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, 2000
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
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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 12, 2000 - 2,803,763 shares $1.00 Par Value
<PAGE>
INDEX
Page No.
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PART I. Financial Information
Consolidated Balance Sheets
February 29, 2000 and November 30, 1999 1
Consolidated Statements of Income
First quarter ended
February 29, 2000 and February 28, 1999 2
Consolidated Statements of Cash Flows
First quarter ended
February 29, 2000 and February 28, 1999 3
Footnotes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations. 5 - 7
PART II. Other Information 8
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<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 2000 AND NOVEMBER 30, 1999
</CAPTION>
<S> <C> <C>
ASSETS 2000 1999
- ------ ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 11,207 $ 17,689
Receivables, less allowance for doubtful accounts 162,691 182,652
Receivables from affiliates and related parties 487,711 481,210
Inventories 184,783 395,153
Prepaid expenses and deposits 10,270 17,745
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Total current assets 856,662 1,094,448
PROPERTY, PLANT AND EQUIPMENT, at cost 3,157,975 3,160,308
Less accumulated depreciation and depletion (1,396,208) (1,336,409)
----------- -----------
1,761,767 1,823,899
INVESTMENT IN UNCONSOLIDATED AFFILIATES 2,855,442 2,884,323
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Total assets $ 5,473,871 $ 5,802,670
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term debt related party $ 175,000 $ 175,000
Current portion of long-term debt 969,647 993,940
Trade accounts payable 203,083 319,450
Deferred obligations to related parties 3,804,951 3,707,255
Other current liabilities 173,821 249,068
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Total current liabilities 5,326,502 5,444,713
LONG-TERM DEBT, less current portion 508,341 493,517
STOCKHOLDERS' INVESTMENT:
Common stock, $1.00 par value. Authorized
6,000,000 shares, issued and outstanding
2,803,763 shares in 2000 and 1999 2,803,763 2,803,763
Additional paid-in capital 5,871,218 5,871,218
Accumulated deficit (9,035,953) (8,810,540)
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Total stockholders' investment (360,972) (135,559)
Total liabilities and stockholders' investment $ 5,473,871 $ 5,802,670
The accompanying notes are an integral part of these consolidated
statements. The 2000 and 1999 financial information is unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIRST QUARTERS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
</CAPTION>
Three Months Ended
February 29 February 28
2,000 1999
<S> <C> <C>
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REVENUES & OTHER ITEMS:
Sales $ 490,729 $ 363,513
Interest income 130 29
Gain (loss) on sale of equipment 55,695 -
Income (loss) from affiliates:
Dividends and interest - 9,315
Equity in earnings (28,881) (299,998)
Consulting fees 7,500 15,000
Other income - 9,315
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Total revenues 525,173 97,174
EXPENSES & OTHER ITEMS:
Cost of sales 405,777 377,736
General and administration 173,983 165,809
Interest 64,729 32,652
Depreciation and amortization 65,626 51,131
Loss on investment - 101,000
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Total costs and expenses 710,115 728,328
Pretax income (loss) from continuing operations (184,942) (631,154)
Provision for income taxes - -
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Net income (loss) from continuing operations $ (184,942) $ (631,154)
EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations (0.07) (0.20)
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Net income (loss) per share $ (0.07) $ (0.20)
Weighted Average Number of Shares of
Common Stock Outstanding 2,820,156 3,203,763
The accompanying notes are an integral part of these consolidated
statements. The 2000 and 1999 financial information is unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE INDUSTRIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIRST QUARTERS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
</CAPTION>
Three Months Ended
February 29 February 28
2,000 1999
<S> <C> <C>
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from continuing operations $ (184,942) $ (640,469)
Adjustments to reconcile net income from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 65,626 52,609
Equity in loss (earnings) of affiliates 28,881 299,998
(Gain) on sale of equipment (55,695) -
Changes in assets and liabilities:
Decrease (increase) in receivables 13,460 (6,627)
Decrease in inventories 210,370 95,559
Decrease in other current assets 7,475 6,664
(Decrease) in trade accounts payable (116,367) (7,844)
Increase in accrued officer salaries 336,082 96,738
(Decrease) increase in other current liabilities (298,411) 36,052
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Total adjustments 191,421 573,149
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Net cash (used) by operating activities 6,479 (67,320)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of equipment 29,136 -
Capital expenditures (32,629) (15,536)
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Net cash provided (used) by investing activities (3,493) (15,536)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in long-term debt (9,468) 54,656
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Net cash provided (used) by financing activities (9,468) 54,656
Net (decrease) in cash and cash equivalents (6,482) (28,200)
Cash and cash equivalents at the beginning of the year 17,689 41,220
Cash and cash equivalents at the end of the year $ 11,207 $ 13,020
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 23,532 $ 7,068
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The accompanying notes are an integral part of these consolidated
statements. The 2000 and 1999 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, 1999 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 1999, 1998, 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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
First quarter ended February 29, 2000 compared
to the first quarter ended February 29, 1999
For the first quarter ended February 29, 2000 the Company had a net loss from
operations of $184,942 or $0.07 per share as compared to a net loss from
operations of $631,154 or $0.20 per share for the same period last year.
The Company's revenues for the first quarter were $525,173 as compared to
$97,174 for the same period last year. The revenues for the quarter
increased because of a reduction in equity losses from an affiliate and
an increase in sales. The sales at the Company's silica sand operation
increased as its glass customer increased it usage of the Company's low
iron sand product. The results for 2000 also include a nonrecurring gain
of $55,695 on the sale of surplus equipment
The general and administration costs increased slightly from $165,809 to
$173,983. Last years quarter included nonrecurring expense of $101,000
that was incurred as a settlement of some obligations related to L-Bar
Products. 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, 1999 to February 29, 2000
The Company's net cash generated (used) by operating activities was $6,479
and $(67,320) for the first quarter ended February 29, 2000 and
February 28, 1999, respectively. The net cash used by investing activities
was $3,493 and $15,536 for the first quarter ended February 29, 2000 and
February 28, 1999, respectively. Most of the cash used by investing
activities in 1999 and 1998 was for capital improvements to the sand project.
The Company (decreased) increased its debt by $(9,468) and $54,656 for the
first quarter ended February 29, 2000 and February 28, 1999, respectively.
The Company's cash and cash equivalents decreased by $6,482 and $28,200 for
the first quarter ended February 29, 2000 and February 28, 1999, respectively.
<PAGE>
The Company had working capital deficits of approximately $4.47 million
and $4.35 million for the first quarter ended February 29, 2000 and the
year ended November 30, 1999, respectively. The working capital deficit
increased as a result of the operating losses. As part of the Company's
program to conserve cash in order to operate the company, part of the
salaries due to the officers of the Company, all of the deferred compensation
due to the deceased chairman's spouse and the part of the interest due on
certain loans were accrued but not paid for the first quarter ended
February 29, 2000 and February 28, 1999, respectively. As of
February 29, 2000, these accruals (salaries, deferred compensation and
deferred interest) exceeded $2.8 million.
For the current year, the Company plans to continue to accrue part of the
obligations described in the paragraph and expects to continue to generate
sufficient cash flow to operate.
Forward-Looking Statements. The Company may from time to time make written
or oral "forward-looking statements", within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements contained
in this Form 10QSB and in other documents filed by the Company with the
Securities and Exchange Commission and in its reports to stockholders,
as well as elsewhere. "Forward-looking statements" are statements such as
those contained in projections, plans, objectives, estimates, statements of
future economic performance, and assumptions related to any of the forgoing,
and may be identified by the use of forward-looking terminology, such as
"may", "expect", "anticipate", "estimate", "goal", "continued", or other
comparable terminology. By their very nature, forward-looking
statements are subject to known and unknown risks and uncertainties relating
to the Company's future performance that may cause the actual results,
performance or achievements of the Company, or industry results, to differ
materially from those expressed or implied in such "forward-looking statements".
Any such statement is qualified by reference to the following cautionary
statements. The Company's business operates in highly competitive markets
and is subject to changes in general economic conditions, competition,
customer and market preferences, government regulation, the impact of tax
regulation, foreign exchange rate fluctuations, the degree of market
acceptance of the products, the uncertainties of potential litigation,
as well as other risks and uncertainties detailed elsewhere herein and from
time to time in the Company's Securities and Exchange Commission filings.
This Form 10QSB contains forward looking statements, particularly
in the section: Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations and in some of the footnotes to the
financial statements. Actual results could differ materially from those
projected in the forward looking statements as a result of known and unknown
risks, uncertainties, and other factors, including but not limited market
acceptance of the Company's products and services, changes in expected
research and development requirements, and the effects of changing
economic conditions and business conditions generally. The Company does
not undertake and assumes no obligation to update any forward-looking
statement that may be made from time to time by or on behalf of the Company.
<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 - Exhibit 27
(b) Reports - A Form 8k was filed on March 7, 2000
<PAGE>
SIGNATURE
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 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> NOV-30-2000 NOV-30-1999
<PERIOD-END> FEB-29-2000 FEB-28-1999
<CASH> 11,207 17,689
<SECURITIES> 0 0
<RECEIVABLES> 650,402 663,862
<ALLOWANCES> 0 0
<INVENTORY> 184,783 395,153
<CURRENT-ASSETS> 856,662 1,094,448
<PP&E> 3,157,975 3,160,308
<DEPRECIATION> (1,396,208) (1,336,409)
<TOTAL-ASSETS> 5,476,871 5,802,670
<CURRENT-LIABILITIES> 5,326,502 5,444,713
<BONDS> 0 0
0 0
0 0
<COMMON> 2,803,763 2,803,763
<OTHER-SE> (3,164,735) (2,939,322)
<TOTAL-LIABILITY-AND-EQUITY> 5,473,871 5,802,670
<SALES> 490,729 363,513
<TOTAL-REVENUES> 525,173 87,859
<CGS> 405,777 377,736
<TOTAL-COSTS> 645,386 594,676
<OTHER-EXPENSES> 0 101,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 64,729 32,652
<INCOME-PRETAX> (184,942) (631,154)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (184,942) (631,154)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (184,942) (631,154)
<EPS-BASIC> (0.07) (0.20)
<EPS-DILUTED> (0.07) (0.20)
</TABLE>
