design firms. The Company has been designated as an Alias Education Partner for East coast, is an Apple Training Alliance Partner and an authorized training center for Netscape, Adobe, Quark, Macromedia, and Microsoft. During the first quarter of fiscal 1997, an arrangement was entered into with Pratt Institute, a New York City College specializing in the field of Graphic Arts, to provide classroom facilities on a contract basis. Revenues from training for the first quarter of the current fiscal year were in excess of $70,000. However, the Company expects that this amount will increase substantially over the next three-quarters. Interactive Media The Interactive media division of the Company has focused its efforts on interactive development, and 2-D and 3-D animation, including motion capture. It recently completed a Dennis the Menace segment for Room Plus, a regional furniture manufacturer and retailer, which combined live action and 2-D animation. Recent projects also include the development of interactive computer-based training modules for Prudential Corporation for distribution on CD ROM. The Company has limited its efforts in the web design area, and in doing so reduced its full time staff in the area by 50%. The Company is now aggressively pursuing the interactive development and animation capture markets. Page - 7 - REVENUES FOR THE THREE MONTH PERIODS ENDED December 31, 1996 and December 31, 1995 Consolidated revenues for the three months ended December 31, 1996, compared to the same period in 1995, increased approximately 53% from approximately $2.4 million to approximately $3.7 million. This increase was due to an increase in every aspect of the Company's business. The Company intends to focus its future operations primarily in the areas of Internet related activities, the development of its CD ROM and 3-D animation operations and training programs, and is looking toward a substantial increase in revenues from such operations. COST OF REVENUES FOR THE THREE MONTH PERIODS ENDED December 31, 1996 and December 31, 1995 Cost of Revenues for the three months ended December 31, 1996 were approximately $2.8 million, or approximately 77% of revenues, as compared to $2 million or approximately 83% of revenues for the comparable period in fiscal 1996. The increase in gross profit margin was due to the fact that an increased percentage of sales came from sales of services (which generated higher profit margins) rather than sales of products. In addition, product sales of more sophisticated computer systems which required greater pre-sales and after market customer assistance, and therefore generated higher profit margins, increased. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FOR THE THREE MONTH PERIODS ENDED December 31, 1996 and December 31, 1995 For the three months ended December 31, 1996, Selling, General and Administrative expenses increased from approximately $521,000 (or 21% of Revenues) to approximately $1.4 million (or 39% of Revenues). This increase was due primarily to an increase in payroll resulting from: (a) hiring engineers to complete system development and sales people to market the systems which have not reached their revenue generation potential; (b) the promotion by the Company of its Shared Direct Access Internet program; and (c) the re-focusing and development of its graphic arts related business. The Company anticipates that revenues from sales of its expanded product line, and Shared Direct Access Internet connections will continue to increase as a percentage of its Revenues. However, the Company expects to continue to show losses until such time as it receives greater marketplace recognition for its products and services. In the interim, commencing in January, 1997, the Company has commenced an internal cost cutting programming. Specifically, it has consolidated all of its operations at 295 Lafayette Street, New York, New York and surrendered its premises at 611 Broadway, New York, New York. This was made possible by the exercise by the Company of an option to acquire additional space at its corporate headquarters at a price of $4.00 per square foot. The Company has also begun to streamline some of its operations and has suspended its Internet Wired program. Page - 8 - NET LOSS FOR THE THREE MONTH PERIODS ENDED December 31, 1996 and December 31, 1995 For the three month period ended December 31, 1996, the Company incurred a net loss of approximately $681,000 compared to a net loss of approximately $191,000 for the corresponding three month period ending December 31, 1995. The Company expects to continue to suffer losses for the next two quarters. LIQUIDITY AND CAPITAL RESOURCES. The Company (through its NAFT subsidiary) presently has approximately $3.0 million available to it pursuant to a Revolving Credit Agreement (to finance its accounts receivable and inventory) with NationsCredit ("Nations"). As of December 31, 1996, the Company had a net outstanding of approximately $1.2 million under this agreement. Such obligation is secured by a continuing security interest in substantially all of the assets of the Company. The borrowings bear interest at the prime rate plus 1.5%. Pursuant to the terms of these agreements, NAFT is required to maintain certain liquidity ratios which the Company is currently maintaining. The Company had a negative cash flow of approximately $1.3 million for the three months ended December 31, 1996. This resulted in part from a cash loss in operations of approximately $500,000, the increase in accounts receivable of approximately $1.3 million, offset in part, by the increase in accounts payable of approximately $500,000. In addition, the purchase of property and equipment of approximately $700,000 was offset by the net proceeds of short term borrowings of approximately $800,000. In total, operations generated a negative cash flow of $966,832. Due to the Company's negative cash flow from operations and past and future expenditures under its aggressive program of capital expenditures, the Company must either increase its borrowings under its NationsCredit line of credit, and/or raise additional equity or loan capital from outside sources. There can be no assurance that the Company could successfully raise such additional capital. Forward Looking Statements The foregoing Management Discussion and analysis contains certain forward looking statements. Due to the fact that the Company faces intense competition in a business characterized by rapidly changing technology, actual results and outcomes may differ materially from any such forward looking statements. Future results of operations are, in general, difficult to forecast due to the fast moving pace of the industry. Page - 9 - PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities Applicable Item 3. Defaults upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K Not applicable 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. Bell Technology Group Ltd. Date: February 12, 1997 By: /s / Marc H. Bell ------------------------------------- Marc H. Bell, President & CEO Date: February 12, 1997 By: /s / Robert B. Bell ------------------------------------- Robert B. Bell, Exec.Vice President & CFO Page - 10 - EX-27 2
5 3-MOS SEP-30-1997 DEC-31-1996 1,463,889 0 3,253,237 127,842 1,005,581 5,722,199 3,256,797 570,699 8,479,493 3,058,937 0 0 0 30,849 5,389,707 8,479,493 3,696,399 3,696,399 2,835,316 4,391,561 (18,055) 0 3,699 (680,806) 0 (680,806) 0 0 0 (680,806) (0.22) (0.22)
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