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 June 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 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 June 30, 2000 registrant had 19,711,380 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 SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<PAGE>
BERENS INDUSTRIES, INC.
TABLE OF CONTENTS
__________
PAGE
----
Unaudited Consolidated Condensed Financial
Statements:
Consolidated Condensed Balance Sheet as of
June 30, 2000 and December 31, 1999 F-1
Unaudited Consolidated Condensed Statement
of Operations for the three months ended
June 30, 2000 and 1999, for the six months
ended June 30, 2000, and for the period
from inception, February 26, 1999, to
June 30, 1999 F-2
Unaudited Consolidated Condensed Statement
of Stockholders' Equity for the six months
ended June 30, 2000 F-3
Unaudited Consolidated Condensed Statement
of Cash Flows for the six months ended
June 30, 2000, and for the period from
inception, February 26, 1999, to June 30,
1999 F-4
Selected Notes to Unaudited Consolidated
Condensed Financial Statements F-5
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED CONDENSED BALANCE SHEET
__________
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
ASSETS (UNAUDITED) NOTE
------ -------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 392,505 $ 13,316
Accounts receivable, trade 21,810 1,989
Other receivables 14,050 -
Prepaid license fee 9,900 69,300
-------------- ------------
Total current assets 438,265 84,605
Property and equipment, net of accum-
ulated depreciation of $2,254 and
$1,618 at June 30, 2000 and
December 31, 1999, respectively 21,154 6,022
Other assets - 1,259
-------------- ------------
Total assets $ 459,419 $ 91,886
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Note payable to bank $ 150,000 $ 150,000
Accounts payable 153,077 18,025
Accrued liabilities 37,738 17,863
-------------- ------------
Total current liabilities 340,815 185,888
-------------- ------------
Commitment and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value, 20,000,000
shares authorized, 18,901,380 and
18,108,500 shares issued and outstand-
ing at June 30, 2000 and December 31,
1999, respectively 18,901 18,108
Additional paid-in capital 9,731,145 9,258,653
Receivables from stockholders (2,700,000) (2,948,775)
Losses accumulated during the development
stage (6,931,442) (6,421,988)
-------------- ------------
Total stockholders' equity (deficit) 118,604 (94,002)
-------------- ------------
Total liabilities and stockholders'
equity (deficit) $ 459,419 $ 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.
F-1
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
__________
(UNAUDITED)
INCEPTION,
THREE MONTHS ENDED SIX MONTHS FEBRUARY 26,
------------------------- ENDED 1999, TO
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Service revenue $ 102,608 $ - $ 115,159 $ -
Cost of services 13,824 - 15,515 -
------------ ----------- ------------ -----------
Gross margin 88,784 - 99,644 -
------------ ----------- ------------ -----------
Selling, general and adminis-
trative expenses:
Common stock and option
compensation - 60,000 33,600 60,000
Salaries and wages 102,773 52,597 137,976 52,597
Legal and consulting fees 191,430 28,500 225,752 28,500
License fees 29,700 - 59,400 -
Other 81,320 4,401 147,739 4,401
------------ ----------- ------------ -----------
Total selling, general and
administrative expenses 405,223 145,498 604,467 145,498
------------ ----------- ------------ -----------
Loss from operations (316,439) (145,498) (504,823) (145,498)
------------ ----------- ------------ -----------
Other income (expense):
Other income 2,355 - 2,355 -
Interest expense (6,986) - (6,986) -
------------ ----------- ------------ -----------
Other expense, net (4,631) - (4,631) -
------------ ----------- ------------ -----------
Net loss $ (321,070) $ (145,498) $ (509,454) $ (145,498)
============ =========== ============ ===========
Basic and dilutive net loss
per common share $ (0.02) $ (0.11) $ (0.03) $ (0.14)
============ =========== ============ ===========
Weighted average shares out-
standing 18,901,380 1,364,583 18,825,673 1,049,314
============ =========== ============ ===========
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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
Net loss - - - - (509,454) (509,454)
---------- ------- ---------- -------------- ------------ ----------
Balance at June 30, 2000 18,901,380 $18,901 $9,731,145 $ (2,700,000) $(6,931,442) $ 118,604
========== ======= ========== ============== ============ ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
__________
(UNAUDITED)
INCEPTION,
SIX MONTHS FEBRUARY 26,
ENDED 1999, TO
JUNE 30, JUNE 30,
2000 1999
------------ --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (509,454) $ (145,498)
Adjustments to reconcile net loss
to net cash used in operating
activities 312,229 42,877
------------ --------------
Net cash used in operating activities (197,225) (102,621)
------------ --------------
Cash flows from investing activities:
Purchase of computers and equipment (14,496) -
Collection of loan to stockholder (48,775) -
------------ --------------
Net cash used in investing activities (63,271) -
------------ --------------
Cash flows from financing activities:
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 639,685 201,000
------------ --------------
Net increase (decrease) in cash and cash
equivalents 379,189 98,379
Cash and cash equivalents at beginning
of period 13,316 -
------------ --------------
Cash and cash equivalents at end of
period $ 392,505 $ 98,379
============ ==============
</TABLE>
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 quarter ended June 30,
2000, the Company generated significant revenue from its operations and
transitioned from a development stage enterprise to an operating company.
Prior to the quarter ended June 30, 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>
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. 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.
F-6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis as of June 30, 2000 and for the
three and six-month periods ended June 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, 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. 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 June 30, 2000, we
generated $115,159 in revenue from our website 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.
2
<PAGE>
RESULTS OF OPERATIONS
During the three months ended June 30, 2000, we generated service revenue
of $102,608 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.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------------
1999
----
During the three months ended June 30, 2000, we began generating revenues
from website hosting activities and those revenues account for the entire
increase of $102,608 in the three months ended June 30, 2000 as compared to the
three months ended June 30, 1999.
Common stock and option compensation decreased from $60,000 in the three
months ended June 30, 1999 to zero in the three months ended June 30, 2000. The
decrease was attributable to decisions by management to curtail use of our
common stock and options to compensate employees and officers.
Salaries and wages increased by $50,176 in the three months ended June 30,
2000 as compared to the three months ended June 30, 1999. The increase was due
to an increase in staffing levels to facilitate growth in operations.
Legal and consulting fees increased from $28,500 during the three months
ended June 30, 1999 to $191,430 during the three months ended June 30, 2000.
This increase was due primarily to $130,000 of fees paid for website development
consulting and an increase in legal fees related to a registration statement we
filed during the three months ended June 30, 2000.
License fees increased by $29,700 in the three months ended June 30, 2000
as compared to the three months ended June 30, 1999 due to our license of
certain website contents for $9,900 per month that began in the second half of
1999.
Other selling, general and administrative expenses increased by $76,919 in
the three months ended June 30, 2000 as compared to the three months ended June
30, 1999. This increase was due to increases in travel costs, accounting fees,
reporting costs, telephone and utilities costs and a significant overall
increase in corporate activity.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------------------------------
During the six months ended June 30, 2000, we began generating revenues
from website hosting activities and those revenues account for the entire
increase of $115,159 in the six months ended June 30, 2000 as compared to the
six months ended June 30, 1999.
Common stock and option compensation decreased from $60,000 in the six
months ended June 30, 1999 to $33,600 in the six months ended June 30, 2000.
The decrease was attributable to decisions by management to curtail use of our
common stock and options to compensate employees and officers.
Salaries and wages increased by $85,379 in the six months ended June 30,
2000 as compared to the six months ended June 30, 1999. The increase was due to
an increase in staffing levels to facilitate growth in operations.
Legal and consulting fees increased from $28,500 during the six months
ended June 30, 1999 to $225,752 during the six months ended June 30, 2000. This
increase was due primarily to $130,000 of fees paid for website development
consulting and an increase in legal fees related to a registration statement we
filed during the three months ended June 30, 2000.
License fees increased by $59,400 in the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999 due to our license of certain
website contents for $9,900 per month that began in the second half of 1999.
3
<PAGE>
Other selling, general and administrative expenses increased by $143,338 in
the six months ended June 30, 2000 as compared to the six months ended June 30,
1999. This increase was due to increases in travel costs, accounting fees,
reporting costs, telephone and utilities costs and a significant overall
increase in corporate activity.
PLAN OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had an accumulated deficit of $6,931,442 incurred
entirely in 1999 and the first six months of 2000 and funded by paid-in capital,
debt, and use of our common stock in acquisitions. At June 30, 2000, we also
had cash and cash equivalents of $392,505. 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 six months ended June 30, 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
$200,000 in the first half 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. As of the
date of this filing, we had not received the monies due under this receivable,
and there is no assurance that we will be able to collect this receivable prior
to September 1, 2000. 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.
4
<PAGE>
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.
5
<PAGE>
PART II
Pursuant to the Instructions to Part II of the Form 10-QSB, Items 1-3, and
5 are omitted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual meeting of shareholders on June 7, 2000 in which we:
- re-elected our current directors;
- ratified the appointment of our auditors Ham, Langston & Brezina, LLP by
the following vote: 15,503,496 for, 0 against, and 0 abstentions;
and
- adopted our 2000 Stock Option Plan by the following vote: 15,503,496 for,
0 against, and 0 abstentions.
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 have received
confidential treatment for such portions.
(b) Reports on Form 8-K.
None.
6
<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: August 14, 2000 /s/ Marc I. Berens
---------------------------------------
Marc I. Berens, Chief Executive Officer
7
<PAGE>
