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, 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 July 11, 1997 - 3,203,763 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
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PART I. Financial Information
Consolidated Balance Sheets
May 31, 1997 and November 30, 1996 1
Consolidated Statements of Income
Second quarter ended
May 31, 1997 and 1996 2
Consolidated Statements of Cash Flows
Second quarter ended
May 31, 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>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
</CAPTION>
<S> <C> <C>
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 442,762 $ 15,332
Receivables, less allowance for doubtful
accounts of $45,582 in 1997 and 1996 214,633 202,819
Receivables from affiliates and related parties 547,605 464,655
Inventories 102,865 92,573
Prepaid expenses and deposits 34,839 28,481
----------- ------------
Total current assets 1,342,704 803,860
PROPERTY, PLANT AND EQUIPMENT, at cost 3,761,454 3,772,373
Less accumulated depreciation and depletion (1,138,010) (1,053,114)
----------- ------------
2,623,444 2,719,259
INVESTMENT IN UNCONSOLIDATED AFFILIATES 4,486,371 4,864,179
OTHER ASSETS 55,710 55,710
------------ ------------
$ 8,508,229 $ 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 223,914 237,463
Trade accounts payable 215,134 267,863
Deferred obligations to related parties 2,172,800 2,046,358
Other current liabilities 589,844 547,101
------------ ------------
Total current liabilities 3,394,273 3,291,366
LONG-TERM DEBT, less current portion 1,095,000 1,183,199
DISCONTINUED OPERATIONS - L-Bar Products 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 (7,616,771) (7,667,284)
------------ ------------
Total stockholders' investment 3,045,710 2,995,197
$ 8,508,229 $ 8,443,008
The accompanying notes are an integral part of these consolidated
statements. The 1997 and 1996 financial information is unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SECOND QUARTER AND SIX MONTHS ENDED MAY 31, 1997 AND 1996
(UNAUDITED)
</CAPTION>
Second Quarter Ended Six Months Ended
MAY 31 MAY 31
<S> <C> <C> <C> <C>
1997 1996 1997 1996
REVENUES:
Sales $ 456,035 $ 476,105 $ 734,312 $ 791,323
Investment income - 252 - 332
Gain (loss) on sales:
Property and equipment 10 - 1,010 -
Income (loss) from affiliates:
Interest Income (29) 7,080 4,691 14,160
Equity in earnings 200,542 321,781 484,022 502,686
Consulting fees 15,000 15,000 30,000 30,000
Other 36 28 67 8,568
----------- ---------- ---------- ----------
Total revenues 671,594 820,246 1,254,102 1,347,069
COSTS AND EXPENSES:
Cost of sales 312,922 296,351 608,992 576,890
General and administration 195,232 210,372 402,191 385,187
Interest 40,837 36,183 82,048 74,498
Depreciation and amortization 55,155 49,936 110,357 100,476
----------- ---------- ---------- ----------
Total costs and expenses 604,146 592,842 1,203,588 1,137,051
Net income (loss) $ 67,448 $ 227,404 $ 50,514 $ 210,018
EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ 0.02 $ 0.07 $ 0.02 $ 0.07
Weighted Average Number of Shares
of Common Stock Outstanding 3,203,763 3,169,004 3,203,763 3,169,004
The accompanying notes are an integral part of these consolidated
statements. The 1997 and 1996 Financial Information is unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 1997 AND 1996
(UNAUDITED)
</CAPTION>
Six Months Ended
May 31
<S> <C> <C>
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations $ 50,514 $ 210,018
Adjustments to reconcile net income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization 110,357 100,476
Equity in (earnings) loss of affiliates (488,713) (516,846)
Cash distribution from affiliates 866,521 154,980
Changes in assets and liabilities:
(Increase) in receivables (94,764) (134,194)
(Increase) in inventories (10,292) (55,541)
(Increase) decrease in other current assets (6,358) 18,215
(Decrease) trade accounts payable (52,729) (68,375)
Increase in accrued officer salaries 126,442 161,439
Increase in other current liabilities 47,743 46,485
----------- ------------
Total adjustments 498,207 (293,361)
Net cash provided (used) by operating
activities 548,721 (83,343)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures Discontinued operations - L-Bar Products - 177
----------- ------------
Net cash (used) by investing activities (19,543) (204,678)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in common stock issued - 46,430
(Decrease) increase long-term debt (101,748) 223,627
----------- ------------
Net cash (used) provided by financing
activities (101,748) 270,057
Net increase (decrease) in cash and cash
equivalents 427,430 (17,964)
Cash and cash equivalents at beginning of year 15,332 36,383
Cash and cash equivalents at end of the quarter $ 442,762 $ 18,419
The accompanying notes are an integral part of these consolidated
statements. The 1997 and 1996 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, 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>
Item 2. Management's Discussion and Analysis or Plan of
Operation
Results of Operations
Second quarter ended May 31, 1997 compared
with the second quarter ended May 31, 1996
For the second quarter ended May 31, 1997 the Company had net
income from operations of $67,448 or $0.02 per share as
compared to net income from operations of $227,404 or $0.07 per
share for the same period last year.
The Company's revenues for the second quarter were $671,594 as
compared to $820,246 for the same period last year. The
revenues decreased because of decreased equity earnings and a
small decrease in sales. The general and administration costs
decreased from last year from $210,372 to $195,232. 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, 1997 compared
with the six months ended May 31, 1996
For the six months ended May 31, 1997 the Company had net
income from operations of $50,514 or $0.02 per share as
compared to net income from operations of $210,018 or $0.07 per
share for the same period last year.
The Company's revenues for the six months were $1,254,102 as
compared to $1,347,069 for the same period last year. The
revenues decreased because of decreased equity earnings and a
small decrease in sales. The general and administration costs
increased from last year from $385,187 to $402,191. 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, 1997
Working capital increased $435,937 for the six months partly as
a result of a payment in loans from unconsolidated affiliates.
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 $19,543 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: July 11, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> NOV-30-1997 NOV-30-1996 NOV-30-1997 NOV-30-1996
<PERIOD-END> MAY-31-1997 MAY-31-1996 MAY-31-1997 MAY-31-1996
<CASH> 442,762 15,332 442,762 15,332
<SECURITIES> 0 0 0 0
<RECEIVABLES> 807,820 713,056 807,820 713,056
<ALLOWANCES> (45,582) (45,582) (45,582) (45,582)
<INVENTORY> 102,865 92,573 102,865 92,573
<CURRENT-ASSETS> 1,342,704 803,860 1,342,704 803,860
<PP&E> 3,761,454 3,772,373 3,761,454 3,772,373
<DEPRECIATION> (1,138,010) (1,053,114) (1,138,010) (1,053,114)
<TOTAL-ASSETS> 8,508,229 8,443,008 8,508,229 8,443,008
<CURRENT-LIABILITIES> 3,394,273 3,291,366 3,394,273 3,291,366
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 3,203,763 3,203,763 3,203,763 3,203,763
<OTHER-SE> (158,053) (208,566) (158,053) (208,566)
<TOTAL-LIABILITY-AND-EQUITY> 8,508,229 8,443,008 8,508,229 8,443,008
<SALES> 456,035 476,105 734,312 791,323
<TOTAL-REVENUES> 671,594 820,246 1,254,102 1,347,069
<CGS> 312,922 296,351 608,992 576,890
<TOTAL-COSTS> 563,309 556,659 1,121,540 1,062,553
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 40,837 36,183 82,048 74,498
<INCOME-PRETAX> 67,448 227,404 50,514 210,018
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> 67,448 227,404 50,514 210,018
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 67,448 227,404 50,514 210,018
<EPS-PRIMARY> 0.02 0.07 0.02 0.07
<EPS-DILUTED> 0.02 0.07 0.02 0.07
</TABLE>
