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 August 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
Incorporation or Organization) Identification No.)
20 First Plaza, Suite 308,
Albuquerque, New Mexico 87102
- ------------------------------- ----------
(Address of principal executive (Zip code)
offices)
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 October 10, 1995 - 3,157,333 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
PART I. Financial Information
Consolidated Balance Sheets
August 31, 1995 and November 30, 1994 1
Consolidated Statements of Income
Third quarter and nine months ended
August 31, 1995 and 1994 2
Consolidated Statements of Cash Flows
Nine months ended
August 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>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1995 AND NOVEMBER 30, 1994
(UNAUDITED)
</CAPTION>
<S> <C> <C>
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $3,197,911 $ 22,940
Marketable securities - 38,360
Receivables,less allowance for doubtful
accounts of $43,274 in 1995 and $69,382
in 1994 224,999 108,492
Receivables from affiliates and related
parties 355,935 302,016
Inventories 106,106 105,694
Prepaid expenses and deposits 54,511 18,159
Investment in limited partnership - 9,900
---------- ----------
Total current assets 939,462 605,561
PROPERTY, PLANT AND EQUIP, at cost 3,199,742 2,990,178
Less accumulated depreciation
and depletion (860,901) (896,356)
---------- ----------
2,338,841 2,093,822
INVESTMENT IN UNCONSOLIDATED AFFILIATES 4,452,528 4,530,393
ORGANIZATION COSTS, less accumulated
amortization of $20,224 in 1995
and $18,644 in 1994 1,236 8,596
GOODWILL, Less accumululated amortization
of $30,000 in 1995 and $26,750 in 1994 1,000 3,250
OTHER ASSETS 55,710 55,710
---------- ----------
$7,788,777 $7,297,332
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term debt related party $ 145,000 $ 145,000
Short-term debt 59,424 -
Current portion of long-term debt 109,828 117,408
Trade accounts payable 413,918 369,212
Deferred obligations to related parties 1,460,702 1,152,462
Other current liabilities 409,547 327,084
---------- ----------
Total current liabilities 2,598,419 2,111,166
LONG-TERM DEBT, less current portion 894,208 707,898
DISCONTINUED OPERATIONS - L-Bar Products 973,069 992,421
STOCKHOLDERS' INVESTMENT:
Common stock, $1.00 par value. Authorized
6,000,000 shares,issued and outstanding
3,157,333 shares in 1995 and
3,147,333 shares in 1994 3,157,333 3,147,333
Additional paid-in capital 7,458,718 7,458,718
Accumulated deficit (7,292,970) (7,120,204)
---------- ----------
Total stockholders'investment 3,323,081 3,485,847
---------- ----------
$7,788,777 $7,297,332
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
The 1995 and 1994 Financial Information is Unaudited.
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
AUGUST 31, 1995 AND 1994
(UNAUDITED)
Third Quarter Ended Nine Months Ended
AUGUST 31 AUGUST 31
1995 1994 1995 1994
</CAPTION>
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 398,170 $ 461,585 $1,325,993 $1,055,113
Contract settlement - - 344,791 -
Investment income 7,084 6,600 21,244 19,800
Gain (loss) on sales:
Marketable securities - (1,959) 16,128 (16,959)
Property and equipment - - (38,552) -
Income (loss) from affiliates:
Equity in earnings (53,269) 73,955 (59,539) 89,887
Consulting fees 15,000 12,500 45,000 86,500
Other (110) 76 1,956 293
---------- ---------- ---------- ----------
366,875 552,757 1,657,021 1,234,634
COSTS AND EXPENSES:
Cost of sales 218,631 279,237 1,003,771 831,493
General and administration 181,576 192,045 611,200 596,071
Interest 30,126 56,543 89,403 113,867
Abandonment of assets 8,531 - 8,531 -
Depreciation and amortization 39,110 31,809 116,883 91,357
---------- ---------- ---------- ----------
477,974 559,634 1,829,787 1,632,788
Net gain (loss) $ (111,099)$ (6,877) $ (172,766) $ (398,154)
EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ (0.04) $ (0.00) $ (0.05) $ (0.14)
Weighted Average Number of Shares
of Common Stock Outstanding 3,149,854 2,805,043 3,149,854 2,805,043
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
The 1995 and 1994 Financial Information is Unaudited.
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
(UNAUDITED)
Nine Months Ended
August 31
1995 1994
</CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations $ (172,766) $ (398,054)
Adjustments to reconcile net income from
continuing operations to net cash provided
by operating activities:
Abandonment Canadian assets 8,531 -
Depreciation and amortization 116,882 91,357
Equity in loss (earnings) of affiliates 59,421 (89,987)
Increase in interest receivable from affiliate (21,240) (19,800)
Cash distribution from affiliates 39,684 198,367
Loss on disposal of investment - 16,959
Changes in assets and liabilities:
(Increase) decrease in trade receivables (170,426) 27,487
(Increase) decrease in inventories (412) 34,454
Decrease in other current assets 11,908 5,647
Increase (Decrease) in trade accounts payable 44,706 (31,188)
Increase in accrued officer salaries 308,240 246,092
Increase in other current liabilities 82,463 76,411
---------- ----------
Total adjustments 479,757 555,799
Net cash provided by operating activities 306,991 157,745
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 8,141 -
Capital expenditures (360,822) (96,074)
Discontinued operations - L-Bar Products (19,352) (53,055)
---------- ----------
Net cash used by investing activities (380,174) (140,988)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Capital Stock for services 10,000 -
Increase (decrease) in short-term debt 59,424 (31,388)
Increase (decrease)in long-term debt 178,730 (77,588)
---------- ----------
Net cash provided (used) by
financing activities 248,154 (108,976)
---------- ----------
Net increase (decrease)
in cash and cash equivalents 174,971 (92,219)
Cash and cash equivalents at beginning of year 22,940 181,115
Cash and cash equivalents at end of the quarter $ 197,911 $ 88,896
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 24,919 $ 29,948
</TABLE>
The accompanying notes are an integral part of these consolidated
statements. The 1995 and 1994 Financial Information is Unaudited.
<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>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Third quarter ended August 31, 1995 compared
with the third quarter ended August 31, 1994
During the third quarter ended August 31, 1995 the Company had
a net loss of $111,099 or $0.04 per share as compared to net
loss of $6,877 or $0.002 per share for the same period last year.
The Company's revenues for the third quarter were $366,875 as
compared to $522,757 for the same period last year. For the
quarter the revenues decreased because of decreases in sales and
equity earnings and the general and administration costs
decreased from $192,045 to $181,576. 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.
Nine months ended Auugust 31, 1995 compared
with the nine months ended August 31, 1994
During the nine months ended August 31, 1995 the Company had a
net loss of $172,766 or $0.05 per share as compared to net loss
of $398,154 or $0.14 per share for the same period last year.
The Company's revenues for the nine months were $1,657,021 as
compared to $1,124,634 for the same period last year. The
revenues increased primarily because of increases in sales and a
one time settlement of a contract, which were offset by a
reduction in equity earnings. For the nine months the general
and administration costs increased slightly from $596,071 to
$611,200. 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 Resources
Period from December 1, 1995 to August 31, 1995
Working capital decreased by $153,352 for the nine 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 $360,822 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
Not Applicable
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: October 10, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
UNAUDITED
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> AUG-31-1995
<CASH> 197,911
<SECURITIES> 0
<RECEIVABLES> 224,999
<ALLOWANCES> 0
<INVENTORY> 106,106
<CURRENT-ASSETS> 939,462
<PP&E> 3,199,742
<DEPRECIATION> (860,901)
<TOTAL-ASSETS> 7,788,777
<CURRENT-LIABILITIES> 2,598,419
<BONDS> 0
<COMMON> 3,157,333
0
0
<OTHER-SE> 165,748
<TOTAL-LIABILITY-AND-EQUITY> 7,788,777
<SALES> 398,170
<TOTAL-REVENUES> 366,875
<CGS> 218,631
<TOTAL-COSTS> 447,848
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,126
<INCOME-PRETAX> (111,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> (111,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (111,099)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
