U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X)QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the 9 month period ended December 31, 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 - December 31, 1998
<PAGE>
Beres Industries, Inc.
December 31, 1998
Form 10-QSB
Index
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1998 and
March 31, 1998
Consolidated Statements of Operations for the Three
Months Ended December 31, 1998 and 1997
Consolidated Statements of Comprehensive Income (Loss)
for the Three Months Ended December 31, 1998 and 1997
Consolidated Statements of Operations for the Nine
Months Ended December 31, 1998 and 1997
Consolidated Statements of Comprehensive Income (Loss)
for the Nine Months Ended December 31, 1998 and 1997
Consolidated Statement of Changes in Stockholders Equity
for the Nine Months Ended December 31, 1998
Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management s Discussion and Analysis, Material Changes in
Financial Condition and Results of Operations
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
12/31/98 3/31/98
ASSETS
Current Assets
Cash and Equivalents $ 501,000 $ 518,000
Marketable Securities 6,000 24,000
Accounts Receivable - Trade:
Less Allowance for Doubtful
Accounts of $7,000 and $15,000
Respectively 159,000 356,000
Inventories - Raw Materials 48,000 69,000
- Work in Process 151,000 27,000
- Finished Goods 85,000 114,000
Prepaid Expenses and Other
Current Assets 9,000 12,000
Total Current Assets 959,000 1,120,000
Property, Plant and Equipment - Less
Accumulated Depreciation of
$4,646,000 and $4,568,000
Respectively 1,284,000 1,361,000
Other Assets 48,000 54,000
Net Long-Term Assets of Discontinued
Operations 90,000 90,000
Total Assets $2,381,000 $2,625,000
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
12/31/98 3/31/98
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Current Maturities of Long-Term
Debt $ 73,000 $ 72,000
Current Maturities of Capital
Lease Obligations 31,000 30,000
Accounts Payable and Accrued
Expenses 179,000 272,000
Customer Deposits 119,000 31,000
Total Current Liabilities 402,000 405,000
Long-Term Debt - Less Current
Maturities 751,000 803,000
Capital Lease Obligations -
Less Current Maturities 34,000 57,000
Total Liabilities 1,187,000 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 6,000 24,000
Accumulated Deficit (2,335,000) (2,187,000)
1,364,000 1,530,000
Less:Common Stock Receivable 170,000 170,000
Total Stockholders Equity 1,194,000 1,360,000
Total Liabilities and Stockholders
Equity $ 2,381,000 $ 2,625,000
Unaudited -See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
12/31/98 12/31/97
Net Sales $ 402,000 $ 564,000
Costs and Expenses
Cost of Goods Sold 335,000 456,000
Selling, General and
Administrative Expenses 158,000 166,000
Total Costs and Expenses 493,000 622,000
Operating Loss (91,000) (58,000)
Other Income (Expenses):
Interest and Other Income 9,000 15,000
Interest Expense (19,000) (22,000)
Total Other Income (Expenses) (10,000) (7,000)
Loss From Continuing
Operations (101,000) (65,000)
Income (Loss) From Discontinued
Operations -0- -0-
Net Loss Applicable
To Common Shareholders $ (101,000) $ (65,000)
Weighted Average Number of Shares
Outstanding Per Common Share-
Basic and Diluted 12,412,000 12,412,000
Loss Per Common Share Outstanding
Loss From Continuing Operations
Applicable Per Common Share-
Basic and Diluted $ (0.008) $ (0.005)
Income (Loss) From Discontinued
Operations Applicable Per Common
Share - Basic and Diluted -0- -0-
Net Loss Applicable Per Common Share-
Basic and Diluted $ (0.008) $ (0.005)
Unaudited - See Accompanying Notes to Financial Statements
PART I - ITEM 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Three Months
Ended Ended
12/31/98 12/31/97
Net Loss Applicable To Common Shareholders $ (101,000) $ (65,000)
Other Comprehensive Loss, Net Of Tax:
Unrealized Holding Loss Arising During
The Period (4,000) -0-
Net Comprehensive Loss $ (105,000) $ (65,000)
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Nine Months
Ended Ended
12/31/98 12/31/97
Net Sales $ 1,577,000 $ 1,868,000
Costs and Expenses
Cost of Goods Sold 1,196,000 1,539,000
Selling, General and
Administrative Expenses 498,000 553,000
Total Costs and Expenses 1,694,000 2,092,000
Operating Loss (117,000) (224,000)
Other Income (Expenses):
Interest and Other Income 29,000 33,000
Interest Expense (60,000) (68,000)
Total Other Income (Expenses) (31,000) (35,000)
Loss From Continuing
Operations (148,000) (259,000)
Income (Loss) From Discontinued
Operations -0- (21,000)
Net Loss Applicable
To Common Shareholders $ (148,000) $ (280,000)
Weighted Average Number of Shares
Outstanding Per Common Share-
Basic and Diluted 12,412,000 12,412,000
Loss Per Common Share Outstanding
Loss From Continuing Operations
Applicable Per Common Share-
Basic and Diluted $ (0.012) $ (0.021)
Income (Loss) From Discontinued
Operations Applicable Per Common
Share - Basic and Diluted -0- (0.001)
Net Loss Applicable Per Common Share-
Basic and Diluted $ (0.012) $ (0.022)
Unaudited - See Accompanying Notes to Financial Statements
PART I - ITEM 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Nine Months Nine Months
Ended Ended
12/31/98 12/31/97
Net Loss Applicable To Common Shareholders $ (148,000) $ (280,000)
Other Comprehensive Loss, Net Of Tax:
Unrealized Holding Loss Arising During
The Period (18,000) -0-
Net Comprehensive Loss $ (166,000) $ (280,000)
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
Accumulated
Common Stock Capital in Other Common
Excess of Comprehensive Accumulated Stock
Shares Par Value Par Value Income Deficit Receivable
Balances -
<S> <C> <C> <C> <C> <C> <C>
April 1, 1998 12,412,000 $ 248,000 $3,445,000 $ 24,000 $ (2,187,000) $ (170,000)
Net Loss
for the Period - - - - (148,000) -
Other Comprehensive
Loss, Net Of Tax,
Unrealized Holding
Loss Arising During
The Period - - - (18,000) - -
Balances -
December 31, 1998 12,412,000 $ 248,000 $3,445,000 $ 6,000 $(2,335,000) $(170,000)
</TABLE>
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Cash Flows from Operating Activities:
Net Loss for the Period $(148,000) $ (280,000)
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 82,000 95,000
Changes in Operating Assets and
Liabilities:
Accounts Receivable - Trade 205,000 162,000
Inventories (74,000) 40,000
Prepaid Expenses and Other
Current Assets 3,000 31,000
Other Assets 2,000 -0-
Accounts Payable and Accrued
Expenses (93,000) (115,000)
Customer Deposits 88,000 28,000
Net Cash Provided By (Used In)
Operating Activities 57,000 (18,000)
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
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Cash Flows from Financing Activities:
Principal Payments on Long-Term Debt $ (51,000) $ (73,000)
Principal Payments on Capital
Lease Obligations (23,000) (39,000)
Net Cash Used in Financing
Activities (74,000) (112,000)
Net Decrease in Cash and
Equivalents (17,000) (141,000)
Cash and Equivalents, Beginning of Year 518,000 701,000
Cash and Equivalents, End of Period $ 501,000 $ 560,000
SUPPLEMENTAL INFORMATION:
Cash Paid for Interest $ 60,000 $ 68,000
Income Taxes $ 250 $ 150
Unaudited - See Accompanying Notes to Financial Statements
Part I - Item 1
BERES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The consolidated balance sheet at the end of the preceding
fiscal year has been derived from the audited consolidated
balance sheet contained in the Company s Form 10-KSB and is
presented for comparative purposes. All other financial
statements presented are unaudited. In the opinion of
Management, all adjustments which include only normal recurring
adjustments necessary to present fairly the financial position
for all periods presented have been made. The results of
operations for the interim periods are not necessarily
indicative of the operating results for the full year.
Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the published
rules and regulations of the Securities and Exchange Commission.
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
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
PART I- ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales for the nine months and three months ended December
31, 1998 decreased by $291,000 or 15.6%; and $162,000 or 28.7%;
from the respective 1997 periods. Net Sales by segment were as
follows:
Nine Months Three Months
Ended December 31, Ended December 31,
1998 1997 1998 1997
Athenia $ 444,000 $ 453,000 $ 117,000 $ 169,000
Custom Molding 886,000 1,049,000 222,000 290,000
Finished Ribbons 247,000 366,000 63,000 105,000
$1,577,000 $ 1,868,000 $ 402,000 $ 564,000
Athenia's sales vary from quarter to quarter depending on the
production time required to build various tools and the amount of
backlog. During the nine months ended December 31, 1998,
Athenia's sales decreased approximately $9,000 or 2.0% from those
in 1997. During the three months ended December 31, 1998, sales
for this segment decreased approximately $52,000 or 30.1% from
the similar 1997 period. This decrease in sales is primarily the
result of the timing of shipments. The current backlog is above
normal levels and it is anticipated that sales for this segment
for fiscal 1999 will exceed those of fiscal 1998.
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 $163,000 or 15.5%, and
$68,000 or 23.5%, for the nine months and three months ended
December 31, 1998 when compared to the similar periods of 1997.
These decreases are primarily the result of the reduced levels of
ribbon cartridges molded and sold to customers in the depressed
ribbon industry which has partially offset by increases in custom
contract molded products. Management intends to continue its
focus on increasing custom molded contract sales. To accomplish
this, a program of increasing the Company's visibility through
advertising and exhibiting at various regional and national trade
shows is continuing to generate new leads which Management is
hopeful will lead to increased sales for this segment.
Finished ribbon cartridge sales decreased approximately $119,000
or 32.5%, and $42,000 or 40% for the nine months and three months
ended December 31, 1998 as compared to the nine months and three
months ended December 31, 1997. These continuing decreases are
primarily the result of the continued shrinking of the ribbon
industry due to the effect of laser and ink jet printers on
impact printers. Additionally, sales to certain co-manufacturers
have decreased as a result of mergers within the industry and
others electing to switch manufacturing to low labor foreign
locations. Although Management is continuing its efforts to
increase sales in this segment, it is anticipated that sales will
remain at reduced levels. Despite this outlook, this level of
sales continues to cover certain overhead and, therefore, it is
Management's intention to continue with this product line for the
immediate future.
Contract costs and costs of goods sold varies based upon sales
volume and product mix. Cost of sales were 75.8% from 83.3% for
the nine months and three months ended December 31, 1998 as
compared to 82.4% and 80.6% for the respective periods of 1997.
The improvement in the nine month figures of 1998 vs. 1997 is
primarily the result of a more favorable product mix and improved
efficiencies despite the lower sales volume. The highest cost
of sales for the most recent three months of 1998 is the result
of the highest volume of sales of one particular product during
that period which requires a high percentage of material.
Selling, general and administrative expenses decreased
approximately $55,000 and $8,000 for the nine months and three
months ended December 31, 1998 when compared to the nine months
and three months ended December 31,1997. These decreases are
primarily the result of lower commissions paid due to the lower
sales volume as well as a decrease in certain fixed costs
resulting from cost cutting measures which were implemented.
Interest and other income decreased approximately $4,000 and
$6,000 for the nine months and three months ended December 31,
1998 when compared to the respective 1997 periods. These
decreases are primarily the result of lower commission income
earned during the 1998 periods on the sale of imported ribbon
cartridge kits.
Interest expense decreased approximately $8,000 and $3,000 for
the nine months and three months ended December 31, 1998 when
compared to the similar periods of 1997. These decreases
represent lower interest costs as a result of the repayment of
debt which occurred during the periods.
Net Income (loss) for the nine months ended December 31, 1998 was
($148,000) as compared to ($280,000) during the similar 1997
period. For the three months ended December 31, 1998, the
Company had a net loss of($101,000) as compared to a net loss of
($65,000) for 1997. The decrease in loss for 1998 is primarily
the result of cost cutting measures that were implemented despite
the lower sales volume. The increase in loss in the most recent
three month period is primarily due to the unusually low sales
volume for that quarter.
Management is continuing to monitor the performance of all
segments with an emphasis on attempting to increase sales and
improving 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 improved
operating results.
MATERIAL CHANGES IN FINANCIAL POSITION
The principal change in financial position during the nine months
ended December 31, 1998 was a decrease in working capital of
approximately $158,000 to $557,000. During the same period,
operations generated net cash of approximately $57,000. During
the nine month period ended December 31, 1998, the Company made
principal payments on long-term debt and capital lease
obligations of $74,000 resulting in a net decrease in cash and
cash equivalents for the period of approximately $17,000.
However, as of December 31, 1998, the Company had a respectable
cash position of $501,000.
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.
Management is evaluating the possibility of raising capital to
invest in new products or attempting to align the Company with a
strategic partner who could utilize the Company's capabilities as
it moves forward. (See Part II, Item 5, "Other Information.")
The potential success of accomplishing either of these avenues is
not determinable at this time. Management will continue its
efforts to increase sales and improve cost controls. Absent any
unanticipated operating expenses on a significant downturn in the
overall economy, Management is hopeful for an improvement in long
term operating results.
YEAR 2000
The Company's Year 2000 readiness remains as stated in the
Company's Form 10-QSB/A-1, filed January 15, 1999.
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
"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.
PART II OTHER INFORMATION
Item 1 Legal Proceedings:
There have been no material changes in legal proceedings from as
previously reported in the Company's 10-KSB for the fiscal year ended March
31, 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:
On February 5, 1999, the Company executed a Letter of Intent to merge
with Discas, Inc., a Delaware corporation (OTC Bulletin Board: DSCS),
pursuant to which Discas would be the surviving corporation. The Letter of
Intent provides that Beres shareholders would receive one share of Discas
common stock for each 6.67 shares of Beres common stock owned. Upon
completion of the merger, Beres shareholders would own approximately 35% of
Discas. Completion of the merger will be subject to satisfactory
completion of due diligence, execution of an Agreement of Merger,
shareholder approval and other matters. Discas, headquartered in
Waterbury, Ct., is primarily engaged in the manufacture of plastic and
rubber compounds and fabricated commercial products from prime and recycled
materials, for the horticulture, packaging, footwear, military, automotive
and consumer markets. The Letter of Intent also states the parties' intent
to relocate, as soon as possible substantially all of Discas' production
from its Kenilworth plant to Beres' Lakewood facility. Beres and Discas
are presently in negotiations as to the terms and conditions of such
relocation.
Item 6 Exhibits and Reports on Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BERES INDUSTRIES, INC.
Date: February 18, 1999 (Registrant)
/s/ Charles Beres, Jr.
Charles Beres, Jr., President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 501,000
<SECURITIES> 6,000
<RECEIVABLES> 166,000
<ALLOWANCES> 7,000
<INVENTORY> 284,000
<CURRENT-ASSETS> 959,000
<PP&E> 5,930,000
<DEPRECIATION> 4,646,000
<TOTAL-ASSETS> 2,381,000
<CURRENT-LIABILITIES> 402,000
<BONDS> 785,000
<COMMON> 248,000
0
0
<OTHER-SE> 946,000
<TOTAL-LIABILITY-AND-EQUITY> 2,381,000
<SALES> 1,577,000
<TOTAL-REVENUES> 1,577,000
<CGS> 1,196,000
<TOTAL-COSTS> 1,694,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,000
<INCOME-PRETAX> (148,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (148,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (148,000)
<EPS-PRIMARY> (0.012)
<EPS-DILUTED> (0.012)
</TABLE>
