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 9 month period ended December 31, 1997.
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition 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 (732) 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 (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 - December 31, 1997
<PAGE>
Beres Industries, Inc.
December 31, 1997
Form 10-QSB
Index
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1997 and
March 31, 1997
Consolidated Statements of Operations for the Three Months
Ended December 31, 1997 and 1996 and the Nine
Months Ended December 31, 1997 and 1996.
Consolidated Statement of Changes in Stockholders' Equity for
the Nine Months Ended December 31, 1997
Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2. Management s Discussion and Analysis, Material Changes in
Financial Condition and Results of Operations
Part II: Other Information
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
12/31/97 3/31/97
ASSETS
Current Assets
Cash and Equivalents $ 560,000 $ 701,000
Accounts Receivable - Trade:
Less Allowance for Doubtful
Accounts of $15,000 at Each
Date 204,000 366,000
Inventories - Raw Materials 62,000 87,000
- Work in Process 54,000 14,000
- Finished Goods 96,000 151,000
Prepaid Expenses and Other
Current Assets -0- 31,000
Net Current Assets of Discontinued
Operations -0- 21,000
Total Current Assets 976,000 1,371,000
Property, Plant and Equipment - Less
Accumulated Depreciation of
$4,535,000 and $4,454,000
Respectively 1,392,000 1,471,000
Other Assets 51,000 56,000
Net Long-Term Assets of Discontinued
Operations 90,000 90,000
Total Assets $2,509,000 $2,988,000
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
12/31/97 3/31/97
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Current Maturities of Long-Term
Debt $ 64,000 $ 85,000
Current Maturities of Capital
Lease Obligations 29,000 46,000
Accounts Payable and Accrued
Expenses 207,000 322,000
Customer Deposits 37,000 9,000
Total Current Liabilities 337,000 462,000
Long-Term Debt - Less Current
Maturities 828,000 880,000
Capital Lease Obligations -
Less Current Maturities 65,000 87,000
Total Liabilities 1,230,000 1,429,000
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 (2,244,000) (1,964,000)
1,449,000 1,729,000
Less: Amounts Due on Sale of
Common Stock 170,000 170,000
Total Stockholders Equity 1,279,000 1,559,000
LIABILITIES AND STOCKHOLDERS EQUITY $ 2,509,000 $ 2,988,000
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
12/31/97 12/31/96
Revenues
Contract Revenue and Net Sales $ 564,000 $ 882,000
Total Revenues 564,000 882,000
Operating Expenses
Contract Costs and Cost of Goods
Sold 456,000 691,000
Selling, General and
Administrative 166,000 229,000
Total Operating Expenses 622,000 920,000
Operating (Loss) (58,000) (38,000)
Other Income (Expenses)
Interest and Other Income 15,000 74,000
Interest Expense (22,000) (26,000)
Total Other Income (Expenses) (7,000) 48,000
Income (Loss) From Continuing
Operations ( 65,000) 10,000
Income (Loss) From Discontinued
Operations -0- -0-
Net Income(Loss) $ (65,000) $ 10,000
Weighted Average Number of Shares
Outstanding 12,412,000 12,412,000
Earnings Per Common Share Outstanding
Income (Loss) From Continuing
Operations $ (0.005) $ 0.001
Income (Loss) From Discontinued
Operations -0- -0-
Net Income (Loss) $ (0.005) $ 0.001
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
12/31/97 12/31/96
Revenues
Contract Revenue and Net Sales $1,868,000 $2,743,000
Total Revenues 1,868,000 2,743,000
Operating Expenses
Contract Costs and Cost of Goods
Sold 1,539,000 2,168,000
Selling, General and
Administrative 553,000 627,000
Total Operating Expenses 2,092,000 2,795,000
Operating (Loss) (224,000) (52,000)
Other Income (Expenses)
Interest and Other Income 33,000 100,000
Interest Expense (68,000) (87,000)
Total Other Income (Expenses) (35,000) 13,000
(Loss)From Continuing Operations (259,000) (39,000)
(Loss)From Discontinued Operations (21,000) -0-
Net (Loss) $ (280,000) $ (39,000)
Weighted Average Number of Shares
Outstanding 12,412,000 12,412,000
Earnings Per Common Share Outstanding
(Loss)from Continuing Operations $ (0.021) $ (0.003)
(Loss)from Discontinued Operations (0.001) -0-
Net (Loss) $ (0.022) $ (0.003)
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, 1997
Common Stock Capital in
Excess of Retained
Shares Par Value Par Value Deficit
Balances -
April 1, 1997 12,412,000 $ 248,000 $ 3,445,000 $(1,964,000)
Net (Loss)
for the Period - - - ( 280,000)
Balances -
Dec. 31, 1997 12,412,000 $ 248,000 $ 3,445,000 $(2,244,000)
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, 1997 AND 1996
1997 1996
Cash Flows from Operating Activities:
Net (Loss) for the Period $(280,000) $ (39,000)
Adjustments to Reconcile Net
(Loss) to Net Cash Provided by
Operating Activities:
Increase in Bad Debt Allowance
From Discontinued Operations 21,000 -0-
Depreciation and Amortization 95,000 117,000
Gain on Disposal of Equipment -0- (67,000)
Changes in Operating Assets and
Liabilities:
Accounts Receivable - Trade 162,000 102,000
Inventories 40,000 (10,000)
Prepaid Expenses and Other
Current Assets 31,000 59,000
Other Assets -0- (3,000)
Accounts Payable and Accrued
Expenses (115,000) 9,000
Customer Deposits 28,000 (3,000)
Net Cash Provided By (Used in)
Operating Activities (18,000) 165,000
Cash Flows from Investing Activities:
Acquisitions of Property and
Equipment (11,000) (1,000)
Proceeds from Insurance Reimbursement -0- 67,000
Cash Released from Restriction -0- 268,000
Net Cash Provided By (Used in)
Investing Activities $ (11,000) $ 334,000
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, 1997 AND 1996
1997 1996
Cash Flows from Financing Activities:
Principal Payments on Long-Term Debt $ (73,000) $(188,000)
Principal Payments on Capital
Lease Obligations (39,000) (47,000)
Net Cash (Used in) Financing
Activities ( 112,000) (235,000)
Net Increase (Decrease)in Cash
and Equivalents (141,000) 264,000
Cash and Equivalents, Beginning of Year 701,000 377,000
Cash and Equivalents, End of Period $ 560,000 $ 641,000
SUPPLEMENTAL INFORMATION:
Cash Paid for Interest $ 68,000 $ 87,000
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.<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales for the nine months ended December 31, 1997 decreased by
$875,000 or 31.9% from the comparable 1996 period. For the three
months ended December 31, 1997, Net Sales decreased $318,000 or 36.1%
from 1996. Net sales by segment were as follows:
Three Months Nine Months
Ended December 31, Ended December 31,
1997 1996 1997 1996
Athenia $ 169,000 $ 105,000 $ 453,000 $ 369,000
Custom Molding 290,000 587,000 1,049,000 1,806,000
Finished Ribbons 105,000 190,000 366,000 568,000
$ 564,000 $ 882,000 $ 1,868,000 $2,743,000
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 and three months ended December 31,
1997, Athenia's sales increased $84,000 or 22.8% and $64,000 or 61%
from their respective periods ended December 31, 1996. These
increases are primarily the result of an increased backlog for tooling
which is being experienced in the current fiscal year. It is
anticipated that sales for this segment will remain at or near current
levels in the immediate future.
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 approximately $757,000 or 41.9% and $297,000 or 50.6% for
the nine months and three months ended December 31, 1997, when
compared to the similar periods of 1996. These decreases are
primarily the result of the loss of a large custom contract customer
who began molding product in house during early calendar 1997 as well
as slowdown in the amount of plastic cartridge kits being made for the
finished ribbon industry. Additionally, there is an overall slowdown
in the custom molding industry which has been particularly hard hit by
the amount of manufacturing for these type of products that has been
transferred out of the country due to the recent trade agreement.
Although Management is currently negotiating with certain new
customers for custom molding projects, it is anticipated that sales
for this segment will remain at these reduced levels for the immediate
future.
Finished ribbons cartridge sales decreased approximately $202,000 or
35.6% for the nine months ended December 31, 1997 as compared to 1996.
For the three months ended December 31, 1997, sales for this segment
decreased $85,000 or 44.7% from the similar 1996 period. These
continuing decreases are primarily the result of a continued shrinking
of the ribbon industry due to the 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 and others
electing to switch manufacturing to foreign locations. Although
Management is continuing its efforts to increase sales in this
segment, it is anticipated that sales will remain at these reduced
levels.
Contract costs and costs of goods sold varies based upon sales volume
and product mix. Cost of sales were 82.4% and 80.9% for the nine
months and three months ended December 31, 1997 as compared to 79.0%
and 78.3% for the respective periods of 1996. The increases in the
1997 periods are primarily the result of lower sales volume and the
nature of certain fixed manufacturing overhead costs. The improvement
in the most recent three month period as compared to the nine month
result is due to additional cost cutting measures which were
implemented during October 1997.
Selling, general and administrative expenses decreased approximately
$74,000 and $63,000 for the nine months and three months ended
December 31, 1997 when compared to nine months and three month periods
ended December 31, 1996. The decreases, once again, are primarily the
result of the additional cost cutting measures which were implemented
during October 1997 and included, among other things, significant
voluntary pay reductions to the officers and other salaried personnel. <PAGE>
Interest and other income decreased approximately $67,000 and $59,000
for the nine months and three months ended December 31, 1997 as
compared to their respective 1996 periods. These decreases are
primarily the result of insurance proceeds in the amount mount of
approximately $66,000 which were collected as payments for assets
damaged in a minor fire during the 1996 periods.
Interest expense decreased approximately $19,000 and $4,000 for the
nine months and three months ended December 31, 1997 as compared to
the similar 1996 periods. 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, 1997 was
($280,000) as compared to ($39,000) during the similar 1996 period.
For the three months ended December 31, 1997, the Company had a net
loss of ($65,000) as compared to net income of $10,000 during the
three months ended December 31, 1996. Included in the nine month 1997
figures is a one time loss from discontinued operations of $(21,000)
which represents a writedown of the remaining audio cassette accounts
receivable. This significant increase in net (loss) for the 1997
periods is primarily the result of the lower level of sales,
particularly in the custom molding segment which usually carries the
highest margins, coupled with the nature of certain fixed overhead
costs. The cost cutting measures as discussed above resulted in a
smaller loss for the most recent three months ended December 31, 1997
despite even lower sales for that period.
Management is continuing to monitor the performance of all segments
with an emphasis on attempting to increase sales and improve cost
controls. The cost cutting measures, including salary reductions,
will remain in effect for the foreseeable future. The Company intends
to continue redirecting its focus toward custom contract molding which
yields the highest gross profit margins. Absent a downturn in the
overall economy, Management remains hopeful for improved operating
results.
MATERIAL CHANGES IN FINANCIAL POSITION
The principal change in financial position during the nine months
ended December 31, 1997 was a decrease in working capital of
approximately $270,000 to $639,000. During the same period, the
Company's cash position decreased approximately $141,000 of which
$18,000 of cash was used in operations. At December 31, 1997,
however, the Company had a respectable cash position of $560,000.
Additionally, during this period, the Company paid down secured debt
of approximately $112,000. Despite these decreases for the nine
months ended December 31, 1997, for the three months ended December
31, 1997, the Company's cash position actually increased $24,000 to
$560,000 and the Company generated cash from operations of
approximately $48,000. This positive result is from the cost cutting
measures which were implemented at the beginning of the December 31,
1997 quarter.
The Company intends to continue operating under the assumption that no
significant new financing will be available. Scheduled obligations
are expected to be met by operating cash flows. If necessary, further
cost cutting will be reviewed.
Achieving the return to growth and profitability will require the
Company to overcome uncertainties which it now faces, namely,
increasing sales in the custom molding segment despite the slowdown in
the custom molding industry and/or purchasing or developing a product
line to replace the Company's impact ribbon product line which
continues to experience weakened demand due to the shrinking market.
Management continues to evaluate the possibility of raising capital to
invest in new products or attempting to align the Company with a
strategic partner that 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 or a significant downturn in the overall economy, Management
remains hopeful for an improvement in long term operating results.
<PAGE>
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, 1997.
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:
During the quarter ended December 31, 1997, one of the
Company's Directors, Joseph L. Ruden, died. The Board of Directors does
not, at this time, have any immediate plans to replace Mr. Ruden.
Item 6 Exhibits and Reports on Form 8-K:
None
<PAGE>
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 10, 1998 (Registrant)
s/s Charles Beres,Jr.
Charles Beres, Jr., President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 560,000
<SECURITIES> 0
<RECEIVABLES> 219,000
<ALLOWANCES> 15,000
<INVENTORY> 212,000
<CURRENT-ASSETS> 976,000
<PP&E> 5,928,000
<DEPRECIATION> 4,535,000
<TOTAL-ASSETS> 2,509,000
<CURRENT-LIABILITIES> 337,000
<BONDS> 893,000
<COMMON> 248,000
0
0
<OTHER-SE> 1,031,000
<TOTAL-LIABILITY-AND-EQUITY> 2,509,000
<SALES> 1,868,000
<TOTAL-REVENUES> 1,901,000
<CGS> 1,539,000
<TOTAL-COSTS> 1,539,000
<OTHER-EXPENSES> 553,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,000
<INCOME-PRETAX> (259,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (259,000)
<DISCONTINUED> (21,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (280,000)
<EPS-PRIMARY> (.022)
<EPS-DILUTED> (.022)
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