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 6 month period ended September 30, 1998.
( ) 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 - November 16, 1998
<PAGE>
Beres Industries, Inc.
September 30, 1998
Form 10-QSB
Index
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1998 and
March 31, 1998
Consolidated Statements of Operations for the Three
Months Ended September 30, 1998 and 1997
Consolidated Statements of Comprehensive Income (Loss)
for the Three Months Ended September 30, 1998 and 1997
Consolidated Statements of Operations for the Six
Months Ended September 30, 1998 and 1997
Consolidated Statements of Comprehensive Income (Loss)
for the Six Months Ended September 30, 1998 and 1997
Consolidated Statement of Changes in Stockholders
Equity for the Six Months Ended September 30, 1998
Consolidated Statements of Cash Flows for the Six
Months Ended September 30, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management s Discussion and Analysis, Material Changes
in Financial Condition and Results of Operations
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
9/30/98 3/31/98
ASSETS
Current Assets
Cash and Equivalents $ 522,000 $ 518,000
Marketable Securities 10,000 24,000
Accounts Receivable - Trade:
Less Allowance for Doubtful
Accounts of $7,000 and $15,000
Respectively 238,000 356,000
Inventories - Raw Materials 45,000 69,000
- Work in Process 47,000 27,000
- Finished Goods 126,000 114,000
Prepaid Expenses and Other
Current Assets 4,000 12,000
Total Current Assets 992,000 1,120,000
Property, Plant and Equipment - Less
Accumulated Depreciation of
$4,620,000 and $4,568,000
Respectively 1,310,000 1,361,000
Other Assets 50,000 54,000
Net Long-Term Assets of Discontinued
Operations 90,000 90,000
Total Assets $2,442,000 $2,625,000
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
9/30/98 3/31/98
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Current Maturities of Long-Term
Debt $ 74,000 $ 72,000
Current Maturities of Capital
Lease Obligations 31,000 30,000
Accounts Payable and Accrued
Expenses 197,000 272,000
Customer Deposits 32,000 31,000
Total Current Liabilities 334,000 405,000
Long-Term Debt - Less Current
Maturities 767,000 803,000
Capital Lease Obligations -
Less Current Maturities 42,000 57,000
Total Liabilities 1,143,000 1,265,000
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
Accumulated Other Comprehensive
Income 10,000 24,000
Accumulated Deficit (2,234,000) (2,187,000)
1,469,000 1,530,000
Less:Common Stock Receivable 170,000 170,000
Total Stockholders Equity 1,299,000 1,360,000
Total Liabilities and Stockholders
Equity $ 2,442,000 $ 2,625,000
Unaudited -See Accompanying Notes to Financial Statements
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
9/30/98 9/30/97
Net Sales $ 557,000 $ 668,000
Costs and Expenses
Cost of Goods Sold 435,000 557,000
Selling, General and
Administrative Expenses 155,000 190,000
Total Costs and Expenses 590,000 747,000
Operating Loss (33,000) (79,000)
Other Income (Expenses):
Interest and Other Income 14,000 8,000
Interest Expense (19,000) (22,000)
Total Other Income (Expenses) (5,000) (14,000)
Loss From Continuing
Operations (38,000) (93,000)
Income (Loss) From Discontinued
Operations -0- (21,000)
Net Loss Applicable
To Common Shareholders $ (38,000) $ (114,000)
Weighted Average Number of Shares
Outstanding Per Common Share-
Basic and Diluted 12,412,000 12,412,000
Earnings Per Common Share Outstanding
Loss From Continuing Operations
Applicable Per Common Share-
Basic and Diluted $ (0.003) $ (0.007)
Income (Loss) From Discontinued
Operations Applicable Per Common
Share - Basic and Diluted -0- (0.002)
Net Loss Applicable Per Common Share-
Basic and Diluted $ (0.003) $ (0.009)
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
PART I - ITEM 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Three Months
Ended Ended
9/30/98 9/30/97
Net Loss Applicable To Common Shareholders $ (38,000) $ (114,000)
Other Comprehensive Loss, Net Of Tax:
Unrealized Holding Loss Arising During
The Period (11,000) -0-
Net Comprehensive Loss $ (49,000) $ (114,000)
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Six Months
Ended Ended
9/30/98 9/30/97
Net Sales $ 1,175,000 $ 1,304,000
Costs and Expenses
Cost of Goods Sold 861,000 1,083,000
Selling, General and
Administrative Expenses 340,000 387,000
Total Costs and Expenses 1,201,000 1,470,000
Operating Loss (26,000) (166,000)
Other Income (Expenses):
Interest and Other Income 20,000 18,000
Interest Expense (41,000) (46,000)
Total Other Income (Expenses) (21,000) (28,000)
Loss From Continuing
Operations (47,000) (194,000)
Income (Loss) From Discontinued
Operations -0- (21,000)
Net Loss Applicable
To Common Shareholders $ (47,000) $ (215,000)
Weighted Average Number of Shares
Outstanding Per Common Share-
Basic and Diluted 12,412,000 12,412,000
Earnings Per Common Share Outstanding
Loss From Continuing Operations
Applicable Per Common Share-
Basic and Diluted $ (0.004) $ (0.016)
Income (Loss) From Discontinued
Operations Applicable Per Common
Share - Basic and Diluted -0- (0.001)
Net Loss Applicable Per Common Share-
Basic and Diluted $ (0.004) $ (0.017)
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
PART I - ITEM 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Six Months Six Months
Ended Ended
9/30/98 9/30/97
Net Loss Applicable To Common Shareholders $ (47,000) $ (215,000)
Other Comprehensive Loss, Net Of Tax:
Unrealized Holding Loss Arising During
The Period (14,000) -0-
Net Comprehensive Loss $ (61,000) $ (215,000)
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30,1998
<TABLE>
Acumulated
Common Stock Capital in Other Common
Excess of Comprehensive Accumulated Stock
Shares Par Value Par Value Income Deficit Receivable
<S> <C> <C> <C> <C> <C> <C>
Balances -
April 1, 1998 12,412,000 $ 248,000 $3,445,000 $ 24,000 $ (2,187,000) $ (170,000)
Net Loss
for the Period - - - - (47,000) -
Other Comprehensive
Loss, Net Of Tax,
Unrealized Holding
Loss Arising During
The Period - - - (14,000) - -
Balances -
September 30, 1998 12,412,000 $ 248,000 $3,445,000 $ 10,000 $(2,234,000)
$(170,000)
</TABLE>
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
Cash Flows from Operating Activities:
Net Loss for the Period $ (47,000) $ (215,000)
Adjustments to Reconcile Net
Loss to Net Cash Provided by
Operating Activities:
Increase in Bad Debt Allowance
From Discontinued Operations -0- 21,000
Decrease in Bad Debt
Allowance from Continuing
Operations (8,000) -0-
Depreciation and Amortization 54,000 63,000
Changes in Operating Assets and
Liabilities:
Accounts Receivable - Trade 126,000 36,000
Inventories (8,000) (40,000)
Prepaid Expenses and Other
Current Assets 8,000 29,000
Other Assets 1,000 (1,000)
Accounts Payable and Accrued
Expenses (75,000) (1,000)
Customer Deposits 1,000 42,000
Net Cash Provided By (Used In)
Operating Activities 52,000 (66,000)
Cash Flows from Investing Activities:
Acquisitions of Property and
Equipment -0- (11,000)
Net Cash Used in
Investing Activities $ -0- $ (11,000)
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
Cash Flows from Financing Activities:
Principal Payments on Long-Term Debt $ (34,000) $ (56,000)
Principal Payments on Capital
Lease Obligations (14,000) (32,000)
Net Cash Used in Financing
Activities (48,000) (88,000)
Net Increase (Decrease)in Cash
and Equivalents 4,000 (165,000)
Cash and Equivalents, Beginning of Year 518,000 701,000
Cash and Equivalents, End of Period $ 522,000 $ 536,000
SUPPLEMENTAL INFORMATION:
Cash Paid for Interest $ 41,000 $ 46,000
Income Taxes $ 250 $ 150
Unaudited - See Accompanying Notes to Financial Statements
<PAGE>
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.
However, the two footnotes below were added to disclose new
information in this reporting quarter. 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 - Subsidiary Merger
On July 23, 1998, Supply Dynamics, Inc. a subsidiary, was merged
into Beres Industries, Inc. This transaction had no effect on the
financial statements.
Note 3 - Accounting Rule Change
In June, 1997 the FASB issued SFAS No. 130 Reporting Comprehensive
Income effective for financial statements beginning after December
15, 1997. During this second quarter of 1998, the Company adopted
this rule change. Adoption of this standard did not impact Beres
Industries, Inc. s financial position, results of operations or
cash flow. The consolidated Statement of Changes in Stockholders
Equity has been revised to include columns for comprehensive
Unaudited
<PAGE>
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Note 3 - Accounting Rule Change - (Continued)
loss and accumulated other comprehensive income. Comprehensive
loss for the Company includes net loss from operations plus the
change in unrealized loss on securities available for sale.
Accumulated other comprehensive income includes the cumulative
changes in unrealized gain on securities available for sale.
Unaudited
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales for the six months and three months ended September 30, 1998
decreased by $129,000 or 9.9%; and $111,000 or 16.6%; from the respective
1997 periods. Net Sales by segment were as follows:
Six Months Three Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
Athenia $ 327,000 $ 281,000 $ 187,000 $ 202,000
Custom Molding 664,000 760,000 308,000 334,000
Finished Ribbons 184,000 260,000 62,000 132,000
$1,175,000 $ 1,304,000 $ 557,000 $ 668,000
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 ended September 30, 1998, sales for this segment increased
$43,000 or 15.1% from the respective 1997 period. However, for the most
recent three month period ended September 30, 1998, sales decreased
approximately $15,000 or 7.4% from the three month period ended September
30, 1997. As mentioned in our prior filing, Management has noticed a
decrease in backlog and a decrease in quote requests for this segment which
has resulted in this most recent sales drop. Management is continuing its
efforts to secure additional customers for this segment and remains hopeful
that any further decrease in sales, if it should occur, will be minimal.
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
$96,000 or 12.6%, and $26,000 or 7.8%, for the six month and three month
periods ended September 30, 1998 as compared to the respective 1997
periods. These decreases are primarily the result of the lower levels of
ribbon cartridges molded for customers in the ribbon industry which
continues to suffer significant decreases as impact ribbons disappear from
the market. Management will continue to make a concentrated effort to
increase sales of custom contract molded product in this segment to replace
lost ribbon cartridge kit sales. The Company is continuing its recent
effort of exhibiting at various industry trade shows which generated
substantial leads for new business. Management remains hopeful that these
efforts will result in increased sales for this product segment.
Finished ribbon cartridge sales decreased approximately $76,000 or 29.2%,
and $70,000 or 53% for the six month and three month periods ended
September 30, 1998 when compared to the respective 1997 periods. These
decreases are due to several factors, namely, the overall slowdown in
demand for impact ribbon products caused by the increased popularity of
laser and ink jet printers and certain large co-manufacturing customers of
the Company reducing purchase requirements as they attempt to keep their
own manufacturing plants busy. Athough Management is continuing its
efforts to increase sales in this segment by concentrating on niche markets
and key customers, it is anticipated that sales will remain at reduced
levels in the immediate future.
Contract costs and costs of goods sold varies based upon sales volume and
product mix. Cost of sales decreased to 73.3% from 83.1% and 78.1% from
83.4% for the six month and three month periods ended September 30, 1998 as
compared to the respective 1997 periods. This improvement is primarily the
result of a better product mix, improved efficiencies and certain operating
level, cost controls that were implemented.
Selling, general and administrative expenses decreased approximately
$47,000 and $35,000 for the six month and three month periods ended
September 30, 1998 as compared to the respective 1997 periods. These
decreases are primarily the result of lower commissions due to the lower
sales volume as well as lower salaries, legal and accounting fees as a
direct result of our cost cutting measures.
Interest and other income increased approximately $2,000 to $6,000 for the
six month and three month periods ended September 30, 1998 as compared to
the respective 1997 periods. This increase in other income is primarily
the result of a decrease in reserve for bad debts of approximately $8,000
during the most recent period which was an adjustment made due to the lower
accounts receivable volume.
Interest expense decreased approximately $5,000 and $3,000 for the six
month and three month periods ended September 30, 1998 when compared to
the six month and three month periods ended September 30, 1997. The
decreases are primarily the result of the repayment of net borrowings.<PAGE>
Net Income (loss) for the six months ended September 30, 1998 was ($47,000)
as compared to a net loss of ($194,000) for the similar 1997 period. The
net loss for the three months ended September 30, 1998 was ($38,000) as
compared to a net loss of ($93,000) for the respective 1997 period.
Included in the 1997 figures was a loss from discontinued operations of
($21,000). The improvement in the operating results for 1998 despite the
lower sales volume, is the result of a more favorable product mix as well
as the effect of prior cost cutting measures that were implemented.
COST CUTTING MEASURES THAT WERE IMPLEMENTED
Management is continuing to monitor the performnce of all segments with an
emphasis on attempting to increase sales and continuing to improve cost
controls. 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 an
improvement in operating results.
MATERIAL CHANGES IN FINANCIAL POSITION
The principal change in financial position during the six months ended
September 30, 1998 was a decrease in working capital of approximately
$57,000 to $658,000. During the same period, the Company's cash position
increased approximately $4,000 to a respectable cash and cash equivalents
of $522,000. The Company's operations provided net cash of $52,000.
During this same period, the Company paid down principal on debts of
$48,000.
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, additional cost
cutting measures will be implemented.
Achieving the return to growth and profitability will require the Company
to continue its efforts to secure additional sales in the custom molding
area. Management is also evaluating the possibility of raising capital to
invest in new plastic related products or attempting to seek out and align
the Company with a strategic partner who could utilize the Company's
capabilities as it moves forward. The potential success of accomplishing
any of these alternatives is not determinable at this time.
<PAGE>
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, 1998.
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
<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: November 12, 1998 (Registrant)
s/ Charles Beres, Jr.
Charles Beres, Jr., President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 522,000
<SECURITIES> 10,000
<RECEIVABLES> 245,000
<ALLOWANCES> 7,000
<INVENTORY> 218,000
<CURRENT-ASSETS> 992,000
<PP&E> 5,930,000
<DEPRECIATION> 4,620,000
<TOTAL-ASSETS> 2,442,000
<CURRENT-LIABILITIES> 334,000
<BONDS> 809,000
<COMMON> 248,000
0
0
<OTHER-SE> 1,051,000
<TOTAL-LIABILITY-AND-EQUITY> 2,442,000
<SALES> 1,175,000
<TOTAL-REVENUES> 1,175,000
<CGS> 861,000
<TOTAL-COSTS> 1,201,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,000
<INCOME-PRETAX> (47,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (47,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47,000)
<EPS-PRIMARY> (0.004)
<EPS-DILUTED> (0.004)
</TABLE>