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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 3 month period ended September 30, 1995.
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transaction period from to
Commission File No. 0-14840
BERES INDUSTRIES, INC.
(Name of Small Business Issuer in its Charter)
New Jersey 22-1661772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1785 Swarthmore Avenue
Lakewood, New Jersey 08701
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (908) 367-5700
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.
(1) Yes X No (2) Yes No
State the number of shares outstanding of each of the
Registrant's
classes of common equity, as of the latest applicable date:
12,412,000 - September 30, 1995
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Beres Industries, Inc.
September 30, 1995
Form 10-QSB
Index
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1995 and
March 31, 1995
Consolidated Statements of Operations for the Three
Months Ended September 30, 1995 and 1994 and the Six
Months Ended September 30, 1995 and 1994
Consolidated Statement of Changes in Stockholders'
Equity for the Six Months Ended September 30, 1995
Consolidated Statements of Cash Flows for the Six
Months Ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Material
Changes in Financial Condition and
Results of Operations
Part II: Other Information
Item 1. Legal Proceedings
Item 2. Change in Securities
Item 3. Default Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
9/30/95 3/31/95
(Unaudited) (Note 1)
ASSETS
Current Assets
Cash and Equivalents $ 249,000 $ 454,000
Cash - Restricted 261,000 254,000
Accounts Receivable - Trade:
Less Allowance for Doubtful
Accounts of $249,000 at Each
Date 650,000 611,000
Note Receivable - Trade 21,000 -0-
Costs in Excess of Billings on
Uncompleted Contracts 11,000 12,000
Inventories - Raw Materials 126,000 128,000
- Work in Process 21,000 15,000
- Finished Goods 185,000 219,000
Prepaid Expenses and Other
Current Assets 52,000 21,000
Total Current Assets 1,576,000 1,714,000
Property, Plant and Equipment - Less
Accumulated Depreciation of
$5,219,000 and $5,091,000,
Respectively 1,721,000 1,784,000
Other Assets
Note Receivable - Trade 24,000 -0-
Deposits and Other Assets 58,000 61,000
Total Other Assets 82,000 61,000
TOTAL ASSETS $ 3,379,000 $ 3,559,000
See Accompanying Notes to Financial Statements
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Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
9/30/95 3/31/95
(Unaudited) (Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Maturities of Long-Term
Debt $ 1,297,000 $ 1,352,000
Accounts Payable - Trade 291,000 302,000
Billings in Excess of Costs on
Uncompleted Contracts 45,000 5,000
Accrued Expenses and Other Current
Liabilities 130,000 142,000
Total Current Liabilities 1,763,000 1,801,000
Long-Term Debt - Less Current
Maturities 36,000 56,000
Stockholders' Equity
Common Stock - Par Value $.02 Per
Share:
Authorized 21,000,000 Shares
Issued and Outstanding -
12,412,000 Shares 248,000 248,000
Capital in Excess of Par Value 3,445,000 3,445,000
Retained Deficit (1,943,000) (1,821,000)
1,750,000 1,872,000
Less: Amounts Due on Sale of
Common Stock 170,000 170,000
Total Stockholders' Equity 1,580,000 1,702,000
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,379,000 $ 3,559,000
See Accompanying Notes to Financial Statements
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Part I - Item I
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
September 30, 1995 September 30, 1994
Revenues
Contract Revenue and Net Sales $ 915,000 $ 1,129,000
Total Revenues 915,000 1,129,000
Operating Expenses
Contract Costs and Cost of
Goods Sold 766,000 1,092,000
Selling, General and
Administrative 191,000 177,000
Total Operating Expenses 957,000 1,269,000
Operating Loss (42,000) (140,000)
Other Income (Expenses)
Interest and Other Income 15,000 14,000
Interest Expense (31,000) (33,000)
Total Other (Expenses) (16,000) (19,000)
Net Loss $ (58,000) $(159,000)
Weighted Average Number of Shares
Outstanding 12,412,000 12,412,000
Net Loss Per Common Share
Outstanding $ (0.005) $ (0.013)
Unaudited - See Accompanying Notes to Financial Statements
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Part I - Item I
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Six Months Six Months
Ended Ended
September 30, 1995 September 30, 1994
Revenues
Contract Revenue and Net Sales $ 1,806,000 $ 2,302,000
Total Revenues 1,806,000 2,302,000
Operating Expenses
Contract Costs and Cost of
Goods Sold 1,512,000 2,152,000
Selling, General and
Administrative 388,000 363,000
Total Operating Expenses 1,900,000 2,515,000
Operating Loss (94,000) (213,000)
Other Income (Expenses)
Interest and Other Income 30,000 35,000
Interest Expense (58,000) (66,000)
Total Other (Expenses) (28,000) (31,000)
Net Loss $ (122,000) $ (244,000)
Weighted Average Number of Shares
Outstanding 12,412,000 12,412,000
Net Loss Per Common Share
Outstanding $ (0.010) $ (0.020)
Unaudited - See Accompanying Notes to Financial Statements
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Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995
Common Stock Capital in
Excess of Retained
Shares Par Value Par Value Deficit
Balances -
April 1, 1995 12,412,000 $248,000 $3,445,000 $(1,821,000)
Net Loss for the
Period - - - (122,000)
Balances -
September 30,
1995 12,412,000 $248,000 $3,445,000 $(1,943,000)
Unaudited - See Accompanying Notes to Financial
Statements
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Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
Cash Flows from Operating Activities:
Net Loss for the Period $(122,000) $(244,000)
Adjustments to Reconcile Net Loss to
Net Cash Provided by Operating
Activities:
Depreciation and Amortization 132,000 197,000
Changes in Operating Assets and
Liabilities:
Accounts Receivable - Trade (39,000) 70,000
Note Receivable - Trade (45,000) (85,000)
Costs in Excess of Billings
on Uncompleted Contracts 1,000 47,000
Inventories 30,000 70,000
Prepaid Expenses and Other
Current Assets (34,000) (11,000)
Deposits and Other Assets 2,000 (2,000)
Accounts Payable and Accrued
Expenses (23,000) (141,000)
Billings in Excess of Costs
on Uncompleted Contracts 40,000 (26,000)
Net Cash Used in Operating
Activities (58,000) (125,000)
Cash Flows from Investing Activities:
Acquisitions of Property and
Equipment (65,000) (14,000)
Investment in Restricted Cash (7,000) -0-
Net Cash Used in Investing
Activities (72,000) (14,000)
Cash Flows from Financing Activities:
Principal Payments on Long-Term Debt (75,000) (126,000)
Net Cash Used in Financing
Activities (75,000) (126,000)
Net Decrease in Cash and Equivalents (205,000) (265,000)
Cash and Equivalents, Beginning of Year 454,000 557,000
Cash and Equivalents, End of Period $ 249,000 $ 292,000
SUPPLEMENTAL INFORMATION:
Cash Paid for Interest $ 62,000 $ 67,000
Unaudited - See Accompanying Notes to Financial
Statements
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Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The consolidated balance sheet at the end of the
preceding fiscal year has been derived from the audited
consolidated balance sheet contained in the Company's
Form 10-KSB and is presented for comparative purposes.
All other financial statements presented are unaudited.
In the opinion of Management, all adjustments which
include only normal recurring adjustments necessary to
present fairly the financial position for all periods
presented have been made. The results of operations for
the interim periods are not necessarily indicative
of the operating results for the full year.
Footnote disclosures normally included in financial
statements prepared in accordance with generally
accepted accounting principles have been omitted in
accordance with the published rules and regulations of
the Securities and Exchange Commission. These
consolidated financial statements should be read in
conjunction with the financial statements and notes
thereto included in the Company's Form 10-KSB for the
most recent fiscal year ended.
Note 2 - Contingencies
The accompanying financial statements have been prepared
assuming that the Company will continue as a going
concern. As discussed in Note 3 to the Company's annual
financial statements in Form 10-KSB, the Company was not
in compliance with certain required ratios included in
their bank loan agreements, had temporarily suspended
production in its audio cassette segment in May 1994 and
had incurred significant net losses which raises
substantial doubt about its ability to continue as a
going concern. Subsequent to May 1994, the Company had
limited production in its audio cassette segment. The
Company is currently evaluating whether to formally
discontinue the cassette division. Management's plans
in regard to this matter are also described in Note 3 to
the annual financial statements and in the Management's
Discussion and Analysis of Financial Condition and
Results of Operations included herein and in the most
recent Form 10-KSB. These financial statements do not
include any adjustments that might result from the
outcome of this uncertainty.
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Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Contingencies (Cont'd)
As referred to above, at March 31, 1995, June 30, 1995
and September 30, 1995, the Company was not in
compliance with certain required ratios included in
their bank loan agreements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales for the six months and three months ended September 30,
1995 decreased by $496,000 and $214,000 respectively, from those
in 1994. Net sales by segment were as follows:
Six Months Three Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
Athenia $ 134,000 $ 487,000 $ 65,000 $ 216,000
Custom Molding 1,181,000 789,000 602,000 499,000
Finished Ribbons 491,000 773,000 248,000 305,000
Audio Cassettes 0 253,000 0 159,000
$1,806,000 $2,302,000 $ 915,000 $1,129.000
Athenia's sales vary from quarter to quarter depending on the
production time required to build various tools and the amount of
backlog. During the six months and three months ended September
30, 1995, Athenia's sales decreased $353,000 or 72.5% and
$151,000 or 69.9% from their respective 1994 periods. These
decreases resulted primarily from a lower backlog for new tooling
orders for this segment which management believes is due to a
generalized slowdown in this industry. Most orders being
obtained
are for repairs and maintenance to existing tooling, as customers
are
tending to be conservative, rather than investing in new tooling.
Although recent requests for quotations for new tooling have been
increasing, management anticipates that sales for this segment
will remain at the current reduced level for the immediate
future.
Custom molding consists of the Company's injection molding
operations, including ribbon cartridge kits sold to outside
customers in the ribbon industry, and the sale of custom molded
contract products to plastic product manufacturers. Sales for
this segment increased $392,000 or 49.7% and $153,000 or 34.1%
for
the six months and three months ended September 30, 1995 as
compared
to similar 1994 periods. These increases are primarily the
result
of a concentrated effort by management to redirect the Company
toward customer contract molding which produces the highest
percentage
of profit for the Company. As of this date, several new
customers
have placed orders and this segment is running at or near
capacity.
Management is anticipating that sales for customer molding will
remain at current levels in the immediate future and is
contemplating investing in additional molding machines to
increase
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capacity above current levels.
Finished ribbons cartridge sales decreased approximately $282,000
or 36.5% and $57,000 or 18.7% for the six months and three months
ended September 30, 1995 as compared to 1994. This decrease is
primarily the result of an overall slowdown in the ribbon
industry due to several factors, namely, the general slowdown in
the overall economy and the negative effect of laser and ink jet
printers on impact printers. Additionally, sales to certain
co-manufacturers have decreased as a result of certain mergers
within the industry and certain companies relocating
manufacturing
facilities to Mexicoas a result of NAFTA. Management is
continuing
its efforts to increase sales in this segment; however, it is
anticipated that sales will remain at reduced levels in the
immediate future.
Audio cassettes sales were $0 for the six months and three months
ended September 30, 1995 due to the fact that production in this
segment remains suspended at this time. As discussed in the
Company's Form 10-KSB for fiscal year ended March 31, 1995,
management invested approximately $60,000 in upgrading the
cassette production equipment and made proposals to certain key
customers to determine if orders could be secured at profitable
prices. Despite an interest by several large customers,
management
decided to pass on these potential orders and remain in a
suspended
production mode. This decision was based on the fact that due to
the
litigation with our primary bank lender, which is ongoing at this
time, and our resulting inability to obtain working capital
financing, the resumption of audio cassette production would
place considerable strain on the Company's cash flow and could
potentially jeopardize the Company's ability to remain in
business. Due to the foregoing, management began investigating
the
possible sale of the cassette assets and permanently
discontinuing
cassette operations. Several potential acquirers have expressed
an
interest in purchasing these assets and management is now
evaluating
whether or not a sale can be consummated.
Contract costs and costs of goods sold varies based upon sales
volume and product mix. Cost of sales decreased to 83.7% from
93.5% and 83.7% from 96.7% for the six months and three months
ended September 30, 1995 as compared to the 1994 similar periods.
This improvement is primarily the result of improved production
efficiencies and the increase in custom molding sales as an
overall percentage of sales which traditionally carries the
highest
profit margins for the Company.
Selling, general and administrative expenses increased
approximately $25,000 and $14,000 for the six months and three
months ended September 30, 1995 a compared to 1994. These
increases are largely the result of legal fees as a result of the
lawsuit against the bank and additional sales salaries which were
added to increase custom molding sales.
Interest and other income decreased approximately $5,000 for the
six months ended September 30, 1995 as compared to 1994, but
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increased $1,000 for the three months ended September 30, 1995
when compared to the similar 1994 period. This decrease is
primarily the result of lower commission income earned on the
sale
of imported plastic ribbon kits during the current year which was
offset during the 1995 quarter by the interest earned on the
$250,000 proceeds from the sale of the Company's interest in
Advanced Imaging Technology, Inc., which occurred during October
1994. These funds are currently invested in a certificate of
deposit at the Company's primary bank.
Interest expense decreased $8,000 to $58,000 for the six months
ended September 30, 1995 as compared to 1994 and decreased $2,000
to $31,000 for the three months ended September 30, 1995 from the
similar quarter of 1994. These decreases are primarily the
result of the continuing repayment of borrowings.
Net (loss) incurred for the six months ended September 30, 1995
was ($122,000) as compared to ($244,000) for 1994. For the three
months ended September 30, 1995, the Company sustained a net loss
of ($58,000) as compared to a net loss of ($159,000) for the
similar 1994 period. This improvement, despite the decrease in
sales, is ,largely the result of an improvement in gross profit,
which is a direct result of the higher volume of custom molding
sales, improved production efficiencies and efforts to
continually control costs.
Management will continue to monitor the performance of all
segments with an emphasis on attempting to increase sales and
improve cost controls. The Company intends to continue re-
directing its focus toward custom contract molding which yields
the highest gross profit margins. Absent a further downturn in
the
overall economy, management is hopeful for improved operating
results.
MATERIAL CHANGES IN FINANCIAL POSITION
The principal change in financial position during the six months
ended September 30, 1995 was a decrease in cash and cash
equivalents of approximately $205,000. This result is primarily
the effect of an increase in accounts and notes receivable of
approximately $84,000 combined with an investment in plant and
equipment of $65,000 which was paid out of operating cash and
principal payments on long term debt of $75,000 during the
period.
The Company intends to continue operating under the assumption
that no significant new financing will be available. Scheduled
debt payments, other than the reclassified long term portions of
the bank debt, as discussed in the March 31, 1995 Form 10-KSB,
are
expected to be met by operating cash flows. If necessary,
additional cost cutting measures will be implemented.
Achieving the return to growth and profitability will require the
Company to overcome uncertainties which it now faces, namely, the
restructuring of bank debt, the securing of capital for growth
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and the overall health of the U.S. economy. It is not possible
to
determine the effects of these factors on the Company's financial
condition or liquidity at this time. Management will continue
its efforts to increase sales and improve cost controls. Absent
any
unanticipated operating expenses or a significant downturn in the
economy, management is hopeful for an improvement in long term
operating results.
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BERES INDUSTRIES, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings:
On or about July 12, 1994 the Company instituted litigation
against Northeast Plastic Distributors, Inc., Teresa Radecka
and Basem Allen, in the New Jersey Superior Court. The
Complaint sought recovery of an outstanding account receivable
due the Company for goods sold and delivered, in the
approximate amount of $273,000. The Company has settled its
claim with the individual defendants for $50,000, of which
$6,500 has been received, with the balance to be paid over a
term of thirty months. Recently, the Company entered judgment
against the corporate defendant in the amount of $222,913.
Due to the unstable financial condition of the corporate
defendant, it is not likely that any substantial recovery will
be obtained from the corporate defendant.
On or about August 2, 1995, the Company instituted
litigation against Cassette Productions, Inc. for collection
of an account receivable due the Company for goods sold and
delivered, in the amount of $92,308. The Company is not able
to predict the outcome of this litigation and the amount, if
any, of the receivable that will be recovered.
On March 30, 1995, the Company instituted litigation
against First Fidelity Bank and certain of its officers in the
United States District Court. The Complaint sought
compensatory and punitive damages, lost profits and release of
certain monies belonging to the Company, which First Fidelity
has arbitrarily refused to release. The litigation arises out
of $250,000 in proceeds which the Company received from the
sale of its interest in the HPM/AIT Joint Venture. At the
time of the Company's sale of its interest in AIT, First
Fidelity required the Company to deposit the proceeds into a
segregated account. First Fidelity agreed to release the
proceeds upon presentation to First Fidelity of a reasonable
business plan for usage of the proceeds. In January, 1995,
the Company presented to First Fidelity a proposal to purchase
the machinery necessary to manufacture a newly designed
Compact Disc jewel case. Despite Beres' presentation of a
Business Plan and other documentation necessary to
substantiate the project, First Fidelity arbitrarily refused
to release the funds. On October 3, 1995, the District Court
ruled that the Company had not stated a federal cause of
action under the Bank Holding Company Act and, therefore,
jurisdiction did not exist in Federal Court. The District
Court dismissed the Complaint and remanded Counts Two through
Ten, relating to various common law tort and breach of
contract claims, to the New Jersey Superior Court. The
Company intends to pursue its claim against First Fidelity
Bank in the Superior Court. However, due to various factual
and legal issues, the Company cannot make any representations
concerning the ultimate outcome of this case.
Item 2. Change in Securities:
None
Item 3. Default Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security
Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Date: November 10, 1995 BERES INDUSTRIES, INC.
(Registrant)
S/ CHARLES BERES, SR.
Charles Beres, Sr., Chairman
S/ CHARLES BERES, JR.
Charles Beres, Jr., President
S/ HAROLD E. ZUBER
Harold E. Zuber, Vice Pres.
S/ JOSEPH L. DELIKAT
Joseph L. Delikat, Vice Pres.
