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 March 31, 2000
[ ] 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 (I.R.S. Employer
of Incorporation or Organization) Identification No.)
701 N. Post Oak Road, 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 April 19, 2000 registrant had 19,644,880 shares of Common Stock
outstanding.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
-----------
PAGE
Consolidated Financial Statements:
Consolidated Balance Sheet as of March 31,
2000 and December 31, 1999 2
Consolidated Statement of Operations for the
three months ended March 31, 2000, for the
period from inception, February 26, 1999,
to March 31, 1999, and for the period from
inception, February 26, 1999, to December 31,
2000 3
Consolidated Statement of Stockholders' Equity
for the three months ended March 31, 2000 4
Consolidated Statement of Cash Flows for the
three months ended March 31, 2000, the
period from inception, February 26, 1999,
to March 31, 1999, and the period from
inception, February 26, 1999 to March 31,
2000 5
Selected Notes to Consolidated Financial Statements 6
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEET
-----------
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
ASSETS (UNAUDITED) NOTE
- ------------------------------------------- -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 429,046 $ 13,316
Accounts receivable, trade 5,249 1,989
Other receivables 11,068 -
Prepaid license fee 39,600 69,300
-------------- ------------
Total current assets 484,963 84,605
Property and equipment, net of accum-
ulated depreciation of $2,254 and
$1,618 at March 31, 2000 and
December 31, 1999, respectively 5,814 6,022
Other assets - 1,259
-------------- ------------
Total assets $ 490,777 $ 91,886
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------
Current liabilities:
Note payable to bank $ 11,000 $ 150,000
Accounts payable 48,004 18,025
Accrued liabilities 16,366 17,863
-------------- ------------
Total current liabilities 75,370 185,888
-------------- ------------
Commitment and contingencies
Stockholders' equity:
Common stock, $.001 par value, 20,000,000
shares authorized, 18,901,380 and
18,108,500 shares issued and outstand-
ing at March 31, 2000 and December 31,
1999, respectively 18,901 18,108
Additional paid-in capital 9,794,455 9,258,653
Receivables from stockholders (2,787,577) (2,948,775)
Losses accumulated during the development
stage (6,610,372) (6,421,988)
-------------- ------------
Total stockholders' equity 415,407 (94,002)
-------------- ------------
Total liabilities and stockholders'
equity $ 490,777 $ 91,886
============== ============
</TABLE>
Note: The balance sheet at December 31, 1999 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.
2
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF OPERATIONS
-----------
(UNAUDITED)
INCEPTION, INCEPTION,
THREE MONTHS FEBRUARY 26, FEBRUARY 26,
ENDED 1999, TO 1999, TO
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Service revenue $ 12,551 $ - $ 15,094
-------------- -------------- --------------
Operating expenses:
Common stock and option
compensation 33,600 - 839,611
Salaries and wages 35,203 - 162,917
Legal and consulting fees 34,322 1,543 98,747
License fees 29,700 - 79,200
Website development costs - - 5,263,157
Other 68,110 - 181,834
-------------- -------------- --------------
Total operating expenses 200,935 1,543 6,625,466
-------------- -------------- --------------
Net loss $ (188,384) $ (1,543) $ (6,610,372)
============== ============== ==============
Basic and dilutive net loss
per common share $ (0.01) $ (0.01)
============== ==============
Weighted average shares out-
standing 18,749,966 737,505
============== ==============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
-----------
(UNAUDITED)
LOSSES
ACCUMULATED
COMMON STOCK ADDITIONAL RECEIVABLE DURING THE
------------------------- PAID-IN FROM DEVELOPMENT
SHARES AMOUNT CAPITAL STOCKHOLDERS STAGE TOTAL
------------ ----------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 18,108,500 $ 18,108 $9,258,653 $ (2,948,775) $(6,421,988) $ (94,002)
Proceeds from private placements of
common stock 759,280 759 502,236 - - 502,995
Common stock issued as compensation
to consultants 33,600 34 33,566 - - 33,600
Receipt of cash from stockholder
under loan commitment - - - 161,198 - 161,198
Net loss - - - - (188,384) (188,384)
------------ ----------- ---------- -------------- ------------ ----------
Balance at March 31, 2000 18,901,380 $ 18,901 $9,794,455 $ (2,787,577) $(6,610,372) $ 415,407
============ =========== ========== ============== ============ ==========
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF CASH FLOWS
-----------
(UNAUDITED)
INCEPTION, INCEPTION
THREE MONTHS FEBRUARY 26, FEBRUARY 26,
ENDED 1999, TO 1999, TO
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (160,278) $ (1,543) $ (6,610,372)
Adjustments to reconcile net loss
to net cash used in operating
activities (49,982) 1,543) 6,113,475
-------------- -------------- --------------
Net cash used in operating
activities (210,260) - (496,897)
-------------- -------------- --------------
Cash flows from investing activities:
Purchase of computers and equipment (428) - (8,068)
Loan to stockholder (48,775) - (48,775)
-------------- -------------- --------------
Net cash used in investing
activities (49,203) - (56,843)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from note payable to bank 150,000 - 150,000
Repayment of note payable to bank (139,000) - (139,000)
Proceeds from sale of common stock 502,995 - 710,588
Proceeds from receivable from
stockholder 161,198 - 261,198
-------------- -------------- --------------
Net cash provided by financing
activities 675,193 - 982,786
-------------- -------------- --------------
Net increase (decrease) in cash and
cash equivalents 415,730 - 429,046
Cash and cash equivalents at
beginning of period 13,316 - -
-------------- -------------- --------------
Cash and cash equivalents at end of
period $ 429,046 $ - $ 429,046
============== ============== ==============
</TABLE>
See accompanying notes.
5
<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, 1999. 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,
1999, 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. 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
6
<PAGE>
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.
Continued
7
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
-----------
(UNAUDITED)
4. 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.
5. 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.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis as of March 31, 2000 and for the
three-month period ended March 31, 2000 and 1999 should be read in conjunction
with the unaudited consolidated financial statements and notes thereto set forth
in Item 1 of this report.
The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. For example, words such as, "may,"
"will," "should," "estimates," "predicts," "potential," "continue," "strategy,"
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. Our actual
results and the timing of certain events may differ significantly from the
results discussed in the forward-looking statement. Factors that might cause or
contribute to such a discrepancy include, but are not limited to the risks
discussed in our other SEC filings, including those in our annual report on Form
10-KSB for the year ended December 31, 1999. These forward-looking statements
speak only as of the date hereof. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in our expectations with
regard thereto or any change in events, conditions or circumstances on which any
such statement is based.
GENERAL
We are a Nevada corporation involved in the development of an online
auction site for exclusive paintings and other art works. We are considered a
development stage enterprise because we have not yet generated significant
revenue from our primary business operations. Since inception, we have devoted
substantially all of our efforts to website development activities and to the
search for sources of capital to fund our efforts.
On June 15, 1999, we were acquired by National Air Corporation 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 us for National Air Corporation's net
monetary assets, accompanied by a recapitalization. In connection with this
transaction, we issued 3,755,745 shares of common stock in exchange for all
outstanding shares of National Air Corporation and for consulting services
rendered in connection with the transaction. Since this transaction was, in
substance, a recapitalization of and not a business combination, proforma
information is not presented and a valuation of our company was not performed.
During the period from inception, February 26, 1999 to March 31, 2000, we
have not generated significant revenue from our website operations and may not
generate significant revenue during the remainder of 2000 because we plan to use
substantially all our resources for further development of our markets and for
further improvements to our website operations.
We have a limited operating history on which to base an evaluation of our
business and prospects. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stages of development, particularly companies in new and rapidly evolving
markets such as online commerce. We will encounter various risks in
implementing and executing our business strategy. We can provide no assurance
that we will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on our business.
PLAN OF OPERATIONS
As of March 31, 2000, we had an accumulated deficit of $6,421,988 incurred
entirely in 1999 and the first quarter of 2000 and funded by paid-in capital,
debt, and use of our common stock in acquisitions. We also had cash and cash
equivalents of $429,046. We do not expect to make any major capital
expenditures in the foreseeable future, but we do expect that operating losses
will continue until such time as website operations generate sufficient revenues
to fund our continuing operations, and we cannot be sure when or if that will
occur.
9
<PAGE>
We have financed our operations mainly through the sale of our common stock
and we have been entirely dependent on outside sources of financing for
continuation of our operations. During the three months ended March 31, 2000 we
raised approximately $503,000 from a private placement of our common stock. Our
acquisition of Artmovement.com for $8,263,157 on December 31, 1999 was designed
to give us a platform for better market penetration and access to additional
capital.
As part of our acquisition of Artmovement, we obtained a $3,000,000
receivable owed to Artmovement, of which $100,000 was received in 1999 and
$161,000 in the first quarter of 2000. The remaining portion of the receivable
is due June 30, 2000 with penalties for late payment; however, the obligation
may be terminated by the debtor on September 1, 2000 without recourse.
Accordingly, there is no assurance that we will be able to collect this
receivable. If collected, it is our belief that the remaining $2,700,000 due
under this receivable will be sufficient to fund our operations for at least two
years. Based on our current plan of operation we anticipate that our monthly
operating expenditures will increase and will average approximately $63,000 per
month for the next twelve months. Operating expenditures include administrative
expenses, web site development, and professional fees. These amounts are merely
estimates, and we can provide no assurance that unexpected expenses will not
shorten the period of time within which our funds may be utilized.
If we do not receive the remaining $2,700,000 due under the receivable
acquired with Artmovement, we may have to limit our operations to an extent that
we cannot presently determine. The effect on our business may include the sale
of our assets or the curtailment of business operations. Currently, we do not
generate significant revenues from the services that we provide and do not
expect to generate significant revenues for the foreseeable future. Although we
have no commitments for capital, we may raise additional funds through:
- public offerings of equity securities or convertible debt,
- private offerings of equity or debt securities, or
- other sources.
Stockholders should assume that any additional funding that we obtain will
cause substantial dilution to current stockholders. In addition, we may be
unable to raise additional funds on favorable terms, if at all.
Our capital requirements will depend on numerous factors, including the
progress of our website development and marketing efforts and the economic
impact of competing websites. We believe that our current assets and potential
committed contributions will be sufficient to meet our operating expenses and
capital expenditures to the successful commercialization of our website.
However, there is no way we can predict when and if any additional contributions
may be needed beyond those currently committed. Consequently, at the expiration
of current commitments, we may need to seek one or more substantial new
investors.
Our ability to achieve profitability will depend on our ability to
successfully make the transformation from a development stage enterprise to a
commercially viable Internet business. We can make no assurance that we will be
able to successfully make that transition.
The report from our independent accountants, included in our Annual Report
on Form 10-KSB, includes an explanatory paragraph which describes substantial
doubt concerning our ability to continue as a going concern, without continuing
additional contributions to capital. We may incur losses for the foreseeable
future due to the significant costs associated with website development and
marketing activities which will be necessary for successful commercialization of
Artmovement.com. See "Financial Statements - Report of Independent Accountants"
included in our annual report on Form 10-KSB for the year ended December 31,
1999.
10
<PAGE>
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 we sold during the three month period ended March
31, 2000, 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.
During the three month period ended March 31, 2000, we issued an aggregate
of 759,280 shares of common stock for an aggregate of $559,000 to 17 accredited
investors. We believe these transactions were exempt from registration
pursuant to Section 4(2) of the Act, as sales to accredited investors. During
the three month period ended March 31, 2000, we issued an aggregate of 33,600
shares of common stock for services rendered to three sophisticated investors.
We believe the above transactions were exempt from registration pursuant to
Section 4(2) of the Securities Act, as the issuances were to sophisticated
investors and, since the transactions were non-recurring and privately
negotiated. The sophisticated investors had specific knowledge of the company
and had general expertise in financial and business matters that they were able
to evaluate the merits and risks of an investment in the company.
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 2.1 Reorganization Agreement between National Air Corporation and
Berensgallery.com, Inc. (Filed previously on Form 8-K SEC File
No.0-22711)
Exhibit 3.1 Amended and Restated Articles of Incorporation of Berens
Industries, Inc. (Filed
previously as Appendix A to our preliminary proxy statement)
Exhibit 3.2 Amended and Restated Bylaws of Berens Industries, Inc. (Filed
previously on Form 10-KSB SEC File No.0-22711)
Exhibit 4.1 Common Stock Certificate of Berens Industries, Inc. (Filed
previously on Form 10-SB SEC File No.0-22711)
Exhibit 10.1 Employment Agreement between Marc I. Berens and
Berensgallery.com, Inc. (Filed previously on Form 10-KSB SEC File
No.0-22711)
Exhibit 10.2 Employment Agreement between Kevin Willcutts and Berens
Industries, Inc. (Filed previously on Form 10-KSB SEC File
No.0-22711)
Exhibit 10.3* Digital Media Resources, Ltd. Database Access Agreement (Filed
previously on Form 10-KSB SEC File No.0-22711)
Exhibit 21.1 List of Subsidiaries (Filed previously on Form 10-KSB SEC File
No.0-22711)
Exhibit 27.1 Financial Data Schedule
- ------------
* We have omitted some portions of these exhibits and submitted them
separately in a confidential treatment request filed with the SEC.
(b) Reports on Form 8-K.
None.
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: May 15, 2000 /s/ Marc I. Berens
----------------------------------------
Marc I. Berens,Chief Executive Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 429046
<SECURITIES> 0
<RECEIVABLES> 5249
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 484963
<PP&E> 8068
<DEPRECIATION> 2254
<TOTAL-ASSETS> 490777
<CURRENT-LIABILITIES> 75370
<BONDS> 0
0
0
<COMMON> 18901
<OTHER-SE> 396507
<TOTAL-LIABILITY-AND-EQUITY> 490777
<SALES> 12551
<TOTAL-REVENUES> 12551
<CGS> 0
<TOTAL-COSTS> 200935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (188384)
<INCOME-TAX> 0
<INCOME-CONTINUING> (188384)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (188384)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
