U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 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. Employer
Incorporation or Organization) Identification No.)
20 First Plaza, Suite 308, Albuquerque, New Mexico 87102
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
505-247-2384
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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 8, 1996 - 3,203,763 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
PART I. Financial Information
Consolidated Balance Sheets
May 31, 1996 and November 30, 1995 1
Consolidated Statements of Income
Second quarter and six months ended
May 31, 1996 and 1995 2
Consolidated Statements of Cash Flows
Six months ended May 31, 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
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1996 AND NOVEMBER 30, 1995
(UNAUDITED)
</CAPTION>
<S> <C> <C>
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 18,419 $ 36,383
Receivables, less allowance for doubtful
accounts of $45,882 in 1996 and
$43,274 in 1995 251,421 185,757
Receivables from affiliates and related
parties 465,411 396,881
Inventories 168,092 112,551
Prepaid expenses and deposits 12,758 30,973
----------- -----------
Total current assets 916,101 762,545
PROPERTY, PLANT AND EQUIPMENT, at cost 3,759,593 3,554,738
Less accumulated depreciation and depletion (1,018,833) (919,317)
----------- -----------
2,740,760 2,635,421
INVESTMENT IN UNCONSOLIDATED AFFILIATES 4,532,593 4,170,727
ORGANIZATION COSTS, less accumulated
amortization of $21,460 in 1996 and
$20,750 in 1995 - 710
GOODWILL, less accumulated amortization
of $30,000 in 1996 and $29,750 in 1995 - 250
OTHER ASSETS 55,710 55,710
----------- -----------
$ 8,245,164 $ 7,625,363
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 219,882 145,005
Trade accounts payable 382,410 450,785
Deferred obligations to related parties 1,812,976 1,651,537
Other current liabilities 482,933 436,448
----------- -----------
Total current liabilities 3,090,782 2,876,356
LONG-TERM DEBT,less current portion 1,183,384 1,034,634
DISCONTINUED OPERATIONS - L-Bar Products 973,246 973,069
STOCKHOLDERS' INVESTMENT:
Common stock, $1.00 par value. Authorized
6,000,000 shares, issued and outstanding
3,203,763 shares in 1996 and 3,157,333 in
1995 3,203,763 3,157,333
Additional paid-in capital 7,458,718 7,458,718
Accumulated deficit (7,664,729 (7,874,747)
----------- -----------
Total stockholders' investment 2,997,752 2,741,304
$ 8,245,164 $ 7,625,363
</TABLE>
The accompanying notes are an integral part of these consolidated
statements. The 1996 and 1995 Financial Information is Unaudited.
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SECOND QUARTER AND SIX MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
Second Quarter Ended Six Months Ended
MAY 31 MAY 31
</CAPTION>
<S> <C> <C> <C> <C>
1996 1995 1996 1995
REVENUES:
Sales $ 476,105 $ 586,264 $ 791,323 $ 927,823
Contract settlement - 344,791 - 344,791
Investment income 252 - 332 -
Gain (loss) on sales:
Marketable securities - (1,590) - 16,128
Property and equipment - (39,352) - (38,552)
Income (loss) from affiliates:
Interest income 7,080 7,080 14,160 14,160
Equity in earnings (losses) 321,781 (74,019) 502,686 (6,270)
Consulting fees 15,000 15,000 30,000 30,000
Other 28 (889) 8,568 2,066
----------- ----------- ----------- ----------
820,246 837,285 1,347,069 1,290,146
COSTS AND EXPENSES:
Cost of sales 296,351 468,166 576,890 785,140
General and administration 210,372 232,606 385,187 429,624
Interest 36,183 29,344 74,498 59,277
Depreciation and amortization 49,936 37,310 100,476 77,772
----------- ----------- ----------- ----------
592,842 767,426 1,137,051 1,351,813
Net income (loss) $ 227,404 $ 69,859 $ 210,018 $ (61,667)
EARNINGS (LOSS) PER SHARE:
Income from continuing
operations $ 0.07 $ 0.02 $ 0.07 $ (0.02)
Weighted Average Number of Shares
of Common Stock Outstanding 3,169,004 3,061,057 3,169,004 3,061,057
</TABLE>
The accompanying notes are an integral part of these consolidated
statements. The 1996 and 1995 Financial Information is Unaudited.
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
</CAPTION>
Six Months Ended
May 31
<S> <C> <C>
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations $ 210,018 $ (61,667)
Adjustments to reconcile net income from
continuing operations to net cash provided
by operating activities:
Depreciation and amortization 100,476 77,772
Equity in (earnings) loss of affiliates (516,846) 6,270
Cash distribution from affiliates 154,980 27,144
Changes in assets and liabilities:
(Increase) decrease in receivables (134,194) (95,809)
(Increase) decrease in inventories (55,541) 13,732
Decrease in other current assets 18,215 8,163
(Decrease) increase in trade accounts payable (68,375) 169,096
Increase in accrued officer salaries 161,439 223,820
Increase in other current liabilities 46,485 56,414
------------ -----------
Total adjustments (293,361) 486,602
Net cash provided by operating activities (83,343) 424,935
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (204,855) (256,327)
Discontinued operations - L-Bar Products 177 (19,349)
------------ -----------
Net cash used by investing activities (204,678) (275,676)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in common stock issued 46,430 -
Increase (decrease) in short-term debt - 63,523
Increase long-term debt 223,627 107,249
------------ -----------
Net cash provided by financing activities 270,057 170,772
Net increase (decrease) in cash and cash
equivalents (17,964) 320,031
Cash and cash equivalents at beginning of year 36,383 22,940
Cash and cash equivalents at end of the quarter $ 18,419 $ 342,971
</TABLE>
The accompanying notes are an integral part of these consolidated
statements. The 1996 and 1995 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, 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 it would 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
Second quarter ended May 31, 1996 compared
with the second quarter ended May 31, 1995
During the second quarter ended May 31, 1996 the Company had a net income
from continuing operations of $227,404 or $0.07 per share as compared to
net income from continuing operations of $69,859 or $0.02 per share for
the same period last year.
The Company's revenues from continuing operations for the second quarter
were $820,246 as compared to $837,285 for the same period last year. The
revenues for this year show a reduction in sales which is offset by an
increase in equity earnings and the revenues for last year included a
contract settlement of $344,791. The general and administration costs
decreased from last year from $232,606 to $210,372. 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, 1996 compared
with the six months ended May 31, 1996
During the six months ended May 31, 1996 the Company had a net income from
continuing operations of $210,018 or $0.07 per share as compared to net
loss from continuing operations of $61,667 or $0.02 per share for the same
period last year.
The Company's revenues from continuing operations for the six months were
$1,347,069 as compared to $1,290,146 for the same period last year. The
revenues for this year show a reduction in sales which is offset by an
increase in equity earnings and the revenues for last year included a
contract settlement of $344,791. The general and administration costs
decreased from last year from $429,624 to $385,187. 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 May 31, 1996
Working capital decreased $60,870 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 $204,855 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 andAccounting
Officer and Authorized Officer)
Date: July 8, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> NOV-30-1996 NOV-30-1996
<PERIOD-END> MAY-31-1996 MAY-31-1996
<CASH> 18,419 18,419
<SECURITIES> 0 0
<RECEIVABLES> 762,714 762,714
<ALLOWANCES> (45,882) (45,882)
<INVENTORY> 168,092 168,092
<CURRENT-ASSETS> 916,101 916,101
<PP&E> 3,759,593 3,759,593
<DEPRECIATION> (1,018,833) (1,018,833)
<TOTAL-ASSETS> 8,245,164 8,245,164
<CURRENT-LIABILITIES> 3,090,782 3,090,782
<BONDS> 0 0
0 0
0 0
<COMMON> 3,203,763 3,203,763
<OTHER-SE> (206,011) (206,011)
<TOTAL-LIABILITY-AND-EQUITY> 8,245,164 8,245,164
<SALES> 791,323 476,105
<TOTAL-REVENUES> 1,347,069 820,246
<CGS> 576,890 296,351
<TOTAL-COSTS> 1,062,553 556,659
<OTHER-EXPENSES> 576,890 296,351
<LOSS-PROVISION> 1,062,553 592,842
<INTEREST-EXPENSE> 74,498 36,183
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 210,018 227,404
<DISCONTINUED> 0 0
<EXTRAORDINARY> 210,010 227,404
<CHANGES> 0 0
<NET-INCOME> 210,018 227,404
<EPS-PRIMARY> 0.07 0.07
<EPS-DILUTED> 0.07 0.07
</TABLE>