SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities \
Exchange Act of 1934
For the quarterly period ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 10 OR 15(d) OF THE EXCHANGE ACT
Commission File Number 0-3926
ANTARES RESOURCES CORPORATION
(Exact name of small business issuer as specified in its charter)
New York 13-1950459
(State or other jurisdiction (I.R.S. Identification number)
of incorporation or organization)
100 Quentin Roosevelt Boulevard, Suite 202 Garden City, New York 11530
(address of principal executive offices)
(516) 683-8116
(Issuer's Telephone Number, Including Area Code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer(1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Outstanding Equity Securities at February 16, 1996
Class of Securities Outstanding Shares
Common Stock, .001 par value, 14,415,395 shares
Preferred Stock, .01 par value
Series A ($10.00 Liquidation Preference), 100,000 shares
Series B ($ 2.50 Liquidation Preference) 135,000 shares
Transitional Small Business Disclosure Format
Yes No X
ANTARES RESOURCES CORPORATION
Index to Quarterly Report on Form 10-QSB
For the Quarter Ended December 31, 1995
Part 1. FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1995
and September 30, 1995. 3-4
Consolidated Statements of Operations for the three month
periods ended December 31, 1995 and 1994. 5
Consolidated Statements of Cash Flows
for the three month periods ended December 31, 1995 and 1994. 6
Notes to Financial Statements. 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8-11
Signature Page 12
Part II. Other information
Item 1. Legal Proceedings
The Company has received notice from a third-party claiming to be
a judgment creditor of David Capps, one of the Company's officers and
directors. The third-party claims to have a valid judgment lien on certain
shares of Caribbean Breeze Inc. a predecessor to the Company's subsidiary
Caribbean Breeze International, Inc. The Company believes based on currently
available information that it has no material liability in this matter. In
addition management has been informed by Mr. Capps that the creditor has agreed
to a settlement in this matter with Mr. Capps.
Item 2. Changes in Securities
(Non Applicable)
Item 3. Defaults upon Senior Securities
(Non Applicable)
Item 4. Submission of Matters to a Vote of Security Holders
(Non Applicable)
Item 5. Other Information
(Non Applicable)
Item 6. Exhibits and Reports on Form 8-K
(None)
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<table:
Financial Data
[CAPTION]
December 31, September 30,
1995 1995
(unaudited) (audited)
[S] [C] [C]
Current assets:
Cash and equivalents $3,626,305 $6,120,164
Accounts receivable, net of allowance for
doubtful accounts of $23,000 in December
and September 17,107 16,753
Current portion of notes receivable 7,718 24,019
Loans receivable stockholders 60,000 0
Inventories 1,075,991 397,191
Prepaid expenses 121,187 76,871
Total current assets 4,908,308 6,634,998
Property and equipment:
Real estate held for development 1,754,245 1,754,245
Machinery and equipment 293,011 64,788
Displays and racks 111,133 111,133
Vehicles 152,158 48,871
Office equipment 42,087 23,196
2,352,634 2,002,233
Less accumulated depreciation (73,251) (47,613)
2,279,383 1,954,620
Other assets:
Investments 1,002,500 2,500
Notes receivable, net of current portion 31,956 34,477
Contract rights 2,900,000 2,900,000
Intangibles 484,192 285,000
Deferred financing costs 30,000 30,000
Deferred acquisition costs 0 44,168
4,448,648 3,296,144
$11,636,339 $11,885,762
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1995 1995
(unaudited) (audited)
Current liabilities:
Current maturities of long-term debt $ 19,324 $ 9,122
Current portion of capital lease obligation 35,597 35,068
Current portion of subordinated debt 400,000 350,000
Accounts payable and accrued expenses 237,103 212,916
Due to stockholders 0 8,505
Payroll taxes payable 45,095 28,485
Total current liabilities 737,119 644,096
Long-term debt, net of current maturities 67,902 24,473
Capital lease obligation, net of current portion 387,257 396,357
Subordinated debt, net of current portion 200,000 250,000
1,392,278 1,314,926
Stockholders' equity:
Preferred stock, $.01 par value
5,000,000 shares authorized
Series A - 100,000 shares issued 1,000 1,000
Series B - 135,000 shares issued 1,350 1,350
Common stock, $.001 par value
200,000,000 shares authorized
6,982,686 shares issued and outstanding in
December 6,983
6,104,994 shares issued and outstanding in
September 6,105
Additional paid-in capital 13,686,849 13,461,877
Accumulated deficit (3,452,121) (2,899,496)
10,244,061 10,570,836
$11,636,339 $11,885,762
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter ended December 31,
1995 1994
Revenues:
Alternative fuel $ 334,209 $ 0
Sun and skin-care products (20,043) 0
Trailer sales 36,503 0
350,669 0
Cost of revenues:
Alternative fuel 194,487 0
Sun and skin-care products 4,976 0
Trailer sales 33,807 0
233,270 0
Gross profit 117,399 0
Selling expenses 101,289 0
General and administrative expenses 542,752 12,888
Project development expenses 56,840 0
700,881 12,888
Loss from operations (583,482) (12,888)
Other expenses (income):
Interest expense 26,616 0
Interest income (57,473) 0
(30,857) 0
Net loss ($552,625) ($12,888)
Net loss per common share ($0.08) ($0.52)
Weighted average number of common shares
outstanding 6,684,785 24,961
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Quarter ended December 31,
1995 1994
Cash flows from operating activities:
Net loss ($552,625) $(12,888)
Adjustments to reconcile net loss to
net cash used inoperating activities:
Depreciation and amortization 32,038
Operating expenses paid by stockholders - 388
Changes in assets and liabilities:
Increase in accounts receivable (354) -
Increase in inventories (566,919) -
Increase in prepaid expenses (44,316) -
Increase in accounts payable &
accrued expenses 15,682 12,500
Increase in payroll taxes payable 16,610 -
Total adjustments (547,259) 12,888
Net cash used in operating
activities (1,099,884) -
Cash flows from investing activities:
Acquisition costs (195,443) (7,444)
Capital expenditures (146,411) -
Loans to stockholders (60,000) -
Principal payments from note receivable 18,822 -
Investment (1,000,000) -
Net cash used in investing activities (1,383,032) (7,444)
Cash flows from financing activities:
Principal payments under loan agreements (3,222) -
Principal payments under capital lease
obligations (8,571) -
Proceeds from issuance of common stock and
options 850 13,000
Net cash provided by (used in) financing
activities (10,943) 13,000
Net increase (decrease) in cash (2,493,859) 5,596
Cash at beginning of period 6,120,164 -
Cash at end of period $3,626,305 $ 5,596
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(unaudited)
Note 1. Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-QSB and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Operating results for
any quarter are not necessarily indicative of the results for any other
quarter or for the full year. These statements should be read in connection
with the financial statements of Antares Resources Corporation and notes
thereto included in the Antares Resources Corporation Company's (the Company)
Annual Report on Form 10KSB for the year ended September 30, 1995 and the
Company's Proxy Statement dated January 26, 1996.
Note 2. History and business activity
The Company was incorporated in the State of New York on November 19, 1958,
and had several name changes reflecting its prior business operations until
December 20, 1983, at which time the Company changed its name to Antares
Resources Corporation. Prior to the business combination which took place
January 1, 1995, the Company had not conducted any material business
operations since 1984. Antares Resources Corporation is a publicly held company
whose stock is listed on the NASDAQ Small Cap Market.
The Company has three operating subsidiaries. Empire Energy, Inc. is engaged
in the buying and selling of pine wood by-products used as fuel in the firing
boilers of paper mills. Caribbean Breeze International, Inc. is engaged in the
design, production and sale of sun and skin care products. Southern Trailers
Manufacturing, Inc. manufactures and sells utility, cargo and horse trailers.
A fourth subsidiary, Cherokee Sun Corp. (a development stage company) has made
arrangements to enter the kitty litter production business as a supplier of the
raw material, montmorillionite clay (fuller's earth) in bulk form or
as finished product which has been processed and packaged with private labels.
A fifth subsidiary, Multi-Source Labs, Inc. acquired the rights to produce
and distribute a drink-holding adapter, "The Beverage Brat", and assigned those
rights to Caribbean Breeze International, Inc. During the quarter, molds were
created and initial production began. Sales are expected to begin in the second
quarter.
Note 3. Business Combinations
On January 1, 1995, the Company acquired the assets of Empire Energy, Inc.
("Old Empire"), and its affiliates Caribbean Breeze International, Inc. ("Old
Caribbean") and Cherokee Sun Corp. ("Old Cherokee"), in exchange for 1,000,000
shares of its .001 par value common stock, 100,000 shares of $10 convertible
preferred stock and $600,000 of 12% subordinated notes. In addition, Antares
Resources Corporation assumed certain liabilities of Old Empire, Old
Caribbean and Old Cherokee. The acquisition was accounted for as a purchase.
The acquisition included the ongoing business, all tangible assets and
intangible assets including contract rights, customer lists, product formulas
and the agreement of certain shareholders not to compete with the business.
On November 14, 1995, Southern Trailers Manufacturing, Inc. acquired the
assets of a company which manufactures horse and utility trailers.
Consideration included $190,000 of cash and $200,000 of the Company's common
stock. The acquisition was accounted for as a purchase.
Note 4. Subsequent Event
The Board of Directors declared a two-for-one forward split of the Company's
common stock, effective for stockholders of record on January 5, 1996. The
share distribution date was January 31, 1996.
Note 5. Legal Proceedings
The Company has received notice from a third-party claiming to be a judgment
creditor of David Capps one of the Company's officers and directors. The
third-party claims to have a valid judgment lien on certain shares of
Caribbean Breeze Inc. a predecessor to the Company's subsidiary Caribbean
Breeze International, Inc. The Company believes based on currently available
information that it has no material liability in this matter. In addition
management has been informed by Mr. Capps that the creditor has agreed to a
settlement in this matter with Mr. Capps.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Financial Statements and related notes.
Overview
Antares Resources acquired the operations of Empire Energy, Inc. Caribbean
Breeze International, Inc., and Cherokee Sun Corporation in January of 1995.
Southern Trailers was acquired on November 14, 1995.
The Company currently has three operating subsidiaries, Caribbean Breeze
International, Inc., Empire Energy, Inc. and Southern Trailers Manufacturing.
The Company also has a subsidiary, Cherokee Sun Corporation, that is in the
process of trying to enter the kitty litter manufacturing business, and Multi-
Source Labs, which hold the rights to all non-suncare products.
The principal business of Caribbean Breeze International is the production,
marketing and distribution of sun, skin care and sun block products which it
sells through a national network of independent distributors and brokers.
Empire Energy, Inc. also engages in the buying and selling of wood
by-products used as fuel primarily by paper mills in Southeastern Georgia
and Northeast Florida. Southern Trailers manufactures and sells trailers,
horse, utility and cargo styles, from its manufacturing facility in
Unadilla, Georgia.
The Company continues to negotiate with major kitty litter producers for a
contract to product on a private label basis. As soon as a contract is signed,
construction can begin on the plant facility.
The following financial information and discussion will cover the consolidated
results of the Company's first quarter operations ending December 31, 1995.
The results will be compared with the operating results for the quarter ended
December 31, 1994, which were before the consolidation of the predecessor
companies and Antares. There are no comparative figures for Southern
Trailers, because prior to 1995, the company was a distributor for other
manufacturers.
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, the percentage of
total revenues represented by certain items included in the Company's
Consolidated Statements of Operations.
EMPIRE ENERGY, INC.
Three Months Ended December 31,
1995 % 1994 %
Revenue
Alternative fuel 334,209 100.00% 438,565 80.06%
Waste disposal 0 0.00% 109,214 19.94%
Total Sales 334,209 100.00% 547,779 100.00%
Cost of sales
Alternative fuel 194,487 58.19% 332,231 60.65%
Waste disposal 0 0.00% 56,527 10.32%
Total cost of sales 194,487 58.19% 388,758 70.97%
Gross profit 139,722 41.81% 159,021 29.03%
Selling expenses 0 0.00% 0 0.00%
General and administrative 99,531 29.78% 80,158 14.63%
CARIBBEAN BREEZE INTERNATIONAL, INC.
1995 % 1994 %
Sales 76,820 N/A (b) N/A
Returns and allowances 96,863 N/A (b) N/A
Net sales (20,043) N/A (41,759) N/A
Cost of sales 4,976 N/A 28,953 N/A
Gross profit (25,019) N/A (70,712) N/A
Selling expenses 99,783 N/A 64,965 N/A
General and administrative 201,311 N/A 97,865 N/A
SOUTHERN TRAILER MANUFACTURING, INC.
1995(a) % 1994 %
Sales 36,503 100.00% N/A N/A
Cost of sales 33,807 92.61% N/A N/A
Gross profit 2,696 7.39% N/A N/A
Selling expenses 1,506 4.13% N/A N/A
General and administrative 85,025 232.93% N/A N/A
(a) Includes operations from November 14, 1995 (date of acquisition) through
December 31, 1995 only.
(b) Detail of sales, returns and allowances not available for pre-acquisition
period.
Revenues
Revenues for the three months ended December 31, 1995 were $350,669
compared to revenues of $506,020 for the three months ended December 31, 1994.
The decrease in revenues was due to two major events:
1. $109,214 of revenue in 1994 was derived from the sales of corrugated
waste product by Empire Energy which was discontinued in mid 1995. Despite the
reduction of revenues, the gross profit percentage increased by twelve percent
due to concentrating on the more profitable wood by-products.
2. Sales returns and discounts in Caribbean Breeze International were
$96,863 for the quarter ended December 31, 1995 versus, $44,759 for the same
quarter ended December 31, 1994 for Caribbean Breeze International. As sales
increased overall from 1994 to 1995, returns as a dollar amount increased as
well. Caribbean Breeze International had net negative sales as a result of
actual returns being in excess of estimated reserves.
Cost of Sales
Cost of sales for the three months ended December 31, 1995 were $233,270
compared to $417,711 for three months ended December 31, 1994, a decrease of
$184,441. The decrease was mainly due to the deletion of the waste disposal
business, as well as decreased costs on alternative fuel operations. Cost of
sales in 1995 for Caribbean Breeze International represents cost of estimated
reserves for returns in excess of cost of actual returns, while 1994 cost of
sales includes under accruals of costs in prior periods and recognition of
some inventory obsolescence.
Management believes that the gross profit percentage for Southern Trailers is
abnormally low for the period from date of acquisition on November 14, 1995
through December 31, 1995. The gross profit percentage is depressed due to the
changes in the production process that were underway. As a result of the
acquisition, management changed operations from a small-scale distributor for
other manufacturers' products to a production-line manufacturer of its own
trailers. During this period of change, sales decreased while certain fixed
cost components of the manufacturing process continued, or even increased in
preparation for the expansion of operations.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses for the three months ended
December31, 1995 were $644,041 compared to $242,988 for the three months ended
December 31, 1994. This increase was due to the addition of Southern Trailers
as an operating entity, and the increased staff and support expenses necessary
to manage the planned future operations of the Company. The kitty litter
business is still in the development stage, and it continues to incur costs
and expenses in an effort to successfully generate sales commitments
necessary for its implementation. Selling expenses for the three months
ended December 31, 1995 were $101,289, while general and administrative
were $542,752. When compared to selling, general and administrative
expenses of $466,950 for the three months ended September 30, 1995; the
major difference was the $86,531 expense of Southern Trailers and insurance
costs of $21,164.
Interest income was generated by investing excess funds in overnight
investments. Interest expense was mainly interest paid on the subordinated
debt.
Liquidity and Capital Resources
The Company is financing its activities primarily from the capital infusion
the Company received in July of 1995. In the future quarters, the company
anticipates that cash flow from operations will assist internal financing.
There can be no assurances that the Company will generate positive cash flow
from operations in the future.
As is customary in the sun and skin care business, the Company began to put
funds into inventory purchases in the first quarter ended December 31, 1995,
in order to be able to meet the anticipated increased demand for the products.
Inventory for Caribbean Breeze International was $832,036 at December 31,
1995 as compared to $350,009 at December 31, 1994. Also, customers are allowed
to return a certain amount of unsold product at the end of the season. The
returns are generally exchanged for other products or given credit against
future orders. Historically most returns occur in the October through December
months. These returns, coupled with the fact that orders do not generally
begin, for suntan products, until January of each year, cause the first
quarter of the Company's fiscal year to show negative sales for Caribbean
Breeze International. New products were introduced this year to try and
alleviate the seasonal nature of the industry. The decrease in negative
sales for the first quarter show that this plan seems to generate more orders
than previously experienced for the period of October through December.
Trends
The Company feels that the increased level of orders received by Caribbean
Breeze International in the first quarter are an indication that the non-
seasonal products are going to increase sales and that the demand for the
Company's products will result in increased sales for the remainder of the
year. During the three month period ended December 31, 1995, Multi-Source
Labs, Inc. acquired the rights to produce and distribute a drink-holding
adapter, The Beverage Brat, and assigned those rights to Caribbean Breeze
International, Inc. During the quarter, additional molds were created
at a capitalized cost of $63,430 and initial production began. Sales of the
"Brat" will begin in the second quarter of the Company's fiscal year.
Southern Trailers was acquired on November 14, 1995 and the results shown
in the preceding tables are for 6 weeks. Southern Trailers is being converted
to a mass-manufacturer and the start-up costs are expected to continue into the
second quarter. The new company should begin to generate significant sales at
the end of the second quarter.
Inflation
The Company does not believe that inflation had a material effect on the
results of operations for the three months ended December 31, 1995.
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 of the
undersigned thereunto duly authorized.
ANTARES RESOURCES CORPORATION
(Registrant)
By/s/William W. Perry III
William W. Perry III
President and Chief Executive Officer
(Duly Authorized Officer)
Dated: February 21, 1996
