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, 2001 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 (I.R.S. Employer
incorporation 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, 2001, 4,368,615 shares of the registrant's common stock,
$0.01 par value per share, were outstanding.
1
2
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
June 30, 2001 (unaudited) and March 31, 2001 3
Consolidated Statements of Operations for the
Quarters Ended June 30, 2001 and 2000 (unaudited) 5
Consolidated Statements of Cash Flows for the
Quarters Ended June 30, 2001 and 2000 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES
2
3
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS JUNE 30, MARCH 31,
2001 2001
----------- -----------
(Unaudited)
CURRENT ASSETS
Cash $ 191,111 $ 618,788
Accounts receivable-trade, net of allowance for
doubtful accounts of $471,685 and $465,321,
allowance for returns and allowances of
$499,150 and $614,477, and allowance for 4,520,496 7,655,118
advertising of $438,791 and $480,476
Escrow deposit for legal settlement 400,000 --
Deposit 500,000 --
Prepaid expenses 166,843 240,266
Inventories, net of allowance for obsolesence of
$977,485 and $782,760 7,939,290 8,172,040
Other current assets 2,288 11,956
----------- -----------
Total current assets 13,720,028 16,698,168
PROPERTY AND EQUIPMENT -- NET 1,143,293 1,295,552
OTHER ASSETS
Goodwill, net of accumulated amortization of
$977,075 and $888,250 2,575,925 2,664,750
License rights, net of accumulated amortization of
$196,625 and $178,750 518,375 536,250
Deferred marketing costs, net of accumulated
amortization of $1,425,333 and $1,247,167 712,072 890,238
Deferred financing fees, net of accumulated
amortization of $36,415 and $0 109,243 --
Other 133,931 199,589
----------- -----------
Total other assets 4,049,546 4,290,827
----------- -----------
TOTAL ASSETS $18,912,867 $22,284,547
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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4
Bollinger Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 30, 2001 MARCH 31, 2001
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Line of credit $ 5,726,586 $ --
Current portion of long-term debt 1,860,386 9,595,304
Current portion of capital lease obligations 338,662 271,852
Notes payable to officers 200,000 200,000
Accounts payable-trade 4,647,583 4,612,673
Taxes payable 49,504 51,304
Accrued liabilities 689,593 723,309
Accrued product liability 201,523 219,777
Contingency for legal settlement 600,000 600,000
------------ ------------
Total current liabilities 14,313,837 16,274,219
LONG-TERM LIABILITIES
Long-term debt, less current portion 1,468,486 1,719,395
Capital lease obligations, less current portion 554,576 641,476
Other long-term liabilities -- 34,085
------------ ------------
Total long-term liabilities 2,023,062 2,394,956
------------ ------------
Total liabilities 16,336,899 18,669,175
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - $0.01 par value;
1,000,000 shares authorized; none issued -- --
Common stock - $0.01 par value; 20,000,000 shares
authorized; 4,400,210 shares issued and
4,368,615 outstanding 44,002 44,002
Capital in excess of par 15,519,058 15,519,058
Accumulated deficit (12,975,145) (11,935,741)
Treasury stock, (31,595 shares) at cost (11,947) (11,947)
------------ ------------
Total stockholders' equity 2,575,968 3,615,372
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,912,867 $ 22,284,547
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
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5
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
QUARTER ENDED JUNE 30,
--------------------------------
2001 2000
----------- -----------
Net sales $ 7,390,948 $ 8,989,403
Cost of goods sold 5,183,963 6,225,100
----------- -----------
Gross profit 2,206,985 2,764,303
Selling expenses 819,633 1,062,303
Distribution, general and
administrative expenses 2,102,278 2,154,150
----------- -----------
2,921,911 3,216,453
----------- -----------
Operating loss (714,926) (452,150)
Other expense (income)
Interest expense 334,346 364,299
Gain on sale of assets (9,868) --
Other -- 28
----------- -----------
324,478 364,327
----------- -----------
Loss before income tax expense (1,039,404) (816,477)
Income tax expense -- --
----------- -----------
Net loss $(1,039,404) $ (816,477)
=========== ===========
Per share data (basic and diluted):
Basic loss per share $ (0.24) $ (0.19)
=========== ===========
Diluted loss per share $ (0.24) $ (0.19)
=========== ===========
Shares used in the calculation of per share amounts:
Basic common shares 4,368,615 4,400,210
Dilutive impact of stock
options -- --
----------- -----------
Diluted common shares 4,368,615 4,400,210
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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6
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
QUARTER ENDED JUNE 30,
--------------------------------
2001 2000
----------- -----------
Cash flows from operating activities
Net loss $(1,039,404) $ (816,477)
Adjustments to reconcile net loss to net cash
provided by operating activities
Gain on sale of assets (9,868) --
Depreciation and amortization 517,578 488,574
Provision for returns and allowances 454,066 369,942
Provision for doubtful accounts 7,889 18,807
Provision for advertising 140,560 326,153
Provision for obsolete inventory 217,136 176,556
Changes in operating assets and liabilities
Accounts receivable-trade 2,532,107 (98,957)
Other current assets 9,668 30,697
Inventories 15,614 (1,110,020)
Prepaid expenses 73,423 18,378
Other assets 64,961 572
Accounts payable-trade 44,910 728,175
Taxes payable (1,800) (1,800)
Accrued liabilities (33,716) 194,132
Escrow deposit for legal settlement (400,000) --
Contingency for legal settlement -- (30,000)
Accrued product liability (18,254) 26,114
Other long-term liabilities (34,085) --
----------- -----------
Net cash provided by operating activities 2,540,785 320,846
Cash flows from investing activities
Purchases of property and equipment (43,473) (86,064)
Deposit with equipment lessor (500,000) --
----------- -----------
Net cash used in investing activities (543,473) (86,064)
Cash flows from financing activities
Net proceeds on a line of credit 5,726,586 --
Net payments on long-term debt (7,985,827) (1,031,935)
Payments on capital lease obligations (20,090) (25,050)
Purchase of treasury stock -- (11,947)
Financing fees (145,658) --
----------- -----------
Net cash used in financing activities (2,424,989) (1,068,932)
----------- -----------
Net decrease in cash (427,677) (834,150)
Cash at beginning of period 618,788 959,242
----------- -----------
Cash at end of period $ 191,111 $ 125,092
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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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, 2001
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
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
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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.
NOTE B - CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures are as follows:
QUARTER ENDED JUNE 30,
-------------------------
2001 2000
-------- --------
Interest paid $514,434 $343,310
Interest paid in 2001 includes fees and penalties associated with refinancing.
NOTE C - INVENTORIES
June 30, March 31,
2001 2001
----------- -----------
Raw materials $ 169,000 $ 177,408
Work in progress 13,599 3,714
Finished goods 8,734,176 8,773,678
Reserve for obsolescence (977,485) (782,760)
----------- -----------
$ 7,939,290 $ 8,172,040
=========== ===========
NOTE D - NOTES PAYABLE AND LONG TERM DEBT
On April 2, 2001 the Company entered into a Loan Agreement with a banking
association replacing the former lender and providing a maximum line of credit
of $12,000,000, subject to certain terms and conditions. This line of credit is
payable on demand and is collateralized by substantially all of the Company's
assets including accounts receivable and inventory. The revolving credit note
bears interest at prime plus 2% but at no time less than 9%. The Company
capitalized financing fees of $145,658 in connection with this financing which
are being amortized over the initial term of the agreement of three years. As of
June 30, 2001 there was $5,727,000 outstanding under the loan agreement.
Availability under the line was $70,000 at June 30, 2001 based upon selected
criteria for accounts receivable and inventory.
The Company has a convertible subordinated note payable for $1,400,000 due
October 1, 2003 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.
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9
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED-CONTINUED)
NOTE E - INCOME TAXES
The Company's effective income tax rates for the three months ended June 30,
2000 and 2001 was 0% because of the lack of taxable income. At June 30, 2001 the
Company had net operating losses available to offset future taxable income of
approximately $ 9.9 million, the benefit of 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 Judicial District Court (originally filed in the 68th 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 filed a cross claim against the
underwriters, and against the Company, Glenn D. Bollinger and Bobby D.
Bollinger, generally seeking contribution.
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 paid a deposit of $500,000 to an equipment lessor in April 2001.
The Company anticipates receiving a refund of this deposit in exchange for a
letter of credit during the year ended March 31, 2002.
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.
9
10
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED-CONTINUED)
NOTE F - COMMITMENTS AND CONTINGENCIES-CONTINUED
In April 2001, the Company and the class representatives entered into a
"Stipulation of Settlement" which calls for the one time payment of $400,000 and
the issuance of 200,000 shares of Bollinger Common Stock in full settlement of
both the Suntrust Lawsuit and the STI Lawsuit. The 200,000 shares of stock are
subject to a Put and Call Agreement which permits (1) the Company to call the
stock for $2.00 per share, and (2) the plaintiffs to require the Company to
purchase the stock for $1.00 per share. These put and call options run for one
year after the effective date of the final settlement and approval of the
litigation. Full and final settlement of both actions require class acceptance
and judicial approval, and the hearings for final approval have been set for
August 24, 2001. The Company has paid the $400,000 into escrow pending final
approval.
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 there-under 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.
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11
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, 2001 and March 31, 2000; the Company's Form 10-Q for the quarter
ended June 30, 2000; and the consolidated financial statements and related notes
for the quarter ended June 30, 2001 found elsewhere in this report.
QUARTER ENDED JUNE 30, 2001 COMPARED WITH QUARTER ENDED JUNE 30, 2000
Net sales decreased for the quarter ended June 30, 2001 by approximately
$1,598,000 on a comparative basis with the prior year, a decrease of 17.8%. The
decrease in net sales resulted from the loss of distribution rights on an
abdominal product and the continued shift of one of the Company's largest
customers away from Company branded products to private label, directly imported
products.
Gross profits as a percent of net sales decreased for fitness accessory products
to 29.9% in the quarter ended June 30, 2001 from 30.8% in the quarter ended June
30, 2000.
Selling expenses for the quarter ended June 30, 2001 decreased by approximately
$243,000 as compared to the quarter ended June 30, 2000, and decreased as a
percentage of net sales to 11.1% from 11.8%. The decrease in selling expense was
primarily related to decreased advertising co-ops paid to customers partially
offset by increased salaries and related expenses.
Distribution, general and administrative expenses for the quarter ended June 30,
2001 decreased by approximately $52,000 as compared to the quarter ended June
30, 2000, and increased as a percentage of net sales to 28.4% in 2001 from 24.0%
in 2000. The dollar decrease in distribution, general and administrative
expenses resulted from decreased freight and legal expenses while the percentage
increase was caused by reduced sales volume.
The Company sustained an operating loss of $715,000 for the quarter ended June
30, 2001, as compared to an operating loss of $452,000 in the same quarter last
year, or a change of $263,000. As a percentage of net sales, the operating loss
increased from 5.0% in 2000 to 9.7% in 2001. The increase of the operating loss
was fueled primarily by lower sales volume.
Interest expense for the quarter ended June 30, 2001 was approximately $334,000
compared to approximately $364,000 for the same quarter in the previous year.
The decrease in interest expense was primarily due to a decrease in the borrowed
balance and a 1.9% decrease in the interest rate assessed by a financial
institution.
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12
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 and a banking
association. Net cash provided by operating activities for the quarter ended
June 30, 2001 was $2,540,000 compared to net cash provided by operating
activities for the same period in the prior year of $321,000.
On April 2, 2001 the Company entered into a Loan Agreement with a banking
association replacing the former lender and providing a maximum line of credit
of $12,000,000, subject to certain terms and conditions. This line of credit is
payable on demand and is collateralized by substantially all of the Company's
assets including accounts receivable and inventory. The revolving credit note
bears interest at prime plus 2% but at no time lower than 9%. As of June 30,
2001 there was $5,727,000 outstanding under the loan agreement. Availability
under the line was $70,000 at June 30, 2001 based on selected criteria for
accounts receivable and inventory. Outstanding balances in the quarter ended
June 30, 2001 bore interest at a rate of 9.35% compared to an approximate rate
of 11.25% for the quarter ended June 30, 2000.
The Company has a convertible subordinated note payable for $1,400,000 due
October 1, 2003 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.
ACCOUNTING CHANGES
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 "Business Combinations" which requires
the purchase method of accounting for business combination transactions
initiated after June 30, 2001.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets".
The statement requires that goodwill recorded on acquisitions completed prior
to July 1, 2001 be amortized through December 31, 2001. Goodwill amortization
is precluded on acquisitions completed after June 30, 2001. Effective January
1, 2002, goodwill will no longer be amortized but will be tested for impairment
as set forth in the statement. We are currently reviewing the new standard and
evaluating the effects of this standard on our future financial condition,
results of operations, and accounting policies and practices. Amortization of
goodwill for the first three months of 2001 totaled $88,825.
FACTORS THAT COULD EFFECT 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 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.
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.
12
13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
Not applicable.
13
14
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 Judicial District Court (originally filed in the 68th 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 filed a cross claim against the
underwriters, and against the Company, Glenn D. Bollinger and Bobby D.
Bollinger, generally seeking contribution.
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.
In April 2001, the Company and the class representatives entered into a
"Stipulation of Settlement" which calls for the one time payment of $400,000 and
the issuance of 200,000 shares of Bollinger Common Stock in full settlement of
both the Suntrust Lawsuit and the STI Lawsuit. The 200,000 shares of stock are
subject to a Put and Call Agreement which permits (1) the Company to call the
stock for $2.00 per share, and (2) the plaintiffs to require the Company to
purchase the stock for $1.00 per share. These put and call options run for one
year after the effective date of the final settlement and approval of the
litigation. Full and final settlement of both actions require class acceptance
and judicial approval, and the hearings for final approval have been set for
August 24, 2001. The Company has paid the $400,000 into escrow pending final
approval.
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 there-under in the future in the
conduct of its business. Glenn Bollinger consented to the entry of an order of
permanent
14
15
injunction enjoining him from violations of the antifraud, record keeping,
periodic reporting and internal accounting controls provisions of the Exchange
Act and regulations promulgated there-under 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
there-under, 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.
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
11 Computation of Earnings Per Share
(b) No reports on Form 8-K were filed during the three-month period
ended June 30, 2001.
15
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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, 2001 /s/ Glenn D. Bollinger
------------------------------------
Glenn D. Bollinger
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: August 10, 2001 /s/ Rose Turner
------------------------------------
Rose Turner
Executive Vice President -
Finance, Chief Financial Officer,
Chief Operating Officer,
Treasurer and Secretary
(Principal Financial Officer)
16
17
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibits Description
-------- -----------
11 Computation of Earnings Per Share
17