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, 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 of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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, 2000 registrant had 20,901,380 shares of Common Stock
outstanding.
<PAGE>
PART I
Item 1. Financial Statements
BERENS INDUSTRIES, INC.
__________
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<PAGE>
BERENS INDUSTRIES, INC.
TABLE OF CONTENTS
__________
PAGE
Unaudited Consolidated Condensed Financial
Statements:
Consolidated Condensed Balance Sheet as of
September 30, 2000 and December 31, 1999 F-1
Unaudited Consolidated Condensed Statement
of Operations for the three months ended
September 30, 2000 and 1999, for the nine months
ended September 30, 2000, and for the period
from inception, February 26, 1999, to
September 30, 1999 F-2
Unaudited Consolidated Condensed Statement
of Stockholders' Equity for the nine months
ended September 30, 2000 F-3
Unaudited Consolidated Condensed Statement
of Cash Flows for the nine months ended
September 30, 2000, and for the period from
inception, February 26, 1999, to September 30,
1999 F-4
Selected Notes to Unaudited Consolidated
Condensed Financial Statements F-5
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
__________
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
ASSETS (UNAUDITED) NOTE
------ -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,600 $ 13,316
Marketable equity securities 92,125 -
Accounts receivable, trade 175,608 1,989
Other receivables 21,331 -
Prepaid license fee - 69,300
-------------- ------------
Total current assets 308,664 84,605
Property and equipment, net of accumulated
depreciation of $6,210 and $1,618 at
September 30, 2000 and December 31, 1999,
respectively 70,263 6,022
Loan costs, net 513,490 -
Other assets - 1,259
-------------- ------------
Total assets $ 892,417 $ 91,886
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Note payable to bank $ 250,000 $ 150,000
Accounts payable 173,271 18,025
Accrued liabilities 79,912 17,863
-------------- ------------
Total current liabilities 503,183 185,888
-------------- ------------
Commitment and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value, 20,000,000
shares authorized, 20,901,380 and
18,108,500 shares issued and outstanding
at September 30, 2000 and December 31,
1999, respectively 20,901 18,108
Additional paid-in capital 11,481,145 9,258,653
Receivables from stockholders (2,700,000) (2,948,775)
Losses accumulated during the development
stage (8,412,812) (6,421,988)
-------------- ------------
Total stockholders' equity (deficit) 389,234 (94,002)
-------------- ------------
Total liabilities and stockholders'
equity (deficit) $ 892,417 $ 91,886
============== ============
</TABLE>
<PAGE>
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.
F-1
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
___________
(UNAUDITED)
INCEPTION,
THREE MONTHS ENDED NINE MONTHS FEBRUARY 26,
------------------------------ ENDED 1999, TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Service revenue $ 184,720 $ - $ 299,879 $ -
Cost of services 167,473 - 295,266 -
--------------- --------------- --------------- --------------
Gross margin 17,247 - 4,613 -
Selling, general and
administrative expenses 241,664 165,423 733,853 310,921
--------------- --------------- --------------- --------------
Loss from operations (224,417) (165,423) (729,240) (310,921)
--------------- --------------- --------------- --------------
Other income (expense):
Other income 1,132 - 3,487 -
Unrealized loss on market-
able equity securities (131,420) - (131,420) -
Interest expense (361,466) - (1,133,651) -
--------------- --------------- --------------- --------------
Other expense, net (491,754) - (1,261,584) -
--------------- --------------- --------------- --------------
Net loss $ (716,171) $ (165,423) (1,990,824) $ (310,921)
=============== =============== =============== ==============
Basic and dilutive net loss
per common share $ (0.03) $ (0.04) $ (0.10) $ (0.14)
=============== =============== =============== ==============
Weighted average shares out-
standing 20,901,380 4,500,000 20,517,575 2,212,195
=============== =============== =============== ==============
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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, net of offering costs
of $63,310 759,280 759 438,926 - - 439,685
Common stock issued as compensation
to consultants 33,600 34 33,566 - - 33,600
Receipt of cash from stockholder
under loan commitment - - - 248,775 - 248,775
Common stock issued to stockholders
for loan guarantees 2,000,000 2,000 1,748,000 - - 1,750,000
Net loss - - - - (1,990,824) (1,990,824)
------------ ----------- ----------- -------------- ------------ ------------
Balance at September 30, 2000 20,901,380 $ 20,901 $11,479,145 $ (2,700,000) $(8,412,812) $ 387,234
============ =========== =========== ============== ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
BERENS INDUSTRIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
___________
(UNAUDITED)
INCEPTION,
NINE MONTHS FEBRUARY 26,
ENDED 1999, TO
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
--------------- --------------
Cash flows from operating activities:
Net loss $ (1,990,824) $ (310,921)
Adjustments to reconcile net loss
to net cash used in operating
activities 1,598,576 110,561
--------------- --------------
Net cash used in operating activities (392,248) (200,360)
--------------- --------------
Cash flows from investing activities:
Purchase of marketable equity securities (223,545) -
Purchase of computers and equipment (68,833) (640)
Collection of loan to stockholder (48,775) -
--------------- --------------
Net cash used in investing activities (341,153) (640)
--------------- --------------
Cash flows from financing activities:
Proceeds from note payable to bank 100,000 -
Net proceeds from sale of common stock 439,685 201,000
Proceeds from subscriptions receivable
from stockholder 200,000 -
--------------- --------------
Net cash provided by financing
activities 739,685 201,000
--------------- --------------
Net increase in cash and cash equivalents 6,284 -
Cash and cash equivalents at beginning
of period 13,316 -
--------------- --------------
Cash and cash equivalents at end of
period $ 19,600 $ -
=============== ==============
See accompanying notes.
F-4
<PAGE>
BERENS INDUSTRIES, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED CONDENSED
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. During the second quarter of 2000,
the Company generated significant revenue from its operations and
transitioned from a development stage enterprise to an operating company.
Prior to the second quarter of 2000, the Company reported as a development
stage enterprise because, since its inception, substantially all its
efforts had been devoted to Web site development and fund raising
activities.
Continued
F-5
<PAGE>
Continued
BERENS INDUSTRIES, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS, CONTINUED
___________
(UNAUDITED)
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 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.
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. NOTE PAYABLE TO BANK
--------------------
Effective July 1, 2000 the Company's revolving line of credit with a bank
was extended for six months to December 31, 2000. The note bears interest
at the bank's prime rate (9.0% at September 30, 2000) plus 2.0% per year
and is collateralized by the guarantees of certain primary
stockholders/officers of the Company. In order to obtain the continued
guarantee of the stockholders/officers of the Company, the Company issued
such guarantors a total of 1,000,000 shares of the Company's common stock
at July 1, 2000. The value of such shares was $0.875 per share based upon
the quoted market price at the date of the guarantee. The resulting
$875,000 loan cost is shown as an asset and is being amortized, using the
interest method, through December 31, 2000. The remaining unamortized loan
cost of $513,490 at September 30, 2000 is presented in non-current assets
in the accompanying unaudited consolidated condensed balance sheet.
Continued
F-6
<PAGE>
BERENS INDUSTRIES, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS, CONTINUED
___________
(UNAUDITED)
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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis as of September 30, 2000 and for
the three and nine-month periods ended September 30, 2000 and 1999 should be
read in conjunction with the unaudited condensed 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, National Air Corporation acquired us 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. 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 three-month period ended September 30, 2000, we generated
$184,720 in revenue from our operations, however, we 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.
RESULTS OF OPERATIONS
During the nine months ended September 30, 2000, we generated service
revenue of $299,879 from website hosting activities and made the transition from
a development stage enterprise to an operating company. Following is a
description of the results of our operations.
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED
--------------------------------------------------------------------------------
SEPTEMBER 30, 1999
--------------------
During the three months ended September 30, 2000, we began generating
revenues from website hosting activities and those revenues account for the
entire increase of $184,720 in the three months ended September 30, 2000 as
compared to the three months ended September 30, 1999.
Selling, general and administrative expenses increased by $76,241 in the
three months ended September 30, 2000 as compared to the three months ended
September 30, 1999. This increase was due to increases in staff, reporting
costs, telephone and utilities costs, and a significant overall increase in
corporate activity.
Interest expense was $366,466 during the three months ended September 30,
2000, as compared to zero for the three months ended September 30, 1999. The
substantial increase was due to the use of debt financing in the third quarter
of 2000 that was not used in 1999. The Company issued 1,000,000 shares of its
common stock to officers/stockholders of the Company for their guarantees of the
Company's bank line of credit. The value of such shares is being amortized as
interest expense over the term of the line of credit and such amortization
accounts for the increase in interest expense.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
--------------------------------------------------------------------------------
30, 1999
---------
During the nine months ended September 30, 2000, we began generating
revenues from website hosting activities and those revenues account for the
entire increase of $299,879 in the nine months ended September 30, 2000 as
compared to the nine months ended September 30, 1999.
Selling, general and administrative expenses increased by $422,932 in the
nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999. This increase was due to increases in staff, moving to
larger quarters, lease of additional computer services (bandwidth), reporting
costs, telephone and utilities costs and a significant overall increase in
corporate activity.
Interest expense was $1,133,651 during the nine months ended September 30,
2000, as compared to zero for the nine months ended September 30, 1999. The
substantial increase was due to the use of debt financing in 2000 that was not
used in 1999. The Company issued 2,000,000 shares of its common stock to
officers/stockholders of the Company during 2000 for their guarantees of the
Company's bank line of credit. The value of such shares is being amortized as
interest expense over the term of the line of credit and such amortization
accounts for the increase in interest expense.
PLAN OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, we had an accumulated deficit of $8,412,812
incurred entirely in 1999 and the first nine months of 2000 and funded by
paid-in capital, debt, and use of our common stock in acquisitions. At
September 30, 2000, we also had cash and cash equivalents of $19,600. 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.
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 nine months ended September 30, 2000
we raised approximately $439,685 in net proceeds 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
non-recourse receivable owed to Artmovement, of which $100,000 was received in
1999 and $200,000 in the first half of 2000. As of September 30, the original
debtor terminated the remaining portion of the receivable. During the quarter,
the majority shareholder of the Company agreed to assume the obligations of the
debtor for the remaining $2,700,000 subscription receivable for an additional
period of one year to provide the funding.
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.
At the present time, we do not have sufficient funding to continue
operations through the remainder of fiscal year 2000, and we are in the process
of seeking additional funding, but have no commitments for any funding at this
time. If we are not able to raise additional funding, 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, the curtailment of business
<PAGE>
operations, or the cessation 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 would
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 our
website development and marketing efforts and the economic impact of competing
websites. 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.
<PAGE>
PART II
Pursuant to the Instructions to Part II of the Form 10-QSB, Items 1, and
3-5 are omitted.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following information sets forth certain information for all securities
we issued during the quarter ended September 30, 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 quarter ended September 30, 2000, we issued one of our customers
an option to purchase 1,000,000 shares of our common stock at an exercise price
of $.25 per share, in connection with a strategic business venture. We believe
this transaction was exempt from registration pursuant to Section 4(2) of the
Act, as the issuance was to an accredited investor.
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 27.1 Financial Data Schedule
____________________
(b) Reports on Form 8-K.
None.
<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 20, 2000 /S/ Marc I. Berens
---------------------------------------
Marc I. Berens, Chief Executive Officer
and principal financial officer
<PAGE>
