SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB-A
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 1996 Commission File Number 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) (Zip Code)
Registrant's telephone number, including area code (908) 367-5700
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.02 Par Value
___________________________________________________________________________
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 __ .
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB X
The issuer's revenues for its most recent fiscal year were $3,987,000.
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $796,778 on July 23, 1996 based on the
last available bid quotation ($.09) at the close of the market on that day.
For the purposes of the foregoing sentence, the term "affiliate" includes
each director and officer of the Registrant.
The number of shares outstanding of the Registrant's common stock on July
23, 1996 was 12,411,934. Documents Incorporated By Reference - See Item
14(c) to this Form 10-KSB.
Item 3. 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. In September, 1995, the Company settled its claim
with the individual defendants for $50,000, $5,000 of which was
paid at the time of settlement, and the balance of which is
payable over a term of thirty (30) months. On November 9, 1995,
Judgment was entered 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, and as a
result, the balance has been fully reserved at year end.
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. As a result, this balance
has been partially reserved at year end.
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 had arbitrarily
refused to release. The litigation arose out of $250,000 in
proceeds which the Company received from the sale of its interest
in the HPM/AIT Joint Venture and which proceeds were being held
by First Fidelity as additional collateral on indebtedness
between the Company and First Fidelity. On June 3, 1996, the
litigation was settled. First Fidelity has agreed to release its
lien on the proceeds in exchange for Beres paying down $107,000
of its indebtedness to First Fidelity. First Fidelity has also
agreed to modify the Note between Beres and First Fidelity so as
to reflect a maturity of October 1, 2006 and collateralization by
a first lien, only, on real property owned by Beres.
Item 6. Management's Discussion & Analysis of Financial
Condition and Results of Operations:
This analysis of the Company's financial condition, capital
resources and operating results should be reviewed in conjunction
with the accompanying Financial Statements, including the notes
thereto.
The Company believes that an understanding of its operating
results requires an analysis into its business segments.
Athenia designs, manufactures and assembles precision
engineered injection molds for the manufacture of molded plastic
products and parts for both its internal operations as well as
for sale to outside customers.
Custom Molding consists of the Company's injection molding
operations, including ribbon cartridge kits or components, both
to outside customers in the ribbon industry and to the Company's
finished ribbon cartridge segment, and custom contract molded
products to plastic product manufacturers.
The Finished Ribbon cartridge segment manufactures computer
printer and electronic typewriter ribbon cartridges for sale
primarily to OEM printer manufacturers and ribbon industry co-
manufacturers.
The Audio Cassette segment manufactures pre-leadered audio
cassettes and related accessories for sale to major record
companies, custom trade duplicators and blank tape loaders.
Operations for this segment were suspended during 1994 due
primarily to intense foreign competition as well as an industry
oversupply. The Company is currently in the process of
liquidating these assets.
The following tables summarize net sales and operating
income (loss) by segment.
Year Ended March 31,
1996 1995
(Dollars in Thousands)
Sales
Athenia $ 351 $ 869
Custom Molding 2,507 2,080
Finished Ribbons 1,125 1,470
Audio Cassettes 4 267
Total Sales $3,987 $4,686
Operating Income (Loss)
Athenia $ (180) $(102)
Custom Molding 289 216
Finished Ribbons (145) (43)
Audio Cassettes (46) (237)
Total Operating Income (Loss) $ (82) $ (166)
Investment Expense $ (122) $ (134)
Interest and Other Income 53 86
Gain on Sale of Joint Venture 22 250
Gain on Sale of Equipment 26 --
Net Income (Loss) $ (103) $ 36
The Company's total net sales for the year ended March 31, 1996
decreased $699,000 or 14.9% from the year ended March 31, 1995.
The Company had a net loss of $103,000 for the year ended March
31, 1996 as compared to net income of $36,000 for the prior year.
Included in the 1995 net income figure is a one-time gain on the
sale of Beres' interest in Advanced Imaging Technology Inc. (AIT)
of $250,000. The 1996 net loss figure included one-time gains of
approximately $48,000.
Athenia's sales decreased $518,000 to $351,000 for the year
ended March 31, 1996 as compared to the 1995 fiscal year. During
the 1996 period, Athenia incurred an operating loss of $180,000
as compared to an operating loss of $102,000 for the fiscal year
ended March 31, 1995. The significant decrease in sales is
primarily the result of slow market conditions being experienced
by most competitors in the industry. The increase in operating
loss is primarily the result of the lower sales level resulting
in a lower gross profit and the nature of certain fixed selling,
general and administrative expenses. Although requests for
quotations for products manufactured by this segment have been
increasing recently, it is not possible to determine at this time
if a reversal of the sales trend will be forthcoming.
Custom Molding sales increased $427,000 or 20.5% during the
year ended March 31, 1996 as compared to the year ended March 31,
1995. This segment produced operating income of $289,000 in the
current year as compared to operating income of $216,000 during
the year ended March 31, 1995. The sales increase for this
segment is a direct result of a concentrated effort to secure
additional custom contract molding and redirect the Company to
becoming more of a custom molder, due to the fact that the
Company has discontinued audio cassette operations. When
manufacturing audio cassettes, a certain portion of the custom
molding equipment was utilized to supply molded parts to the
audio cassette segment. The increase in operating profit for
this segment is a direct result of an increase in gross profit
dollars realized from the increased sales level, despite the
fact that a customer who, in 1995, signed a five year contract
with the Company guaranteeing a minimum of $1,000,000 annually in
custom molding sales, has not reached those levels. Management
is hopeful that through a continued intense sales effort this
higher level of sales for this segment will continue. Management
is currently negotiating a settlement with the customer that
breached the contract.
Finished Ribbon cartridge sales decreased $345,000 or 23.5%
during fiscal year ended March 31, 1996 as compared to the prior
year. This segment produced an operating loss of $145,000 during
the most recent fiscal year as compared to an operating loss of
$43,000 during the year ended March 31, 1995. The decrease in
sales is primarily the result of a shrinking market for impact
printer ribbon products which are losing market share to the
newer ink jet and laser printers that do not use ribbons. The
increase in loss results from the lower gross profit caused by
increased competition. Management is now concentrating its
efforts on controlling costs in this segment to improve profit
margins and concentrating its sales efforts on certain niche
markets in the industry. It is not possible as this time to
determine if these efforts will reverse the trend of this segment
during the current fiscal year.
Audio Cassette sales were virtually non-existent during the
fiscal year ended March 31, 1996 with the exception of some
inventory that was sold off. As discussed above, Management
suspended audio cassette production during 1994 due to intense
foreign competition, a world wide oversupply and the credit
worthiness of certain customers in the industry. At the current
time Management is concentrating its efforts on selling the audio
cassette assets. Although certain companies have expressed an
interest, it is not possible to determine at this time if a
purchaser will be found.
Contract Costs and Costs of Goods Sold varies based upon
sales volume and product mix. Cost of sales decreased to 81.4%
during the year ended March 31, 1996 from 86.2% during fiscal
year 1995. This cost decrease and resultant increase in gross
profit is primarily the result of the increased sales level for
the custom molding segment which traditionally carries the
highest gross margins of the Company's products and services and
Management's efforts to control manufacturing costs and improve
efficiencies.
Selling, General and Administrative Expenses increased
$58,000 to $815,000 during fiscal year ended March 31, 1996 as
compared to 1995. This increase is primarily the result of an
increase in legal fees which was incurred during the year,
primarily caused by the litigation with the Company's bank.
Interest and Other Income decreased approximately $33,000
during fiscal year ended March 31,1996 as compared to 1995. This
decrease is primarily the result of lower commissions earned on
the sale of imported ribbon cartridge kits from an unaffiliated
company.
Interest Expense decreased approximately $12,000 during 1996
as compared to fiscal 1995. This decrease is primarily the
result of the repayments of net borrowings.
Gain on Sale of Joint Venture amounted to $22,000 during
fiscal year ended March 31, 1996. This gain resulted from
selling assets received from the joint venture (AIT) for which
the Company had no use.
Gain on Sale of Equipment was $26,000 for the fiscal year
ended March 31, 1996. This gain resulted primarily from the sale
of a molding machine which was replaced with a new machine.
LIQUIDITY AND CAPITAL RESOURCES AND MATERIAL CHANGES IN FINANCIAL
CONDITION
Operating Activities
Although the Company reported a net loss of $103,000 for fiscal
year ended March 31, 1996, the Company generated a respectable
$132,000 in net cash from operations. However, due to a
repayment of outstanding debt during the year of approximately
$174,000 and the net affect of investing in equipment of
approximately $35,000, the Company experienced a net decrease in
cash and cash equivalents of $77,000 for fiscal year ended March
31, 1996. Despite this reduction, however, the Company had cash
reserves at March 31, 1996 of $645,000 of which $268,000 is being
held as restricted cash by our primary bank lender. As of June
3, 1996, litigation related to the restricted cash was settled,
with $107,000 of the restricted cash being utilized to reduce the
Company's indebtedness to its lender, and the balance being
released to the Company. Management is of the opinion that
operations during the coming year will generate sufficient cash
flows to service scheduled debt repayments.
Financing Activities and Liquidity
The Company had working capital of $850,000 at March 31, 1996 as
compared to a working capital deficit of $87,000 at March 31,
1995. The large increase in working capital is a result of the
company's refinancing of their mortgage payable over a term of
approximately eleven (11) years. This refinance removes the
restrictive covenants from the loan, and allows the majority of
the debt to be classified as long term, thereby freeing up
certain other collateral and releasing a substantial portion of
the restricted cash. This will have a significant positive
affect on the Company's balance sheet as well as affording the
Company the ability to seek additional financing utilizing the
released collateral.
Scheduled debt repayments are expected to be met by operating
cash flows. If necessary, additional cost cutting measures will
also be instituted.
Achieving a return to growth and profitability will require the
Company to overcome uncertainties which it now faces, namely,
increasing sales above current levels, securing capital for
growth 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 on liquidity at this time.
Management will continue its efforts to increase sales and
improve cost controls. Absent any unanticipated operating
expenses on a significant downturn in the economy, Management is
hopeful for an improvement in long term operating results.
Item 7. Financial Statements and Supplementary Date:
INDEX TO FINANCIAL STATEMENTS - See Page F-1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
Page
Independent Auditors' Report F-2
Financial Statements:
Consolidated Balance Sheet as of March 31, 1996 F-3
Consolidated Statements of Operations
For the Years Ended March 31, 1996 and 1995 F-4
Consolidated Statements of Changes in
Stockholders' Equity
For the Years Ended March 31, 1996 and 1995 F-5
Consolidated Statements of Cash Flows
For the Years Ended March 31, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7 to F-14
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Beres Industries, Inc.
We have audited the accompanying consolidated balance sheet of
Beres Industries, Inc. and subsidiaries as of March 31, 1996 and
the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the two years in the
period ended March 31, 1996. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects the financial
position of Beres Industries, Inc. and subsidiaries as of March
31, 1996, and the results of their operations and their cash
flows for the two years in the period ended March 31, 1996 in
conformity with generally accepted accounting principles.
WITHUM, SMITH & BROWN
TOMS RIVER, NJ 08753
June 12, 1996, except as to
Note 13 for which the date
is June 30, 1996
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
ASSETS
Current Assets:
Cash and cash equivalents $ 377,000
Cash - restricted 268,000
Accounts receivable less allowance for
doubtful accounts of $258,000 600,000
Inventories:
Raw materials 94,000
Work-in-process 183,000
Finished goods 17,000
Prepaid expenses and other current assets 70,000
Total Current Assets 1,609,000
Property, Plant and Equipment - Net 1,759,000
Other Assets 57,000
TOTAL ASSETS $ 3,425,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 250,000
Current maturities of capital lease obligations 61,000
Accounts payable and accrued expenses 413,000
Customer deposits 35,000
Total Current Liabilities 759,000
Long-Term Debt, Less Current Maturities 934,000
Long-Term Capital Lease obligations,
Less Current Maturities 133,000
Commitments and Contingencies -
Stockholders' Equity:
Common stock, par value $.02 per share:
Authorized - 21,000,000 shares
Issued and outstanding - 12,412,000 shares 248,000
Capital in excess of par value 3,445,000
Accumulated deficit (1,924,000)
1,769,000
Less: Amounts due on sale of common stock 170,000
Total Stockholders' Equity 1,599,000
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,425,000
See accompanying notes to consolidated financial statements
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
1996 1995
Revenues:
Net sales
- Unaffiliated customers $ 3,987,000 $ 4,591,000
- Advanced Imaging Technology, Inc. - 95,000
Total Revenues 3,987,000 4,686,000
Costs and Expenses:
Cost of goods sold 3,244,000 4,038,000
Selling, general and administrative
expenses 815,000 757,000
Provision for doubtful accounts 10,000 57,000
Total Costs and Expenses 4,069,000 4,852,000
Operating Loss (82,000) (166,000)
Other Income (Expense):
Interest and other income 53,000 86,000
Interest expense (122,000) (134,000)
Gain on sale of joint venture 22,000 250,000
Gain on sale of equipment 26,000 -
Total Other Income (Expense)-Net (21,000) 202,000
Net Income (Loss) $ (103,000) $ 36,000
Weighted Average Number of
Common Shares Outstanding 12,412,000 12,412,000
Net Income (Loss) Per Common Share $(.01) $ -
See accompanying notes to consolidated financial statements
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
Common Stock Excess of Accumulated Common Stock
Shares Par Value Par Value Deficit Receivable
Balance,
April 1, 1994 12,412,000 $ 248,000 $3,445,000 $(1,857,000) $(170,000)
Year Ended
March 31, 1995
Net Income - - - 36,000 -
Balance,
March 31, 1995 12,412,000 248,000 3,445,000 (1,821,000) (170,000)
Year ended
March 31, 1996
Net Loss - - - (103,000) -
Balance,
March 31, 1996 12,412,000 $ 248,000 $3,445,000 $(1,924,000) $(170,000)
See accompanying notes to consolidated financial statements
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (103,000) $ 36,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 246,000 385,000
Gain on sale of joint venture (22,000) (250,000)
Gain on sale of equipment (26,000) -
Changes in operating assets and liabilities:
Accounts receivable - trade:
Unaffiliated customers 11,000 197,000
Advanced Imaging Technology, Inc. - 26,000
Inventories 80,000 38,000
Prepaid expenses and other current assets (52,000) 3,000
Accounts payable and accrued expenses (31,000) (237,000)
Customer deposits 30,000 (36,000)
Other assets (1,000) (8,000)
Net cash provided by operating activities 132,000 154,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 26,000 -
Proceeds from sale of joint venture 22,000 250,000
Investments in restricted cash (14,000) (254,000)
Acquisitions of property, plant and equipment (69,000) (50,000)
Net cash used in investing activities (35,000) (54,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (124,000) (152,000)
Principal payments on capital lease obligations (50,000) (51,000)
Net cash used in financing activities (174,000) (203,000)
NET DECREASE IN CASH AND CASH EQUIVALENTS (77,000) (103,000)
CASH AND EQUIVALENTS, BEGINNING OF YEAR 454,000 557,000
CASH AND EQUIVALENTS, END OF YEAR $ 377,000 $ 454,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 123,000 $ 126,000
Income taxes paid $ - $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Capitalized lease obligations incurred $ 144,000 $ -
See acompanying notes to consolidated financial statements
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
Nature of Business - The Company's principal business is injection
molding plastic parts, manufacturing precision engineered molds and
assembling finished ribbons. The Company's customers range from local
to multi-national companies.
Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All
intercompany transactions and balances have been eliminated in
consolidation.
Cash and Cash Equivalents - Cash and cash equivalents include cash on
hand and in the bank as well as all short term securities held for the
primary purpose of general liquidity. Such securities normally mature
within three months from the date of acquisition.
Revenue Recognition - Sales are recognized as products are shipped.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out method) or market.
Property, Plant and Equipment - Property, plant and equipment are
stated at cost. The Company provides for depreciation and
amortization using the straight-line method, based upon estimated
useful lives of 5 to 10 years for machinery, equipment, furniture and
fixtures, 5 years for automobiles, 31-1/2 years for buildings and 10
years for building improvements.
Income Taxes - Deferred income tax assets and liabilities are
recognized for the differences between financial and income tax
reporting basis of assets and liabilities based on enacted tax rates
and laws. The deferred income tax provision or benefit generally
reflects the net change in deferred income tax assets and liabilities
during the year. The current income tax provision reflects the tax
consequences of revenues and expenses currently taxable or deductible
on the Company's various income tax returns for the year reported.
Net Income (Loss) Per Common Share - Net income (loss) per common
share is computed by dividing net income (loss) by the weighted
average number of common shares outstanding during each period.
Options are not included when their inclusion would be antidilutive.
Reclassifications - Certain amounts previously reported in the March
31, 1995 financial statements have been reclassified to conform with
the March 31, 1996 presentation.
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (continued):
Use of Estimates in the Preparation of Financial Statements - 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 disclosure of contingent assets and
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.
Effect of New Accounting Pronouncements - In March, 1995, the
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standard ("SFAS") No. 121 "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." The Company believes that this pronouncement will
not have a material impact on the Company's results of operations
and financial condition. In October, 1995, the FASB issued SFAS
No. 123 "Accounting for Stock-Based Compensation." The Company is
currently studying SFAS No. 123, but does not currently plan to
adopt the fair value based method of accounting for stock options
or similar equity instruments. Accordingly, the adoption of SFAS
No. 123 is not expected to have a material impact on the Company's
results of operations or financial condition.
Note 2 - Management Actions to Overcome Liquidity Problems:
At March 31, 1996 and 1995, the Company was not in compliance with
certain required ratios included in their bank loan agreements.
This situation caused approximately $1,200,000 of the Company's
long term debt to become currently due, created a working capital
ratio of under 1.0 to 1.0 and, therefore, created substantial
doubt about the Company's ability to continue as a going concern.
On June 30, 1996 the company refinanced this debt on terms and
conditions that provide for $250,000 of principal to be currently
due. See Note 13 for further information concerning the
refinance. This substantially improved the Company's liquidity.
Note 3 - Property, Plant and Equipment:
Property, plant and equipment at March 31, 1996 is summarized as
follows:
Land $ 50,000
Building or building improvements 1,719,000
Machinery and equipment 5,034,000
Furniture and fixtures 93,000
Automotive equipment 18,000
6,914,000
Less: Accumulated depreciation 5,155,000
$1,759,000
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Property, Plant and Equipment (continued):
Assets under capital leases at March 31, 1996 are included in
property, plant and equipment as follows:
Machinery and equipment $ 311,000
Less: Accumulated amortization 98,000
$ 213,000
Depreciation and amortization included as a charge to operations
amounted to $238,000 for 1996 and $376,000 for 1995.
Note 4 - Long-Term Debt:
Long-term debt at March 31, 1996 is summarized as follows:
Mortgage payable to bank, due in monthly installments
of $11,977 including interest at 8.6%, through
May 1999 when the remaining balance of
$962,000 is due $1,099,000
Note payable to bank, due in monthly principal
installments of $5,000 plus interest at
Prime + 1-1/2% through September 1997 85,000
Total 1,184,000
Less: Current maturities as adjusted by the
refinance referred to in Note 13 250,000
Long-Term Debt, Less Current Maturities $ 934,000
Accounts receivable, inventories, equipment, land and building are
collateral for the above indebtedness.
Future maturities of long-term debt as adjusted by the refinancing
referred to in Note 13 are as follows:
Year Ending March 31,
1997 $ 250,000
1998 66,000
1999 72,000
2000 78,000
2001 85,000
2002 and subsequent 633,000
$1,184,000
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Income Taxes:
The provision for income taxes consists of the following:
Federal State Total
1996 Provision - Current $ - $ 100 $ 100
1996 Provision - Deferred - - -
Benefit of NOL Carryforwards - - -
March 31, 1996 Net Provision $ - $ 100 $ 100
1995 Provision - Curren $12,600 $ 3,000 $15,600
1995 Provision - Deferred - - -
Benefit of Surtax Exemption (7,600) - (7,600)
Benefit of NOL Carryforwards (5,000) (3,000) (8,000)
March 31, 1995 Net Provision $ - $ - $ -
Temporary differences which give rise to significant deferred income
tax assets and (liabilities) at March 31, 1996 follow:
Allowance for Doubtful Accounts Receivable $ 110,000
Accrued Vacation and Bonus Pay 27,000
Net Operating Loss Carryforwards 627,000
Valuation Allowance (706,000)
Total Deferred Income Tax Assets $ 58,000
Accelerated Depreciation $ (58,000)
Total Deferred Income Tax Liabilities $ (58,000)
Net Deferred Income Tax Asset $ -
At March 31, 1996, the Company had consolidated net operating loss
carryforwards for Federal income tax purposes of approximately
$1,500,000 that expire through the year 2009,and approximately
$1,300,000 that expire through the year 2001 for state income tax
purposes.
A reconciliation of income tax at the statutory rate to the company's
effective rate is as follows:
1996 1995
U.S. Federal Statutory Rate of Tax 34.0% 34.0%
Benefit of Surtax Allocation - (19.0)
Benefit of Net Operating Loss
Carryforwards - (15.0)
Operating Losses with no Current
Tax Benefit (34.0) -
Effective Tax Rate - % - %
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Capital Leases:
Obligations under capital leases due in monthly
installments of principal plus interest at rates
ranging from 4.3% to 17.9% and maturing through
November 2000. $ 194,000
Less: Current Maturities 61,000
Long-Term Capital Leases, Less Current Maturities $ 133,000
The following is a schedule of future minimum rental payments required
for all noncancellable capital leases that have initial or remaining
lease terms in excess of one year at March 31, 1996.
Year Ended March 31,
1997 $ 75,000
1998 55,000
1999 35,000
2000 35,000
2001 27,000
Total future minimum lease payments 227,000
Less: Amount representing interest 33,000
Present value of future minimum
lease payments $194,000
Note 7 - Contingencies:
Legal Proceedings - The Company is a defendant in a number of
legal proceedings which occurred in the normal course of
business. Management of the Company, after consultation with
legal counsel, feels that the ultimate resolution of these
matters will not have a material affect on the Company's
financial position.
SEC Proceedings - On August 17, 1993 the United States District
Court for the District of New Jersey entered a Final Judgment of
Permanent Injunction by Consent against Beres Industries, Inc.,
Charles Beres, Sr. and Charles Beres, Jr. enjoining future
violations under Section 17(a) which may arise out of any future
negligent conduct. The Company, Charles Beres, Sr. and Charles
Beres, Jr. consented to the entry of the injunction without
admitting or denying the allegations in the Complaint.
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Common Stock and Options:
Amounts Due on Sale of Common Stock - Amounts due on the sale of
common stock relate to a sale of 1,200,000 shares of common stock at
$.25 per share to the Company's Chairman of the Board, prior to the
company's 1986 public offering. Pursuant to the terms of the original
note dated April 13, 1986, interest only was payable at the prime rate
until June 30, 1988 and principal payments at $37,500 per calendar
quarter plus interest were to commence on September 30, 1988 and end
on June 30, 1990. At March 31, 1996, the unpaid balance includes
principal and interest which was in arrears. No subsequent payments
or new arrangements have yet been made for payment.
During 1990, counsel provided the Company with an opinion that the
1,200,000 shares issued for the promissory note did not comply with
New Jersey statutory law at the time.
Pending resolution of the matter, no interest has been recorded on
this note since 1989. In the event shares were returned at the
subscription price and unpaid principal and interest recorded were
forgiven, 589,000 shares would be returned and a charge against
earnings equal to $23,000 for accrued interest would be made. Pro
forma income (loss) per share would be $(.01) and $( - ) for March 31,
1996 and 1995, respectively.
Options - At March 31, 1996, the Company had previously granted
Incentive Stock Options for officers and other employees to purchase
117,000 shares of the Company's common stock at the fair market value
on the date of the grant of $3.00 per share. Such options expire
from 1996 through 1999. As of March 31, 1996, all such options were
exercisable.
The Company has also reserved an additional 1,383,000 shares of common
stock for possible future issuance under its Incentive Stock Option
Plan. Pursuant to the plan, grants entitling the holder to purchase
up to $100,000 in fair market value of shares in any calendar year may
be made to an officer or employee. Options may be granted for a
period of ten years at 100% of the fair market value of the common
stock on the date of grant, except for grants to stockholders owning
more than 10% of the outstanding common stock (for whom the period is
five years and the exercise price is 110% of fair market value). As
of March 31, 1996, no option has been granted under this plan.
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Major Customers and Credit Risk Concentrations:
Major Customers and Credit Risk Concentrations - Sales to
unaffiliated customers in excess of 10% of such net sales were as
follows:
Accounts Receivable Sales for the
at March 31: Year Ended March 31:
1996 1995 1996 1995
Customer A $ 21,000 $ 6,000 $691,000 $ -
Customer B $126,000 $195,000 $569,000 $474,000
Customer C $129,000 $ 90,000 $541,000 $933,000
Customer D $ 57,000 $ 2,000 $842,000 $909,000
The Company maintains its cash balances in several financial
institutions. The accounts at each institution are insured by
the Federal Deposit Insurance Corporation up to $100,000.
Uninsured balances, including outstanding checks, aggregate
$500,000 at March 31, 1996. Management reviews the banks
periodically and considers the credit risk minimal.
Note 10- Fair Value of Financial Instruments:
The amounts included in the balance sheet as of March 31, 1996
for cash and cash equivalents, other current assets, accounts
payable and accrued expenses and other liabilities approximate
fair value because of the short-term nature of these instruments.
The carrying value of long-term debt approximates the estimated
fair value because the long-term debt is at interest rates
comparable to rates currently available to the Company for debt
with similar terms and remaining maturities.
Note 11- Segment Information:
Segment Information - The Company includes definitions of its
segments in its "Management's Discussion and Analysis" appearing
elsewhere herein. The segment descriptions are an integral part
of this footnote. Such segment information provides an
appropriate description of the nature of its credit risks.
Athenia sells molds to other segments at cost, including
materials, labor and overhead determined on the same basis as for
sales to unaffiliated parties. Such intersegment sales and
related costs which are not included in revenues or costs of
Athenia were $51,000 and $16,000 for the years ended March 31,
1996 and 1995, respectively.
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11- Segment Information (Continued):
Corporate assets consist of cash and cash equivalents, prepaid
expenses, due from officers, and other assets. General corporate
expenses, interest expense, and interest income are classified as
"corporate and other". All other assets are identifiable with
specific segments.
Information about segments follows:
<TABLE>
<CAPTION>
Precision Custom Finished Audio Corporate
Molds Molding Ribbon Cassette and Other Consolidated
<S> <C> <C> <C> <C> <C> <C>
1996:
Sales 351,000 2,507,000 1,125,000 4,000 - 3,987,000
Operating Earnings (180,000) 289,000 (145,000) (46,000) - (82,000)
Identifiable Assets 291,000 1,291,000 524,000 413,000 906,000 3,425,000
Depreciation and
Amortization 20,000 162,000 22,000 25,000 17,000 246,000
Capital Expenditures - 153,000 - 56,000 4,000 213,000
1995:
Sales 869,000 2,080,000 1,470,000 267,000 - 4,686,000
Operating Earnings (102,000) 216,000 (43,000)(237,000) - (166,000)
Identifiable Assets 333,000 1,427,000 448,000 466,000 885,000 3,559,000
Depreciation and
Amortization 38,000 232,000 27,000 69,000 19,000 385,000
Capital Expenditures - 23,000 10,000 17,000 - 50,000
</TABLE>
Note 12- Joint Venture:
On May 30, 1988, the Company entered into a Joint Venture
Agreement (the "Agreement") with Hitachi Powdered Metals Co.,
Ltd. ("HPM"), a member of the Hitachi Group. Pursuant to the
Agreement, the Company and HPM formed Advanced Imaging
Technology, Inc. ("AIT"), in which the company owned a 15%
interest until November, 1994 at which time the Company sold it's
entire interest in AIT to Hitachi. AIT was engaged in the
manufacture and sale of finished ribbon cartridges, other ribbon-
related products and plastic kits. The Company and AIT also had
a plastic kit supply agreement that provided for AIT to purchase
substantially all of its requirements for plastic kits from the
Company.
Note 13- Subsequent Events:
On June 30, 1996, the Company refinanced it's mortgage payable
over a term of approximately eleven years, at 8.6% per year.
This refinance removes the restrictive covenants from the loan
and, allows the majority of the debt to be classified as long-
term.
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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. (Registrant)
BY: /S/ CHARLES BERES, JR.
________________________________
CHARLES BERES, JR., Chief
Executive Officer, President,
Treasurer, Chief Financial
Officer, Director
Date: 1/6/97
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
BY:_________________________________
CHARLES BERES, SR. Chairman of
the Board, Director
Dated:______________________________
BY: /S/ CHARLES BERES, JR.
________________________________
CHARLES BERES, JR., Chief
Executive Officer, President,
Treasurer, Chief Financial
Officer, Director
Dated: 1/6/97
BY: /S/ JOSEPH DELIKAT
________________________________
JOSEPH DELIKAT, Vice President,
Secretary, Director
Dated: 1/6/97
BY: /S/ HAROLD ZUBER
_________________________________
HAROLD ZUBER, Vice President,
Director
Dated: 1/6/97
BY:_________________________________
JOSEPH L. RUDEN, Vice Chairman
of the Board, Director
Dated:______________________________
