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 3 month period ended June 30, 2000.
( ) 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:
18,072,934 - August 21, 2000
BERES INDUSTRIES, INC.
FORM 10-QSB
JUNE 30, 2000
Page
Part I: Financial Information
Item 1: Financial Statements:
Balance Sheets as of June 30, 2000 and March 31, 2000 F-2
Statements of Operations
For the Three Months Ended June 30, 2000 and 1999 F-3
Statements of Changes in Stockholders' Equity
For the Three Months Ended June 30, 2000 F-4
Statements of Comprehensive Income (Loss)
For the Three Months Ended June 30, 2000 and 1999 F-5
Statements of Cash Flows
For the Three Months Ended June 30, 2000 and 1999 F-6
Notes to Financial Statements F-7 to F-9
Item 2: Management's Discussion and Analysis, Material
Changes in Financial Condition and Results of Operations
<PAGE>
BERES INDUSTRIES, INC.
BALANCE SHEETS
ASSETS 6/30/00 3/31/00
Current Assets:
Cash and cash equivalents $ 162,000 $ 259,000
Marketable securities - 4,000
Accounts receivable, less allowance for
doubtful accounts of $25,000 230,000 265,000
Inventories:
Raw materials 38,000 48,000
Work-in-process 89,000 43,000
Finished goods 72,000 63,000
Prepaid expenses and other current assets 8,000 12,000
Total Current Assets 599,000 694,000
Property, Plant and Equipment - Net 1,155,000 1,176,000
Other Assets:
Deposits on equipment 482,000 -
Debt issuance costs - net 92,000 -
Other assets 35,000 36,000
Total Other Assets 609,000 36,000
TOTAL ASSETS $2,363,000 $1,906,000
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 86,000 $ 83,000
Current maturities of capital lease obligations 14,000 23,000
Accounts payable and accrued expenses 195,000 233,000
Customer deposits 112,000 131,000
Total Current Liabilities 407,000 470,000
Long-Term Debt, Less Current Maturities $1,226,000 650,000
Commitments and Contingencies -
Stockholders' Equity:
Common stock, par value $.02 per share:
Authorized - 21,000,000 shares
Issued - 18,662,000 shares at 6/30/00
Outstanding - 18,073,000 shares at 6/30/00 373,000 248,000
Capital in excess of par value 3,587,000 3,445,000
Accumulated other comprehensive income (loss) - 4,000
Accumulated deficit (3,083,000) (2,741,000)
877,000 956,000
Treasury Stock - 589,000 shares (147,000) -
Common stock receivable - (170,000)
Total Stockholders' Equity 730,000 786,000
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $2,363,000 $1,906,000
Unaudited - See accompanying notes to financial statements
F-2
BERES INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
Net Sales $ 441,000 $ 419,000
Costs and Expenses:
Cost of goods sold 335,000 337,000
Selling, general and administrative
expenses 197,000 170,000
Consultant Compensation 206,000 -
Total Costs and Expenses 738,000 507,000
Operating Loss (297,000) (88,000)
Other Income (Expense):
Interest and other income 3,000 4,000
Interest expense (48,000) (18,000)
Total Other Income (Expense)-Net (45,000) (14,000)
Loss From Operations $(342,000) $ (102,000)
Net Loss Per Common Share -
Basic and Diluted $ (.02) $ (.01)
Shares Used in Per Share Calculation:
Basic and Diluted 16,186,000 12,412,000
BERES INDUSTRIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2000
<TABLE>
Accumulated
Capital in Other
Common Stock Excess of Comprehensive Accumulated Common Stock Treasury Stock
Shares Par Value Par Value Income Deficit Receivable Shares Amount
Balance,
<S> <C> <C> <C> <C> <C> <C>
March 31, 2000 12,412,000 248,000 3,445,000 4,000 (2,741,000) (170,000) - -
Three Months Ended
June 30,2000 -
Net Loss - - - - (342,000) - - -
Acquisition of
Treasury Stock - - - - - 170,000 589,000 (147,000)
Issuance of
Common Stock 6,250,000 125,000 142,000 - - - - -
Other
Comprehensive
Income - - - (4,000) - - - -
Balance,
June 30,2000 18,662,000 $373,000 $3,587,000 $ - $(3,083,000) $ - 589,000 $(147,000)
</TABLE>
Unaudited - See accompanying notes to financial statements.
F-4
BERES INDUSTRIES, INC.
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
Net loss $ (342,000) $(102,000)
Other Comprehensive Income (Loss):
Unrealized loss on available for
sale securities arising during period (4,000) (1,000)
Comprehensive Loss $ (346,000) $(101,000)
Unaudited - See accompanying notes to financial statements.
F-5
BERES INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
Net loss $ (342,000) $(102,000)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 24,000 22,000
Noncash compensation expense 206,000 -
Noncash interest expense on treasury stock 23,000 -
Changes in operating assets and liabilities:
Accounts receivable - trade 35,000 16,000
Inventories (45,000) 2,000
Prepaid expenses & other current assets 4,000 4,000
Accounts payable and accrued expenses (38,000) (19,000)
Customer deposits (19,000) 13,000
Net cash used in operating activities (152,000) (64,000)
Cash Flows Used In investing Activities:
Deposits on machinery and equipment (482,000) -
Cash Flows Used In Financing Activities:
Principal payments on long-term debt (21,000) (19,000)
Principal payments on capital lease
obligations (9,000) (8,000)
Proceeds from long-term debt, net 567,000 -
Net cash provided by (used in) financing
activities 537,000 (27,000)
Net Decrease In Cash And Cash Equivalents (97,000) (91,000)
Cash And Cash Equivalents, Beginning Of Period 259,000 458,000
Cash And Cash Equivalents, End Of Period $ 162,000 $ 367,000
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 17,000 $ 18,000
Income taxes $ - $ 200
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of note receivable into
treasury stock 170,000 -
Stock issued as compensation 267,000 -
See accompanying notes to financial statements.
F-6
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
The March 31, 2000 balance sheet at the end of the preceding fiscal
year has been derived from the audited balance sheet contained in
the Company's Form 10-KSB and is presented for comparative
purposes. All other financial statements and financial information
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 footnotes below were added to disclose additional
information for this reporting quarter. These 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 March 31, 2000.
Note 2 - Long-Term Debt:
Long-term debt at June 30, 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. $ 709,000
Note payable, interest at 6.8%, due January 2001.
The loan is secured by an automobile. 3,000
Convertible subordinated notes, interest at 9%
payable semi-annually on June 30 and December 31,
due December 2004. The notes are convertible
anytime at the rate of one share of common stock
for each $.50 principal amount of the note. 600,000
Total long-term debt 1,312,000
Less: Current maturities 86,000
Long-Term Debt, Less Current Maturities $1,226,000
F-7
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 2 - Long-Term Debt(Continued):
Future maturities of long-term debt are as follows:
Year Ending March 31
2001 $ 86,000
2002 89,000
2003 99,000
2003 101,000
2004 108,000
2005 118,000
2006 and subsequent 812,000
Total $1,312,000
Note 3 - Interim Segment Information Reporting:
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 on an interim
basis. The Company discusses its segments in its Management=s
Discussion and Analysis appearing elsewhere herein. The segment
descriptions are an integral part of this footnote.
The Athenia Plastics Segment provides materials, labor and overhead
at cost determined on the same basis as for sales to unaffiliated
parties. Such intersegment costs which are not included in revenues
or costs of Athenia were $4,000 for the three months ended June 30,
2000 as compared to $10,000 for the three months ended June 30, 1999.
Information about the Company's segments is as follows for the three
months ended June 30, 2000 and 1999:
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
Operating Operating
Segment Sales Income (Losses) Sales Income (Losses)
Precision Molds $ 134,000 $(149,000) $104,000 $ (46,000)
Custom Molding 250,000 (32,000) 238,000 (6,000)
Finished Ribbons 57,000 (116,000) 77,000 (36,000)
Totals $ 441,000 $(297,000) $ 419,000 $ (88,000)
Reconciliation of Segment Operating Income (Losses) to Total Company
Net Loss for the Three Months Ended June 30, 2000 and 1999.
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
Total Segment Operating Income (Losses) $(297,000) $ (88,000)
Interest Expense (48,000) (18,000)
Interest and Other Income 3,000 4,000
Net Loss $(342,000) $(102,000)
F-8
BERES INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 3 - Interim Segment Information Reporting (Continued):
As of the last annual report (Form 10-KSB) as of March 31, 2000, there
have been no material changes in total assets during the three months
ended June 30, 2000 and there have been no material changes in the
basis of measurement of segment accounting during the three months
ended June 30, 2000.
Note 4 - Issuance of Common Stock and Options:
Pursuant to an 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.
As set forth in the stock purchase agreement, the partners of BAP
have been issued six million shares of restricted Beres Industries=
common stock. An additional 250,000 shares were issued to outside
consultants for services related to this transaction. Consideration
paid for the shares consisted of 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.
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-9
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales for the three months ended June 30, 2000 increased
$22,000 or 5.3% to $441,000 from net sales of $419,000 for the
quarter ended June 30, 1999. Net Sales by segment were as
follows:
Three Months
Ended June 30,
2000 1999
Precision Molds $ 134,000 $ 104,000
Custom Molding 250,000 238,000
Finished Ribbons 57,000 77,000
$ 441,000 $ 419,000
Precision Mold's sales vary from quarter to quarter depending on
the production time required to build various tools and the amount
of backlog. During the three months ended June 30, 2000, precision
mold sales increased $30,000 or 28.9% from the comparable 1999
period. This increase is primarily the result of an increase in
backlog over the past year. It should be noted, however, that the
current sales backlog has weakened recently and lower sales levels
may result in the near term. Management is stepping up its efforts
to secure additional sales of precision molds to hopefully reverse
this trend.
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 product segment increased approximately $12,000 or 5%, for
the three months ended June 30, 2000 when compared to the similar
1999 period. This increase is primarily the result of the addition
of certain new customers. (See "Private Placement and Proposed New
Product Line," below).
Finished ribbon cartridge sales decreased approximately $20,000 or
26%, to $57,000 for the three months ended June 30, 2000 as
compared to the three months ended June 30, 1999. This decrease in
sales for this product segment is primarily the result of a
continued shrinking market for impact printer ribbon products which
continue to lose market share to the ink jet and laser printers
that do not use ribbons. Although increasing sales and attaining
true profitability is doubtful for this segment, Management is
confident that the ribbons that are produced and sold contribute
positively to covering certain fixed overhead, which costs would
remain if ribbon manufacturing were discontinued. (See "Private
Placement and Proposed New Product Line," below).
Contract costs and costs of goods sold varies based upon sales
volume and product mix. Cost of sales decreased to 76% from 80.4%
for the three months ended June 30, 2000 as compared to the similar
period of 1999. This decrease is primarily the result of a more
favorable product mix, namely, the increased level of precision
mold sales which resulted in a higher gross profit.
Selling, general and administrative expenses increased
approximately $27,000 to $197,000 for the three months ended June
30, 2000 as compared to the three months ended June 30, 1999. This
increase is primarily the result of an increase in legal fees and
other costs associated with the ongoing private placement.
Consultant compensation during the three months ended June 30, 2000
was $206,000 as compared to $0.00 for the three months ended June
30, 1999. This compensation is the value of stock issued to Beres
Acquisition Partners for services rendered pursuant to the ongoing
private placement and assistance in entering the manufacture of a
new product line as discussed.
Interest and other income decreased approximately $1,000 to $3,000
for the three months ended June 30, 2000 when compared to the
equivalent 1999 period. This decrease is primarily the result of
lower interest and dividends earned on the lower invested cash
balances.
Interest expense increased approximately $30,000 to $48,000 for the
three months ended June 30, 2000 as compared to the three months
ended June 30, 1999. This increase is primarily the result of two
factors, namely, accrued interest on the $600,000 of notes payable
resulting from the private placement as well as the reversal of
previously accrued interest income on notes receivable which were
cancelled.
Net Income (loss) for the quarter ended June 30, 2000 was a loss of
($342,000) as compared to a loss of ($102,000) for the quarter
ended June 30, 1999. Absent the consultant compensation and
additional interest expense for the most recent quarter as
discussed above, the net loss was approximately($105,000)for the
quarter ended June 30, 2000. This increase in net loss when
compared to the similar 1999 period despite the increased sales
volume is primarily the result of expenses associated with the
private placement and proposed entry into the new product line.
PRIVATE PLACEMENT AND PROPOSED NEW PRODUCT LINE
As disclosed in previous filings, on October 8, 1999, the Company
entered into a Stock Purchase Agreement with Beres Acquisition
Partnership, a New York General Partnership (BAP). It is the
Company's and BAP's intention to raise $1,000,000 through a private
placement, secure additional debt financing and enter into the
manufacturing of a proprietary product line of five gallon plastic
pails for the paint, chemical and food service markets, and to
phase out of its existing operations other than precision molds and
certain limited custom injection molding contracts.
As of August 10, 2000, $850,000 of the private placement has been
closed on. The Company has received commitments for most of the
additional debt financing and has placed deposits on the necessary
equipment and molds. However, the Company's ability to
successfully commence manufacture of its new product line, is
dependent upon BAP raising the balance of the private placement and
receiving the balance of commitments for the debt financing
necessary to complete the acquisition of the new manufacturing
equipment.
MATERIAL CHANGES IN FINANCIAL POSITION
The Company had working capital of approximately $192,000 at June
30, 2000 as compared to working capital of $224,000 at March 31,
2000. At June 30, 2000, the Company had cash and cash equivalents
of approximately $162,000 as compared to $259,000 at March 31,
2000. Operations used cash of approximately $152,000 which
included additional interest expense for the period of
approximately $31,000. As discussed above, during the three months
ended June 30, 2000, the Company realized net proceeds of $567,000
on long term debt financing, placed deposits on machinery and
equipment of $482,000 and paid down principal on long term debt and
capital leases of approximately $30,000. The result of the above
was a decrease in cash and cash equivalents of approximately
$97,000 for the three months ended June 30, 2000. The Company's
current ratio was 1.47 at June 30, 2000, and the Company is within
terms on all its obligations.
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, and outlooks for operating results. All forward-looking
statementsinvolve a number of risks and uncertainties that could
cause theactual results to differ materially from the projected
results,including problems that may arise on the part of third
partiesover 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, 2000.
Item 2 Change in Securities:
In connection with a private placement of the Company's 9%
Convertible Subordinated Promissory Notes, the Company's Board of
Directors has authorized the issuance of 6,000,000 of the Company's
unregistered, restricted common shares to members of Beres
Acquisition Partnership for services rendered and assistance in
entry into manufacture of a new product line.
Item 3 Default Upon Senior Securities:
None
Item 4 Submission of Matters to a Vote of Security Holders:
None
Item 5 Other Information:
None
Item 6 Exhibits and Reports on Form 8-K:
Form 8-K filed 05/12/00 - Item 1, Changes in Control
of Registrant and Item 5, Other Events.
<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: August 21, 2000 (Registrant)
/s/ Charles Beres, Jr.
Charles Beres, Jr., President
/s/ Joel Schonfeld
Joel Schonfeld, Chairman
of the Board
