Broad Street Realty, Inc. - Quarter Report: 2008 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
|
þ
|
Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For
the
quarterly period ended
March 31, 2008
|
o
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Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
Commission
file number: 1-9043
B.H.I.T.
Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
|
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36-3361229
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|
(State
of incorporation)
|
|
(I.R.S.
Employer Identification No.)
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7005
Stadium Drive, Suite 100, Brecksville, Ohio 44141
(Address
of principal executive offices)
440-746-8600
(Registrant’s
telephone number)
Indicate
by a 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 þ
No
¨
Indicate
by a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
Accelerated Filer ¨ Accelerated
Filer ¨ Non-Accelerated
Filer ¨
Smaller
Reporting Company þ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes þ
No
¨
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 24,988,051
shares of common stock, $0.01 par value per share, as of May 5,
2008.
Table
of Contents
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Part
I — Financial Information
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1
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Item
1.
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Financial
Statements
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1
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|
|
Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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1
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Our
History
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1
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Forward
Looking Statements
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2
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||
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Results
of Operations
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2
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Financial
Condition and Liquidity
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2
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||
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Off-Balance
Sheet Arrangements
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3
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||
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How
to Learn More About BHIT
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3
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||
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Item
4.
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Controls
and Procedures
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3
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Part
II — Other Information
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3
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||
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Item
1.
|
Legal
Proceedings
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3
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|
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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3
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Item
3.
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Defaults
Upon Senior Securities
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3
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|
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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3
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Item
5.
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Other
Information
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4
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|
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Item
6.
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Exhibits
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4
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Signatures
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5
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||
Part
I — Financial Information
Item
1. Financial
Statements
Our
March
31, 2008 unaudited consolidated financial statements follow this quarterly
report beginning on page F-1.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
B.H.I.T.
Inc. is a shell company without significant operations or sources of revenues
other than its investments. Our existing operations relate primarily to
servicing our cash investment portfolio and maximizing existing capital with
stable interest generating instruments. However, our new management team is
aggressively investigating potential operating companies to acquire and
additional sources of financing. In June 2007, we sold 10.0 million of our
common shares in a private placement for $0.10 a share for a total of $1.0
million. Currently we are focusing our efforts on railroad track repair and
maintenance businesses, but we cannot guarantee we will complete an acquisition
in this industry. Accordingly, we may explore potential acquisitions in other
industries as well.
Our
History
The
company was originally organized under the laws of the State of Massachusetts
in
1985, under the name VMS Hotel Investment Trust, for the purpose of investing
in
mortgage loans, principally to entities affiliated with VMS Realty Partners.
These loans were collateralized by hotel and resort properties. The company
was
subsequently reorganized as a Delaware corporation in 1987 and changed its
name
to B.H.I.T. Inc. in 1998.
As
the
result of a public offering in 1986, the company received gross proceeds of
$98,482,751. From 1989 to 1992 we experienced severe losses due primarily to
a
decline in real estate property values and the resulting default on mortgage
loans held by us. The company has recorded losses every year since 1989
resulting in the accumulated deficit totaling $87,319,630 on March 31,
2008.
In
September 2000, Summa Holdings, Inc. (“Summa”), formerly known as Arrowhead
Holdings Corporation, purchased 5,870,563 shares of our stock, or 39.2% of
the
outstanding shares. Subsequent purchases of our shares resulted in Summa owning
a total of 6,243,563 shares, or 41.7% of the outstanding shares on December
31,
2006.
On
January 24, 2007, a group of private investors purchased all of the BHIT shares
held by Summa. As a result of the transaction, James Benenson, Jr. and John
V.
Curci each resigned as directors and officers of the company and Paul S. Dennis,
Gary O. Marino, Harvey J. Polly and Andrew H. Scott were appointed to fill
vacancies in the board. In April 2008 Mr. Scott resigned from the board to
pursue other business interests.
1
Forward
Looking Statements
Some
of
the statements that we make in this report, including statements about our
confidence in BHIT’s prospects and strategies are forward-looking statements
within the meaning of § 21E of the Securities Exchange Act. Some of these
forward-looking statements can be identified by words like “believe,” “expect,”
“will,” “should,” “intend,” “plan,” or similar terms; others can be determined
by context. Statements contained in this report that are not historical facts
are forward-looking statements. These statements are necessarily estimates
reflecting our best judgment based upon current information, and involve a
number of risks and uncertainties. Many factors could affect the accuracy of
these forward-looking statements, causing our actual results to differ
significantly from those anticipated in these statements. While it is impossible
to identify all applicable risks and uncertainties, they include our ability
to:
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·
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execute
our business plan by identifying and acquiring an operating
company;
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·
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obtain
appropriate financing to complete potential
acquisitions;
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·
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effectively
invest our existing funds and raise additional capital to fund our
operations; and
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|
·
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comply
with SEC regulations and filing requirements applicable to us as
a public
company.
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You
should not place undue reliance on our forward-looking statements, which reflect
our analysis only as of the date of this report. The risks and uncertainties
listed above and elsewhere in this report and other documents that we file
with
the Securities and Exchange Commission, including our annual report on Form
10-KSB, quarterly reports on Form 10-QSB, and any current reports on Form 8-K,
must be carefully considered by any investor or potential investor in
BHIT.
Results
of Operations
Our
total
revenues for the quarter ended March 31, 2008 were $17,749, compared to $13,810
for the same period in 2007, an increase of $3,939, or 28.5%. Revenues increased
as the result of additional interest earned on invested funds which were
increased by the proceeds from our June 2007 private placement.
Our
total
expenses for the first quarter of 2008 decreased $132,293, or 66.5%, to $66,534,
compared to $198,827 for the first quarter of 2007. The decrease was caused
by
$180,000 in stock based compensation expense recognized in 2007 arising from
the
issuance of stock options to members of the board of directors, partially offset
by higher general and administrative expenses in 2008 as a result of
professional fees associated with exploring potential acquisition
candidates.
Accordingly,
our net loss for the first quarter of 2008 was $48,785 ($0.002 per share),
compared to a net loss of $185,017 ($0.012 per share) in 2007, a decrease of
$136,232.
Financial
Condition and Liquidity
Cash
and
cash equivalents consist of cash and short-term investments. Our cash and cash
equivalents balance at March 31, 2008 was $2,183,950, a decrease of $85,104
from
$2,269,054 at December 31, 2007. Cash and cash equivalents decreased in the
first quarter primarily as the result of our net loss for the
period.
2
At
this
time, we have no material commitments for capital expenditures, although we
are
exploring various acquisition opportunities. We believe our cash is sufficient
to meet our needs for anticipated operating expenses as a shell company for
2008. However, we are exploring additional sources of financing to fund the
possible acquisition of an operating company.
Off-Balance
Sheet Arrangements
We
do not
have any material off-balance sheet arrangements.
How
to Learn More About BHIT
We
file
annual, quarterly and special reports and other information with the SEC. Our
SEC filings are available to the public on the internet at the SEC’s web site at
SEC.gov. To learn more about BHIT you can also contact our CEO, Paul S. Dennis,
at 440-746-8600.
Item
4. Controls
and Procedures
Under
the
direction of our interim chief executive and chief financial officer management
evaluated our disclosure controls and procedures (as defined in Exchange Act
Rule 13a-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rule 13a-15(f)) and concluded that our disclosure controls and
procedures were effective as of March 31, 2008, and no change in our internal
control over financial reporting occurred during the quarter ended March 31,
2008 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Part
II — Other Information
Item
1. Legal
Proceedings
We
are
not aware of any pending legal proceedings involving BHIT as of May 5, 2008,
nor
were any proceedings terminated in the first quarter of 2008.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
Not
applicable.
Item
3. Defaults
Upon Senior Securities
Not
applicable.
Item
4. Submission
of Matters to a Vote of Security Holders
Not
applicable.
3
Item
5.Other
Information
On
April
9, 2008, Andrew H. Scott resigned as our interim chief executive officer and
as
a director to pursue other business interests and Paul S. Dennis was immediately
appointed to replace Mr. Scott as interim chief executive officer.
Item
6. Exhibits
|
31
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Rule
13a-14(a)/15d-14(a) Certification of Principal Executive and Financial
Officer Pursuant to § 302 of the Sarbanes-Oxley Act of
2002
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32
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Rule
13a-14(b)/15d-14(b) Certification Pursuant to § 906 of the Sarbanes-Oxley
Act of 2002
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4
Signatures
In
accordance with the requirements of the Securities Exchange Act of 1934,
B.H.I.T. Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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B.H.I.T.
Inc.
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Date:
May 14, 2008
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/s/
Paul S. Dennis
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By
Paul S. Dennis
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Interim
Chief Executive and Financial
Officer
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5
B.H.I.T.
Inc.
Balance
Sheets
As
of March 31, 2008 and December 31, 2007
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March 31, 2008
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December 31, 2007
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||||||
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(Unaudited)
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|||||||
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ASSETS
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|||||||
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Current
Assets
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|||||||
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Cash
and cash equivalents
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$
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2,183,950
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$
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2,269,054
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|||
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Interest
receivable on cash and cash equivalents
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1,018
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1,897
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|||||
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Prepaid
insurance
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9,191
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13,786
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|||||
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Total
Current Assets
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$
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2,194,159
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$
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2,284,737
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|||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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|||||||
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Current
Liabilities
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|||||||
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Accounts
payable and other accrued expenses
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$
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31,131
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$
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72,924
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|||
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Stockholders'
Equity
|
|||||||
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Shares
of Common Stock, $0.01 par value, 75,000,000 shares authorized
and
25,020,808 shares issued at March 31, 2008 and at December 31,
2007
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89,490,847
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89,490,847
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|||||
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Accumulated
deficit
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(87,319,630
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)
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(87,270,845
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)
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|||
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Treasury
stock, at cost, for 32,757 shares of Common Stock
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(8,189
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)
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(8,189
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)
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|||
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Total
Stockholders' Equity
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2,163,028
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2,211,813
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|||||
|
Total
Liabilities and Stockholders' Equity
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$
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2,194,159
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$
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2,284,737
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|||
See
accompanying notes to the Financial Statements.
F-1
B.H.I.T.
Inc.
Statements
of Operations
For
the Three Months Ended March 31, 2008 and 2007
(Unaudited)
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Three Months
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|||||||
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2008
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2007
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||||||
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Revenue
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|||||||
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Interest
earned on cash and cash equivalents
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$
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17,749
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$
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13,810
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|||
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Expenses
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|||||||
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General
and Administrative
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66,534
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18,827
|
|||||
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Stock
based compensation
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—
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180,000
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|||||
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Total
Expenses
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66,534
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198,827
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|||||
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Net
Loss
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$
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(48,785
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)
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$
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(185,017
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)
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Weighted
average number of shares outstanding
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24,988,051
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14,988,051
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|||||
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Basic
and diluted net loss per share of Common Stock
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$
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(0.002
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)
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$
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(0.012
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)
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|
See
accompanying notes to the Financial Statements.
F-2
B.H.I.T.
Inc.
Statements
of Cash Flows
For
the Three Months Ended March 31, 2008 and 2007
(Unaudited)
|
2008
|
2007
|
||||||
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Operating
Activities
|
|||||||
|
Net
Loss
|
$
|
(48,785
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)
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$
|
(185,017
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)
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
|
Stock
based compensation
|
—
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180,000
|
|||||
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Changes
in assets and liabilities:
|
|||||||
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Interest
receivable on cash and cash equivalents
|
879
|
1,836
|
|||||
|
Prepaid
insurance and miscellaneous expenses
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4,595
|
3,786
|
|||||
|
Accounts
payable and accrued expenses
|
(41,793
|
)
|
(6,189
|
)
|
|||
|
Net
cash used in operations
|
(85,104
|
)
|
(5,584
|
)
|
|||
|
Cash
and cash equivalents at beginning of period
|
$
|
2,269,054
|
$
|
1,420,313
|
|||
|
Cash
and cash equivalents at end of period
|
$
|
2,183,950
|
$
|
1,414,729
|
|||
See
accompanying notes to the Financial Statements.
F-3
B.H.I.T.
Inc.
Notes
to Financial Statements
Quarters
Ended March 31, 2008 and 2007
(Unaudited)
Nature
of Operations
B.H.I.T.
Inc. (“BHIT,” “we,” “our” or the “company”) was originally organized under the
laws of the State of Massachusetts in 1985, under the name VMS Hotel Investment
Trust, for the purpose of investing in mortgage loans, principally to entities
affiliated with VMS Realty Partners. The company was subsequently reorganized
as
a Delaware corporation in 1987. We changed our name from Banyan Hotel Investment
Fund to B.H.I.T. Inc. in 1998.
Currently
BHIT is a shell company without significant operations or sources of revenues
other than its investments. However, our management team is aggressively
investigating potential operating companies to acquire and additional sources
of
financing. Currently we are focusing our efforts on railroad track repair
and
maintenance businesses, but we cannot guarantee we will complete an acquisition
in this industry and we may explore potential acquisitions in other industries
as well.
Basis
of Presentation
We
have
prepared the accompanying financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, these financial statements give effect to all normal recurring
adjustments necessary to present fairly the financial position of the company
as
of March 31, 2008 and December 31, 2007, and the results of operations and
cash
flows for the three months ended March 31, 2008 and 2007. The financial
information for the three months ended March 31, 2008 and 2007 is
unaudited.
Although
we believe that the disclosures included in our financial statements are
adequate to make the information presented not misleading, certain information
and footnote disclosures normally included in financial statements prepared
in
accordance with generally accepted accounting principles have been omitted.
Accordingly, the accompanying financial statements should be read in conjunction
with BHIT’s latest annual report on Form 10-KSB for the year ended December 31,
2007.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
The
results of operations for the three months ended March 31, 2008 are not
necessarily indicative of the results to be expected for the full 2008
year.
Stock-Based
Compensation
The
company has stock option agreements with its directors that provide for the
issuance of a total of 2.0 million shares of common stock. We entered into
stock
option agreements for the purchase of a total of 1.0 million shares with
our
directors on March 2, 2007, with an exercise price of $0.15 a share, as
compensation for serving on the board in 2007. We entered into stock option
agreements for the purchase of an additional 1.0 million shares on October
23,
2007, with an exercise price of $0.35 a share, as compensation for serving
on
the board in 2008. The number of options issued and the grant dates were
determined at the discretion of the company’s board. Grantees vested in the
options immediately. Options granted under the plan are exercisable for a
period
not to exceed three years. No options were exercised during 2007 or during
the
quarter ended March 31, 2008.
F-4
B.H.I.T.
Inc.
Notes
to Financial Statements
Quarters
Ended March 31, 2008 and 2007
(Unaudited)
The
fair
values of the stock options issued during 2007 have been estimated using
the
Black-Scholes method, whereby the valuation model takes into account variables
such as volatility, dividend yield, and the risk free interest rate. Management
has determined that the March 2, 2007 options have a value of $0.18 per share
($180,000 in total) and the October 23, 2007 options have a value of $0.25
per
share ($250,000 in total) resulting in total compensation expense for the
year
ended December 31, 2007 of $430,000.
Expected
volatility rate was estimated using the average volatility rates of fourteen
public companies in the financial and business services industry. The weighted
average assumptions used in the option-pricing models during 2007 were as
follows:
|
4.28
|
%
|
|||
|
Expected
life (years)
|
3
|
|||
|
69.67
|
%
|
|||
|
Dividend
yield
|
0
|
The
stock
options are not considered in calculating diluted earnings per share because
they are anti-dilutive.
New
Accounting Pronouncements
In
February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
159, “The Fair Value Option for Financial Assets and Financial
Liabilities-including an amendment of FASB Statement No. 115.” SFAS 159 allows
companies to choose to elect measuring eligible financial instruments and
certain other items at fair value that are not required to be measured at
fair
value. SFAS 159 requires that unrealized gains and losses on items for which
the
fair value option has been elected be reported in earnings at each reporting
date. SFAS 159 is effective for fiscal years beginning after November 15,
2007.
The Company was not impacted by the adoption of SFAS 159.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
defines fair value, provides a framework for measuring fair value, and expands
the disclosures required for fair value measurements. SFAS 157 applies to
other
accounting pronouncements that require fair value measurements; it does not
require any new fair value measurements. SFAS 157 was to be effective for
BHIT
on January 1, 2008. However, in February 2008, the FASB released a FASB Staff
Position (FSP FAS 157-2 — Effective Date of FASB Statement No. 157) which
delayed the effective date of SFAS No. 157 for BHIT to January 1, 2009. We
are
currently evaluating the impact of the adoption of SFAS 157 on the company’s
financial condition and operating results.
F-5