U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly report under Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the quarterly period ended May 31, 1995
Commission file number 0-3492
RESERVE INDUSTRIES CORPORATION
(Name of Small Business Issuer in its charter)
NEW MEXICO 85-0128783
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
20 First Plaza, Suite 308, Albuquerque, New Mexico 87102
(Address of principal executive offices) (Zip Code)
505-247-2384
Issuer's telephone number, including area code
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 and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
State the number of shares of outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date. As of July 13, 1995 - 3,157,333 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
PART I. Financial Information
Consolidated Balance Sheets
May 31, 1995 and November 30, 1994 1
Consolidated Statements of Income
Second quarter and six months ended
May 31, 1995 and 1994 2
Consolidated Statements of Cash Flows
Six months ended
May 31, 1995 and 1994 3
Footnotes to Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. Other Information 6
<PAGE>
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying statements, which should be read in conjunction
with the Consolidated Financial Statements included in the
November 30, 1994 fiscal year end Annual Report filed on Form
10-KSB, are unaudited but have been prepared in the ordinary
course of business for the purpose of providing information with
respect to the interim periods, and are subject to audit at the
close of the year. However, it is the opinion of the management
of the Company that all adjustments (none of which were other
than normal recurring accruals) necessary for a fair
presentation of such periods have been included.
The Consolidated Financial Statements prepared for fiscal years
1994, 1993, 1992 and 1991 were unaudited because the Company
elected to not incur the expense of an audit and to conserve its
cash for other corporate requirements.
In November 1992, the Company determined to discontinue the
operations of L-Bar Products Incorporated (L-Bar), a wholly
owned subsidiary.
<PAGE>
<TABLE>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1995 AND NOVEMBER 30, 1994
(UNAUDITED)
<CAPTION>
ASSETS 1995 1994
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 342,971 $ 22,940
Marketable securities 28,608 38,360
receivables, less allowance for doubtful
accounts of $69,382 in 1995 and 1994 184,457 108,492
Receivables from affiliates and related parties 321,860 302,016
Inventories 91,962 105,694
Prepaid expenses and deposits 29,648 18,159
Investment in limited partnership - 9,900
Total current assets 999,506 605,561
PROPERTY, PLANT AND EQUIPMENT, at cost 3,093,045 2,990,178
Less accumulated depreciation and depletion (818,115) (896,356)
2,274,930 2,093,822
INVESTMENT IN UNCONSOLIDATED AFFILIATES 4,496,979 4,530,393
ORGANIZATION COSTS, less accumulated
amortization of $19,697 in 1995 and
$18,644 in 1994 7,543 8,596
GOODWILL, less accumulated amortization
of $28,250 in 1995 and $26,750 in 1994 1,750 3,250
OTHER ASSETS 55,710 55,710
$ 7,836,418 $ 7,297,332
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term debt related party $ 145,000 $ 145,000
Short-term debt 63,523 -
Current portion of long-term debt 126,287 117,408
Trade accounts payable 538,308 369,212
Deferred obligations to related parties 1,376,282 1,152,462
Other current liabilities 383,498 327,084
Total current liabilities 2,632,898 2,111,166
LONG-TERM DEBT, less current portion 806,268 707,898
DISCONTINUED OPS - L-Bar Products 973,072 992,421
STOCKHOLDERS' INVESTMENT:
Common stock, $1.00 par value. Authorized
6,000,000 shares, issued and outstanding
3,147,333 shares in 1995 and 1994 3,147,333 3,147,333
Additional paid-in capital 7,458,718 7,458,718
Accumulated deficit (7,181,871) (7,120,204)
Total stockholders'investment 3,424,180 3,485,847
$ 7,836,418 $ 7,297,332
The accompanying notes are an integral part of these consolidated
statements. The 1995 and 1994 Financial Information is Unaudited.
</TABLE>
<PAGE>
<TABLE>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
MAY 31, 1995 AND 1994
(UNAUDITED
<CAPTION>
Second Quarter Ended Six Months Ended
MAY 31 MAY 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 586,264 $ 354,344 $ 927,823 $ 593,528
Contract settlement 344,791 - 344,791 -
Investment income 7,080 6,600 14,160 13,200
Gain (loss) on sales:
Marketable securities (1,590) (15,000) 16,128 (15,000)
Property and equipment (39,352) - (38,552) -
Income (loss) from affiliates:
Equity in earnings (74,019) (6,744) (6,270) 16,032
Consulting fees 15,000 35,500 30,000 74,000
Other (889) 86 2,066 217
837,285 374,786 1,290,146 681,977
COSTS AND EXPENSES:
Cost of sales 468,166 253,314 785,140 552,256
General and administration 232,606 199,701 429,624 404,026
Interest 29,344 28,398 59,277 57,324
Depreciation and amortization 37,310 30,521 77,772 59,548
767,426 511,934 1,351,813 1,073,154
Net income (loss) $ 69,859 $ (137,148) $ (61,667 $(391,177)
EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ 0.02 $ (0.05) $ (0.02) $ (0.14)
Weighted Average Number of Shares
of Common Stock Outstanding 3,061,057 2,805,043 3,061,057 2,805,043
The accompanying notes are an integral part of these consolidated
statements. The 1995 and 1994 Financial Information is Unaudited.
</TABLE>
<PAGE>
<TABLE>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
Six Months Ended
May 31
<S> <C> <C>
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations $ (61,667) $ (391,177)
Adjustments to reconcile net income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization 77,772 59,548
Equity in loss (earnings) of affiliates 6,270 (16,032)
Cash distribution from affiliates 27,144 93,021
Changes in assets and liabilities:
(Increase) decrease in trade receivables (95,809) 53,723
Decrease in inventories 13,732 31,582
Decrease in other current assets 8,163 22,397
Increase in trade accounts payable 169,096 11,139
Increase in accrued officer
salaries & directors fees 223,820 157,374
Increase in other current liabilities 56,414 44,886
Total adjustments 486,602 457,638
Net cash provided by operating
activities 424,935 66,461
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (256,327) (63,268)
Discontinued operations - L-Bar Products (19,349) (48,800)
Net cash used by investing activities (275,676) (112,068)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt 63,523 (31,388)
Increase (decrease) long-term debt 107,249 (51,725)
Net cash provided (used) by financing activities 170,772 (83,113)
Net increase (decrease) in cash and cash
equivalents 320,031 (128,720)
Cash and cash equivalents at beginning of year 22,940 181,115
Cash and cash equivalents at end of the quarter $ 342,971 $ 52,395
The accompanying notes are an integral part of these consolidated
statements. The 1995 and 1994 Financial Information is Unaudited.
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Second quarter ended May 31, 1995 compared
with the second quarter ended May 31, 1994
During the second quarter ended May 31, 1995 the Company had a
net income of $69,859 or $0.02 per share as compared to net loss
of $137,148 or $0.05 per share for the same period last year.
The Company's revenues for the second quarter were $837,285 as
compared to $374,786 for the same period last year. The
revenues increased because of increases in sales and a one time
settlement of a contract and this was offset by reductions in
equity earnings and losses on disposal of equipment. The
general and administration costs increased from $199,704 to
$232,606. Some of the expenses contained in the general and
administrative costs pertaining to salaries of the officers and
deferred compensation have been accrued but not paid as the
Company is conserving its cash.
Six months ended May 31, 1995 compared
with the six months ended May 31, 1994
During the six months ended May 31, 1995 the Company had a net
loss of $61,667 or $0.02 per share as compared to net loss of
$391,177 or $0.14 per share for the same period last year.
The Company's revenues for the six months were $1,290,146 as
compared to $681,977 for the same period last year. The
revenues increased primarily because of increases in sales and a
one time settlement of a contract. The general and
administration costs increased from $404,026 to $429,624. Some
of the expenses contained in the general and administrative
costs pertaining to salaries of the officers and deferred
compensation have been accrued but not paid as the Company is
conserving its cash.
Liquidity and Capital Resource
Period from December 1, 1995 to May 31, 1995
Working capital decreased $127,787 for the six months. The
decrease in working capital includes salaries, directors fees,
deferred compensation and certain interest charges which have
been accrued but not paid. The Company made net capital
improvement expenditures of $256,327 during this period.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
In April 1995, L-Bar Products, Inc. (currently in Bankruptcy Chapter 7
liquidation), a former plant manager and a former site manager were
indicted for allegedly burying hazardous chemicals at L-Bar's Chewelah, WA
facility. In May 1992 Federal officals dug up 80 mostly empty acid barrels
buried at the Chewelah plant site. L-Bar Products, Inc. has not yet entered
a plea before the Court and the Bankruptcy Trustee is handling this matter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports - none
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RESERVE INDUSTRIES CORPORATION
(Registrant)
/s/ William J. Melfi
William J. Melfi, Vice President Finance
and Administration
(Principal Financial and Accounting
Officer and Authorized Officer)
Date: July 13, 1995
