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, 1998
Commission file number 0-3492
RESERVE INDUSTRIES CORPORATION
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(Name of Small Business Issuer in its charter)
NEW MEXICO 85-0128783
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
20 First Plaza, Suite 308, Albuquerque, New Mexico 87102
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(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 April 14, 1998 - 3,203,763 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
PART I. Financial Information
Consolidated Balance Sheets
February 28, 1998 and November 30, 1997 1
Consolidated Statements of Income
First quarter ended
February 28, 1998 and 1997 2
Consolidated Statements of Cash Flows
First quarter ended
February 28, 1998 and 1997 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
1997, 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.
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<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1998 AND NOVEMBER 30, 1997
(UNAUDITED)
</CAPTION>
<S> <C> <C>
ASSETS 1998 1997
CURRENT ASSETS:
Cash and cash equivalents $ 358,491 $ 653,906
Receivables, less allowance for doubtful accounts
of $46,332 in 1998 and 1997 158,313 159,751
Receivables from affiliates and related parties 514,214 516,430
Inventories 124,653 99,493
Prepaid expenses and deposits 22,325 28,048
----------- -----------
Total current assets 1,177,996 1,457,628
PROPERTY, PLANT AND EQUIPMENT, at cost 4,142,480 4,119,171
Less accumulated depreciation and depletion (1,312,551) (1,252,112)
----------- -----------
Total property, plant and equipment 2,829,929 2,867,059
INVESTMENT IN UNCONSOLIDATED AFFILIATES 5,435,405 5,377,316
OTHER ASSETS - -
Total assets $ 9,443,330 $ 9,702,003
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 942,979 943,979
Trade accounts payable 131,721 396,985
Deferred obligations to related parties 2,372,287 2,340,310
Other current liabilities 658,721 593,560
----------- -----------
Total current liabilities 4,298,289 4,467,415
LONG-TERM DEBT, less current portion 224,383 269,464
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 1998 and 1997 3,203,763 3,203,763
Additional paid-in capital 7,458,718 7,458,718
Accumulated deficit (6,715,069) (6,670,603)
----------- -----------
Total stockholders'investment 3,947,412 3,991,878
Total liabilities and stockholders' investment $ 9,443,330 $ 9,702,003
The accompanying notes are an integral part of these consolidated
statements. The 1998 and 1997 financial information is unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIRST QUARTER ENDED FEBRUARY 28, 1998 AND 1997
(UNAUDITED)
Three Months Ended
February 28 February 28
1998 1997
</CAPTION>
REVENUES:
<S> <C> <C>
Sales $ 286,750 $ 278,277
Investment income 3,891 4,720
Gains on sales of property and equipment - 1,000
Income from affiliates:
Equity in earnings 239,900 283,480
Consulting fees 15,000 15,000
Other 287 31
----------- -----------
Total revenues 545,828 582,508
COSTS AND EXPENSES:
Cost of sales 289,811 296,070
General and administration 201,355 206,959
Interest 36,506 41,211
Depreciation and amortization 62,622 55,202
----------- -----------
Total costs and expenses 590,294 599,442
Income (loss) from continuing operations (44,466) (16,934)
PROVISION FOR INCOME TAXES: - -
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Income (loss) before extraordinary item (44,466) (16,934)
EXTRAORDINARY ITEM:
Reduction of income taxes from
net operating loss carryforward - -
----------- -----------
Net income (loss) $ (44,466) $ (16,934)
EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary item $ (0.01) $ (0.01)
Extraordinary item - -
----------- -----------
Net income (loss) per share $ (0.01) $ (0.01)
Weighted Average Number of Shares of
Common Stock Outstanding 3,203,763 3,203,763
The accompanying notes are an integral part of these consolidated
statements. The 1998 and 1997 financial information is unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIRST QUARTER ENDED FEBRUARY 28, 1998 AND 1997
(UNAUDITED)
Three Months Ended
February 28 February 28
1998 1997
</CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from continuing operations $ (44,466) $ (16,934)
Adjustments to reconcile net income from
continuing operations to net cash provided by
operating activities:
Depreciation and amortization 62,222 55,202
Equity in earnings of affiliates (254,900) (303,200)
Cash distribution from affiliates 196,811 238,009
Changes in assets and liabilities:
Decrease (increase) in receivables 3,654 (7,466)
(Increase) decrease in inventories (25,160) 12,698
Decrease in other current assets 5,723 5,842
(Decrease) increase in trade accounts payable (265,264) 5,667
Increase in accrued officers salaries
and directors fees 31,977 76,687
Increase (decrease) in other current liabilities 65,160 (598)
----------- -----------
Total adjustments (179,777) 82,841
Net cash (used) provided by operating activities (224,243) 65,907
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,091) (10,902)
----------- -----------
Net cash (used) by investing activities (25,091) (10,902)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) in long-term debt (46,081) (52,612)
----------- ----------
Net cash (used) by financing activities (46,081) (52,612)
Net (decrease) increase in cash
and cash equivalents $ (295,415) $ 2,393
Cash and cash equivalents at the beginning
of the year 653,906 15,332
----------- ----------
Cash and cash equivalents at the end of the quarter $ 358,491 $ 17,725
The accompanying notes are an integral part of these consolidated
statements. The 1998 and 1997 financial information is unaudited.
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
First quarter ended February 29, 1998 compared
with the first quarter ended February 29, 1997
During the first quarter ended February 28, 1998 the Company had
a net loss from operations of $44,466 or $0.01 per share as
compared to net loss from operations of $16,934 or $0.01 per
share for the same period last year.
The Company's revenues from continuing operations for the first
quarter were $545,828 as compared to $582,508 for the same
period last year. The revenues decreased because of a decrease
equity earnings which was offset by an increase in sales. The
general and administration costs decreased from last year to
$201,355 from $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, 1997 to February 28, 1998
Working capital decreased $110,506 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 $25,091 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 Registrant is continuing its review of
discovery materials provided by Northwest Alloy's. Northwest
Alloys and its parent company Alcoa have not fully complied with
the Registrant's discovery request. The Registrant is
continuing its efforts to obtain all of the applicable documents.
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
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William J. Melfi, Vice President
Finance and Administration (Principal
Financial and Accounting Officer
and Authorized Officer)
Date: April 14, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> NOV-30-1998 NOV-30-1997
<PERIOD-END> FEB-28-1998 FEB-28-1997
<CASH> 358,491 653,906
<SECURITIES> 0 0
<RECEIVABLES> 718,859 722,513
<ALLOWANCES> 46,332 46,332
<INVENTORY> 124,653 99,493
<CURRENT-ASSETS> 1,177,996 1,457,628
<PP&E> 4,142,480 4,119,171
<DEPRECIATION> (1,312,551) (1,252,112)
<TOTAL-ASSETS> 9,443,330 9,702,003
<CURRENT-LIABILITIES> 4,298,289 4,467,415
<BONDS> 0 0
0 0
0 0
<COMMON> 3,203,763 3,203,763
<OTHER-SE> 743,649 788,115
<TOTAL-LIABILITY-AND-EQUITY> 9,443,330 9,702,003
<SALES> 286,750 278,277
<TOTAL-REVENUES> 545,828 599,442
<CGS> 289,811 296,070
<TOTAL-COSTS> 553,788 558231
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 36,506 41,211
<INCOME-PRETAX> (44,466) (16,934)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (44,466) (16,934)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (44,466) (16,934)
<EPS-PRIMARY> (0.01) (0.01)
<EPS-DILUTED> (0.01) (0.01)
</TABLE>
