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 December 31, 1996.
( ) 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 X No
State the number of shares outstanding of each of the
Registrant's classes of common equity, as of the latest
applicable date:
12,411,934 - January 31, 1997
Beres Industries, Inc.
December 31, 1996
Form 10-QSB
Index
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1996 and
March 31, 1996
Consolidated Statements of Operations for the Three
Months Ended December 31, 1996 and 1995 and the Nine
Months Ended December 31, 1996 and 1995.
Consolidated Statement of Changes in Stockholders
Equity for the Nine Months Ended December 31, 1996
Consolidated Statements of Cash Flows for the Nine
Months Ended December 31, 1996 and 1995
Notes to Consolidated Financial Statements
Item 2. Managements s Discussion and Analysis, Material Changes
in Financial Condition and Results of Operations
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
12/31/96 3/31/96
ASSETS
Current Assets
Cash and Equivalents $ 641,000 $ 377,000
Cash - Restricted -0- 268,000
Accounts Receivable - Trade:
Less Allowance for Doubtful
Accounts of $60,000 at 12/31/96
and $258,000 at 3/31/96 498,000 600,000
Inventories - Raw Materials 113,000 94,000
- Work in Process 39,000 183,000
- Finished Goods 152,000 17,000
Prepaid Expenses and Other
Current Assets 11,000 70,000
Total Current Assets 1,454,000 1,609,000
Property, Plant and Equipment - Less
Accumulated Depreciation of
$5,154,000 and $5,155,000
Respectively 1,649,000 1,759,000
Other Assets 54,000 57,000
Total Assets $ 3,157,000 $3,425,000
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
12/31/96 3/31/96
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Current Maturities of Long-Term
Debt $ 99,000 $ 250,000
Current Maturities of Capital
Lease Obligations 54,000 61,000
Accounts Payable and Accrued
Expenses 422,000 413,000
Customer Deposits 32,000 35,000
Total Current Liabilities 607,000 759,000
Long-Term Debt - Less Current
Maturities 990,000 1,067,000
Total Liabilities 1,597,000 1,826,000
Stockholders Equity
Common Stock - Par Value $0.02 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 (1,963,000) (1,924,000)
1,730,000 1,769,000
Less: Amounts Due on Sale of
Common Stock 170,000 170,000
Total Stockholders Equity 1,560,000 1,599,000
LIABILITIES AND STOCKHOLDERS
EQUITY $3,157,000 $3,425,000
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
12/31/96 12/31/95
Revenues
Contract Revenue and Net Sales $ 882,000 $ 1,225,000
Total Revenues 882,000 1,225,000
Operating Expenses
Contract Costs and Cost of Goods
Sold 691,000 1,016,000
Selling, General and
Administrative 229,000 230,000
Total Operating Expenses 920,000 1,246,000
Operating (Loss) ( 38,000) ( 21,000)
Other Income (Expenses)
Interest and Other Income 74,000 13,000
Interest Expense ( 26,000) ( 30,000)
Total Other Income (Expenses) 48,000 ( 17,000)
Net Income (Loss) $ 10,000 $( 38,000)
Weighted Average Number of Shares
Outstanding 12,412,000 12,412,000
Net Income(Loss) Per Common Share
Outstanding $( 0.001) $( 0.003)
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Nine Months
Ended Ended
12/31/96 12/31/95
Revenues
Contract Revenue and Net Sales $ 2,743,000 $ 3,031,000
Total Revenues 2,743,000 3,031,000
Operating Expenses
Contract Costs and Cost of Goods
Sold 2,168,000 2,528,000
Selling, General and
Administrative 627,000 618,000
Total Operating Expenses 2,795,000 3,146,000
Operating (Loss) ( 52,000) ( 115,000)
Other Income (Expenses)
Interest and Other Income 100,000 43,000
Interest Expense ( 87,000) ( 88,000)
Total Other Income (Expenses) 13,000 ( 45,000)
Net (Loss) $( 39,000) $( 160,000)
Weighted Average Number of Shares
Outstanding 12,412,000 12,412,000
Net (Loss) Per Common Share
Outstanding $( 0.003) $( 0.013)
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996
Common Stock Capital in
Excess of Retained
Shares Par Value Par Value Deficit
Balances -
April 1, 1996 12,412,000 $ 248,000 $ 3,445,000 $(1,924,000)
Net (loss)
for the Period - - - ( 39,000)
Balances -
Dec. 31,1996 12,412,000 $ 248,000 $ 3,445,000 $(1,963,000)
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
Cash Flows from Operating Activities:
Net (Loss) for the Period $( 39,000) $(160,000)
Adjustments to Reconcile Net
(Loss) to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 117,000 194,000
Gain on Disposal of Equipment ( 67,000) -0-
Changes in Operating Assets and
Liabilities:
Accounts Receivable - Trade 102,000 ( 90,000)
Inventories ( 10,000) 95,000
Prepaid Expenses and Other
Current Assets 59,000 ( 11,000)
Other Assets ( 3,000) ( 36,000)
Accounts Payable and Accrued
Expenses 9,000 34,000
Customer Deposits ( 3,000) 30,000
Net Cash Provided By
Operating Activities 165,000 56,000
Cash Flows from Investing Activities:
Acquisitions of Property and
Equipment ( 1,000) (213,000)
Investment in Restricted Cash -0- ( 10,000)
Cash Released from Restriction 268,000 -0-
Proceeds from Insurance Reimbursement 67,000 -0-
Net Cash Provided By (Used in)
Investing Activities $ 334,000 $(223,000)
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT D)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
Cash Flows from Financing Activities:
Principal Payments on Long-Term Debt $(188,000) $( 97,000)
Principal Payments on Capital
Lease Obligations ( 47,000) ( 18,000)
Long-Term Borrowings -0- 145,000
Net Cash Provided by (Used in)
Financing Activities (235,000) 30,000
Net Increase (Decrease)in Cash 264,000 (137,000)
and Equivalents
Cash and Equivalents, Beginning of Year 377,000 454,000
Cash and Equivalents, End of Period $ 641,000 $ 317,000
SUPPLEMENTAL INFORMATION:
Cash Paid for Interest $ 87,000 $ 92,000
Unaudited - See Accompanying Notes to Financial Statements
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 - Reclassifications
Certain amounts previously reported in the December 31,
1995 financial statements have been reclassified to conform
with the December 31, 1996 presentation.
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales for the nine months ended December 31, 1996 decreased by
$288,000 or 9.5% from the comparable 1995 period. For the three
months ended December 31, 1996, net sales decreased $343,000 or 28%
from 1995. Net sales by segment were as follows:
Three Months Nine Months
Ended December 31, Ended December 31,
1996 1995 1996 1995
Athenia $ 105,000 $ 126,000 $ 369,000 $ 260,000
Custom Molding 587,000 702,000 1,806,000 1,883,000
Finished Ribbons 190,000 394,000 568,000 885,000
Audio Cassettes -0- 3,000 -0- 3,000
$ 882,000 $1,225,000 $2,743,000 $3,031,000
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 nine months ended December 31, 1996, sales
increased $109,000 or 41.9% from 1995. For the three months ended
December 31, 1996, sales decreased $21,000 or 16.7% from the similar
period of 1995. These changes are primarily the result of the timing
of shipments. It is anticipated that sales for this segment will
remain at the current levels for the near term.
Custom molding consists of the Company's injection molding operations,
including ribbon cartridge kits molded and sold to outside customers
in the ribbon industry, and the sale of custom molded contract
products to plastic product manufacturers. Sales for this segment
decreased $77,000 or 4.1% and $115,000 or 16.4% for the nine months
and three months ended December 31, 1996 when compared to their
respective similar periods of 1995. These decreases are primarily the
result of two custom contract customers who are bringing their work
back into their own facilities. Management is actively seeking to
replace these contracts with new customers. Although Management is
currently negotiating with certain new customers for custom molding
projects, it is anticipated that sales for the custom molding segment
will remain at these reduced levels for the immediate future.
Finished ribbons cartridge sales decreased approximately $317,000 or
35.8% for the nine months ended December 31, 1996 as compared to 1995.
For the three months ended December 31, 1996, sales for this segment
decreased $204,000 or 51.8% from 1995. These decreases are primarily
the result of an overall slowdown in the ribbon industry due to the
negative effect of laser and ink jet printers on impact printers.
Additionally, sales to certain co-manufacturers have decreased as a
result of mergers within the industry. 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 $0.00 for the nine months and three months
ended December 31, 1996 due to the fact that production in this
segment remains suspended at this time. As discussed in previous
filings, production of audio cassettes was halted due to losses
resulting primarily from low selling prices caused by intense foreign
competition. Management is attempting to liquidate the manufacturing
equipment. It is not known at this time if a sale of these assets
will be successfully completed.
Contract costs and costs of goods sold varies based upon sales volume
and product mix. Cost of sales were 79.0% and 78.3% for the nine
months and three months ended December 31, 1996 as compared to 83.4%
and 82.9% for the respective periods of 1995. These improvements in
both the nine and three month cost of sales percentages are primarily
the result of a decrease in depreciation expense of approximately
$9,000 per month for the current year when compared to 1995. As well
as Managements continued efforts to improve production efficiencies
and control manufacturing costs.
Selling, general and administrative expenses increased approximately
$9,000 for the nine months ended December 31, 1996 as compared to
1995. For the three months ended December 31, 1996 these expenses
remained approximately the same as those for the similar period of
1995. The increase in the nine month figure is primarily the result
of additional sales salaries added during the current year which in
the most recent three month period were partially offset by a decrease
in legal fees associated with settlement of the bank lawsuit which
occurred during the second quarter of the current fiscal year.
Interest and other income increased approximately $57,000 and $61,000
for the nine months and three months ended December 31, 1996 as
compared to 1995. These increases are primarily the result of
insurance proceeds in the amount of approximately $66,000 which were
collected as payment for assets damaged in a minor fire, which
proceeds were partially offset by lower commissions earned on the
sales of imported plastic ribbon cartridge kits.
Interest expense decreased by $1,000 and $4,000 for the nine months
and three months ended December 31, 1996 as compared to the similar
periods of 1995. These decreases represent lower interest costs as a
result of the repayment of debt which occurred during the year.
Net Income (loss) for the nine months ended December 31, 1996 was
($39,000) as compared to ($160,000) during the similar 1995 period.
The actual loss during the 1996 nine moths was ($105,000) excluding
the income of approximately $66,000 realized from the fire related
insurance proceeds as discussed above. This improvement in 1996
despite the 9.5% decrease in sales is primarily the result of
continuing efforts to control costs and improve efficiencies. For the
three months ended December 31, 1996, the Company had net income of
$10,000 as compared to a net loss of ($38,000) for the comparable 1995
period. Adjusting the 1996 three month period for the insurance
proceeds, the Company sustained a net loss of ($56,000). This
increase in loss of approximately ($18,000) during the three months
ended December 31, 1996 as compared to the 1995 period is primarily
the result of the significant 28% decrease in sales during 1996 and
the nature of certain fixed costs which the Company must bear.
MATERIAL CHANGES IN FINANCIAL POSITION
The principal change in financial position during the nine months
ended December 31, 1996 was that the Company's operations generated
cash of approximately $165,000 which was more than sufficient to allow
the Company to meet its principal debt payments of approximately
$128,000, excluding the one time paydown of approximately $107,000 on
the building mortgage which occurred during July, 1996. More
importantly, however, during the most recent three months ended
December 31, 1996, the Company's operations generated positive cash of
approximately $11,000 which was not sufficient to meet the principal
payments on Notes due during this period of approximately $45,000.
This was primarily due to the significant decrease in sales which
occurred during the most recent quarter.
Additionally, during the three months ended December 31, 1996, the
Company wrote off approximately $221,000 of bad debt from a former
cassette customer, which amount was fully reserved in the allowance
for doubtful accounts, during the prior period. This adjustment had
no affect on the Company's net income for the current period. The
Company also elected to increase the reserve for bad debts at December
31, 1996 by approximately $22,800 to provide for possible losses from
another former cassette customer who recently ceased operations. This
adjustment decreased net income for the nine months and three months
ended December 31, 1996 by approximately $22,800.
Although the Company is currently exploring sources of new financing,
Management will continue operating under the assumption that no
significant new financing will be available. Every effort will
continue to be made to increase sales so that scheduled obligations
will be met by operating cash flows without the need to deplete
reserves. 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
weakening markets for the Company's product lines due primarily to
sluggishness in the U.S. economy. Management is evaluating the
possibility of raising capital to invest in new products and/or
markets and also seeking out strategic partners that could align with
the Company and who could utilize the Company's capabilities. The
success of accomplishing either of these avenues is not determinable
at this time. Management will continue its efforts to increase sales
and improve cost controls. Absent any unanticipated operating
expenses on a significant further downturn in the economy, Management
is hopeful for an improvement in long-term operating results.
BERES INDUSTRIES, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1 Legal Proceedings:
There have been no material changes in legal proceedings from as
previously reported in the Company's 10-KSB for the fiscal year ended
March 31, 1996 other than as follows:
Relative to the litigation against Northeast Plastic
Distributors, Inc., reported in the Company's 10-KSB for the fiscal
year ended March 31, 1996, the Company has received $19,450 of the
$50,000 settlement. The Company has entered Judgment on the balance
and has commenced collection procedures for the recovery of such
amount.
Relative to the litigation against Cassette Productions, Inc.,
reported in the Company's 10-KSB for the fiscal year ended March 31,
1996, on September 27, 1996 Judgment was entered against Cassette
Productions in the amount of $83,308.96. Cassette Productions is no
longer in operation and it is questionable whether any substantial
recovery will be obtained.
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.
BERES INDUSTRIES, INC.
Date: February 12, 1997 (Registrant)
/S/ CHARLES BERES, JR.
Charles Beres, Jr., President
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