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 February 29, 1996
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. EmployerIdentification 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 April 10, 1996 - 3,203,763 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
PART I. Financial Information
Consolidated Balance Sheets
February 29, 1996 and November 30, 1995 1
Consolidated Statements of Income
First quarter ended
February 29, 1996 and 1995 2
Consolidated Statements of Cash Flows
First quarter ended
February 29, 1996 and 1995 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
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<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 1996 AND NOVEMBER 30, 1995
(UNAUDITED)
ASSETS 1996 1995
CURRENT ASSETS:
</CAPTION>
<S> <C> <C>
Cash and cash equivalents $ 17,788 $ 36,383
Receivables, less allowance for
doubtful accounts of $45,882
in 1996 and $43,274 in 1995 162,481 185,757
Receivables from affiliates
and related parties 421,554 396,881
Inventories 120,086 112,551
Prepaid expenses and deposits 22,183 30,973
----------- -----------
Total current assets 744,092 762,545
PROPERTY, PLANT AND EQUIPMENT,
at cost 3,562,659 3,554,738
Less accumulated depreciation
and depletion (969,075) (919,317)
----------- -----------
2,593,584 2,635,421
INVESTMENT IN UNCONSOLIDATED
AFFILIATES 4,317,052 4,170,727
ORGANIZATION COSTS, less accumulated
amortization of $21,283 in 1996
and $20,750 in 1995 177 710
GOODWILL, less accumulated amortization
of $30,000 in 1996 and $29,750 in 1995 - 250
OTHER ASSETS 55,710 55,710
----------- -----------
$ 7,710,438 $ 7,624,653
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LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term debt related party $ 145,000 $ 145,000
Short-term debt 47,581 47,581
Current portion of long-term debt 159,886 145,005
Trade accounts payable 402,105 450,785
Deferred obligations to related
parties 1,740,822 1,651,537
Other current liabilities 468,581 436,448
----------- -----------
Total current liabilities 2,963,975 2,876,356
LONG-TERM DEBT, less current portion 1,049,653 1,034,634
DISCONTINUED OPERATIONS - L-Bar Products 973,069 973,069
STOCKHOLDERS' INVESTMENT:
Common stock, $1.00 par value.
Authorized 6,000,000 shares, issued
and outstanding 3,157,333 shares
in 1996 and 1995 3,157,333 3,157,333
Additional paid-in capital 7,458,718 7,458,718
Accumulated deficit (7,892,133) (7,874,747)
----------- -----------
Total stockholders' investment 2,723,918 2,741,304
$ 7,710,615 $ 7,625,363
The accompanying notes are an integral part of these consolidated
statements. The 1996 and 1995 Financial Information is Unaudited.
</TABLE>
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<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIRST QUARTER ENDED FEBRUARY 29, 1996 AND 1995
(UNAUDITED)
Three Months Ended
February 29
1996 1995
REVENUES:
</CAPTION>
<S> <C> <C>
Sales $ 315,219 $ 341,559
Investment income 7,160 7,080
Gains on sales:
Marketable securities - 17,718
Property and equipment - 800
Income from affiliates:
Equity in earnings 180,905 67,749
Consulting fees 15,000 15,000
Other 8,540 2,955
----------- -----------
Total revenues 526,823 452,861
COSTS AND EXPENSES:
Cost of sales 280,539 316,974
General and administration 174,815 197,018
Interest 38,315 29,933
Depreciation and amortization 50,540 40,462
----------- -----------
Total costs and expenses 544,209 584,387
Net loss $ (17,386) $ (131,526)
EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ (0.01) $ (0.04)
Weighted Average Number of Shares of
Common Stock Outstanding 3,157,333 2,974,781
The accompanying notes are an integral part of thes consolidated
statements. The 1996 and 1995 Financial Information is Unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIRST QUARTER ENDED FEBRUARY 29, 1996 AND 1995
(UNAUDITED)
Three Months Ended
February 29
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
</CAPTION>
<S> <C> <C>
Net loss from continuing operations $ (17,386) $ (131,526)
Adjustments to reconcile net income
from continuing operations to net
cash provided by operating activities:
Depreciation and amortization 50,540 40,462
Cash from sale of securities - 27,618
Gain on sale of securities - (17,718)
Cash from sale of equipment - 800
Gain on sale of equipment - (800)
Equity in earnings of affiliates (180,905) (74,829)
Cash distribution from affiliates 34,580 25,000
Changes in assets and liabilities:
(Increase) decrease in trade receivables (1,397) 21,561
(Increase) in inventories (7,535) (11,780)
Decrease (increase) in other current assets 8,790 (4,106)
(Decrease) increase in trade accounts payable (48,680) 31,548
Increase in accrued officer salaries
and directors fees 89,285 66,899
Increase in other current liabilities 32,133 72,275
------------ ------------
Total adjustments (23,189) 176,930
Net cash (used) provided by operating
activities (40,575) 45,404
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,920) (135,486)
Discontinued operations - L-Bar Products - (13,161)
------------ ------------
Net cash (used) by investing activities (7,920) (148,647)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt - 69,733
Increase in long-term debt 29,900 20,542
------------ ------------
Net cash provided by financing activities 29,900 90,275
Net decrease in cash and cash
equivalents $ (18,595) $ (12,968)
Cash and cash equivalents at beginning of year 36,383 22,940
Cash and cash equivalents at end of the
quarter $ 17,788 $ 9,972
The accompanying notes are an integral part of these consolidated
statements. The 1996 and 1995 Financial Information is Unaudited.
</TABLE>
<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, 1995 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
1995,1994, 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
First quarter ended February 29, 1996 compared
with the first quarter ended February 28, 1995
During the first quarter ended February 29, 1996 the Company
had a net loss from continuing operations of $17,386 or $0.01
per share as compared to net loss from continuing operations of
$131,526 or $0.04 per share for the same period last year.
The Company's revenues from continuing operations for the first
quarter were $526,823 as compared to $452,861 for the same
period last year. The revenues increased because of increase
equity earnings which was offset by a decrease in sales. The
general and administration costs decreased from last year from
$197,018 to $174,815. 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, 1996 to February 29, 1996
Working capital decreased $106,072 for the three 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 $7,920 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)
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<PERIOD-END> FEB-29-1996
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<ALLOWANCES> (45882)
<INVENTORY> 120086
<CURRENT-ASSETS> 744092
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<CGS> 280539
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