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EX-32.1 - CERTIFICATION - MULTI-CORP INTERNATIONAL INC.ex321.htm
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EX-31.1 - CERTIFICATION - MULTI-CORP INTERNATIONAL INC.ex311.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarter ended:  December 31, 2009
 
o  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________

Commission file number: 333-145471

BWI Holdings, Inc.
(Exact name of registrant as specified in its charter)

Nevada
 
N/A
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
   
 
3915 61 Avenue South East
Calgary, Alberta, Canada  T2C 1V5
(Address of principal executive offices)
 
(403) 255-2900
(Registrant’s telephone number, including area code)
 
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes o  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer   o
Accelerated Filer   o     
Non-Accelerated Filer   o
Smaller Reporting Company   x

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.  Yes o No x
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of December 14, 2010: 9,498,063 shares of common stock.

 
 

 


BWI HOLDINGS, INC. AND SUBSIDIARY

FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008
__________________

TABLE OF CONTENTS
___________________
 
   
 Page
     
PART I - FINANCIAL INFORMATION
  2
      
Item 1.
Consolidated Financial Statements
  2
 
Consolidated Balance Sheets
  3
 
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
  4 and 5
 
Consolidated Statements of Cash Flows
  6
 
Notes to Consolidated Financial Statements
  7 to 13
Item 2.
Management’s Discussion & Analysis or Plan of Operation
  14
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  17
Item 4.
Controls and Procedures
  17
     
PART II -- OTHER INFORMATION  19
     
Item 1.
Legal Proceedings
 19
Item 1A.
Rick Factors
 19
Item 2.
Unregistered Sales of Equity securities and Use of Proceeds
 19
Item 3.
Defaults Upon Senior Securities
 19
Item 4.
Removed and Reserved
 19
Item 5
Other Information
 19
Item 6.
Exhibits
 20
     
Signatures
   21


 
1

 

PART I.                 FINANCIAL INFORMATION

ITEM I.                  CONSOLIDATED FINANCIAL STATEMENTS
 
 
2

 
BWI HOLDINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(US Dollars)
As Of December 31, 2009 and March 31, 2009

 
December 31, 2009
(Unaudited)
 
March 31, 2009
(Audited)
 
ASSETS
     
Current Assets
           
Cash
 
$
830,186
   
$
124,011
 
Accounts receivable, net of allowance for doubtful accounts of $73,786 as of December 31, 2009 and $62,634 as of March 31, 2009
   
1,607,107
     
1,451,547
 
Prepaid expenses
   
183,573
     
155,744
 
Equipment held for sale
   
692,308
     
569,728
 
Total Current Assets
   
3,313,174
     
2,301,030
 
Long-Term Assets
               
Performance bonds
   
28,545
     
23,785
 
Property and equipment, net
   
3,554,779
     
4,665,478
 
Goodwill
   
3,039,046
     
2,532,262
 
Customer lists
   
21,929
     
73,073
 
Total Long-Term Assets
   
6,644,299
     
7,294,598
 
Total Assets
 
$
9,957,473
   
$
9,595,628
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Current Liabilities
               
Revolving bank loan
 
$
17,636
   
$
14,695
 
Accounts payable
   
465,228
     
267,303
 
Accrued liabilities
   
287,341
     
151,123
 
Liabilities under compromise
   
3,821,132
     
2,706,247
 
Notes payable
   
15,345
     
12,786
 
Advances from related parties
   
135,357
     
195,920
 
Advances from shareholders
   
210,653
     
442,274
 
Current portion of long-term debt
   
38,322
     
25,545
 
Current portion of obligations under capital lease
   
495,026
     
1,512,180
 
Total Current Liabilities
   
5,486,040
     
5,328,073
 
Long-Term Liabilities
               
Long-term debt
   
-
     
6,386
 
Obligations under capital lease
   
1,586,356
     
1,089,406
 
Total Long-Term Liabilities
   
1,586,356
     
1,095,792
 
Total Liabilities
   
7,072,396
     
6,423,865
 
Stockholders’ Equity
               
Preferred stock, $0.001 par value, non-voting, 20,000,000 authorized, none issued and outstanding (March 31, 2009 – Nil)
   
-
     
-
 
Common stock, $0.001 par value, voting, 100,000,000 authorized, 55,320,270 issued and outstanding (March 31, 2009 – 55,320,270)
   
55,320
     
55,320
 
Additional paid-in capital
   
11,687,255
     
11,687,255
 
Accumulated other comprehensive income (loss)
   
555,519
     
(36,299
)
Accumulated deficit
   
(9,413,017
)
   
(8,534,513
)
Total Stockholders’ Equity
   
2,885,077
     
3,171,763
 
Going concern (Note 2)
               
Commitments, contingencies and subsequent events (Note 8)
               
Total Liabilities and Stockholders’ Equity
 
$
9,957,473
   
$
9,595,628
 

The accompanying notes are an integral part of these financial statements.

 
3

 
BWI HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of (Loss) Income and Comprehensive Loss
(US Dollars)
For The Three Months Ended December 31
(Unaudited)

     
2009
     
2008
 
Sales
 
$
1,786,887
   
$
1,628,770
 
Cost of Sales
   
1,452,551
     
964,853
 
Gross Profit
   
334,336
     
663,917
 
Operating Expenses
               
Advertising and promotion
   
3,623
     
39,836
 
Automotive
   
879
     
2,019
 
Bad debts (recovery)
   
(5,986
)
   
(97,633
)
Depreciation
   
189,390
     
186,851
 
Insurance
   
6,692
     
7,382
 
Interest and bank charges
   
9,572
     
14,332
 
Interest on long-term debt
   
99,746
     
54,286
 
Office
   
46,884
     
25,865
 
Professional fees
   
56,968
     
39,715
 
Rent
   
40,406
     
57,759
 
Repairs and maintenance
   
1,705
     
14,175
 
Salaries and benefits
   
108,618
     
202,260
 
Telephone
   
22,415
     
28,154
 
Travel
   
(2,108
)
   
1,669
 
Total Operating Expenses
   
578,804
     
576,670
 
(Loss) Income From Continuing Operations
   
(244,468
)
   
87,247
 
Loss on sale of equipment
   
(131,823
)
   
-
 
Gain on insurance settlement
   
203,153
     
-
 
Reorganization costs
   
(164,203
)
   
-
 
(Loss) Income Before Discontinued Operations
   
(337,341
)
   
87,247
 
Income (Loss) From Discontinued Operations (Note 10)
   
35,866
     
(63,738
)
Net (Loss) Income
 
$
(301,475
)
 
$
23,509
 
Foreign currency translation adjustment
   
56,442
     
(74,751
)
Comprehensive Loss
 
$
(245,033
)
 
$
(51,242
)
(Loss) Income From Continuing Operations Per Weighted Number Of Shares Outstanding – Basic And Diluted
 
$
(0.01
)
 
$
0.00
 
Loss From Discontinued Operations Per Weighted Number Of Shares Outstanding – Basic And Diluted
   
(0.00
)
   
(0.00
)
Net (Loss) Income Per Weighted Number Of Shares Outstanding – Basic And Diluted
   
(0.01
)
   
0.00
 
Weighted Average Number Of Shares Outstanding – Basic And Diluted
   
55,320,270
     
27,759,251
 

The accompanying notes are an integral part of these financial statements.

 
4

 
BWI HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of (Loss) Income and Comprehensive Loss
(US Dollars)
For The Nine Months Ended December 31
(Unaudited)

     
2009
     
2008
 
Sales
 
$
6,014,407
   
$
7,679,055
 
Cost of Sales
   
4,539,807
     
5,463,001
 
Gross Profit
   
1,474,600
     
2,216,054
 
Operating Expenses
               
Advertising and promotion
   
40,377
     
219,885
 
Automotive
   
2,026
     
11,100
 
Bad debts (recovery)
   
(7,803
)
   
(242,288
)
Depreciation
   
606,443
     
754,000
 
Insurance
   
14,163
     
10,971
 
Interest and bank charges
   
46,146
     
55,509
 
Interest on long-term debt
   
174,867
     
228,215
 
Office
   
121,541
     
123,952
 
Professional fees
   
80,795
     
114,015
 
Rent
   
261,565
     
206,196
 
Repairs and maintenance
   
4,831
     
44,510
 
Salaries and benefits
   
609,788
     
862,903
 
Telephone
   
94,429
     
98,796
 
Travel
   
15,602
     
23,289
 
Total Operating Expenses
   
2,064,770
     
2,511,053
 
Loss From Continuing Operations
   
(590,170
)
   
(294,999
)
Write off of mining claim
   
-
     
(8,000
)
(Loss) gain on sale of equipment
   
(106,098
)
   
441,695
 
Gain on insurance settlement
   
203,153
     
-
 
Reorganization costs
   
(421,255
)
   
-
 
(Loss) Income Before Discontinued Operations
   
(914,370
)
   
138,696
 
Income From Discontinued Operations (Note 11)
   
35,866
     
14,779
 
Net (Loss) Income
 
$
(878,504
)
 
$
153,475
 
Foreign currency translation adjustment
   
591,818
     
(826,548
)
Comprehensive Loss
 
$
(286,686
)
 
$
(673,073
)
(Loss) Income From Continuing Operations Per Weighted Number Of Shares Outstanding – Basic And Diluted
 
$
(0.02
)
 
$
0.01
 
Income From Discontinued Operations Per Weighted Number Of Shares Outstanding – Basic And Diluted
   
0.00
     
0.00
 
Net (Loss) Income Per Weighted Number Of Shares Outstanding – Basic And Diluted
   
(0.02
)
   
0.01
 
Weighted Average Number Of Shares Outstanding – Basic And Diluted
   
55,320,270
     
27,759,251
 

The accompanying notes are an integral part of these financial statements.

 
5

 

BWI HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(US Dollars)
For The Nine Months Ended December 31
(Unaudited)

   
2009
   
2008
 
Cash Flows From Operating Activities
           
Net (loss) income
 
$
(878,504
)
 
$
153,476
 
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Operating Activities
               
Depreciation and amortization
   
606,443
     
861,538
 
Write off of mining claim
   
-
     
8,000
 
Loss (gain) on sale of equipment
   
106,098
     
(441,695
)
Insurance settlement receivable
   
(203,153
)
       
Changes in operating assets and liabilities
               
Accounts receivable
   
543,058
     
450,967
 
Prepaid expenses
   
3,168
     
(77,296
)
Corporate taxes payable
   
-
     
(1,231
)
Accounts payable, accrued liabilities and accounts payable under compromise
   
386,250
     
(348,889
)
Net Cash Provided By (Used In) Operating Activities
   
563,360
     
451,394
 
Cash Flows From Investing Activities
               
Proceeds from performance bonds
   
-
     
20,000
 
Acquisition of property and equipment
   
(199,447
)
   
(498,356
)
Proceeds on disposal of property and equipment
   
1,344,191
     
122,419
 
Net Cash (Used In) Provided By Investing Activities
   
1,144,744
     
(355,937
)
Cash Flows From Financing Activities
               
Proceeds from bank indebtedness and revolving bank loans
   
-
     
(75,721
)
Repayment of notes payable
   
-
     
(29,530
)
Repayment of long-term debt
   
-
     
(25,971
)
Repayment of obligations under capital lease
   
(592,337
)
   
(855,787
)
Repayment of related parties
   
(94,677
)
   
866,445
 
Repayment of shareholders
   
(299,225
)
   
188,614
 
Net Cash Provided By Financing Activities
   
(986,239
)
   
68,050
 
Effect of Exchange Rate Changes in Cash
   
(15,690
)
   
(134,305
)
Net Decrease in Cash
   
706,175
     
29,202
 
Cash, Beginning of Period
   
124,011
     
-
 
Cash, End of Period
 
$
830,186
   
$
29,202
 
                 
Supplemental Cash Flow Information:
               
Cash Paid During the Year for
               
Interest
 
$
221,013
   
$
270,912
 
Income Taxes
 
$
-
   
$
-
 
Supplemental Schedule of Noncash Investing and Financing Activities:
               
Issuance of common stock for services
 
$
-
   
$
-
 

The accompanying notes are an integral part of these financial statements.

 
6

 
BWI HOLDINGS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(US Dollars)
For The Three and Nine Months Ended December 31, 2009 and 2008
(Unaudited)

1.       NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Company Description

Gray Creek Mining, Inc. was incorporated on August 10, 2006 under the laws of the State of Nevada. On November 7, 2008, a Certificate of Amendment was filed with the Nevada Secretary of State changing the name to BWI Holdings, Inc.

These financial statements include the accounts of BWI Holdings, Inc. (A Nevada Corporation) and subsidiary (the "Company" or “BWI”) and its wholly owned subsidiary Budget Waste Inc. (an Alberta Corporation) ("Budget Alberta").

The Company provides non-hazardous waste collection, transfer, recycling and disposal services. Additionally, the Company provides support to the construction industry such as fence rentals, sanitary facility rentals, bin rentals, hydrovac and water hauling. The Company operates primarily, but not exclusively, in Alberta, Canada. The Company evaluates principal operations through three functional departments: Solid Waste, Liquid Waste and Water Hauling.

Basis of Presentation

The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Securities and Exchange Commission, or SEC, Form 10Q and Article 10 of SEC Regulation S-X. They do not include all of the information and footnotes required by generally accepted accounting principles, or GAAP, for complete financial statements. In the opinion of management, all adjustments and reclassifications considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature.  The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2009.  Operating results for the three and nine months ended December 31, 2009 are not necessarily indicative of the results that may be expected for future quarters or the year ending March 31, 2010.

On March 4, 2009, the Company’s subsidiary, Budget Alberta, filed for protection under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) with the Court of the Queen’s Bench, Alberta (Court). Under the provisions of this act, Budget Alberta has been granted temporary relief from its creditors while it under goes restructuring. In late 2009, Budget Alberta expects to hold a creditors meeting to vote on a Plan of Compromise and Arrangement (the “Plan”), and on approval of the Plan by the Court, expects to emerge from credit protection.

In February 2010, Budget Alberta’s creditors voted to accept the proposed plan of restructuring in order to emerge from creditor protection.  Under the terms of the Plan, preferred and secured creditors are to be paid in full in the amount of approximately $1,668,000.  Unsecured creditors are to receive fifty cents on the dollar and will receive approximately $475,000.  The preferred and secured creditors are to be paid in instalments over six months commencing in March of 2010, and the unsecured creditors are to paid over twelve months.
 
 
7

 
BWI HOLDINGS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(US Dollars)
For The Three and Nine Months Ended December 31, 2009 and 2008
(Unaudited)

1.       NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Continued)

Basis of Presentation (continued)

The consolidated financial statements of BWI are presented in accordance with Accounting Standards Codification (“ASC”) 852-10-45, Reorganizations – Overall - Other Presentation Matters. Accordingly, liabilities subject to compromise as of March 31, 2009, which include the expected allowed claims for liabilities incurred prior to our CCAA filing, are presented separately from those liabilities not subject to compromise on our Consolidated Balance Sheet. Liabilities not subject to compromise include all liabilities incurred after the CCAA petition date. All liabilities incurred prior to the petition date are considered liabilities subject to compromise. These amounts represent the Company’s estimates of known or potential pre-petition date claims that are likely to be resolved in connection with the CCAA filings. In addition, those expenses directly attributable to our CCAA activities, including, but not limited to, professional fees, mailings to creditors, and fees payable to the trustee, are presented separately from other operating expenses on our Consolidated Statement of Loss as reorganization expenses.

On November 10, 2008, pursuant to a Share Exchange Agreement between BWI (formerly known as Gray Creek Mining, Inc.) and Budget Waste Inc., a Nevada corporation ("Budget Nevada"), the Company acquired 100% of the issued and outstanding common shares of Budget Alberta in exchange for 27,570,270 common shares of BWI (the "Acquisition").

The acquisition by the Company of Budget Alberta is deemed to be a reverse acquisition. In accordance with the Accounting and Financial Reporting Interpretations and Guidance prepared by the staff of the U.S. Securities and Exchange Commission, BWI (the legal acquirer) is considered the accounting acquiree and Budget Alberta (the legal acquiree) is considered the accounting acquirer. The combined financial statements of the combined entity will in substance be those of Budget Nevada, with the assets and liabilities, and revenues and expenses, of BWI being included effective from the date of consummation of Share Exchange Agreement. BWI is deemed to be a continuation of business of Budget Nevada. The outstanding common stock of BWI prior to the Share Exchange Agreement will be accounted for at their net book value and no goodwill will be recognized.

Comparative Figures

As discussed above, the continuing operations are of Budget Nevada and the operations of Gray Creek Mining, Inc. ceased following the capital transaction described above. Prior to the Acquisition, Gray Creek Mining, Inc. reported on an April 30 fiscal year end. Subsequent to changing its name to BWI Holdings, Inc, the Company also changed its fiscal year end to March 31, the original year end of Budget Nevada. Comparative figures have been reclassified, where applicable, in order to conform to the current periods presentation.

 
8

 

BWI HOLDINGS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(US Dollars)
For The Three and Nine Months Ended December 31, 2009 and 2008
(Unaudited)

2.       GOING CONCERN

The Company's ability to continue as a going concern is dependent upon achieving profitable operations and upon the continued financial support of its lenders and investors. The outcome of these matters cannot be predicted at this time.

On March 4, 2009, the Company’s subsidiary Budget Waste Inc. entered into credit protection under the provisions of the Companies’ Credit Arrangement Act (Canada) whereby Budget Waste Inc. is granted temporary relief while undergoing restructuring. The Company’s continuation as a going concern is dependent upon the approval and execution of the Company's business plan including achieving more efficient operations, and marketing initiatives, obtaining new financing either by debt or by equity and making arrangements with existing creditors.

These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

3.
EQUIPMENT HELD FOR SALE

In order to meet cash flow requirements and planned commitments under the Plan, The Company reviewed its equipment inventory in March 2009 and assessed that there was a large surplus of unused waste bins, specifically small-roll-off bins. Management established that approximately $692,000 ($570,000 at March 31, 2009) carrying value of waste bins will be held for sale, and have therefore presented these items separately as Equipment held for sale on the December 31, 2009 and March 31, 2009 Consolidated Balance Sheets.

4.       PROPERTY AND EQUIPMENT

The components of property and equipment are as follows:
 
   
Cost
   
Accumulated
Depreciation
   
Net December 31, 2009
   
Net March 31,
2009
 
                         
Equipment
 
$
476,375
   
$
201,651
   
$
274,724
   
$
267,028
 
Waste bins
   
1,290,099
     
670,797
     
619,302
     
687,355
 
Automotive
   
3,932,872
     
2,052,548
     
1,880,324
     
2,974,592
 
Port-A-Potties
   
419,845
     
193,292
     
226,553
     
195,823
 
Office equipment
   
66,194
     
29,735
     
36,459
     
35,385
 
Fencing
   
593,294
     
246,788
     
346,506
     
337,447
 
Computer equipment
   
71,245
     
49,958
     
21,287
     
22,540
 
Leasehold improvements
   
306,955
     
157,331
     
149,624
     
145,308
 
   
$
7,156,879
   
$
3,602,100
   
 $
3,554,779
   
$
4,665,478
 

 
9

 

BWI HOLDINGS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(US Dollars)
For The Three and Nine Months Ended December 31, 2009 and 2008
(Unaudited)

5.       GOODWILL AND INTANGIBLE ASSETS

   
Net December 31, 2009
   
Net March 31,
2009
 
Goodwill
               
Balance, beginning
 
$
2,532,262
   
$
3,107,397
 
Foreign currency translation
   
506,784
     
(575,135
)
Balance, ending
 
$
3,039,046
   
$
2,532,262
 
                 
Customer lists
               
Balance, beginning
 
$
239,725
   
$
239,725
 
Accumulated amortization
   
(241,161
)
   
(146,144
)
Foreign currency translation
   
23,365
     
(20,508
)
Balance, ending
 
$
21,929
   
$
73,073
 

6.       LONG-TERM DEBT

   
December 31, 2009
   
March 31, 2009
 
                 
Loan payable to BDC is secured by a general charge over the assets of the Company. It bears interest at 8.25% per annum, and is repayable in monthly principal payments of $2,685 CAD plus interest, maturing on July 23rd, 2010
   
38,322
     
 
31,931
 
Less current portion
   
38,322
     
25,545
 
Long-term portion
 
$
-
   
$
6,386
 
                 

7.
OBLIGATIONS UNDER CAPITAL LEASES

   
December 31, 2009
   
March 31, 2009
 
Obligations under capital lease
 
$
2,081,382
   
$
2,601,586
 
Less current portion
   
495,026
     
1,512,180
 
Long-term portion
 
$
1,586,356
   
$
1,089,406
 
                 
                 
Minimum lease payments over the next five years are as follows:
               
2010 (Three months)
         
$
495,026
 
2011
           
723,354
 
2012
           
142,934
 
2013
           
720,068
 
2014
           
-
 
Thereafter
           
-
 
Total
         
$
2,081,382
 

 
10

 

BWI HOLDINGS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(US Dollars)
For The Three and Nine Months Ended December 31, 2009 and 2008
(Unaudited)

8.        COMMITMENTS, CONTINGINCIES AND SUBSEQUENT EVENTS

Commitments

The Company has entered into various operating leases for equipment and premises. Minimum payments over the next five years are as follows:

2010 (Three months)
 
$
22,826
 
2011
   
65,532
 
2012
   
12,801
 
2013
   
-
 
2014
   
-
 
Thereafter
   
-
 
Total
 
$
101,159
 

Litigation

By statement of claim issued January 10, 2008, Budget Alberta sought a declaration confirming an interest in certain leased lands, as well as various corollary relief including judgment in the amount of $220,000 plus costs. By statement of defence and counterclaim issued January 30, 2008, the defendant denied the existence of the claim, and counterclaimed for damages for trespass and wrongful occupation of the subject lands in an unspecified amount. The lawsuit is ongoing and the outcome is not determinable at this time.

Subsequent events

In February 2010, Budget Alberta’s creditors voted to accept the proposed plan of restructuring in order to emerge from creditor protection.  Under the terms of the Plan, preferred and secured creditors are to be paid in full in the amount of approximately $1,668,000.  Unsecured creditors are to receive fifty cents on the dollar and will receive approximately $475,000.  The preferred and secured creditors are to be paid in instalments over six months commencing in March of 2010, and the unsecured creditors are to be paid over twelve months.

 
11

 
BWI HOLDINGS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(US Dollars)
For The Three and Nine Months Ended December 31, 2009 and 2008
(Unaudited)

9.       RELATED PARTY TRANSACTIONS

The Company has transactions with various related parties, including the Company’s officers, directors and significant shareholders and companies controlled by shareholders, directors or family members, and a company controlled by the spouse of a shareholder. These transactions are in the normal course of operations and are transacted at the exchange amount agreed to by the related parties.

Included in accounts receivable at December 31, 2009 and March 31, 2009
 
$
-
   
$
-
 
Included in accounts payable at December 31, 2009 and March 31, 2009
   
32,719
     
109,004
 
Included in obligations under capital lease at December 31, 2009 and March 31, 2009
   
1,036,103
     
1,087,748
 
Transactions during the nine months ended December 31, 2009 and 2008:
               
Rent
   
81,212
     
7,325
 
Repairs and supplies
   
164,692
     
97,131
 
Loan interest
   
69,160
     
107,643
 

During the nine months ended December 31, 2008, the Company sold property to a related party. The property was independently appraised at $541,741. The Company recognized a gain of $317,220 on this sale.

10.        SEGMENTED INFORMATION

The Company provides non-hazardous waste collection, transfer, recycling and disposal services. Additionally, the Company provides support to the construction industry such as fence rentals, sanitary facility rentals, bin rentals, hydrovac and water hauling. The Company operates primarily, but not exclusively, in Alberta, Canada. The Company evaluates principal operations through four functional departments: Solid Waste, Liquid Waste and Water Hauling.

The results of operations for the nine months ended December 31, 2009 by functional department is as follows:

   
Revenue
   
Cost of Sales
   
Gross Profit
   
Depreciation
   
Administration
 
Net Loss
 
Solid Waste
 
$
4,440,851
   
$
3,580,828
   
$
860,023
   
$
471,681
   
$
1,386,398
   
$
(998,056
)
Liquid Services
   
1,157,519
     
586,736
     
570,783
     
99,132
     
(278,677)
     
750,328
 
Water Hauling
   
297,387
     
251,670
     
45,717
     
25469
     
281,589
     
(261,341
)
Septic
   
118,650
     
120,574
     
(1,923
)
   
10,161
     
69,032
     
(81,117
)
   
$
6,014,407
   
$
4,539,807
   
$
1,474,600
   
$
606,443
   
$
1,458,343
   
$
(590,186
)


 
12

 

BWI HOLDINGS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(US Dollars)
For The Three and Nine Months Ended December 31, 2009 and 2008
(Unaudited)

10.        SEGMENTED INFORMATION (Continued)

The results of operations for the nine months ended December 31, 2008 by functional department is as follows:

   
Revenue
   
Cost of Sales
   
Gross Profit
   
Depreciation
   
Administration
 
Net Income (Loss)
 
Solid Waste
 
$
5,985,096
   
$
4,196,821
   
$
1,788,726
   
$
617,266
   
$
1,056,133
   
$
114,877
 
LiquidServices
   
1,050,354
     
737,987
     
312,367
     
109,428
     
185,842
     
17,097
 
Water Hauling
   
1,006,615
     
707,256
     
299,359
     
104,221
     
178,153
     
16,985
 
Septic
   
297,198
     
208,813
     
88,384
     
30,623
     
53,244
     
4,517
 
   
$
8,339,263
   
$
5,850,877
   
$
2,488,836
   
$
861,538
   
$
1,473,372
   
$
153,476
 

11.        DISCONTINUED OPERATIONS

The gains and losses from the disposition of certain assets, and associated liabilities, operating results, and cash flows are reflected as discontinued operations in the consolidated financial statements for all periods presented. Although net earnings are not affected, the Company has reclassified results that were previously included in continuing operations as discontinued operations for qualifying dispositions.

October 2, 2009 management decided to close down all the operations at their Edson, Alberta location. The Edson location was primarily involved in the Water Hauling segment. The decision to close this location was made as a result of a substantial decrease in sales because of the lack of oil rigs operating in Alberta during the year.  The Edson location owned several of our trucks and trailers which were all sold at auctions during the three months ended December 31, 2009, except for one truck which was brought back to our Calgary location.  Subsequent to the sale of these assets, no other significant assets or liabilities remained in Edson and the Company did not have any continuing operations at this location.  Summarized financial information for discontinued operations for the nine months ended December 31, 2009 and 2008 is as follows:
 
     
2009
     
2008
 
Sales
 
$
162,640
   
$
660,208
 
Cost of Sales
   
54,866
     
387,876
 
Gross Profit
   
107,774
     
272,332
 
Operating Expenses
               
Advertising and promotion
   
3,152
     
-
 
Depreciation
   
-
     
107,539
 
Interest and bank charges
   
901
     
2,676
 
Interest on long-term debt
   
795
     
42,697
 
Office
   
1,687
     
8,967
 
Rent
   
57,633
     
72,496
 
Repairs and maintenance
   
-
     
6,301
 
Telephone
   
3,785
     
15,995
 
Travel
   
3,955
     
882
 
Total Operating Expenses
   
71,908
     
257,553
 
Net Income From Discontinued Operations
 
$
35,866
   
$
14,779
 


 
13

 
ITEM 2.         MANAGEMENT’S DISCUSSION OR PLAN OF OPERATION

The following discussion of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto in Item I, and the Company’s 10-K Annual Report, the Company’s 8-K Entry Into a Material Definitive Agreement  and other publicly available financial information. This discussion contains forward-looking statements and involves numerous risks and uncertainties. Our actual results may differ materially from those contained in any forward-looking statements.
 
Operating Results for the Three Months Ended December 31, 2009 Compared to Three Months Ended December 31, 2008.
 
For the three months ended December 31, 2009, the Company reported revenues of $1,787M (“M” representing thousands), compared to $1,629M for the three months ended December 31, 2008. The decrease was caused by the economic recession as it resulted in less construction of residential and commercial properties, which is a core segment of our business.
 
The gross margin for the three months ended December 31, 2009 of $334M represented 19% of revenue as compared to $664M for the three months ended December 31, 2008 or 41%. This decline was the result of certain fixed costs that could not be cut as sales declined.
 
Operating expenses remained constant at $578M for the three months end December 31, 2009 compared to $576M for the three months ended December 31, 2008. During the quarter, decreases to salaries were offset by increased interest expenses, resulting in a minimal overall change. Advertising and promotion decreased to $4M for the three months ended December 31, 2009 from $40M for the three months ended December 31, 2008. This expense decreased as a result of the economic recession and overall construction industry. Salaries and benefits also decreased to $109M for the three months ended December 31, 2009 from $202M for the three months ended December 31, 2008. Additionally, general administrative and operating expenses decreased due to the Company’s commitment to stronger systems of internal controls and effort to stabilize costs.
 
The Company experienced net loss from operations of $244M for the three months ended December 31, 2009 compared to income of $87M for the three months ended December 31, 2008. This decline arose from a deteriorating gross margin and reduced sales.
 
The Company experienced net loss of $301M for the three months ended December 31, 2009 mainly due to reorganization costs of $164M compared to income of $23M for the three months ended December 31, 2008.

Liquidity and Capital Resources for the Three Months Ended December 31, 2009

As of December 31, 2009, our current assets were $3,313M and our current liabilities were $5,486M, which resulted in a working capital deficit of $2,173M . As of December 31, 2009, our total assets were $9,957M and out total liabilities were $7,072M.

Stockholders’ equity decreased from $3,171M as of March 31, 2009 to $2,885M as of December 31, 2009.

 
14

 
Cash Flows from Operating Activities

We have generated positive cash flows from operating activities. For the nine months ended December 31, 2009, net cash flows provided by operating activities was $563,360 compared to net cash flow provided by operating activities of $451,394 during the nine month period ended December 31, 2008. Net cash flows provided by operating activities consisted primarily of a net loss of $878,504 (2008: net gain of $153,476), which was partially offset by $606,443 (2008: $861,538) in depreciation and amortization, $-0- (2008: $8,000) in write off of mining claim, $106,098 (2008: ($441,695) in gain on sale of equipment and ($203,153) (2008: $-0-) in insurance settlement receivable. Net cash flows provided by operating activities was further changed by $543,058 (2008: $450,967) in accounts receivable, $3,168 (2008: ($77,296) in prepaid expenses, $386,250 (2008: ($348,889)) in payable, accrued liabilities and accounts payable under compromise and $-0- (2008: $1,231 in corporate taxes payable.

Cash Flows from Investing Activities

For the nine month period ended December 31, 2009, net cash flows provided by investing activities was $1,144,744 compared to net cash flows used in investing activities of ($355,937) in nine month period ended December 31, 2008. Net cash flows provided by investing activities for the nine month period ended December 31, 2009 was comprised of proceeds of $1,344,191 on disposal of property and equipment offset by $199,447 in acquisition of property and equipment. .

Cash Flows from Financing Activities

We have financed our operations primarily from debt or the issuance of equity instruments. For the nine month period ended December 31, 2009, net cash flows used in financing activities was ($986,239) compared to net cash flows provided by financing activities of $68,050 for the nine month period ended December 31, 2008. Cash flows used in financing activities for the nine month period ended December 31, 2009 consisted of ($592,337) in repayment of obligations under capital lease, ($94,677) in repayment of related parties and ($299,225) in repayment to shareholders.

On March 4, 2009, the Company’s subsidiary, Budget Alberta, filed for protection under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) with the Court of the Queen’s Bench, Alberta (Court). Under the provisions of this act, Budget Alberta has been granted temporary relief from its creditors while it under goes restructuring. In late 2009, Budget Alberta expects to hold a creditors meeting to vote on a Plan of Compromise and Arrangement (the “Plan”), and on approval of the Plan by the Court, expects to emerge from credit protection.

In February 2010, Budget Alberta’s creditors voted to accept the proposed plan of restructuring in order to emerge from creditor protection.  Under the terms of the Plan, preferred and secured creditors are to be paid in full in the amount of approximately $1,668,000.  Unsecured creditors are to receive fifty cents on the dollar and will receive approximately $475,000.  The preferred and secured creditors are to be paid in installments over six months commencing in March of 2010, and the unsecured creditors are to be paid over twelve months.

In order to meet its obligations under the Plan, the Company intends to sell excess waste bins and vehicles it has on hand, as well as make periodic payments towards these obligations out of cash flows from operations. At this time, acquisitions of equipment are anticipated to be minimal, while the Company focuses on debt repayment. In order to lower its debt, the Company intends to disclaim certain capital leases if their cost is no longer worth the benefit. Further, the Company also intends to increase its collection efforts in order to avoid bad debts.

 
15

 
Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Consolidated Financial Statements.
 
Depreciation Expense on Property and Equipment
 
Estimates are used in determining our accumulated amortization for depreciation on property and equipment.  We currently use the declining balance based over management’s estimate of the useful lives of the assets to the Company.
 
We also test our assets for impairment at least annually by way of undiscounted cash flow analysis. We have not encountered any instances of where our fixed assets were impaired.  Generally, our fixed assets have represented their useful life to the Company.
 
Bad Debt Allowance
 
Estimates are used in determining our allowance for bad debts and are based on our historical collection experience, current trends, credit policy and a review of our accounts receivable by aging category. Our reserve is evaluated and revised on a quarterly basis.

Off-Balance Sheet Arrangements

The Company has approximately 30 operating leases for vehicles and waste bins used in the operations of the Company.

Approximate Minimum lease payments over the next five years are as follows:
 
2010 (Three months)
 
$
22,826
 
2011
   
65,532
 
2012
   
12,801
 
2013
   
-
 
2014
   
-
 
Thereafter
   
-
 
Total
 
$
101,159
 

 
16

 
Inflation and Prevailing Economic Conditions
 
To date, inflation has not had a significant impact on our operations. Consistent with industry practice, most of our contracts provide for a pass-through of certain costs, including increases in landfill tipping fees and, in some cases, fuel costs. We have implemented a fuel surcharge program, which is designed to recover fuel price fluctuations. We therefore believe we should be able to implement price increases sufficient to offset most cost increases resulting from inflation. However, competitive factors may require us to absorb at least a portion of these cost increases, particularly during periods of high inflation.

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material changes in the Company’s market risk during the fiscal period ended December 31, 2009.  For additional information, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009.
   
ITEM 4.        CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES & CHANGES TO INTERNAL CONTROLS

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our Company, particularly during the period when this report was being prepared.

Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.

Internal control over financial reporting includes those policies and procedures that:

(1)  
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
(2)  
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and
(3)  
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 
17

 
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.

Management assessed the effectiveness of the Company's internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:

-  
INSUFFICIENT RESOURCES: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.

-  
INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to properly implement control procedures.

-  
LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS: We do not have a functioning audit committee and we have only two outside directors serving on the Company's Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.

Management, including our Chief Executive Officer and Chief Financial Officer, has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.

 
18

 
PART II - OTHER INFORMATION

ITEM 1.         LEGAL PROCEEDINGS

The Company’s wholly owned subsidiary (Budget Waste Inc.) entered into credit protection on March 4, 2009 under the provisions of the Companies’ Credit Arrangement Act (Canada).

On August 19, 2010, The Company's wholly owned subsidiary (Budget Waste Inc.), located in Calgary, Alberta, Canada, was placed into receivership.

As of August 19, 2010, the Company is abandoning all claim of ownership to this subsidiary and will continue with other opportunities and possible acquisition candidates.

Our wholly owned subsidiary, Budget Waste Inc., was involved in various legal proceedings; however as mentioned above we have abandoned all claim of ownership of this subsidiary and all legal claims would be handled by the trustee appointed to Budget Waste Inc.

ITEM 1A.      RISK FACTORS.

Not applicable.

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company did not have any unregistered sales of equity during the three and nine months ended December 31, 2009.

ITEM 3.         DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.         (Removed and Reserved).

None.

ITEM 5.         OTHER INFORMATION

None.
 
 
19

 
 ITEM 6.       EXHIBITS
 
(a)    Exhibits

Exhibit Number
 
Description of Exhibit
     
31.1
 
Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended
     
31.2
 
Certification of  Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended
     
32.1
 
 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2
 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
 
 
20

 
SIGNATURES
  
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

BWI HOLDINGS, INC.
     
     
Date: December 21, 2010
By:
/s/ Jim Can
   
Jim Can
   
President, Chief Executive Officer and Director
     
Date: December 21, 2010
By:
/s/ Bruce Milroy
   
Bruce Milroy
   
Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer


 
21