U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
________________________________________________________________________________
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
BERENS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Commission file number: 0-22711
Nevada 87-05065948
------ -----------
(State or Other Jurisdiction of (I.R.S. Employer Identification
No.)
Incorporation or Organization)
701 N. Post Oak Road, Suite 350, Houston, Texas 77024
------
(Address of Principal Executive Office) (Zip Code)
(713) 682-7400
--------------
(Registrant's Telephone Number, Including Area Code)
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 [ ]
As of September 30, 1999 registrant had 4,500,000 shares of Common Stock
outstanding.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
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Page
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Consolidated Financial Statements:
Consolidated Balance Sheet as of September 30,
1999 and December 31, 1998 1
Consolidated Statement of Operations for the
three months ended September 30, 1999 and for
the period from inception, February 26, 1999,
to September 30, 1999 2
Consolidated Statement of Stockholders' Equity
for the period from inception, February 26,
1999, to September 30, 1999 3
Consolidated Statement of Cash Flows for the
period from inception, February 26, 1999,
to September 30, 1999 4
Selected Notes to Consolidated Financial Statements 5
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
------------------
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
ASSETS (UNAUDITED) NOTE
- --------------------------------------------- -------------- ---------
<S> <C> <C>
Current assets:
Receivables from affiliates $ 39,651 $ -
Prepaid license fee 11,000 -
-------------- ---------
Total current assets 50,651 -
Property and equipment, net of accum-
ulated depreciation of $764 at
September 30, 1999 6,876 -
-------------- ---------
Total assets $ 57,527 $ -
============== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------
Current liabilities:
Book overdraft $ 5,497 $ -
Accounts payable 25,269 -
Federal withholding tax payable 9,932 -
Due to stockholders - 7,764
-------------- ---------
Total current liabilities 40,698 7,764
-------------- ---------
Commitment and contingencies
Stockholders' equity:
Common stock, $.001 par value, 20,000,000
shares authorized, 4,500,000 and 737,505
shares issued and outstanding at
September 30, 1999 and December 31, 1998,
respectively 4,500 738
Additional paid-in capital 323,250 57,469
Losses accumulated during the development
stage (310,921) (65,971)
-------------- ---------
Total stockholders' equity 16,829 (7,764)
-------------- ---------
Total liabilities and stockholders'
equity $ 57,527 $ -
============== =========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND
THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO SEPTEMBER 30, 1999
---------------------
(UNAUDITED)
THREE MONTHS
ENDED INCEPTION TO
SEPTEMBER 30, SEPTEMBER 30,
1999 1999
--------------- -----------
<S> <C> <C>
Costs and expenses:
Salaries and wages $ 74,562 $ 127,159
Stock and option based compensation
to consultants 36,750 96,750
Legal and consulting fees 28,500 28,500
Depreciation expense 382 1,839
Other 25,229 56,673
--------------- -----------
Net loss $ (165,423) $ (310,921)
=============== ===========
Basic and dilutive net loss per
common share $ (0.04) $ (0.14)
=============== ===========
Weighted average shares outstanding 4,500,000 2,199,542
=============== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO SEPTEMBER 30, 1999
---------------------
(UNAUDITED)
LOSSES
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
------------------------ PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at inception,
February 26, 1999 - $ - $ - $ - $ -
Net proceeds from an ini-
tial capitalization 2,900,000 2,900 198,100 - 201,000
Recapitalization effective
June 15, 1999 737,505 738 (738) - -
Common stock issued as com-
pensation to consultants 862,495 862 59,138 - 60,000
Stock options issued as
employee compensation and
for payment of legal fees - - 66,750 - 66,750
Net loss - - - (310,921) (310,921)
---------- ------------ --------- ---------- ----------
Balance at September 30,
1999 4,500,000 $ 4,500 $323,250 $(310,921) $ 16,829
========== ============ ========= ========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO SEPTEMBER 30, 1999
---------------------
(UNAUDITED)
<S> <C>
Cash flows from operating activities:
Net loss $(310,921)
Adjustments to reconcile net loss
to net cash used in operating
activities: 110,561
----------
Net cash used in operating
activities (200,360)
----------
Cash flows from investing activities:
Purchase of computers and equipment (29,140)
Proceeds from sale of computers and
equipment 28,500
----------
Net cash used in investing
activities (640)
----------
Cash flows from financing activities:
Proceeds from sale of common stock 201,000
----------
Net cash provided by financing
activities 201,000
----------
Net increase in cash and cash equivalents -
Cash and cash equivalents at beginning
of period -
----------
Cash and cash equivalents at end of
period $ -
==========
</TABLE>
See accompanying notes.
4
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------
(UNAUDITED)
1. BASIS OF PRESENTATION
-----------------------
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles and the rules
of the U.S. Securities and Exchange Commission, and should be read in
conjunction with the audited financial statements and notes thereto
contained in the Company's Annual Report of Form 10-KSB for the year ended
December 31, 1998. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the
interim periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited
financial statements for the most recent fiscal year ended December 31,
1998, as reported in the Form 10-KSB, have been omitted.
2. GENERAL
-------
Effective June 15, 1999, Berens Industries, Inc. acquired National Air
Corporation (together the "Company") in a recapitalization transaction
accounted for similar to a reverse acquisition. Berens Industries, Inc. is
currently involved in the development of an online auction site for sale of
exclusive paintings and other art works. The Company is a development stage
enterprise because since its inception, substantially all its efforts have
been devoted to Web site development and fund raising activities.
3. RECAPITALIZATION
----------------
Effective June 15, 1999 National Air Corporation was acquired by Berens
Industries, Inc. in a recapitalization transaction accounted for similar to
a reverse acquisition, except that no goodwill was recorded. National Air
Corporation was the "acquired" company in the transaction, but remains the
surviving legal entity. Prior to the acquisition National Air Corporation
was a non-operating public shell corporation with no significant assets.
Accordingly, the transaction was treated as an issuance of stock by Berens
Industries, Inc. for National Air Corporation's net monetary assets,
accompanied by a recapitalization. Since this transaction is in substance,
a recapitalization of Berens Industries, Inc. and not a business
combination, proforma information is not presented. The balance sheet of
National Air Corporation is presented as of December 31, 1998 in the
accompanying financial statements because it was the legal reporting
entity. December 31, 1998 is prior to the inception of Berens Industries,
Inc.
5
<PAGE>
4. COMPREHENSIVE INCOME
---------------------
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, which requires a company
to display an amount representing comprehensive income as part of the
Company's basic financial statements. Comprehensive income includes such
items as unrealized gains or losses on certain investment securities and
certain foreign currency translation adjustments. The Company's financial
statements include none of the additional elements that affect
comprehensive income. Accordingly, comprehensive income and net income are
identical.
5. ESTIMATES
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets or liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
6. INCOME TAX
-----------
The difference between the Federal statutory income tax rate and the
Company's effective income tax rate is primarily attributable to increases
in valuation allowances for deferred tax assets relating to net operating
losses.
7. STOCK OPTIONS
--------------
During the quarter ended September 30, 1999, the Company issued
compensatory stock options to employees and consultants for a total of
66,750 shares of the Company's common stock. The options bear an option
price of $0.001 per share and the Company recognized $66,750 of
compensation, legal and consulting expense in connection with the
issuances.
Subsequent to September 30, 1999, the Company issued additional
compensatory options to employees and consultants for 572,000 shares of the
Company's common stock at prices ranging from $0.001 to $1.00 per share.
6
<PAGE>
8. CHANGE OF COMPANY NAME
-------------------------
In July 1999, the Company's stockholders approved 1) a change in the name
of the Company from National Air Corporation to Berens Industries, Inc.; 2)
a change in the number of authorized shares of the Company's common stock
from 20,000,000 to 50,000,000 shares; and 3) a change in the number of
authorized shares of the Company's preferred stock from 2,000,000 shares
with par values of $0.10 to $0.25 to 10,000,000 shares with a par value of
$0.001.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Some of the statements contained in this Form 10-QSB, discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. These statements are
subject to known and unknown risks, uncertainties, and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and is
derived using numerous assumptions. Important factors that may cause actual
results to differ from projections include, for example:
- - the success or failure of management's efforts to implement their business
strategy;
- - the Company's ability to raise sufficient capital to meet operating
requirements;
- - the Company's ability to compete with major established companies;
- - the Company's ability to retain an active user base, to attract new users
who list items for sale and who complete transactions through the Company's
service and to maintain customer satisfaction;
- - the Company's ability to keep its web site operational and to manage the
number of items listed on its service;
- - federal, state or local government regulation, including investigations
prompted by items improperly listed or sold by its users;
- - the introduction of new sites, services and products by the Company or its
competitors;
- - volume, size, timing and completion rate of trades on the Company's web
site;
- - seasonal effects on revenue in the Company's online service;
- - the success of the Company's brand building and marketing campaigns;
- - the amount and timing of operating costs and capital expenditures relating
to maintaining and expanding the business, operations and infrastructure of
the Company;
- - the Company's ability to upgrade and develop its systems and infrastructure
to accommodate growth;
- - the Company's ability to attract new personnel in a timely and effective
manner;
- - the Company's ability to retain key employees in its online business;
- - the timing, cost and availability of advertising in traditional media and
on other websites and online services;
- - consumer trends and popularity of the artwork sold at auction;
- - the level of use of the Internet and online services;
- - increasing consumer acceptance of the Internet and other online services
for commerce and, in particular, the trading of products such as those
listed on the Company's web site;
- - consumer confidence in the security of transactions on the Company's web
site; and
- - general economic conditions and economic conditions specific to the
Internet and electronic commerce industries.
8
<PAGE>
GENERAL
National Air Corporation ("Company") was incorporated under the laws of the
State of Nevada on January 9, 1985. On June 15, 1999, the Company entered into
a Reorganization Agreement with Berensgallery.com, Inc., a Nevada Corporation
("Berens Gallery"), whereby Berens Gallery became a wholly-owned subsidiary of
the Company (See "Recent Developments"). On August 2, 1999, the Company filed
its Restated Articles of Amendment, thereby changing its name to Berens
Industries, Inc. Hereinafter, any reference to the Company includes its
subsidiary Berens Gallery.
The Company is developing a web-based community in which buyers and sellers
are brought together in an efficient and entertaining auction format to buy and
sell personal items such as art, antiques, coins, collectibles, memorabilia,
stamps and toys. The Company plans to operate through its web site at
www.berensgallery.com and intends to permit sellers to list items for sale,
buyers to bid on items of interest and all users to browse through listed items
in a fully automated, topically arranged, intuitive and easy-to-use online
service that is available 24 hours a day, seven days a week.
The Company has a limited operating history on which to base an evaluation
of our business and prospects. The Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new and
rapidly evolving markets such as online commerce. The Company will encounter
various risks in implementing and executing our business strategy. There can be
no assurance that the Company will be successful in addressing such risks, and
the failure to do so could have a material adverse effect on our business.
From the inception of its operations through June 30, 1999, the Company has
utilized funds obtained primarily through private placements to develop its web
site. The Company has not generated any revenues and has incurred net losses
totaling approximately $310,921 from inception of operations through September
30, 1999.
The Company is currently seeking short-term and long-term debt or equity
financing sufficient to fund projected working capital and web site development
and marketing needs. However, there is no assurance that the Company will be
successful in raising funds, or that the amount and terms of any financing will
be acceptable. Failure to obtain sufficient funding will adversely impact the
Company's financial position.
Recent Developments
Effective June 15, 1999, the Company acquired all of the issued and
outstanding shares of capital stock of Berensgallery.com, Inc., a Nevada
corporation ("Subsidiary"). In connection with such acquisition, the Company
issued an aggregate of 2,900,000 shares of authorized but unissued common stock,
$0.001 par value, to the shareholders of Subsidiary ("Shareholders"). The
Shareholders exchanged an aggregate of 2,900,000 shares of Subsidiary common
stock for the 2,900,000 shares of Company common stock. Currently therewith, the
Company issued 862,495 shares of common stock to certain consultants, for
services rendered pursuant to Regulation D of the Securities Act of 1933. On
August 2, 1999, the Company filed its Restated Articles of Incorporation
changing its name to Berens Industries, Inc.
PLAN OF OPERATIONS
The Company has been in the development stage since its inception and has
not generated any revenues from operations. However, the Company anticipates
that expenses will continue to increase during 1999 and 2000 with the
development of its web site. Additional capital will be necessary to expand
operations or continue current operations. The Company has financed its growth
primarily from the sale of common stock. From the inception of its current
operations, it has received approximately $200,000 from the sale of its common
stock. The Company's sources of external and internal financing are limited,
and it is not expected that its internal source of liquidity will improve until
net cash is provided by operating activities, and, until such time, it will rely
upon external sources for liquidity. The Company has not established any lines
of credit or other significant financing arrangement with any third-party
lenders. There can be no assurance that the Company will be able to obtain
financing on reasonable terms, if at all. Until the Company is able to develop,
construct and operate its web site and derive revenues therefrom, the Company
will continue to use cash obtained from outside sources for its operations and
development of its business.
9
<PAGE>
In the future, the Company may be required to seek debt or equity financing
(public or private), curtail operations, sell assets, or otherwise bring cash
flows in balance if it approaches a condition of cash insufficiency. The
Company anticipates a need for additional capital, but has no specific
commitments with respect thereto. There is no assurance that the Company will
be successful in any such effort.
YEAR 2000 COMPLIANCE
The year 2000 poses certain issues for business and consumer computing,
particularly the functionality of software for two-digit storage of dates and
special meanings for certain dates such as 9/9/99. The year 2000 is also a leap
year, which may also lead to incorrect calculations, functions, or system
failure. The problem exists for many kinds of software, including software for
mainframes, PCs, and embedded systems.
In assessing the effect of the Year 2000 Problem, management determined
that there existed two general areas that needed to be evaluated:
- - Internal infrastructure and
- - Supplier/third-party relationships.
A discussion of the various activities related to assessment and actions
resulting from those evaluations is set forth below.
INTERNAL INFRASTRUCTURE.
The Company is in the process of verifying that all of its personal
computers and software are Year 2000 compliant. The Company is in the process
of replacing or upgrading all items that have been found not to be Year 2000
compliant. The Company intends to determine if the software vendors of all of
our critical applications have represented that their products are Year 2000
compliant. The costs related to these efforts have not been determined.
SUPPLIERS/THIRD-PARTY RELATIONSHIPS.
The Company relies on its outside vendors for water, electrical, and
telecommunications services as well as climate control, building access, and
other infrastructure services. The Company does not intend to independently
evaluate the Year 2000 compliance of the systems utilized to supply these
services. The Company has received no assurance of compliance from the
providers of these services. There can be no assurance that these suppliers
will resolve any or all Year 2000 Problems with these systems before the
occurrence of a material disruption to the Company's business. Any failure of
these third-parties to resolve Year 2000 problems with their systems in a timely
manner could have a material adverse effect on the Company's business.
CONTINGENCY PLANS.
The Company has not currently developed a formal contingency plan to be
implemented as part of its efforts to identify and correct Year 2000 Problems
affecting its internal systems. However, if it deems necessary, the Company may
take the following actions:
- - Accelerated replacement of affected equipment or software;
- - Short to medium-term use of backup equipment and software;
- - Increased work hours for Company personnel;
- - Other similar approaches.
10
<PAGE>
If the Company is required to implement any of these contingency plans,
such plans could have a material adverse effect on its business.
Based on the actions taken to date as discussed above, the Company is
reasonably certain that it has or will identify and resolve all Year 2000
Problems that could materially adversely affect its business and operations.
PART II
Pursuant to the Instructions to Part II of the Form 10-QSB, Items 1,3, 4 and 5
are omitted.
ITEM 2. CHANGES IN SECURITIES
The following information sets forth certain information, as of November
10, 1999, for all securities the Company sold since August 19, 1999, without
registration under the Act, excluding any information "previously reported" as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. There were no
underwriters in any of these transactions, nor were any sales commissions paid
thereon.
In November 1999, the Company issued warrants to purchase an aggregate of
638,750 shares of Company common stock at an exercise prices of between $0.01
and $1.00 per share to eight accredited investors, including officers and
directors of the Company, for services rendered. The Company believes these
transactions were exempt from registration pursuant to Section 4(2) of the Act,
as the officers and the director were accredited investors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are to be filed as part of this Form 10-QSB:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 3.1(1) Restated Articles of Incorporation of National Air
Corporation
Exhibit 3.2(2) Bylaws of National Air Corporation
Exhibit 3.3(2) Common Stock Certificate
(1) Filed previously on Form 10-QSB for quarter ended June 30, 1999 SEC File
No.0-22711.
(2) Filed previously on registration statement Form 10-SB SEC File No.0-22711.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K file number 0-22711, dated June 30,
1999, describing the Company's reorganization as discussed above in Item 2 C
"Recent Developments."
11
<PAGE>
SIGNATURES
----------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the undersigned, thereunto duly authorized.
Berens Industries, Inc.
Date: November 11, 1999 /S/ Marc I. Berens
--------------------------------------------
Marc I. Berens, Chief Executive Officer
12
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR QUARTERLY 10-QSB
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 39651
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50651
<PP&E> 7640
<DEPRECIATION> 764
<TOTAL-ASSETS> 57527
<CURRENT-LIABILITIES> 40698
<BONDS> 0
0
0
<COMMON> 4500
<OTHER-SE> 12329
<TOTAL-LIABILITY-AND-EQUITY> 57527
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 310921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (310921)
<INCOME-TAX> 0
<INCOME-CONTINUING> (310921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (310921)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
