SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 1999 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 (732) 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 $2,162,000.
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $501,709 on June 28, 1999 based on the
last available bid quotation ($.055) 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 June
28, 1999 was 12,411,934. Documents Incorporated By Reference - See Item
14(c) to this Form 10-KSB.
2
Item 1. Description of Business:
General Development of Business.
Beres Industries, Inc. ("Beres") was incorporated in the State
of New Jersey on June 23, 1960. Its two wholly-owned subsidiaries,
Athenia Plastic Mold Corp. ("Athenia") and Supply Dynamics, Inc.
("Supply Dynamics") were incorporated in the State of New Jersey on
July 27, 1976 and October 11, 1983, respectively. As of Beres'
March 31, 1998 fiscal year end, Athenia was merged into Beres and
as of Beres' March 31, 1999 fiscal year end, Supply Dyanmics was
merged into Beres. The foregoing mergers eliminated Beres'
subsidiaries and combined all operations into the parent company.
(Beres, Athenia and Supply Dynamics are hereinafter collectively
referred to as the "Registrant" or the "Company").
Beres has been engaged in the design, manufacture and assembly
of precision engineered molds for use in the manufacture of molded
plastic products and parts from its inception in June, 1960 until
July, 1976, when Beres formed Athenia. After Athenia's formation,
Athenia began conducting Beres' operations under the name Athenia.
In October 1983, Beres formed Supply Dynamics and commenced
production of a new product line consisting primarily of the
manufacture of spools and cartridges for computer ribbon supplies
as well as engaging in custom plastic injection molding.
Production of Molds by Athenia
The molds produced by Athenia are of high quality steel which
is hardened to resist distortion and wear. In the molding process,
the two halves of the mold, the cavity and the cores, are pressed
together to form a space of the shape and dimension of the plastic
product or part. As the plastic mass hardens, the molds are
separated and the finished part is removed. There exist many
different methods of producing plastic parts, all of which require
molds similar to those made by Athenia. Production may be by such
methods as compression, transfer, injection, hand, semi-automatic
and automatic molding. Within these classifications there are
numerous subclassifications and combinations of the major
technology.
Compression molding is a molding method wherein the plastic
powder is placed upon a heated two-piece mold so that the powder
becomes fluid or plastic. This mass of molding compound is
compressed to the required density by pressure while the material
3
is confined to the shape of the mold. Transfer molding is a
process wherein the plastic powder is preheated and the fluid
compound or mass is forced into a closed mold through a small
orifice from an external pressure cylinder. The compound is heated
in the cylinder prior to being placed in the mold. This process is
similar to injection molding with the exception that the material
is hardened in the mold as a result of the heat and pressure which
brings on the chemical reaction. Molds can be used either by hand
or with semi-automatic or automatic machinery. Hand molds are
those molds that must be removed from the molding press in order to
extract the molded piece. These molds are usually heated by
contact with the hot plates in the press. Hand molds are
principally used at the present time for samples of extremely
difficult and precision shapes. A semi-automatic mold is one which
is rigidly fastened in the press, but the mold must be manually
loaded with the raw material and the operator must manually remove
the finished pieces. An automatic mold performs all operations
including loading of raw material and removal of finished pieces
automatically.
Machinery for the above methods varies, but all require the
use of a custom mold in order to manufacture a plastic part in the
desired shape, size and density.
Production of a mold begins with the customer's parts drawings
and specifications of a new mold. Athenia quotes prices for the
design and manufacture of the mold based on the detail and the
degree of complexity of the customer's specifications. The mold is
then designed and engineered by Athenia's design department for
approval by the customer. Upon customer approval, the design is
then executed by Athenia's mold makers, who are highly skilled tool
and die makers. Each mold produced by Athenia is made with
precision machinery and requires many separate operations involving
lathe turning, milling, drilling, jig boring, electrical discharge
machinery, duplicating, heat treating, grinding, polishing and
chrome plating. If a customer reorders a previously produced mold,
Athenia must repeat all stages of the described process, except for
layout and design. The production of molds, from design through
manufacture, is primarily performed by Athenia employees, including
designers, engineers, and tool and die makers.
The period of production of molds, from the date of quotation
to the date of shipment, ranges from 10 weeks to 6 months but
averages approximately 4 months. The cost of molds produced by
4
Athenia ranges from $25,000 to $300,000 but generally averages
$75,000.
Injection Molding Operation
Supply Dynamics operates injection-molding equipment, located
at Beres' facility in Lakewood, New Jersey. Supply Dynamics is
capable of producing custom plastic injection-molding for use in
the manufacture of a product line consisting primarily of
cartridges and spools for ribbon supplies. The cartridges and
spools manufactured by Supply Dynamics are primarily used by the
computer printer market and are designed to accepts ribbons for use
on various computer and word processing printers, electronic
typewriters, point of sale terminals and various other printing
devices.
The Company's in-house technology provides Supply Dynamics
with complete control of the product, from the initial design stage
of the molds produced at Athenia's facility, through construction
of a precision engineered tool which will produce a uniform quality
product. Additionally, Supply Dynamics has the technical expertise
to assist its customers in the development of new products and
tools.
Sources and Availability of Raw Materials
The Company purchases raw materials for the manufacture of its
products from a variety of suppliers. Since the materials utilized
by the Company are available at competitive prices from numerous
domestic sources, the loss of any one supplier would not have a
significant impact on the Company. The Company had an adequate
supply of raw materials to meet its needs in its 1995 fiscal year,
and the Company does not anticipate a shortage in the supply of
these materials in the future.
Competition
Although there are many companies engaged in the manufacture
of plastic products and molds in the United States, not all of
these companies are engaged in the manufacture of precision
engineered molds. The Company is of the opinion that its ability
to both manufacture its molds and assemble its products at its own
facilities strengthens its competitive edge despite the fact that
many of the Company's competitors possess financial, sales,
5
marketing and other capabilities substantially greater than the
Company's. Moreover, the Company has been engaged in various
aspects of its business for over thirty years, and has developed a
significant amount of good will with its customers.
Marketing and Sales
Athenia's sales force is presently headed by Harold Zuber, and
Supply Dynamics' sales force is presently headed by Joseph Delikat
and one other salaried employee. The Company also employs the
services of independent sales representatives on a commission basis
as part of its overall marketing and sales efforts. The Company
utilizes various techniques in marketing its products, including
but not limited to, direct customer contact, direct mail,
advertising and attendance at trade shows. The Company believes
that there is a large market for its products and services and it
intends to utilize its technical expertise to assist its customers
in developing new products and perfecting existing products to suit
customer needs.
Customers
Three of the Company's unaffiliated customers accounted for
approximately 1,034,700 (48%) percent of the Company's total sales
for the fiscal year ended March 31, 1999. The loss of any one of
these customers could have a material adverse effect on the
Company's business. No material portion of the Company's business
is seasonal.
Backlog of Orders
The following table illustrates the Company's backlog of
orders believed to be firm as of June 1, 1999, and as of that
approximate date in the preceding fiscal year:
As of As of
June 1, 1999 June 1, 1998
Sales Backlog $304,439 $376,180
6
As of As of
June 1, 1999 June 1, 1998
% deliverable
in succeeding
fiscal year 100% 100%
The Company's backlog consists of contracts issued by the
Company to deliver a specific quantity or type of goods on
approximate dates, at a specified price. The contract term varies
in duration but generally runs from six months to one year. Due to
the fact that a substantial portion of the Company's orders are
filed within a relatively short period of less than six months, the
dollar amount of backlog at any one time may not be indicative of
future sales.
Patents and Trademarks
On July 30, 1986, Beres acquired four patents from Costar
Corporation for the following cartridges: (i) a high speed printer
cartridge; (ii) a ribbon cartridge for band printer; (iii) a ribbon
cartridge with shield; and (iv) a cartridge having ribbon inverting
means. Two of the patents expire in or about the year 1998, and
two of the patents expire in or about the year 2000.
On August 15, 1995, the Company was issued Design Patent
Number 361,266 for an ink jet refill dispensing tip with captive
enclosure. The patent will expire in 2009.
Although the Company does not have any other patent protection
with respect to the precision engineered molds, cartridges, spools
for ribbon supplies and custom plastic injection molds, designs,
manufactures or sells, the Company intends to rely upon the
proprietary nature of its products and processes, and the
confidentiality agreements that it has entered into with all of its
key technical personnel who have access to the Company's
proprietary process and trade secrets. In the event that such
persons breach this confidential relationship and discloses such
proprietary information, however, the Company would have no
protection other than those remedies provided by law.
7
Employees
At July 1, 1999 the Company employed an aggregate of
29 employees. The Company has not experienced any labor problems
or work stoppages to date, and management is of the opinion that
the Company's relations with its employees is good.
Item 2. Description of Property:
The following table describes the Company's principal
facilities:
Approximate
Floor Area
Location Square Feet Use
1785 Swarthmore (1) 32,500 Executive Offices;
Lakewood, New Jersey Manufacturing Facility
(1) The Company also owns approximately 6.7 acres of land
upon which the building is situated.
Item 3. Legal Proceedings:
During the fiscal year ended March 31, 1999, there were no
material legal proceedings which the Company is required to report.
Item 4. Submission of Matters to a Vote of Security Holders:
None.
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters:
The following table sets forth the high and low stock prices
(bid) for Beres Common Stock as reported by the National Quotation
Bureau, Inc., (symbol "BERS") for the calendar years indicated.
The following quotations do not include retail mark-ups, markdowns
or commissions and represent prices between dealers and not
necessarily actual transactions.
8
The past performance of Beres' Common Stock is not necessary
indicative of future performance.
1996
High (Bid) Low (Bid)
1st Qtr $ .07 $ .06
2nd Qtr $ .13 $ .07
3rd Qtr $ .09 $ .07
4th Qtr $ .075 $ .03125
1997
High (Bid) Low (Bid)
1st Qtr $ .075 $ .07
2nd Qtr $ .10 $ .04
3rd Qtr $ .10 $ .10
4th Qtr $ .08 $ .04
1998
High (Bid) Low (Bid)
1st Qtr $ .06 $ .04
2nd Qtr $ .125 $ .045
3rd Qtr $ .075 $ .0525
4th Qtr $ .075 $ .075
1999
High (Bid) Low (Bid)
1st Qtr $.10 $.035
2nd Qtr* $.055 $.035
* Through June 28, 1999.
As of June 30, 1999 the approximate number of Shareholders of
record of the Company was 1877. Any payment of dividends will be
within the discretion of the Company's Board of Directors and will
depend, among other factors, on earnings, capital requirements and
the operating and financial condition of the Company. At the
present time, the Company's anticipated financial capital
requirements are such that it intends to follow a policy of
retaining earnings in order to finance the development of its
business. The Company's securities quoted in the "Pink Sheets", as
published by the National Quotation Bureau, Inc. and the "OTC
Bulletin Board".
9
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. The
business segments are as follows:
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.
10
The following tables summarize net sales and operating income
(loss) by segment.
Year Ended March 31,
1999 1998
(Dollars in Thousands)
Sales
Athenia $ 717 $ 610
Custom Molding 1,157 1,471
Finished Ribbons 288 507
Total Sales $2,162 $2,588
Operating Income (Loss)
Athenia $ (111) $ (100)
Custom Molding 47 72
Finished Ribbons (144) (124)
Discontinued Segment ( 45) ( 21)
Total Operating Income (Loss) $ (253) $ (173)
Investment Expense $ ( 79) $ ( 89)
Interest and Other Income 33 34
Gain (Loss) on Sale of Equipment 0 4
Gain (Loss)from Discontinued Segment 0 1
Net Income (Loss) $ (299) $ (223)
The Company's total net sales for the fiscal year ended March
31, 1999 were $2,162,000, a decrease of $426,000 or 16.5% from the
year ended March 31, 1998. For the 1999 fiscal year, the Company
posted a net loss of $(299,000), as compared to net loss of
$(223,000) for the fiscal year ended March 31, 1998. Included in
the 1999 loss figure was a write-down or discontinued segment
assets of $45,000, as compared to $20,000 in the 1998 net loss.
Athenia's sales increased $107,000 to $717,000 or
approximately 17.5% for the fiscal year ended March 31, 1999, as
compared to the 1998 fiscal year. During the 1999 period, Athenia
incurred an operating loss of $(111,000) as compared to an
operating loss of $(100,000) for the fiscal year ended March 31,
1998. The increase in sales is the result of an increase in demand
11
and orders realized for the Company's tooling services during 1999.
The disappointing increase in loss for this segment during fiscal
1999 despite the increase in sales is primarily the result of a 4%
lower gross profit due to competitive pricing demands as well as an
increase in material costs. Management remains hopeful that sales
for this segment will remain at these increase levels and a
concentrated effort will be made to improve the gross profit,
control overhead costs and reduce the operating loss.
Custom Molding sales decreased approximately $314,000 or 21.3%
to $1,157,000 during the fiscal year ended March 31, 1999, as
compared to the year ended March 31, 1998. This segment produced
operating income of $47,000 for the 1999 fiscal year as compared to
operating income of $72,000 for the fiscal year ended March 31,
1998. The reduction in sales for the custom molding segment is
primarily the result of the continuing slowdown in the ribbon
industry and the resulting decrease in shipments of cartridge
ribbon kits to ribbon manufacturers. The decrease in operating
income for this segment is strictly the result of the lower sales
volume which generated less gross profit dollars to cover certain
fixed overhead expenses. Management continues to intensify its
efforts to secure additional customers and thereby increase sales
and remains hopeful that higher sales levels for custom molded
products will be attained over time. In the interim, a continued
effort to control costs in order to minimize any effects the
decrease in sales is having on operating income will be ongoing.
Finished Ribbon cartridge sales decreased $219,000 or 43.2% to
$288,000 during the fiscal year ended March 31, 1999 as compared to
the year ended March 31, 1998. This segment produced an operating
loss of $(144,000) during the 1999 fiscal year as compared to an
operating loss of $(124,000) during 1998. The decrease in sales is
primarily the result of a shrinking market for impact printer
ribbon products which continue to lose market share to the newer
ink jet and laser printers that do not use ribbons. The increase
in net operating loss of approximately $20,000 for this segment is
the result of the lower sales volume generating lower gross profit
dollars coupled with certain fixed allocations which are being
applied to this segment. Although increasing sales and attaining
true profitability is doubtful for this product, Management is
confident that what ribbons are produced and sold contribute
positively to covering fixed overhead, which costs would remain if
ribbon manufacturing were discontinued. Therefore, it is
Management's intention at this time to continue manufacturing
impact printer ribbons.
12
Contract Costs and Costs of Goods Sold varies based upon sales
volume and product mix. For the fiscal year ended March 31, 1999,
cost of sales was 78.2% which was the same as the cost of sales for
the 1998 fiscal year despite the significant reduction in sales
volume. This is primarily the result of a more favorable product
mix, cost controls and improved manufacturing efficiencies.
Selling, General and Administrative Expenses decreased
approximately $35,000 to $680,000 for the fiscal year ended March
31, 1999 when compared to the 1998 fiscal year. This decrease is
primarily the result of lower salaries which resulted from certain
voluntary pay reductions, lower commission amounts paid for sales
and a decrease in accounting fees.
Interest and Other Income decreased approximately $1,000 to
$33,000 during fiscal year ended March 31, 1999 as compared to
1998. This decrease is the result of lower interest earned on
invested cash balances.
Interest Expense decreased $10,000 to $79,000 for the 1999
fiscal year as compared to fiscal 1998. This decrease is primarily
the result of the repayment of net borrowings.
(Loss) from Discontinued Operations was $(45,000) for the
fiscal year ended March 31,1999. This resulted from Management's
decision to write-down the remaining audio cassette assets, which
consists primarily of molds, from $90,000 to $45,000.
Net Income (Loss) for the fiscal year ended March 31, 1999 was
$(299,000) as compared to a net loss of $(223,000) for the fiscal
year ended March 31, 1998. Included in the 1999 loss was the
write-down of cassettes assets of $45,000 as discussed above, as
well as an increase in reserve for bad debts of approximately
$17,000 due to the filing of a Chapter 11 by one of the Company's
ribbon customers. Management continues to take steps to reduce
costs until higher sales levels can be achieved. Management
intends to continue its efforts to increase sales and control costs
and is hopeful for an improvement in operating results.
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had working capital of approximately $437,000 at
March 31, 1999, as compared to working capital of $715,000 at March
31, 1998. At March 31, 1999, the Company had cash and cash
13
equivalents of approximately $458,000, as compared to $518,000 a
year earlier. Operations provided cash of approximately $41,000
while principal payments on loan term debt and capital leases
amounts to $101,000 decreasing cash by $60,000 to $458,000, as
mentioned above. The Company's current ratio was 2.12 at March 31,
1999 and the Company is within term on all its obligations.
Additionally, the Company has significant free assets on which to
borrow if the need should arise.
Management intends to make every effort to improve operating
cash flows including whatever cost cutting measures are necessary
until higher sales levels can be attained. Scheduled debt
repayments are expected to be met by cash flow.
Achieving a return to growth and profitability will require
the Company to overcome uncertainties which it now faces, namely,
increasing sales in custom molding by securing additional accounts,
investing in or purchasing a plastic related product line and/or
aligning the Company with a strategic partner who could utilize the
Company's capabilities. The success of accomplishing any 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 downtown in
the overall economy, Management is hopeful for an improvement in
long term operating results.
Year 2000 Issue
The term "Year 2000 ('Y2K') Issue" is a general term used to
describe the various problems that may result from the improper
processing of dates and date-sensitive calculations by computers
and other machinery as the year 2000 is approached and reached.
These problems generally arise from the fact that most of the
world's computer hardware and software have historically used only
two digits to identify the year in a date, often meaning that the
computer will fail to distinguish dates in the "2000's" from the
date in the "1900's." These problems may also arise from other
sources as well, such as the use of special codes and conventions
in software that make use of the date field. The Y2K computer
software compliance issues may affect the Company and most
companies in the world.
The Company does not believe that its information technology
(IT) systems used for financial accounting record keeping and other
administrative systems, will be materially affected by the Y2K
14
issue. The Company further believes that various Non-IT
micro-controllers utilized in conjunction with the Company's
production equipment are not date sensitive and will not be
materially affected by the Y2K issue. To the extent that
production equipment is date sensitive and is not Y2K compliant,
the Company believes that such equipment may be modified quickly
and at a minimum expense, to achieve Y2K compliance.
As of the date of this disclosure, the Company has consulted
with its chief suppliers of raw materials (primarily plastic
resins) and has received what the Company considers to be adequate
assurances as to Y2K readiness. In the event of any interruption of
the Company's raw material supplies, the Company believes that
alternate suppliers would be available. However, the Company is
unable to predict the effects upon raw material costs, as may
result from reduced supply. A catastrophic breakdown of supply
availability, or a catastrophic breakdown of other services or
utilities required to operate the Company's business would, of
course, have a materially adverse effect upon the Company's
operations. Likewise, interruption of customer demand, resulting
from Y2K failures, could have a materially adverse affect upon the
Company's financial condition.
As of the date of this disclosure, the Company's expenditures
relative to Y2K compliance, have been nominal. Based upon
information presently available to the Company, Company Management
believes that costs associated with Y2K compliance, should not be
material.
The failure to correct a material Y2K problem could result in
an interruption in, or failure of,certain normal business
activities or operations. Such failures could materially and
adversely affect the Company's results of operations, liquidity and
financial condition. Due to the general uncertainty inherent in
the Y2K problem, resulting in part from the uncertainty of the Y2K
readiness of the Company's customers and suppliers, the Company is
unable to determine at this time whether the consequences of any
Y2K failures will have a material impact on the Company's results
of operations, liquidity or financial condition.
FORWARD LOOKING STATEMENTS
The preceding Management's Discussion and Analysis contains
various forward-looking statements which represent the Company's
beliefs or expectations regarding future events. The words
15
"believes," "expects," "estimates" and similar expressions are
intended to identify forward-looking statements. Forward-looking
statements include, without limitation, discussions as to sales
outlooks, outlooks for operating results, the estimated cost of
becoming Y2K compliant,the Company's belief that its equipment
will be Y2K compliant in a timely manner and that the readiness
of its customers and suppliers to be Y2K compliant will not have
a material impact on the Company. All forward-looking statements
involve a number of risks and uncertainties that could cause the
actual results to differ materially from the projected results,
including problems that may arise on the part of third parties
over whom the Company has little or no control. The impact of
the foregoing could, in turn, have a material adverse effect on
the Company's results of operations and financial condition.
Item 7. Financial Statements and Supplementary Date:
INDEX TO FINANCIAL STATEMENTS - See Page F-1
<PAGE>
BERES INDUSTRIES, INC.
CONTENTS TO FINANCIAL STATEMENTS
MARCH 31, 1999
Page
Independent Auditors' Report F-2
Financial Statements:
Balance Sheet as of March 31, 1999 F-3
Statements of Operations
For the Years Ended March 31, 1999 and 1998 F-4
Statements of Changes in
Stockholders' Equity
For the Years Ended March 31, 1999 and 1998 F-5
Statements of Comprehensive Income (Loss)
For the Years Ended March 31, 1999 and 1998 F-6
Statements of Cash Flows
For the Years Ended March 31, 1999 and 1998 F-7
Notes to Financial Statements F-8 to F-19
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Beres Industries, Inc.
We have audited the accompanying balance sheet of Beres Industries,
Inc. as of March 31, 1999, and the related statements of
operations, changes in stockholders' equity, comprehensive income
(loss), and cash flows for each of the two years in the period
ended March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these 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 financial statements referred to above present
fairly, in all material respects, the financial position of Beres
Industries, Inc. as of March 31, 1999, and the results of their
operations and their cash flows for each of the two years in the
period ended March 31, 1999, in conformity with generally accepted
accounting principles.
/s/ Withum, Smith & Brown
WITHUM, SMITH & BROWN
TOMS RIVER, NJ
June 2, 1999
F-2
BERES INDUSTRIES, INC.
BALANCE SHEET
MARCH 31, 1999
ASSETS
Current Assets:
Cash and cash equivalents $ 458,000
Marketable securities 3,000
Accounts receivable, less allowance for
doubtful accounts of $23,000 181,000
Inventories:
Raw materials 47,000
Work-in-process 37,000
Finished goods 85,000
Prepaid expenses and other current assets 17,000
Total Current Assets 828,000
Property, Plant and Equipment - Net 1,264,000
Other Assets 48,000
Net Assets of Discontinued Operations 45,000
TOTAL ASSETS $2,185,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 83,000
Current maturities of capital lease obligations 34,000
Accounts payable and accrued expenses 251,000
Customer deposits 23,000
Total Current Liabilities 391,000
Long-Term Debt, Less Current Maturities 731,000
Capital Lease Obligations,
Less Current Maturities 23,000
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 other comprehensive income (loss) 3,000
Accumulated deficit (2,486,000)
1,210,000
Common stock receivable (170,000)
Total Stockholders' Equity 1,040,000
TOTAL LIABILITIES AND STOCKHOLDERS' $2,185,000
EQUITY
See accompanying notes to financial statements.
F-3
BERES INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED March 31, 1999 and 1998
1999 1998
Net Sales $ 2,162,000 $ 2,588,000
Costs and Expenses:
Cost of goods sold 1,690,000 2,025,000
Selling, general and administrative
expenses 680,000 715,000
Total Costs and Expenses 2,370,000 2,740,000
Operating Loss (208,000) (152,000)
Other Income (Expense):
Interest and other income 33,000 34,000
Interest expense (79,000) (89,000)
Gain on sale of equipment - 4,000
Total Other Income (Expense)-Net (46,000) (51,000)
Loss From Continuing Operations (254,000) (203,000)
Loss From Discontinued Operations (45,000) (20,000)
Net Loss Applicable to Common
Shareholders $ (299,000) $ (223,000)
Net Loss From Continuing Operations
Per Common Share -
Basic and Diluted $ (.02) $ (.02)
Net Loss From Discontinued Operations
Per Common Share -
Basic and Diluted - -
Net Loss Per Common Share -
Basic and Diluted $ (.02) $ (.02)
Shares Used in Per Share Calculation:
Basic and Diluted 12,412,000 12,412,000
See accompanying notes to financial statements.
F-4
BERES INDUSTRIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED March 31, 1999 and 1998
<TABLE>
Accumulated
Capital in Other
Common Stock Excess of Comprehensive Accumulated Common Stock
Shares Par Value Par Value Income Deficit Receivable
Balance,
<S> <C> <C> <C> <C> <C> <C>
March 31,1997 12,412,000 $248,000 $3,445,000 $ - $(1,964,000) $(170,000)
Year ended
March 31, 1998-
Net Loss - - - - (223,000) -
Other
Comprehensive
Income - - - 24,000 - -
Balance,
March 31,1998 12,412,000 248,000 3,445,000 24,000 (2,187,000) (170,000)
Year ended
March 31, 1999-
Net Loss - - - - (299,000) -
Other
Comprehensive
Loss - - - (21,000) - -
Balance
March 31, 1999 12,412,000 $248,000 $3,445,000 $ 3,000 $(2,486,000) $(170,000)
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BERES INDUSTRIES, INC.
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
1999 1998
Net loss $(299,000) $(223,000)
Other Comprehensive Income (Loss):
Unrealized gain (loss) on available for
sale securities arising during year (21,000) 24,000
Comprehensive Loss $(320,000) $(199,000)
See accompanying notes to financial statements.
F-6
<PAGE>
BERES INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED March 31, 1999 and 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations $(254,000) $(203,000)
Adjustments to reconcile net loss from continuing
operations to net cash provided by (used in)
operating activities:
Depreciation and amortization 112,000 127,000
Gain on sale of equipment - (4,000)
Changes in operating assets and liabilities:
Accounts receivable - trade 175,000 10,000
Inventories 41,000 42,000
Prepaid expenses and other current assets (5,000) 19,000
Accounts payable and accrued expenses (21,000) (50,000)
Customer Deposits (8,000) 22,000
Other assets 1,000 (4,000)
Net cash provided by (used in) continuing
operations 41,000 (41,000)
Net cash provided by discontinued operations - 1,000
Net cash provided by (used in) operating
activities 41,000 (40,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment - 5,000
Acquisitions of property, plant and equipment - (12,000)
Net cash used in investing
activities - (7,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (71,000) (90,000)
Principal payments on capital lease obligations (30,000) (46,000)
Net cash used in financing activities (101,000) (136,000)
NET DECREASE IN CASH AND CASH EQUIVALENTS (60,000) (183,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 518,000 701,000
CASH AND CASH EQUIVALENTS, END OF YEAR $ 458,000 $ 518,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 79,000 $ 110,000
Income taxes $ - $ -
Supplemental schedule of non-cash investing and
financing activities:
Acquisition of vehicle through the incurrence
of long-term debt $ 10,000 $ -
See accompanying notes to financial statements.
F-7
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
Nature of Business - The Company's principal business is the
manufacturing and sale of injection molded plastic parts, precision
engineered molds and finished ribbons. The Company's customers
range from local to multi-national companies and are located
primarily in the United States.
Consolidation - For the year ending March 31, 1998 the financial
statements are consolidated and include all the accounts of the
Company and its wholly-owned subsidiaries, Supply Dynamics, Inc. and
Athenia Plastic Mold Corp. All intercompany transactions and
balances have been eliminated in the consolidation.
On July 23, 1998, Supply Dynamics, Inc. and Athenia Plastics Mold
Corp. were merged into Beres Industries, Inc. There was no effect
on the financial statements from the merger.
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.
Marketable Securities - All marketable securities are classified as
available for sale under Statement of Financial Accounting Standard
No. 115 "Accounting for Certain Investments in Debt & Equity
Securities" and are stated at fair value based upon market quotes.
Unrealized holding gains and losses are reported as a component of
comprehensive income (loss) until realized. Realized gains and
losses are determined using the specific identification method.
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, 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.
F-8
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (continued):
Reclassifications - Certain amounts previously reported in the March
31, 1998 financial statements have been reclassified to conform with
the March 31, 1999 presentation.
Use of Estimates - 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 February, 1998, the
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standard ("SFAS") No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits" and in
June, 1998, issued No. 133 "Accounting for Derivative Instruments
and Hedging Activities". The Company believes that these
pronouncements will not have a material impact on the Company's
results of operations and financial condition.
Net Loss Per Common Share - The Company follows Statement of
Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per
Share". SFAS No. 128 superseded Accounting Principles Board Opinion
No. 15 (APB 15), "Earnings Per Share", and other related
interpretations. Basic earnings per share is based upon weighted-
average common shares outstanding. Dilutive earnings per share is
computed using the weighted-average common shares outstanding plus
any potentially dilutive securities.
The following tables set forth the computations of basic and diluted
net loss per common share for continuing operations and discontinued
operations:
F-9
<PAGE>
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (continued):
Net Loss Per Common Share (continued):
1999 1998
Continuing Operations:
Numerator for basic and
diluted net loss per
common share for continuing
operations $ (254,000) $ (203,000)
Denominator for basic and
diluted net loss per common
share - adjusted weighted
average shares for
continuing operations 12,412,000 12,412,000
Basic and diluted net loss
per common share for
continuing operations $ (.02) $ (.02)
Discontinued Operations:
Numerator for basic and
diluted net loss per common
share for discontinued
operations $ (45,000) $ (20,000)
Denominator for basic and
diluted net loss per common
share - adjusted weighted
average shares for
discontinued operations 12,412,000 12,412,000
Basic and diluted net loss
per common share for
discontinued operations $ - $ -
Options were outstanding during 1999 and 1998 but were not included
in the computation of diluted net loss per common share because the
effect in years with a net loss would be antidilutive. Therefore,
basic and diluted computations are the same in both 1999 and 1998.
F-10
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 2 - Discontinued Segment
On August 1, 1997, the Company adopted a plan to withdraw from its
audio cassette segment due to declining sales and limited prospects
for increased revenues.
The loss for 1999 and 1998 from discontinued operations consisted of
the following:
1999 1998
Operating losses $ - $ (21,000)
SFAS 121 charges (45,000)
Gain on sale of equipment - 1,000
$ (45,000) $ (20,000)
The SFAS 121 charge is described further in Note 5. The income
statement shows operating results of the Audio Cassette division
separately. The net sales of the segment were $-0- in 1999 and
1998.
Net assets of discontinued operations shown in the March 31, 1999
balance sheet have been reclassed at their expected net realizable
values. The assets consist of equipment. There were no liabilities
of this segment.
Note 3 - Marketable Securities:
The Company currently invests in common stock which it classifies as
available for sale. The carrying amounts of the securities and
their estimated fair values at March 31, 1999 are as follows:
Cost $ -
Gross unrealized gains 3,000
Gross unrealized losses -
Estimated fair value $ 3,000
The security held by the Company consists of 3,736 shares of Smith
Corona common stock which the Company received in lieu of accounts
receivable pursuant to a bankruptcy settlement. The Company
originally assigned a zero cost to this asset. The change in the
unrealized gain amounted to a $21,000 decrease for the year ended
March 31,1999 compared to a $24,000 increase for the year ended
March 31, 1998. Income taxes have not been considered due to
immateriality.
F-11
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 4 - Property, Plant and Equipment:
Property, plant and equipment at March 31, 1999 is summarized as
follows:
Land $ 50,000
Building or building improvements 1,719,000
Machinery and equipment 4,069,000
Automotive equipment 9,000
Furniture and fixtures 91,000
5,938,000
Less: Accumulated depreciation 4,674,000
$1,264,000
Assets held under capital lease obligations at March 31, 1999 are
included in property, plant and equipment as follows:
Machinery and equipment $147,000
Less: Accumulated amortization 70,000
$ 77,000
Depreciation and amortization of property, plant and equipment
included as a charge to continuing operations amounted to $107,000
for 1999 and $121,000 for 1998.
Note 5 - Asset Impairment Charges:
The Company follows Financial Accounting Standard No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" ("FAS 121"). This statement
requires companies to record impairments of long-lived assets,
certain identifiable intangibles, and associated goodwill on an
exception basis, when there is evidence that events or changes in
circumstances have made recovery of an asset's carrying value
unlikely. In conducting its review, management considered, among
other things, its current and expected operating cash flows together
with a judgement as to the fair value the Company could receive upon
sale of fixed assets.
Based on this review, the Company recognized a non-cash charge of
$45,000 in fiscal year 1999. This charge was primarily for the
write-down of certain discontinued fixed assets to their estimated
fair market value. Impairment indicators included a lack of
interest in the equipment. Fair value was based on available
information related to market value.
F-12
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 6 - Long-Term Debt:
Long-term debt at March 31, 1999 is summarized as follows:
Mortgage payable to bank, interest at 8.6%, due
November 2006. The loan is secured by a first lien
on the building and improvements and all fixtures,
machinery and systems servicing the building therein. $805,000
Note payable, interest at 6.8%, due January 2001.
The loan is secured by an automobile. 9,000
Total long-term debt 814,000
Less: Current maturities 83,000
Long-Term Debt, Less Current Maturities $731,000
Future maturities of long-term debt are as follows:
Year Ending March 31
2000 $ 83,000
2001 89,000
2002 93,000
2003 101,000
2004 110,000
2005 and subsequent 338,000
Total $814,000
Note 7 - Other Income:
Interest and other income consists of the following for the years
ended March 31,
1999 1998
Interest $ 22,000 $ 26,000
Miscellaneous 11,000 8,000
$ 33,000 $ 34,000
F-13
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 8 - Income Taxes:
Due to losses generated in both years, there is no provision for
income taxes for the years ended March 31, 1999 and 1998.
Temporary differences which give rise to significant deferred
income tax assets and (liabilities) at March 31, 1999 follow:
Allowance for Doubtful Accounts
Receivable $ 8,000
Accrued Vacation and Bonus Pay 19,000
Net Operating Loss Carryforwards 861,000
Valuation Allowance (819,000)
Total Deferred Income Tax Assets 69,000
Accumulated Depreciation (68,000)
Unrealized Gain on Marketable
Securities (1,000)
Total Deferred Income Tax Liabilities (69,000)
Net Deferred Income Tax Asset $ -
During the year ended March 31, 1999, the valuation allowance
increased $92,000 due primarily to an increase in the deferred tax
asset for net operating loss carryforwards.
At March 31, 1999, the Company had consolidated net operating loss
carryforwards for federal income tax purposes of approximately
$2,500,000 that begin to expire in the year 2001, and approximately
$1,217,000 for state income tax purposes that begin to expire in
the year 2000.
A reconciliation of the Company's expected income tax benefit at the
federal statutory rate to the Company's effective tax benefit rate
is as follows:
1999 1998
U.S. Federal Statutory Tax Benefit Rate (34.0)% (34.0)%
Increase in Valuation Allowance 34.0 34.0
Effective Tax Benefit Rate - -
F-14
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 9 - Capital Leases:
Obligations under capital leases due in monthly
installments of principal plus interest at rates
ranging from 6.8% to 8.2% and maturing through
January 2001. $57,000
Less: Current Maturities 34,000
Capital Leases, Less Current Maturities $23,000
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, 1999.
Year Ended March 31
2000 $38,000
2001 23,000
Total future minimum lease payments 61,000
Less: Amount representing interest 4,000
Present value of future minimum
lease payments $57,000
Note 10 - Comprehensive Income:
On April 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income" which establishes standards for displaying comprehensive
income and its components.
The components of accumulated other comprehensive income (loss)
consists of the following:
Unrealized Gain (loss)
on Marketable Securities
Balance March 31, 1998 $ 24,000
Current-year change (21,000)
Balance March 31, 1999 $ 3,000
The tax effect on the components of comprehensive income (loss) is
not significant.
F-15
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENT
Note 11 - Commitments and Contingencies:
Commitments:
The Company is a lessee under noncancellable operating equipment
leases which expire at varying dates through 2002. Future minimum
lease payments are tabulated as follows:
Years Ending March 31, Amount
2000 $16,000
2001 6,000
2002 4,000
2003 and subsequent -
Total $26,000
The rent expense incurred under the leases amounted to $23,000 for
the years ended March 31, 1999 and 1998.
Note 12 - 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, 1999,
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
any new further developments, no interest has been recorded on this
note since 1989.
Options - At March 31, 1999, 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 in 1999. As of March 31, 1999, all such options
were exercisable.
F-16
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 12 - Common Stock and Options (continued):
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, 1999, no
options have been granted under this plan.
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting
for Stock-Based Compensation" requires that the Company disclose
additional information about employee stock-based compensation plans.
The objective of SFAS No. 123 is to estimate the fair value, based on
the stock price at the grant date, of the Company's stock options to
which employees become entitled when they have rendered their requisite
service and satisfied any other conditions necessary to earn the right
to benefit from the stock options. The fair market value of a stock
option is to be estimated using an option-pricing model that takes into
account, as of the grant date, the exercise price and expected life of
the option, the current price of the underlying stock and its expected
volatility, expected dividends on the stock, and the risk-free interest
rate for the expected term of the options.
As permitted under SFAS No. 123, the Company has elected to follow APB
25 and related interpretations in accounting for stock based awards to
employees.
Note 13 - Major Customers and Credit Risk Concentrations:
Major Customers and Credit Risk Concentrations - Accounts
receivable from and 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:
1999 1998 1999 1998
Customer A $ - $ - $318,000 $ 17,000
Customer B $34,000 $33,000 $145,000 $270,000
Customer C $36,000 $74,000 $354,000 $189,000
Customer D $ - $13,000 $ - $292,000
Customer E $ - $78,000 $ 56,000 $384,000
Customer F $43,000 $ 1,000 $370,000 $ 80,000
F-17
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 13 - Major Customers and Credit Risk Concentrations (Continued):
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 $330,000 at March
31, 1999. Management reviews the financial status of the banks
periodically and considers its credit risk minimal.
Note 14- Fair Value of Financial Instruments:
The amounts included in the balance sheet as of March 31, 1999 for
cash and cash equivalents, accounts receivable, 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 15- Segment Information:
Segment Information - In 1997, the Financial Accounting Standards
Board issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which has been adopted by the
Company. SFAS No. 131 requires companies to report financial and
descriptive information about its reportable operating segments,
including segment profit or loss, certain specific revenue and
expense items and segment assets, as well as information about the
revenues derived from the Company's products and services, the
countries in which the company earns revenues and holds assets, and
major customers. 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.
Athenia Plastics Mold Corp. 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 $18,000 and $25,000 for the years ended March 31, 1999 and
1998, respectively.
Corporate assets consist of cash and cash equivalents, prepaid
expenses, 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.
F-18
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15 - Segment Information (continued):
Information about segments follows:
<TABLE>
Operating
Earnings Identifiable Depreciation & Capital
Sales (Losses) Assets Amortization Expenditures
1999:
<S> <C> <C> <C> <C> <C>
Precision Molds $ 717,000 $ (111,000) $ 281,000 $ 8,000 $ -
Custom Molding 1,157,000 47,000 864,000 71,000 -
Finished Ribbon 288,000 (145,000) 299,000 18,000 -
Discontinued
Operation - (45,000) 45,000 - -
Corporate & Other - - 696,000 15,000 10,000
$ 2,162,000 $ (254,000) $ 2,185,000 $ 112,000 $ 10,000
1998:
Precision Molds $ 610,000 $ (100,000) $ 329,000 $ 10,000 $ -
Custom Molding 1,471,000 72,000 1,039,000 82,000 -
Finished Ribbon 507,000 (124,000) 397,000 20,000 12,000
Discontinued
Operation - (20,000) 90,000 - -
Corporate & Other - - 770,000 15,000 -
$ 2,588,000 $ (172,000) $ 2,625,000 $ 127,000 $ 12,000
</TABLE>
F-19
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure:
NONE
PART III
Item 9. Directors and Executive Officers of the Registrant:
The Company's Officers and Directors are as follows:
Name Age Positions Held with the Registrant
Charles Beres, Sr. 81 Chairman of the Board
and Director
Charles Beres, Jr. 50 President, Chief Executive
Officer, Chief Financial
Officer, Treasurer and Director
Joseph Delikat 59 Vice President, Secretary
and Director
Harold Zuber 66 Vice President and Director
Charles Beres, Sr., is Beres' founder and has been associated with it
since its inception in June, 1960. Mr. Beres, whose term as a Director will
continue until his successor is duly elected and qualified, is a member of the
Company's Incentive Stock Option and Compensation Advisory Committee. Mr.
Beres now serves the Company as Chairman of the Board, and in an advisory
capacity only.
Charles Beres, Jr., has been President, Chief Executive Officer and a
Director of Beres since 1972, Treasurer and Chief Financial Officer since
December, 1987 and Secretary from 1979 until February, 1986. Charles Beres,
Jr., is the son of Charles Beres, Sr. Mr. Beres holds a Bachelor of Science
Degree in Mechanical Engineering from New York University and a Masters in
Business Administration from Fairleigh Dickinson University which he received
in 1970 and 1976, respectively. Mr. Beres was employed by the Engineering
Department of Beres from June, 1970 until November, 1972 when he became
17
President and Chief Executive Officer. Mr. Beres was also Secretary of Athenia
and Supply Dynamics from July, 1976 and October 1983, respectively, until
February, 1986. Mr. Beres is primarily responsible for managing the day-to-day
operations of the Company. Mr. Beres, whose term as a Director will continue
until his successor is duly elected and qualified, is a member of the Company's
Incentive Stock Option and Compensation Advisory Committee.
Joseph Delikat has served as Vice President of Beres since October, 1983,
as Director in 1986, as Secretary since December, 1986 and was subsequently
appointed as a Director in 1989. Mr. Delikat was Vice President of Business
Machine Supply, Inc., from August, 1980 until September, 1983 where he was
primarily responsible for that company's marketing and production activities;
was Vice President/General Manager of Cellu-Pak, the office machines supply
division of Paramount Packaging, from December, 1972 until August, 1980; and
was Plant Manager for the Burlington Plant of Olivetti Corporation of America
from October, 1964 until December, 1972. Mr. Delikat holds a bachelor of
Science degree from Newark College of Engineering, and a Masters degree in
Management Engineering from Newark College of Engineering. He is responsible
for overseeing the engineering, product development and sales aspects of Supply
Dynamics' business, and is also President, Chief Operating Officer and a
Director of Supply Dynamics. Mr. Delikat has also been Secretary of Athenia
since December, 1987. Mr. Delikat, whose terms as a Director will continue
until his successor is duly elected and qualified, is a member of the Company's
Incentive Stock Option and Compensation Advisory Committee.
Harold Zuber has served as Vice President of Beres since September, 1979
and was the head of its Mold Division from November, 1960 until March 1975.
Mr. Zuber also served as a Director of Beres from 1972 until January, 1986 and
was subsequently appointed as a Director in 1989. Mr. Zuber was Vice President
of Lincoln Mold Tool & Die Company, Inc., a manufacturer of precision
engineered molds, from March, 1975 until August, 1976 when he rejoined the
Company and became President, Chief Operating Officer, and a Director of
Athenia, positions which he still maintains. Mr. Zuber is also responsible for
overseeing the engineering, product development and sales aspects of Athenia's
business. In addition, Mr. Zuber has been Secretary of Supply Dynamics since
December, 1987. Mr. Zuber obtained a Certificate in Plastics Technology and
Newark College of Engineering in 1957 and was a graduate of the Plastic Mold
Design Course of Stevens Institute of Technology in 1954. Mr. Zuber's term as
Director will continue until his successor is duly elected and qualified.
18
Item 10. Executive Compensation:
The following table sets forth the amount of all cash compensation paid
to the Company's most highly compensated executive officers and for all
executive officers as a group for the fiscal year ended March 31, 1999.
Name of Individual
or Number of Capacities in Cash
Persons In Group Which Served Compensation Paid*
Charles Beres, Sr. Chairman of the $ 29,392.00
Board
Charles Beres, Jr. Chief Executive $ 76,652.25(1)
Officer, President,
Treasurer, Director
Harold Zuber Vice President $ 74,456.25(1)
Joseph Delikat Vice President $ 65,507.46(1)
All Officers and Directors
as a Group Total $246,007.96
__________________________
* Includes bonuses and additional compensation paid for vacations not taken.
(1) In addition, the Company provides vehicles to and/or pays all related
expenses on behalf of these officers.
INCENTIVE STOCK OPTION PLAN
On March 5, 1986, Beres' shareholders and directors adopted the Beres
Industries, Inc. Incentive Stock Option Plan (the "Plan"), which Plan was
amended by Beres' Board of Directors on April 29, 1986 to increase the total
number of shares reserved for issuance pursuant to the Plan as a result of
Beres' 3 to 1 stock split effective April 29, 1986. In the opinion of the
Board of Directors, the use of stock options will make an important
contribution to the Company's efforts to attract, retain and motivate its key
employees and officers, and will promote an identity of interest between the
19
Company's key employees and management. The Plan is an Incentive Stock Option
Plan under the Economic Recovery Tax Act of 1981.
Participation
Any person who is a full-time employee of the Company, or any subsidiary
thereof, shall be eligible to participate in the Plan.
Shares Subject to the Plan
Subject to adjustments authorized by the Plan, options to purchase a
maximum of One Million Five Hundred Thousand (1,500,000) shares of Beres'
Common Stock may be granted under the Plan to officers and employees who are
eligible to become participants. The number of shares available for grant will
be reduced by the number of stock options which are granted. If stock options
under the Plan lapse because they are unexercised, the number of shares covered
by the lapsed option will be available for grant again. Pursuant to the Plan,
Beres may not grant a single employee or officer an option to purchase more
than $100,000 of shares of its Common Stock in any one calendar year.
In the event of adjustments in Beres' outstanding Common Stock, the number
of shares subject to options will be protected against dilution in accordance
with the terms of the Plan.
Administration
The Plan is administered by a Compensation Advisory Committee (the
"Committee") consisting of the members of Beres' Executive Committee. The
Committee has the authority, subject to the approval of the Board of Directors,
to:
(a) Determine (1) the employees and officers to who the options under the
Plan will be granted, and (ii) the number of options to be awarded to each
grantee;
(b) Interpret, construe and implement the provisions of the various
arrangements available under the Plan; and
(c) Establish, amend and rescind appropriate rules and regulations
relating to the Plan (however, the number of shares subject to the Plan may not
be increased without shareholder approval).
The members of the Committee are appointed on an annual basis.
Exercise of Options
Stock Options may be exercised in whole or in part and shall be
exercisable at such time following the date of grant as shall be determined by
the Committee. In the event that a grantee owns more than ten (10%) percent
of Beres' outstanding Common Stock, however, the option must be exercised
within five (5) years from the date of grant. All other grantees have ten (10)
years from the date of grant to exercise their options.
The option price must not be less than one hundred (100%) percent of the
"Fair Market Value" (defined in the Plan as the average bid and ask price of
the Company's Common Stock on NASDAQ or such other exchange on which the
Company's Common Stock may be listed) of the Common Stock on the date the
option is granted, or in the event that the grantee owns more than ten (10%)
percent of Beres' outstanding Common Stock, the option price shall be one
hundred ten (110%) percent of the Fair Market value on the date of the grant.
If Beres' Common Stock is not listed on NASDAQ or any other exchange, the "Fair
Market Value" will be determined by the Committee, some or all of the members
of which may be eligible for grants under the Plan. The date of the grant
shall be the date on which the Board of Directors approves each option
authorized by the Committee.
In order to exercise an option in whole or in part, the grantee must give
written notice to Beres' Secretary accompanied by full payment in cash, check
or such other consideration as may be approved by the Board of Directors.
The Committee and Beres' Board of Directors have the power to amend the
Plan, except that the Committee or the Board of Directors may not, without the
approval of Beres' shareholders increase the total number of shares reserved
for issuance pursuant to the Plan (except to adjust for certain changes in
capital.)
An aggregate of 117,000 options are issued and outstanding under the Plan
to certain officers, executives, and employees of the Registrant. See
"Executive Compensation". During the fiscal year ended March 31, 1999, no
options were issued to officers, executives and employees of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of June 30, 1999, certain information
regarding the beneficial ownership of all officers, directors, nominees, and
the beneficial ownership of those persons owning five (5%) percent or more of
21
the outstanding shares of Beres' Common Stock, and the beneficial ownership of
all officers and directors as a group. Each of these persons exercises sole
discretion to vote and dispose of the shares beneficially owned.
Amt. of Shares
Name and Address Beneficially Percent of
Title of Class of Beneficial Owner Owned Class
Common Stock Charles Beres, Sr. 2,467,667 (1) 19.9%
3227 Abbey Lane
Lavalette, N.J.
Common Stock Charles Beres, Jr. 468,213 (2) 3.8%
16 Sunnydale Drive
Brick, N.J.
Common Stock Harold Zuber 114,076 1.0%
P.O. Box 482
Spring Lake, N.J.
Common Stock Joseph Delikat 240,000 (3) 1.9%
9 Forest Lane
Tabernacle, N.J.
Common Stock All Officers and 3,289,956 26.5%
Directors as a Group
(1) Includes 313,561 shares held as of record by Mr. Beres' wife, Ann.
(2) Includes an aggregate of 324,000 shares held as of record by Mr. Beres'
wife, Patricia, and his three children, Charles, III, Jacqueline and
Laura, in which Mr. Beres disclaims any beneficial ownership.
(3) Includes 105,000 shares held of record by Mr. Delikat's wife, Rosemary.
Item 12. Certain Relationships and Related Transactions:
In or about April, 1986, the Company issued 1,200,000 shares of the
restricted, unregistered Common Stock of the Company to its Chairman of the
Board, Charles Beres, Sr., in exchange for a Promissory Note executed by Mr.
Beres to the Company in the amount of $300,000. The Promissory Note provided
for payments of interest only until June 30, 1988 and quarterly payments of
principal in the amount of $37,500, plus interest until the note was paid in
full. There is presently outstanding on the loan $147,000 principal, plus
22
$23,000 of accrued interest. Although the issuance of the shares to Charles
Beres, Sr., was not in accord with the New Jersey Business Corporation Act as
in effect at the time of the issuance, the rights and obligations of the
respective parties cannot be determined except by agreement of the parties or
a judicial finding. Pending resolution of this issue, no further payments of
principal or interest have been made.
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 10-K and
Reports on Form 8-K:
Page
(a) 1. See Index to Financial Statements.......... F-l
2. Schedules - To be supplied
3. The exhibits which are required by Item 601
of Regulations S-K that are hereby incorpor-
ated by reference pursuant to Rule 12b-23 are
as follows:
(3.) Articles of Incorporation and By-Law. (1)
(9.) Voting Trust Agreement (1)
(10.38) Note by and between the Registrant and Charles
Beres Sr., dated April 13, 1987. (1)
(10.39) Joint Venture Agreement by and between the
Registrant and Hitachi Powdered Metals, Co.,
Ltd., and Advance Imaging Technology, Inc.,
dated May 30, 1988. (2)
(10.40) Employment Agreement, dated as of January 2,
1989, by and between the Registrant and Charles
Beres, Jr., (1)
(10.41) Employment Agreement dated as of January 2,
1989, by and between the Registrant and Joseph
Delikat. (1)
(10.42) Employment Agreement dated as of January 2,
1989, by and between the Registrant and Harold
Zuber. (1)
23
(10.43) Employment Agreement dated as of January 2,
1989, by and between the Registrant and Paul
Rolando. (1)
(10.45) Termination of Employment Agreement, dated as
of January 2, 1989, by and between the Regis-
trant and Paul Rolando. (1)
(10.46) Incentive Stock Option Agreement dated as of
January 2, 1989, by and between the Registrant
and Charles Beres, Jr. (1)
(10.47) Incentive Stock Option Agreement dated as of
January 2, 1989, by and between the Registrant
and Joseph Delikat. (1)
(10.48) Incentive Stock Option Agreement dated as of
January 2, 1989, by and between the Registrant
and Harold Zuber. (1)
(10.49) Incentive Stock Option Agreement dated as of
January 2, 1989, by and between the Registrant
and Paul Rolando. (1)
(18.) Letter re change in accounting principles. (3)
(28.14) Term Note by and between the Registrant and
Midlantic National Bank North dated November,
1987. (3)
(28.15) Term Note by and between the Registrant and
Midlantic National Bank North dated December,
1987. (3)
(28.16) Mortgage Loan Documents by and between the
Registrant and Midlantic National Bank North
dated April 13, 1987. (3)
24
<PAGE>
(28.17) Term Note with Agreement between Beres Indus-
tries, Inc. and First Fidelity Bank, N.A. dated
March 29, 1994 (the "First Fidelity Loan").
(28.18) Term Loan Agreement between Beres Industries,
Inc. and First Fidelity Bank, N.A., dated
March 29, 1994 (the "First Fidelity Loan").
(28.19) Mortgage, Assignment of Leases and Security
Agreement between Beres Industries, Inc. and
First Fidelity Bank, N.A., dated March 29,
1994 (the "First Fidelity Loan").
(28.20) Guaranty and Suretyship of Athenia Plastic Mold
Corp. as to the First Fidelity Loan.
(28.21) Guaranty and Suretyship of Supply Dynamics, Inc.
as to the First Fidelity Loan
_____________________
(1) Incorporated herein by reference to Registration Statement No. 33-3987-
NY as initially filed and Amendment Nos. 1,2,3 and 4 thereto
previously filed on March 12, 1986, May 1, 1986, May 7, 1986, May 13,
1986, June 9, 1986, respectively, and Post-Effective Amendment
Nos. 1,2,3, and 4 and Amendment No. 1 to Post-Effective Amendment No.
1 to Post-Effective Amendment Nos. 1,2,3 and 4 and Amendment No. 1
to Post-Effective Amendment No. 4 filed on October 27, 1987, January
28, 1988,February 12, 1988, November 30, 1988 and February 9, 1989,
respectively.
(2) Incorporated herein by reference to Form 8-K as filed with the
Securities and Exchange Commission on June 8, 1988.
(3) Incorporated herein by reference to Form 10-K for the year ended
December 31, 1987, as filed with the Securities and Exchange
Commission on March 29, 1988.
(4) Incorporated herein by reference to Form 10-K for the year ended March
31,1995 as filed with the Securities and Exchange Commission.
(b) Form 8-K was filed on March 9, 1995, and amended March 13, 1995 with
respect to Item 4 - Changes in Registrant's Certifying Accountant.
25
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
Dated: June 30, 1999
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: /s/ Charles Beres, Sr.
CHARLES BERES, SR. Chairman of
the Board, Director
Dated: June 30, 1999
BY: /s/ Charles Beres, Jr.
CHARLES BERES, JR., Chief
Executive Officer, President,
Treasurer, Chief Financial
Officer, Director
Dated: June 30,1999
BY: /s/ Joseph Delikat
JOSEPH DELIKAT, Vice President,
Secretary, Director
Dated: June 30, 1999
BY: /s/ Harold Zuber
HAROLD ZUBER, Vice President,
Director
Dated: June 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 458
<SECURITIES> 3
<RECEIVABLES> 204
<ALLOWANCES> 23
<INVENTORY> 169
<CURRENT-ASSETS> 828
<PP&E> 5938
<DEPRECIATION> 4674
<TOTAL-ASSETS> 2185
<CURRENT-LIABILITIES> 391
<BONDS> 754
<COMMON> 248
0
0
<OTHER-SE> 792
<TOTAL-LIABILITY-AND-EQUITY> 2185
<SALES> 2162
<TOTAL-REVENUES> 2162
<CGS> 1690
<TOTAL-COSTS> 2371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79
<INCOME-PRETAX> (254)
<INCOME-TAX> 0
<INCOME-CONTINUING> (254)
<DISCONTINUED> (45)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
