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, 2000 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 $2,063.000.
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $756,138 on July 12, 2000 based on the
last available bid quotation ($.07) at the close of the market on that day.
For the purposes of the foregoing sentence, the term "affiliate" includes
each director and officer of the Registrant.
The number of shares outstanding of the Registrant's common stock on July
13, 2000 was 17,822,934, including the pending issuance of 6,000,000 shares
to certain partners of Beres Acquisition Partnership. (See "Certain
Transactions," below).
Documents Incorporated By Reference - See Item 14(c) to this Form 10-KSB.
<PAGE>
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
Dynamics 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 "Beres" or the "Company"). As
described below, the Company is presently conducting a private
placement (the "Private Placement") pursuant to which the Company
is raising the funds necessary to finance establishment of a new
product line consisting of the manufacture of plastic five gallon
pails. Presuming the Private Placement is successfully completed,
the Company shall continue operating its Athenia Plastic Mold
Division and shall,other than with respect to certain customers,
phase out its present injection molding operations.
A description of the Company's existing mold production and
injection molding operations, is set forth below.
Production of Molds by Athenia
At present, Beres operates its Athenia Plastic Mold division.
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
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. Presuming the
Company successfully completes the within Private Placement, the
Company's primary business objective shall be operation of a
manufacturing plant for the production of plastic containers. The
Company shall, however, continue to operate its Athenia Plastic
Mold division, provided the division is able to generate sales on
a profitable basis.
Injection Molding Operation
Beres' Supply Dynamics division is presently capable of
producing custom plastic injection-molded parts 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 accept ribbons for use on
various computer and word processing printers, electronic
typewriters, point of sale terminals and various other printing
devices. Supply Dynamics also manufactures other custom molded
parts, as requested by its customer base. Presuming the Company
successfully completes its Private Placement, it is Company
management's intention to phase out certain custom molding product
lines, and replace those operations with the manufacture of five
gallon plastic pails. This phase out shall be completed in a
manner so that existing customers, whose product lines shall not be
retained, shall be inconvenienced as little as possible. Company
management intends to provide such customers with sufficient notice
and inventory, so as to enable customers to obtain alternate
sources of supply.
PROPOSED BUSINESS EXPANSION
Presuming the Company raises sufficient funds through its
Private Placement, the Company intends to acquire the equipment
necessary to manufacture five gallon industrial plastic containers,
for sale to the chemical, paint, adhesive, joint compound and food
industries.
Acquisition of New Equipment
In order to manufacture the plastic containers, it will be
necessary for the Company to acquire new manufacturing equipment
(the "New Equipment"). Company management anticipates that it will
acquire up to six (6) injection molding machines, various
associated feeders, conveyors and chillers, silos for resin
storage, and miscellaneous palletizing, shrink wrapping and
warehousing equipment. Company management shall also acquire the
tools (molds) necessary to manufacture the containers and lids, as
well as the equipment necessary to print labelling information on
the containers, together with associated conveyor, feeding and
stacking equipment.
Present estimates for total New Equipment acquisition costs,
are $3,600,000. Funds for acquisition of the New Equipment shall be
obtained through the Company's pending Private Placement and
through equipment leases and/or debt financing. (See "Certain
Relationships and Related Transactions" as to the present status of
the Private Placement)
Proposed Manufacturing Operation
The containers to be manufactured and sold by the Company
shall consist of 5-gallon plain and printed plastic containers,
including a short 5-gallon container for joint compound. The
containers to be manufactured by the Company are in common use
throughout industry. Company management expects some seasonality
with respect to sales, for products such as driveway sealer, paint,
and joint sealer. The Company intends to employ "just in time"
inventory and manufacturing procedures.
Description of the Manufacturing Process
Plastic container manufacturing is a process that has evolved
over the last twenty-five years into a reliable and predictable
process. The Company intends to utilize state of the art injection
molding machinery. The Company's choice of equipment shall be
based upon price, performance, and availability of financing. Upon
receipt of proceeds for the maximum amount of the offering, the
Company will seek to acquire, via lease or debt financing, four
720-ton presses to manufacture pails, equipped with state of the
art hydraulic and electronic control systems to deliver
reliability, precision and high productivity. This equipment will
be coupled with two 500-ton injection-molding machines to produce
covers. In the event that less than the maximum proceeds and
financing are received, the amount of equipment to be obtained by
the Company, may have to be reduced.
The pail and cover molds that are mounted into the above
presses are single cavity pail molds and dual cavity lid molds that
are manufactured from custom forged, pre-hardened P-20 tool steel.
The above equipment configuration will allow the Company to
produce, assuming 24 hour, seven day per week operations, in excess
of six million containers per year.
The manufacturing process consists of pelletized high-density
polyethylene resin that is melted and forced under high pressure by
the screw in the injection molding press into the container mold.
Chilled water is then circulated through the mold, cooling the part
and allowing the mold to be opened and the part ejected. The
estimated cycle time for the pail mold is 20 seconds per cycle, and
for the cover mold, 20 seconds per cycle. The pail and/or lid then
enter a conveyor system that shall deliver them to the stacking
area where handles will be inserted on the pails and fittings, if
necessary, are inserted in the covers. Containers and lids shall
be manufactured in a variety of colors to suit the customer's
specifications. Other containers shall be sent to the printing
department to be offset printed with up to four colors per design
possible. The printing process shall be accomplished utilizing a
Kase four-color pail printer with an ultraviolet on mandrel curing
system. Pails shall be fed into the printer by an automatic
stacker and pail-feeder. The containers shall then be discharged
from the printer onto a conveyor and into an automatic restacker in
preparation for shrink-wrapping and palletization.
After quality control, testing and inspection, all lids and
pails are stretched wrapped and palletized for shipment by truck or
rail to the customers.
Company management believes that its existing plant facility,
located in Lakewood, New Jersey, is more than adequate for
installation of the new manufacturing equipment and related
warehousing/office needs. In the event sales should increase
beyond the facility's present capacity, there is additional
undeveloped property available for expansion of Beres' present
facility. The Company is not aware of any environmental
considerations or issues beyond those with which the Company must
comply for its present operations.
Sources and Availability of Raw Materials
The Company's primary raw material will be plastic resin,
which is a commodity item, and readily available on the open
market. Other raw material items include colorant, packaging,
handles, gaskets and fittings, all of which are available from
multiple suppliers.
Competition
The plastic container business is well developed with a number
of national and regional manufacturers in existence. The industry
is price and service driven. In order to successfully enter this
industry, the Company shall be required to develop a customer base,
and to manufacture and sell product on a profitable basis.
Company management intends to apply its prior experience in the
injection molding industry to its new operations and is optimistic,
presuming the maximum amount of the Private Placement is completed,
that manufacture and production of the containers will be
successfully commenced. The Company's future profitability will,
however, be dependent upon successfully competing with existing
competitors, on a price and service basis.
Marketing and Sales
The Company will employ the services of independent, outside
sales representatives on a commission basis as part of its overall
marketing and sales efforts. The Company will utilize 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
the plastic containers it intends to manufacture, and that it can
capitalize on the contacts and good-will developed by BAP in the
container industry, towards development of sales for the Company.
(See below, "Certain Transactions").
Customers
Insofar as sales of the Company's proposed new product line
have not commenced, there is no concentration of sales with any
particular customers. Likewise, other than orders still remaining
from the Company's present operations, there is no backlog of
orders. However, Company management expects that pail customers
shall be originated through existing contacts established through
the BAP acquisition group which has recently acquired an interest
in the Company. (See "Certain Relationships and Related
Transactions").
Patents and Trademarks
Patents and trademarks do exist in the plastic container
industry and will be considered throughout the product design and
development process. Appropriate licenses will be negotiated, as
required, prior to commencement of sales and manufacture.
Employees
The Company presently employs 30 persons in its manufacturing
operations. At such time as production of the Company's new
product line commences, the Company anticipates that its total
number of employees shall increase to approximately 50. The Company
considers its relationship with its employees to be 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, 2000, 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.
The past performance of Beres' Common Stock is not necessarily
indicative of future performance.
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
3rd Qtr $.055 $.03
4th Qtr $.10 $.03
2000
High (Bid) Low (Bid)
1st Qtr $.19 $.05
2nd Qtr $.10 $.07
3rd Qtr* $.075 $.07
* Through July 12, 2000.
As of July 12, 2000 the approximate number of Shareholders of
record of the Company was 1849. 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 are quoted in the "Pink
Sheets", as published by the National Quotation Bureau, Inc. and
the "OTC Bulletin Board".
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.
The following tables summarize net sales and operating
income (loss) by segment.
Year Ended March 31,
2000 1999
(Dollars in Thousands)
Sales
Athenia $ 955 $ 717
Custom Molding 850 1,157
Finished Ribbons 258 288
Total Sales $ 2,063 $ 2,162
Operating Income (Loss)
Athenia $ (70) $ (111)
Custom Molding 87 47
Finished Ribbons (169) (144)
Discontinued Segment (45) (45)
Total Operating Income(Loss) $ (197) $ (253)
Investment Expense $ (71) $ (79)
Interest and Other Income 13 33
Net Income (Loss) $ (255) $ (299)
The Company's total net sales for the fiscal year ended March
31, 2000 were $2,063,000, a decrease of $99,000 or 4.6% from the
year ended March 31, 1999. For the 2000 fiscal year, the Company
posted a net loss of $(255,000), as compared to net loss of
$(299,000) for the fiscal year ended March 31, 1999. Included in
both the 2000 and 1999 loss figures was a write-down of
discontinued segment assets of $45,000 per year.
Athenia's sales increased $238,000 to $955,000 or
approximately 33.2% for the fiscal year ended March 31, 2000, as
compared to the 1999 fiscal year. During the 2000 period, Athenia
incurred an operating loss of $(70,000) as compared to an operating
loss of $(111,000) for the fiscal year ended March 31, 1999. The
increase in sales is the result of an increase in demand and orders
realized for the Company's tooling services during 2000. Management
remains hopeful that sales for this segment will remain at these
increased 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 $307,000 or 26.5%
to $850,000 during the fiscal year ended March 31, 2000, as
compared to the year ended March 31, 1999. This segment produced
operating income of $87,000 for the 2000 fiscal year as compared to
operating income of $47,000 for the fiscal year ended March 31,
1999. 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 increase in operating
income for this segment is strictly the result of better control
over certain expenses. This segment will continue its efforts to
control costs in order to minimize any effects the decrease in
sales is having on operating income, as it did in fiscal year 2000.
Finished Ribbon cartridge sales decreased $30,000 or 10.4% to
$258,000 during the fiscal year ended March 31, 2000 as compared to
the year ended March 31, 1999. This segment produced an operating
loss of $(169,000) during the 2000 fiscal year as compared to an
operating loss of $(144,000) during 1999. 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 $25,000 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 those ribbons which are produced and sold contribute
positively to covering fixed overhead costs, which would remain if
ribbon manufacturing were discontinued. Therefore, it is
Management's intention at this time to continue manufacturing
impact printer ribbons.
New Product Line. The Company currently has deposits on new
equipment necessary to manufacture five gallon industrial plastic
containers, for sale to the chemical, paint, adhesive, joint
compound and food industries.
Contract Costs and Costs of Goods Sold varies based upon sales
volume and product mix. For the fiscal year ended March 31, 2000,
cost of sales was 75.6% which decreased by 2.6% over the cost of
sales for the 1999 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 $25,000 to $655,000 for the fiscal year ended March
31, 2000 when compared to the 1999 fiscal year. This decrease is
primarily the result of lower commission amounts paid for sales and
a decrease in accounting fees.
Interest and Other Income decreased approximately $20,000 to
$13,000 during fiscal year ended March 31, 2000 as compared to
1999. This decrease is the result of lower invested cash balances.
Interest Expense decreased $8,000 to $71,000 for the 2000
fiscal year as compared to fiscal 1999. This decrease is primarily
the result of the repayment of net borrowings.
(Loss) from Discontinued Operations was $(45,000) for both the
fiscal years ended March 31,2000 and 1999. This resulted from
Management's decision to write-down the remaining audio cassette
assets, which consisted primarily of molds, from $90,000 to $0 over
two years.
Net Income (Loss) for the fiscal year ended March 31, 2000 was
$(255,000) as compared to a net loss of $(299,000) for the fiscal
year ended March 31, 1999. Included in both the 2000 and 1999
losses was the write-down of cassette assets of $45,000 each year
as discussed above, as well as an increase in reserve for bad debts
of approximately $2,000 and $17,000 respectively 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.
Private Placement. As disclosed in the Company s 10-QSB for the
fiscal quarter ended December 31, 1999, on October 8, 1999, the
Company entered into a Stock Purchase Agreement with Beres
Acquisition Partnership, a New York general partnership (BAP). In
connection with the completion of the minimum amount of the
Company s Private Placement, in the amount of $500,000, it is the
Company s intention to commence manufacture of a proprietary
product line of five gallon plastic pails for the paint, chemical
and food service markets, and to phase out of the Registrant s
existing operations other than precision molds and certain limited
customer injection molding contracts. Pursuant to the Stock
Purchase Agreement, BAP completed a Private Placement of $600,000
of the Company s 9% Convertible Subordinated Promissory Notes (the
Notes), the proceeds of which have been received by the Company.
BAP is seeking to raise the remaining balance of the Private
Placement, in the amount of an additional $400,000. (See "Certain
Relationships and Related Transactions" for present status of
Private Placement). The Notes are convertible into one (1) share
of the Registrant s post reverse split common stock, for each $.50
of the principal amount of the Notes tendered for conversion.
The Stock Purchase Agreement further provides for completion
of a four-to-one reverse split of the Registrant s outstanding
shares, including the 6,000,000 shares that have been issued to
BAP. Immediately following approval of the reverse split, there
would be issued to BAP, an additional 4,900,400 shares, so that BAP
would own or control a total of 6,400,400 shares, or approximately
56% of the outstanding shares of the Registrant (not including
shares issued to BAP partners who are also Note Holders), assuming
full conversion of the Notes.
Based upon completion of the minimum amount of the Private
Placement, the Registrant has placed deposits for equipment and
molds and is obtaining equipment financing. However, the Company s
ability to successfully commence manufacture of its new product
line, will be dependent upon BAP raising the balance of the Private
Placement, and receipt of commitments for the debt financing
necessary to complete acquisition of the new manufactuirng
equipment.
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had working capital of approximately $224,000 at
March 31, 2000, as compared to working capital of $437,000 at March
31, 1999. At March 31, 2000, the Company had cash and cash
equivalents of approximately $259,000, as compared to $458,000 a
year earlier. Operations used cash of approximately $84,000 and
principal payments on long term debt and capital leases amounted to
$115,000 decreasing cash by $199,000 to $259,000, as mentioned
above. The Company's current ratio was 1.48 at March 31, 2000 and
the Company is within term on all its obligations.
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 re-
payments are expected to be met by cash flow.
FORWARD LOOKING STATEMENTS
This Form 10-KSB and the preceding Management's Discussion and
Analysis contain 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 and outlooks for operating results. 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
BERES INDUSTRIES, INC.
CONTENTS TO FINANCIAL STATEMENTS
MARCH 31, 2000
Page
Independent Auditors' Report F-2
Financial Statements:
Balance Sheet as of March 31, 2000 F-3
Statements of Operations
For the Years Ended March 31, 2000 and 1999 F-4
Statements of Changes in
Stockholders' Equity
For the Years Ended March 31, 2000 and 1999 F-5
Statements of Comprehensive Income (Loss)
For the Years Ended March 31, 2000 and 1999 F-6
Statements of Cash Flows
For the Years Ended March 31, 2000 and 1999 F-7
Notes to Financial Statements F-8 to F-19
F-1
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, 2000, and the related statements of
operations, changes in stockholders' equity, comprehensive income
(loss), and cash flows for each of the two years in the two year
period ended March 31, 2000. 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, 2000, and the results of their
operations and their cash flows for each of the two years in the
two year period ended March 31, 2000 in conformity with generally
accepted accounting principles.
WITHUM, SMITH & BROWN
TOMS RIVER, NJ
May 30, 2000
F-2
BERES INDUSTRIES, INC.
BALANCE SHEET
MARCH 31, 2000
ASSETS
Current Assets:
Cash and cash equivalents $ 259,000
Marketable securities 4,000
Accounts receivable, less allowance for
doubtful accounts of $25,000 265,000
Inventories:
Raw materials 48,000
Work-in-process 43,000
Finished goods 63,000
Prepaid expenses and other current assets 12,000
Total Current Assets 694,000
Property, Plant and Equipment - Net 1,176,000
Other Assets 36,000
TOTAL ASSETS $1,906,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 83,000
Current maturities of capital lease obligations 23,000
Accounts payable and accrued expenses 233,000
Customer deposits 131,000
Total Current Liabilities 470,000
Long-Term Debt, Less Current Maturities 650,000
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) 4,000
Accumulated deficit (2,741,000)
956,000
Common stock receivable ( 170,000)
Total Stockholders' Equity 786,000
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $1,906,000
See accompanying notes to financial statements.
F-3
BERES INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
2000 1999
<S> <C> <C>
Net Sales $ 2,063,000 $ 2,162,000
Costs and Expenses:
Cost of goods sold 1,560,000 1,690,000
Selling, general and administrative
expenses 655,000 680,000
Total Costs and Expenses 2,215,000 2,370,000
Operating Loss (152,000) (208,000)
Other Income (Expense):
Interest and other income 13,000 33,000
Interest expense (71,000) (79,000)
Total Other Income (Expense)-Net (58,000) (46,000)
Loss From Continuing Operations (210,000) (254,000)
Loss From Discontinued Operations (45,000) (45,000)
Net Loss Applicable to Common
Shareholders $ (255,000) $ (299,000)
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
</TABLE>
BERES INDUSTRIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED March 31, 2000 and 1999
<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 31,1998 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)
Year ended
March 31,2000 -
Net Loss - - - (255,000) -
Other
Comprehensive
Income - - - 1,000 - -
Balance,
March 31,2000 12,412,000$ 248,000 $3,445,000 $ 4,000 $ (2,741,000)$ (170,000)
</TABLE>
See accompanying notes to financial statements.
F-5
>
BERES INDUSTRIES, INC.
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
2000 1999
Net loss (255,000) $(299,000)
Other Comprehensive Income (Loss):
Unrealized gain (loss) on available for
sale securities arising during year 1,000 (21,000)
Comprehensive Loss $ (254,000) $ (320,000)
See accompanying notes to financial statements.
F-6
BERES INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
2000 1999
Loss from continuing operations $(210,000) $ (254,000)
Adjustments to reconcile net loss from
continuing operations to net cash provided
by (used in)operating activities:
Depreciation and amortization 88,000 112,000
Changes in operating assets and liabilities:
Accounts receivable - trade (84,000) 175,000
Inventories 15,000 41,000
Prepaid expenses & other current assets 5,000 (5,000)
Other assets 12,000 1,000
Accounts payable and accrued expenses (18,000) (21,000)
Customer deposits 108,000 (8,000)
Net cash provided by (used in) operating
Activities (84,000) 41,000
Cash Flows Used In Financing Activities:
Principal payments on long-term debt (81,000) (71,000)
Principal payments on capital lease
obligations (34,000) (30,000)
Net cash used in financing activities (115,000) (101,000)
Net Decrease In Cash And Cash Equivalents (199,000) (60,000)
Cash And Cash Equivalents, Beginning Of Year 458,000 518,000
Cash And Cash Equivalents, End Of Year $ 259,000 $ 458,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 71,000 $ 79,000
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
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 - 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, 1999 financial statements have been reclassified to conform with
the March 31, 2000 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 - The Company will adopt
SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" in fiscal 2001. This Statement provides comprehensive
guidance on accounting for derivative instruments, including certain
derivatives that are embedded in other contracts, and hedging
activities. The Company believes that adoption of this Statement
will not have a material effect on its financial statements.
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):
2000 1999
Continuing Operations:
Numerator for basic and
diluted net loss per
common share for continuing
operations $ (210,000) $ (254,000)
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) $(45,000)
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 2000 and 1999 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 2000 and 1999.
F-10
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 2000 and 1999 from discontinued operations consisted of
the following:
2000 1999
SFAS 121 charges $(45,000) $(45,000)
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 2000 and
1999.
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, 2000 are as follows:
Cost $ -
Gross unrealized gains 4,000
Gross unrealized losses -
Estimated fair value $ 4,000
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 $1,000 increase for the year ended
March 31,2000 compared to a $21,000 decrease for the year ended
March 31, 1999. Income taxes have not been considered due to
immateriality.
F-11
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 4 - Property, Plant and Equipment:
Property, plant and equipment at March 31, 2000 is summarized as
follows:
Land $ 50,000
Building or building improvements 1,719,000
Machinery and equipment 4,069,000
Automotive equipment 10,000
Furniture and fixtures 91,000
5,939,000
Less: Accumulated depreciation 4,763,000
$1,176,000
Assets held under capital lease obligations at March 31, 2000 are
included in property, plant and equipment as follows:
Machinery and equipment $147,000
Less: Accumulated amortization 91,000
$ 56,000
Depreciation and amortization of property, plant and equipment
included as a charge to continuing operations amounted to $88,000
for 2000 and $107,000 for 1999.
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 charges of
$45,000 in both fiscal year 2000 and 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, 2000 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. $729,000
Note payable, interest at 6.8%, due January 2001.
The loan is secured by an automobile. 4,000
Total long-term debt 733,000
Less: Current maturities 83,000
Long-Term Debt, Less Current Maturities $650,000
Future maturities of long-term debt are as follows:
Year Ending March 31
2001 $ 83,000
2002 89,000
2003 99,000
2004 108,000
2005 118,000
2006 and subsequent 236,000
Total $733,000
Note 7 - Other Income:
Interest and other income consists of the following for the years
ended March 31,
2000 1999
Interest $13,000 $ 22,000
Miscellaneous - 11,000
$ 13,000 $ 33,000
F-13
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, 2000 and 1999.
Temporary differences which give rise to significant deferred
income tax assets and (liabilities) at March 31, 2000 follow:
Deferred Income Tax Assets:
Allowance for Doubtful Accounts $ 9,000
Accrued Vacation and Bonus Pay 15,000
Net Operating Loss Carryforwards 913,000
Valuation Allowance (932,000)
5,000
Deferred Income Tax Liabilities:
Accumulated Depreciation (5,000)
Net Deferred Income Tax Asset $ -
During the year ended March 31, 2000, the valuation allowance
increased $112,000 due primarily to an increase in the deferred tax
asset for net operating loss carryforwards.
At March 31, 2000, the Company had consolidated net operating loss
carryforwards for federal income tax purposes of approximately
$2,700,000 that begin to expire in the year 2001, and approximately
$1,400,000 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:
2000 1999
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 STATEMENT
Note 9 - Commitments and Contingencies:
Commitments:
The Company is a lessee under noncancellable automobile leases
which expire at varying dates through 2002. Future minimum lease
payments are tabulated as follows:
Years Ending March 31, Amount
2001 $ 13,000
2002 8,000
2003 and subsequent -
Total $21,000
The rent expense incurred under the leases amounted to $19,000 and
$23,000 for the years ended March 31, 2000 and 1999.
Note 10 - 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.
F-15
<PAGE>
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 10 - 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, 2000, 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 11 - 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:
2000 1999 2000 1999
Customer A $ 58,000 $ - $ 306,000 $318,000
Customer B $ 60,000 $36,000 $ 376,000 $354,000
Customer C $ 11,000 $43,000 $ 62,000 $370,000
Customer D $ 30,000 $ 5,000 $ 237,000 $ 42,000
F-16
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 11 - 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 $189,000 at March
31, 2000. Management reviews the financial status of the banks
periodically and considers its credit risk minimal.
Note 12- Fair Value of Financial Instruments:
The amounts included in the balance sheet as of March 31, 2000 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 13- 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 $17,000 and $18,000 for the years ended March 31, 2000 and
1999, 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-17
Note 13 - Segment Information (continued):
Information about segments follows:
<TABLE>
Operating
Earnings Identifiable Depreciation & Capital
Sales (Losses) Assets Amortization Expenditures
2000:
<S> <C> <C> <C> <C> <C>
Precision Molds $ 955,000 $ (81,000) $ 364,000 $ 7,000 $ -
Custom Molding 850,000 62,000 862,000 55,000 -
Finished Ribbon 258,000 (191,000) 200,000 16,000 -
Discontinued
Operation - (45,000) - - -
Corporate & Other - - 480,000 10,000 -
$ 2,063,000 $(255,000) $1,906,000 $88,000 $ -
1999:
Precision Molds $ 717,000 $(175,000) $ 281,000 $ 8,000 $ -
Custom Molding 1,157,000 139,000 864,000 71,000 -
Finished Ribbon 288,000 (218,000) 299,000 18,000 -
Discontinued
Operation - (45,000) 45,000 - -
Corporate & Other - - 696,000 15,000 10,000
$ 2,162,000 $(299,000) $ $112,000 $10,000
</TABLE>
Note 14 - Subsequent Event:
In a Form 8K Filing with the Securities and Exchange
Commission, the Company disclosed that, pursuant to a
previously announced stock purchase agreement with a
New York Investor Group (Beres Acquisition Partnership
or BAP) signed last October, $600,000 of its planned
$1,000,000 private placement of 9% Convertible
Subordinated Promissory Notes had been sold by BAP,
resulting in a change of control. Meanwhile BAP will
seek to complete the $400,000 balance of the offering.
In accordance with the terms of the original stock
purchase agreement, three new directors were elected to
the Beres board. In addition, two current directors of
the Company resigned, leaving incumbent directors
Charles Beres, Jr. and Joseph Delikat to continue on
the board.
As set forth in the stock purchase agreement, the
partners of BAP have, subsequent to the year end been
issued six million shares of restricted Beres
Industries common stock. Consideration paid for the
shares consisted of BAP s services in connection with
the financing and technical assistance relative to the
expansion of the Company s product line and the
origination of new product sales. After issuance of
the six million restricted shares, BAP and/or its
partners own 33.7%, present members of management and
their families 17.8%, and public shareholders 48.5% of
the outstanding shares.
F-18
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 14 - Subsequent Event (Continued):
The Stock Purchase Agreement further provides for completion
of a four-to-one reverse split of the Registrant s outstanding
shares, including the 6,000,000 shares issued to BAP, as
described in Item 1, above. Immediately following approval of
the reverse split, there would be issued to BAP, an additional
4,900,400 shares, so that BAP would own or control a total of
6,400,400 shares, or approximately 56% of the outstanding
shares of the Registrant (not including shares issued to BAP
partners who are also Note Holders), assuming full conversion
of the Notes.
Based upon completion of the minimum amount of the Private
Placement, the Registrant has placed deposits for equipment
and molds and is obtaining equipment financing. However, the
Registrant s ability to successfully commence manufacture of
its new product line, will be dependent upon BAP raising the
balance of the Private Placement.
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
Joel Schonfeld 64 Chairman of the Board
and Director
Charles Beres, Jr. 51 President, Chief Executive
Officer, Chief Financial
Officer, Treasurer and Director
Joseph Delikat 60 Vice President, Secretary
and Director
Andrea I. Weinstein 34 Director
Victor Weinstein 63 Director
Joel Schonfeld was appointed Director and Chairman of the Board of
the Company on May 3, 2000. Mr. Schonfeld holds a Bachelor of Arts
degree from Adelphi College, and a Juris Doctor degree from Brooklyn Law
School. Mr. Schonfeld is a partner in the law firm of Schonfeld &
Weinstein and has practiced law for over 40 years. Mr. Schonfeld's term
as a Director shall continue until his successor is duly qualified and
elected.
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 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.
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's term
as a Director will continue until his successor is duly elected and
qualified.
Andrea I. Weinstein was appointed Director of the Company on May 3,
2000. Ms. Weinstein holds a Bachelor of Arts degree from State
University of New York, Albany, and Juris Doctor degree from Columbia
Law School. Ms. Weinstein is a partner in the law firm of Schonfeld &
Weinstein and has practiced law since 1990. Ms. Weinstein's term as a
Director shall continue until her successor is duly qualified and
elected. Ms. Weinstein is the daughter of Victor W. Weinstein, who is a
Director of the Company.
Victor W. Weinstein was appointed Director of the Company on May 3,
2000. Mr. Weinstein is a Program Manager on the Real Estate and
Construction Staff of International Business Machines. Mr. Weinstein's
term as a Director shall continue until his successor is duly qualified
and elected. Mr. Weinstein is the father of Andrea I. Weinstein, who is
a Director of the Company.
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,
2000.
Name of Individual
or Number of Capacities in Cash
Persons In Group Which Served Compensation Paid*
Charles Beres, Sr. Chairman of the $ 36,868
Board [Resigned 05/03/00]
Charles Beres, Jr. Chief Executive $ 89,385 (1)
Officer, President,
Treasurer, Director
Harold Zuber Vice President $ 94,740 (1)
Joseph Delikat Vice President $ 76,836 (1)
Director
All Officers and Directors
as a Group Total $ 297,829
__________________________
* 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.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth as of July 13, 2000, 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 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. 1,878,667 (1) 10.5%
3227 Abbey Lane
Lavalette, N.J.
Common Stock Charles Beres, Jr. 468,213 (2) 2.6%
16 Sunnydale Drive
Brick, N.J.
Common Stock Joseph Delikat 240,000 (3) 1.3%
9 Forest Lane
Tabernacle, N.J.
Common Stock Joel Schonfeld 960,000 (4) 5.4%
63 Wall St - Ste 1801
New York, NY
Common Stock Andrea I. Weinstein 960,000 (4) 5.4%
63 Wall St - Ste 1801
New York, NY
Common Stock Kenneth Sokoloff 1,440,000 (4) 8.1%
29 Brookside Drive
Skillman, NJ
Common Stock All Officers and 2,628,213 14.7%
Directors as a Group
(1) Includes 313,561 shares held as of record by Mr. Beres' wife, Ann.
Also includes the return to Treasury of 589,000 shares.
(See "Certain Relationships and Related Transactions," below)
(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.
(4) These individuals and entities are beneficial owners of the
number of shares disclosed. Issuance of share certificates
representing ownership of the shares was approved by the
Company's Board of Directors on May 3, 2000. It is expected
that the share certificates shall be issued shortly. Follow-
ing completion of the Company's planned four to one reverse
split, an additional 4,900,400 shares shall be issued to
BAP, of which the disclosed individuals are partners. [See,
"Certain Relationships and Related Transactions"]
Item 12. Certain Relationships and Related Transactions:
On October 8, 1999, the Company entered into a Stock Purchase
Agreement with Beres Acquisition Partnership ("BAP"). The purpose for
the initiation of the relationship between the Company and BAP was to
provide the Company with a business opportunity to establish a new
product line, consisting of the manufacture of five gallon plastic
pails, and to assist with the raising of the capital necessary to
finance the introduction of the new product line. The Stock Purchase
Agreement, as amended, (the "Stock Purchase Agreement") provided that
BAP would be responsible for completing a Private Placement in the
amount of between $500,000 and $1,000,000 of the Company's 9%
Convertible Subordinated Promissory Notes (the "Notes"). The Notes
which shall pay interest only until their maturity date of December 31,
2004, and assuming receipt of Shareholder approval of the four to one
reverse split, are convertible at the rate of one (1) share of the
Company's post four to one Reverse Split Common Stock, for each $.50
principal amount of the Notes. The Stock Purchase Agreement, as
amended, provides that the Company shall, as soon as possible after
completion of the minimum amount of the Private Placement, present to
its Shareholders for approval, a four to one reverse split of its
outstanding shares of common stock.
The Stock Purchase Agreement, as amended, further provides that
BAP, and or its partners and assignees shall, upon completion of the
minimum amount of the Private Placement and receipt of commitments for
New Equipment financing, be issued 6,000,000 shares of Beres'
restricted, unregistered pre-Reverse Split shares. Immediately
following shareholder approval of the Reverse Split, there shall be
issued to BAP and/or its partners and assignees, 4,900,400 shares of
Beres' post Reverse Split shares, so that the total number of shares
issued to BAP, after adjustment for the Reverse Split, shall be
6,400,400. The shares are being issued to BAP for and in consideration
of BAP's efforts towards raising the capital necessary, and providing
other services relative to the Company's proposed business expansion.
The Company's management has determined that the foregoing issuance is
reasonable, in view of the new business which BAP will be introducing to
Beres, BAP's efforts relative to arranging financing for the new
equipment required for the Company's proposed business expansion, and
BAP's efforts relative to raising the equity and debt capital necessary
to accomplish the proposed business expansion. The Stock Purchase
Agreement provides that 20% (1,280,080) of the shares to be issued to
BAP, shall be escrowed to secure BAP's representation that new business
in the minimum amount of $1,500,000 shall be received in the one (1)
year following the date that the new equipment is operational.
On May 3, 2000, the Company closed on $600,000 of the Private
Placement, and issued Notes to the subscribers in a like amount. On the
same date, Messrs. Charles Beres, Sr. and Harold Zuber resigned as
Directors of the Company, and Joel Schonfeld, Andrea I. Weinstein and
Victor Weinstein were appointed Chairman of the Board and Directors,
respectively. As of July 5, 2000, the Escrow Agent for the Private
Placement had received subscriptions for an additional $250,000, which
is being held in escrow pending clearance of funds and issuance of the
Notes. The Company's ability to successfully establish its new product
line will be dependent upon raising the full amount of the Private
Placement and obtaining the debt/lease financing necessary to acquire
the new equipment. As of this date, Company management is still
negotiating equipment leases with manufacturers and lessors.
BAP and the Company have agreed to pay Parrex Associates, Inc. and
W.K. Ledgard, Jr. d/b/a Golfview Management, a total of five (5%)
percent of the net proceeds of the sale of the Notes, (up to a maximum
of $75,000), together with 62,500 shares of the Company's post Reverse
Split restricted, unregistered shares, in compensation for services
performed relative to introducing BAP to the Company. Beres has agreed,
for a period of one (1) year after issuance of the shares, to use its
best efforts to include the shares in any registration statement filed
during that period.
In or about April, 1986, the Company issued 1,200,000 shares of the
restricted, unregistered Common Stock of the Company to its former
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. Subsequent to the
issuance of the shares to Mr. Beres, it was determined that the New
Jersey Business Corporation Act did not, at the time that the shares
were issued, authorize the issuance of shares in exchange for a
promissory note. As a consequence, Mr. Beres has ceased making payments
of principal and interest, and has agreed to return 589,000 shares of
Beres' common stock, owned by him, to the Company's Treasury. There is
presently outstanding on the loan $147,000 principal, plus $23,000 of
accrued interest, which will be discharged in exchange for return of the
shares. On May 3, 2000, Mr. Beres tendered back to the Company the
shares, and the Company discharged Mr. Beres from the balance due, if
any, under the Promissory Note.
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 incorpo-
rated 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)
(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"). (1)
(28.18) Term Loan Agreement between Beres Industries,
Inc. and First Fidelity Bank, N.A., dated
March 29, 1994 (the "First Fidelity Loan"). (1)
(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"). (1)
(28.20) Guaranty and Suretyship of Athenia Plastic Mold
Corp. as to the First Fidelity Loan. (1)
(28.21) Guaranty and Suretyship of Supply Dynamics, Inc.
as to the First Fidelity Loan. (1)
_____________________
(1) 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 May 3, 2000 with respect to Item 1 - Changes
in Control of Registrant and Item 5 - Other Events.
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, Director
Dated: July 14, 2000
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:
JOEL SCHONFELD Chairman of
the Board, Director
Dated: July , 2000
BY: /s/ Charles Beres, Jr.
CHARLES BERES, JR., Director
Dated: July 14, 2000
BY: /s/ Joseph Delikat
JOSEPH DELIKAT, Director
Dated: July 14, 2000
<PAGE>
BY: /s/ Andrea I. Weinstein
ANDREA I. WEINSTEIN, Director
Dated: July 14, 2000
BY: /s/ Victor Weinstein
VICTOR WEINSTEIN, Director
Dated: July 14, 2000
