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 28, 1997
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 April 10, 1997 - 3,203,763 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
PART I. Financial Information
Consolidated Balance Sheets
February 28, 1997 and November 30, 1996 1
Consolidated Statements of Income
First quarter ended
February 28, 1997 and 1996 2
Consolidated Statements of Cash Flows
First quarter ended
February 28, 1997 and 1996 3
Footnotes to Consolidated Financial Statements 4
Management's Discussion and Analysis or
Plan of Operation 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, 1996 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
1996, 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>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
</CAPTION>
<S> <C> <C>
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 17,725 $ 15,332
Receivables, less allowance for
doubtful accounts of $45,582
in 1997 and 1996 180,110 202,819
Receivables from affiliates and
related parties 494,830 464,655
Inventories 79,875 92,573
Prepaid expenses and deposits 22,639 28,481
------------ ------------
Total current assets 795,179 803,860
PROPERTY, PLANT AND EQUIPMENT, at cost 3,770,151 3,772,373
Less accumulated depreciation
and depletion (1,095,192) (1,053,114)
------------ ------------
2,674,959 2,719,259
INVESTMENT IN UNCONSOLIDATED AFFILIATES 4,929,370 4,864,179
OTHER ASSETS 55,710 55,710
------------ ------------
$ 8,455,218 $ 8,443,008
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 236,273 237,463
Trade accounts payable 273,530 267,863
Deferred obligations to related parties 2,123,045 2,046,358
Other current liabilities 546,503 547,101
------------ ------------
Total current liabilities 3,371,932 3,291,366
LONG-TERM DEBT, less current portion 1,131,777 1,183,199
DISCONTINUED OPERATIONS - L-Bar Product 973,246 973,246
STOCKHOLDERS' INVESTMENT:
Common stock, $1.00 par value.
Authorized 6,000,000 shares,
issued and outstanding 3,203,763 shares
in 1997 and 1996 3,203,763 3,203,763
Additional paid-in capital 7,458,718 7,458,718
Accumulated deficit (7,684,218) (7,667,284)
------------ ------------
Total stockholders' investment 2,978,263 2,995,197
$ 8,455,218 $ 8,443,008
</TABLE>
The accompanying notes are an integral part of these consolidated
statements. The 1997 and 1996 financial information is unaudited.
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIRST QUARTER ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
(UNAUDITED)
Three Months Ended
February 28 February 29
1997 1996
</CAPTION>
REVENUES:
<S> <C> <C>
Sales $ 278,277 $ 315,219
Investment income 4,720 7,160
Gains on sales:
Marketable securities - -
Property and equipment 1,000 -
Income from affiliates:
Equity in earnings 283,480 180,905
Consulting fees 15,000 15,000
Other 31 8,540
------------ ------------
Total revenues 582,508 526,823
COSTS AND EXPENSES:
Cost of sales 296,070 280,539
General and administration 206,959 174,815
Interest 41,211 38,315
Depreciation and amortization 55,202 50,540
------------ ------------
Total costs and expenses 599,442 544,209
Net loss $ (16,934) $ (17,386)
EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ (0.01) $ (0.01)
Weighted Average Number of Shares of
Common Stock Outstanding 3,203,763 3,157,333
</TABLE>
The accompanying notes are an integral part of these consolidated
statements. The 1997 and 1996 financial information is unaudited.
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIRST QUARTER ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
(UNAUDITED)
Three Months Ended
February 28 February 29
1997 1996
</CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss from continuing operations $ (16,934) $ (17,386)
Adjustments to reconcile net income
from continuing operations to net
cash provided by operating activities:
Depreciation and amortization 55,202 50,540
Equity in earnings of affiliates (303,200) (180,905)
Cash distribution from affiliates 238,009 34,580
Changes in assets and liabilities:
(Increase) in receivables (7,466) (1,397)
Decrease (increase) in inventories 12,698 (7,535)
Decrease in other current assets 5,842 8,790
Increase (decrease) in trade
accounts payable 5,667 (48,680)
Increase in accrued officer
salaries and directors fees 76,687 89,285
(Decrease) increase in other
current liabilities (598) 32,133
------------- ------------
Total adjustments 82,841 (23,189)
Net cash provided (used) by
operating activities 65,907 (40,575)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,902) (7,920)
------------- ------------
Net cash (used) by investing activities (10,902) (7,920)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in long-term debt (52,612) 29,900
------------- ------------
Net cash (used) provided by
financing activities (52,612) 29,900
Net increase (decrease) in cash
and cash equivalents $ 2,393 $ (18,595)
Cash and cash equivalents at beginning
of year 15,332 36,383
------------- ------------
Cash and cash equivalents at end
of the quarter $ 17,725 $ 17,788
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated
statements. The 1997 and 1996 financial information is unaudited.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
First quarter ended February 29, 1997 compared
with the first quarter ended February 29, 1996
During the first quarter ended February 28, 1997 the Company
had a net loss from operations of $16,934 or $0.01 per share as
compared to net loss from operations of $17,386 or $0.01 per
share for the same period last year.
The Company's revenues from continuing operations for the first
quarter were as $582,508 compared to $526,823 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 increased from last year from
$174,815 to $206,959. 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 28, 1997
Working capital decreased $89,277 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 $10,902 during this period.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In the matter of the Registrant and L-Bar Products vs Northwest
Alloys Inc. the discovery portion of the litigation is
proceeding. The Registrant is continuing its review of
discovery materials provided by Northwest Alloy's and is
awaiting the remainder of the materials, which are to be
provided by Northwest Alloys. The discovery process has been
delayed and is now scheduled to end in the fall of 1997.
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: April 10, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> NOV-30-1997 NOV-30-1996
<PERIOD-END> FEB-28-1997 FEB-29-1996
<CASH> 17,725 15,332
<SECURITIES> 0 0
<RECEIVABLES> 720,522 713,056
<ALLOWANCES> 45,582 45,582
<INVENTORY> 79,875 92,573
<CURRENT-ASSETS> 795,179 803,860
<PP&E> 3,770,151 3,772,373
<DEPRECIATION> 1,095,192 1,053,114
<TOTAL-ASSETS> 8,455,218 8,443,008
<CURRENT-LIABILITIES> 3,371,932 3,291,366
<BONDS> 0 0
0 0
0 0
<COMMON> 3,203,763 3,203,763
<OTHER-SE> (225,500) (208,566)
<TOTAL-LIABILITY-AND-EQUITY> 8,455,218 8,443,008
<SALES> 278,277 315,219
<TOTAL-REVENUES> 582,508 526,823
<CGS> 296,070 280,539
<TOTAL-COSTS> 558,231 505,894
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 558,231 50,894
<INCOME-PRETAX> (16,934) (17,386)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 41,211 38,315
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> (16,934) (17,306)
<NET-INCOME> 0 0
<EPS-PRIMARY> (0.01) (0.01)
<EPS-DILUTED> (0.01) (0.01)
</TABLE>
