BULOVA TECHNOLOGIES GROUP, INC. Files SEC form 10-Q/A, Quarterly Report at EDGAR Online Fri 12:49pm
Form 10-Q/A for BULOVA TECHNOLOGIES GROUP, INC.
24-Feb-2017
Quarterly Report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
Certain portions of this report, and particularly the Management's Discussion and Analysis of Financial Condition and Results of Operations, and the Notes to Consolidated Financial Statements, contain forward-looking statements which represent the Company's expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements.
1 . Overview:
From January 1, 2009, Bulova Technologies Group, Inc. operated in multiple business segments. Government Contracting was focused on the production and procurement of military articles for the US Government and other Allied Governments throughout the world, and was accounted for through two of the Company's wholly owned subsidiaries, Bulova Technologies Ordnance Systems LLC, and Bulova Technologies (Europe) LLC. In October 2012, this segment was discontinued through the sale of substantially all of the assets of Bulova Technologies Ordnance Systems LLC, with any remaining assets and liabilities associated with that operation being segregated and reported as a discontinued operation. Contract Manufacturing included the production of cable assemblies and circuit boards accounted for through BT Manufacturing Company LLC, a wholly owned subsidiary that was discontinued and disposed of in March 2011.
In July of 2013, the Company began the sale of high precision industrial machine tools through a distributor network accounted for through Bulova Technologies Machinery LLC, a newly formed subsidiary.
In January 2016, the Company, through a newly created joint venture, BT-Twiss Transport LLC, acquired 100% of the outstanding common stock of Twiss Transport, Inc., Twiss Logistics, Inc. and Twiss Cold Storage, Inc. and entered into the transportation and logistics industry of freight storage and movement. The joint venture agreement provides for Bulova's 30% ownership interest, however, Bulova is fully responsible for operational management of the acquired entities, and is liable for approximately 4.6 million of convertible debt utilized to accomplish the acquisition. Accordingly, the joint venture financial statements have been combined with those of the Company.
The Company continues to evaluate the incubation and marketing of innovative technology products for which it believes it can lend value because of its highly recognizable name brand and extensive marketing experience
Application of critical accounting policies:
Management's Discussion and Analysis of our Financial Condition and Results of Operations is based on the Company's unaudited Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and corresponding disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we continue to evaluate our estimates which in large part are based on historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
2. Results of operations:
For the three months ended December 31, 2016 compared to the three months ended December 31, 2015.
Discontinued Operations
The Company is reporting results of operations of Bulova Technologies Ordnance Systems LLC (BTOS) as discontinued operations for the three months ended December 31, 2016 and 2015.
In October 2012, Bulova Technologies Ordnance Systems LLC sold substantially all of its assets to an unrelated party. The purchaser performed certain contracts remaining in the name of Ordnance as a subcontractor for the balance of the year ended September 30, 2013 and for a portion of the year ended September 30, 2014. The effect was a very small gross profit as most of the contract revenues were passed through to the purchaser for fulfillment.
Ordnance did not have any revenue for the three months ended December 31, 2016 and 2015.
Table of Contents
Ordnance did not incur any costs of revenues for the three months ended December 31, 2016 or 2015.
Ordnance did not realize any gross profit for the three months ended December 31, 2016 or 2015.
Operating expenses and interest for the discontinued operations of Ordnance for the three months ended December 31, 2016 of $28,797 is an increase of $25,370 when compared to operating expenses and interest for the three months ended December 31, 2015 of $3,427, and is due primarily to professional fees.
Continuing Operations
Revenue for continuing operations for the three months ended December 31, 2016 of $6,387,244 is an increase of $5,973,975 when compared to the revenue for the three months ended December 31, 2015 of $413,269, and is primarily due to the acquisition of the Transportation businesses in January 2016.
Cost of revenues for continuing operations for the three months ended December 31, 2016 of $4,714,669 is an increase of $4,421,665 when compared to the cost of revenues for the three months ended December 31, 2015 of $293,004, and is primarily due to the acquisition of the Transportation businesses in January 2016, and consists of the tractor, trailer and driver expenses associated with the transportation services.
Gross profit for continuing operations for the three months ended December 31, 2016 of $1,672,575 is a large increase of $1,552,310 when compared to the gross profit for the three months ended December 31, 2015 of $120,265 for the reasons referred to above.
Selling and administrative expenses for continuing operations for the three months ended December 31, 2016 of $1,912,914 is an increase of $1,365,269 when compared to selling and administrative expense for the three months ended December 31, 2015 of $547,645. The Company did not have any stock based compensation for the three months ended December 31, 2016 as compared to stock based compensation for the three months ended December 31, 2015 of $1,703,499.
Interest expense for continuing operations for the three months ended December 31, 2016 of $1,054,602 is an increase of $777,105 when compared to interest expense of $277,497 for the three months ended December 31, 2015.
3. Liquidity and capital resources:
As of December 31, 2016, the Company's sources of liquidity consisted of new debt as well as new sales reported in the commercial sales and service business segment along with the new sales in the transportation segment of the business.
As of December 31, 2016, we had $398,261 in cash and cash equivalents.
Cash flows used in operating activities was $598,528 for the three months ended December 31, 2016.
Cash flows provided by in investing activities was $36,626 for the three months ended December 31, 2016.
Cash flows provided by financing activities were $309,901 for the three months ended December 31, 2016.
The Company's ability to cover its operating and capital expenses, and make required debt service payments will depend primarily on its ability to generate operating cash flows.
The Company's business may not generate cash flows at sufficient levels, and it is possible that currently anticipated contract awards may not be achieved. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to reduce costs and expenses, sell assets, reduce capital expenditures, refinance all or a portion of our existing debt as well as our operating needs, or obtain additional financing and we may not be able to do so on a timely basis, on satisfactory terms, or at all. Our ability to make scheduled principal payments or to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.
While the Company believes that anticipated revenues resulting from its expanded efforts relative to its transportation and commercial sales segments will be sufficient to bring profitability and a positive cash flow to the Company, it is uncertain that these results can be achieved. Accordingly, the Company will, in all likelihood have to raise additional capital to operate. There can be no assurance that such capital will be available when needed, or that it will be available on satisfactory terms.
There are no off-balance sheet arrangements.
