10QSB 1 doc1.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB ________________________________________________________________________________ [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 BERENS INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Commission file number: 0-22711 Nevada 87-05065948 ------ ----------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 701 N. Post Oak Road, Suite 350, Houston, Texas 77024 ----------------------------------------------- ----- (Address of Principal Executive Office) (Zip Code) (713) 682-7400 --------------- (Registrant's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of March 31, 2001 registrant had 24,229,355 shares of Common Stock outstanding. PART I ITEM 1. FINANCIAL STATEMENTS BERENS INDUSTRIES, INC. __________ UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 F-1 BERENS INDUSTRIES, INC. TABLE OF CONTENTS __________ PAGE ---- Unaudited Consolidated Condensed Financial Statements: Unaudited Consolidated Condensed Balance Sheet as of March 31, 2001 and December 31, 2000 F-3 Unaudited Consolidated Condensed Statement of Operations for the three months ended March 31, 2001 and 2000 F-4 Unaudited Consolidated Condensed Statement of Stockholders' Equity for the three months ended March 31, 2001 F-5 Unaudited Consolidated Condensed Statement of Cash Flows for the three months ended March 31, 2001 and 2000 F-6 Notes to Unaudited Consolidated Condensed Financial Statements F-7 F-2
BERENS INDUSTRIES, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET __________ MARCH 31, DECEMBER 31, 2001 2000 ASSETS (UNAUDITED) (NOTE) ------ ------------- -------------- Current assets: Cash and cash equivalents $ 3,937 $ 23,968 ------------- -------------- Total current assets 3,937 23,968 Property and equipment, net of accum- ulated depreciation of $2,254 and $1,618 at March 31, 2001 and December 31, 2000, respectively 142,871 157,527 ------------- -------------- Total assets $ 146,808 $ 181,495 ============= ============== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- Current liabilities: Note payable to bank $ - $ 250,000 Accounts payable 262,114 240,424 Accrued liabilities 132,466 114,258 ------------- -------------- Total current liabilities 394,580 604,682 ------------- -------------- Commitment and contingencies Stockholders' deficit: Common stock, $.001 par value, 50,000,000 shares authorized, 25,139,354 and 24,229,355 shares issued and outstand- ing at March 31, 2001 and December 31, 2000, respectively 25,139 24,229 Additional paid-in capital 10,160,912 9,945,487 Receivables from stockholders (350,000) (500,848) Accumulated deficit (10,083,823) (9,892,055) ------------- -------------- Total stockholders' deficit (247,772) (423,187) ------------- -------------- Total liabilities and stockholders' deficit $ 146,808 $ 181,495 ============= ==============
Note: The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. F-3
BERENS INDUSTRIES, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS __________ THREE MONTHS ENDED MARCH 31, -------------------------- 2001 2000 ------------ ------------ Service revenue $ 11,578 $ 12,551 Cost of services 39,675 59,080 ------------ ------------ Gross margin (28,097) (46,529) Selling, general and administrative expenses (163,671) 137,739 ------------ ------------ Loss from operations (191,768) (184,259) Interest expense - 4,125 ------------ ------------ Net loss $ (191,768) $ (188,384) ============ ============ Basic and dilutive net loss per common share $ (0.01) $ (0.01) ============ ============ Weighted average shares outstanding 24,684,355 18,749,966 ============ ============
See accompanying notes. F-4
BERENS INDUSTRIES, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 2001 __________ COMMON STOCK ADDITIONAL RECEIVABLE ------------------- PAID-IN FROM ACCUMULATED SHARES AMOUNT CAPITAL STOCKHOLDERS DEFICIT TOTAL ---------- ------- ----------- -------------- ------------- ---------- Balance at December 31, 2000 24,229,355 $24,229 $ 9,945,487 $ (500,848) $ (9,982,055) $(423,187) Collection of receivables from stockholders - - - 45,008 - 45,008 Common stock issued as compensation 909,999 910 71,265 - - 72,175 Note payable to a bank assumed by a stockholder in payment of an account receivable and as a contribution to addi- tional paid-in capital - - 144,160 105,840 - 250,000 Net loss - - - - (191,768) (191,768) ---------- ------- ----------- -------------- ------------- ---------- Balance at March 31, 2000 25,139,354 $25,139 $10,160,912 $ (350,000) $(10,083,823) $(247,772) ========== ======= =========== ============== ============= ==========
See accompanying notes. F-5
BERENS INDUSTRIES, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS __________ THREE MONTHS ENDED MARCH 31, ---------------------------- 2001 2000 ---------- ---------- Cash flows from operating activities: Net loss $(191,768) $(160,278) Adjustments to reconcile net loss to net cash used in operating activities 126,729 (49,982) ---------- ---------- Net cash used in operating activities (65,039) (210,260) ---------- ---------- Cash flows from investing activities: Purchase of computers and equipment - (428) Loan to stockholder - (48,775) ---------- ---------- Net cash used in investing activities - (49,203) ---------- ---------- Cash flows from financing activities: Proceeds from note payable to bank - 150,000 Repayment of note payable to bank - (139,000) Proceeds from sale of common stock - 502,995 Collection of receivable from stockholder 45,008 161,198 ---------- ---------- Net cash provided by financing activities 45,008 675,193 ---------- ---------- Net increase (decrease) in cash and cash equivalents (20,031) 415,730 Cash and cash equivalents at beginning of period 23,968 13,316 ---------- ---------- Cash and cash equivalents at end of period $ 3,937 $ 429,046 ========== ==========
See accompanying notes. F-6 BERENS INDUSTRIES, INC. NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS __________ 1. BASIS OF PRESENTATION ----------------------- The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles and the rules of the U.S. Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report of Form 10-KSB for the year ended December 31, 2000. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2000, as reported in the Form 10-KSB, have been omitted. 2. GENERAL ------- Effective June 15, 1999, Berens Industries, Inc. acquired National Air Corporation (together the "Company") in a recapitalization transaction accounted for similar to a reverse acquisition. Berens Industries, Inc. is currently involved in the development of an online auction site for sale of exclusive paintings and other art works. 3. COMPREHENSIVE INCOME --------------------- The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, which requires a company to display an amount representing comprehensive income as part of the Company's basic financial statements. Comprehensive income includes such items as unrealized gains or losses on certain investment securities and certain foreign currency translation adjustments. The Company's financial statements include none of the additional elements that affect comprehensive income. Accordingly, comprehensive income and net income are identical. Continued F-7 BERENS INDUSTRIES, INC. NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED __________ 4. ESTIMATES --------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets or liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 5. INCOME TAX ----------- The difference between the Federal statutory income tax rate and the Company's effective income tax rate is primarily attributable to increases in valuation allowances for deferred tax assets relating to net operating losses. 6. RELATED PARTY TRANSACTIONS ---------------------------- During the quarter ended March 31, 2000, a major stockholder of the Company assumed a $250,000 bank note to repay a $105,840 stockholder receivable and to contribute to additional paid-in capital. The major stockholder has also agreed to return 7,000,000 shares of the Company's common stock to treasury in exchange for cancellation of a $350,000 subscription receivable, if the acquisition of certain assets of Crescent Services Corporation is successfully completed (see Note 7). 7. ACQUISITION OF CRESCENT SERVICES CORPORATION ("CSC") --------------------------------------------------------- Effective April 18, 2001, the Company signed a letter of intent to acquire certain assets of CSC d/b/a Crescent Broadband for $150,000. The Company will finance the transaction and the operation of CSC through the issuance of approximately $1,200,000 of convertible preferred stock that, upon conversion, will provide the preferred stockholders with approximately 90% ownership of the Company. F-8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS This Management's Discussion and Analysis as of March 31, 2001 and for the three-month periods ended March 31, 2001 and 2000 should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto set forth in Item 1 of this report. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. For example, words such as, "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statement. Factors that might cause or contribute to such a discrepancy include, but are not limited to the risks discussed in our other SEC filings, including those in our annual report on Form 10-KSB for the year ended December 31, 2000. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. GENERAL We are a Nevada corporation that has been involved in the development of an online auction site for exclusive paintings and other art works. We are a development stage enterprise because we have not generated significant revenue from our business operations and because substantially all of our efforts are focused on website development activities and to the search for sources of capital to fund our efforts. In 2000, we began generating revenue from website hosting activities. On June 15, 1999, we were acquired by National Air Corporation in a recapitalization transaction accounted for similar to a reverse acquisition without recognition of goodwill. National Air Corporation was the "acquired" company in the transaction, but remains the surviving legal entity. Prior to the acquisition, National Air Corporation was a non-operating public shell corporation with no significant assets. Accordingly, the transaction was treated as an issuance of stock by us for National Air Corporation's net monetary assets, accompanied by a recapitalization. In connection with this transaction, we issued 3,755,745 shares of common stock in exchange for all outstanding shares of National Air Corporation. Since this transaction was, in substance, a recapitalization, and not a business combination, proforma information was not presented and a valuation of our company was not performed. During the three-month period ended March 31, 2001, we generated $11,578 in revenue from our operations. The majority of our revenues were generated from website hosting activities. We do not feel that this activity will sustain our business because low revenues and related liquidity problems have caused us to curtail our website hosting operations. We have developed what we believe to be useful Internet technologies that we hope to commercialize or sell to assist with our current liquidity problems, but the success or commercial viability of those technologies is not assured. We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in the new and rapidly evolving markets of online commerce. We have and will continue to encounter various risks in implementing and executing our business strategy. We can provide no assurance that we will be successful in addressing such risks, and the failure to do so could have a serious adverse effect on our business. RESULTS OF OPERATIONS During the three months ended March 31, 2001, we generated service revenue of $11,578 from website hosting activities and made the transition from a development stage enterprise to an operating company. Following is a description of the results of our operations. THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31, -------------------------------------------------------------------------------- 2000 ---- During the three months ended March 31, 2001, service revenues from website hosting activities decreased $973 in the three months ended March 31, 2001 as compared to the three months ended March 31, 2000. This decrease was due to the general downturn in the business cycle. Selling, general and administrative expenses increased by $25,932 in the three months ended March 31, 2001 as compared to the three months ended March 31, 2000. This increase was due to a significant overall increase in corporate activity. PLAN OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2001, we had an accumulated deficit of $10,083,823 incurred since inception, and funded by paid-in capital, debt, and use of our common stock in acquisitions. At March 31, 2001, we also had cash and cash equivalents of $3,937. We do not expect to make any major capital expenditures in the foreseeable future, but we do expect that operating losses will continue until such time as website operations generate sufficient revenues to fund our continuing operations, and we cannot be sure when or if that will occur. We have financed our operations mainly through the sale of our common stock and we have been entirely dependent on outside sources of financing for continuation of our operations. During the three months ended March 31, 2001, we collected a note receivable from a stockholder in the amount of $45,008. Our acquisition of Artmovement.com for $8,263,157 on December 31, 1999 was designed to give us a platform for better market penetration and access to additional capital. As part of our acquisition of Artmovement, we obtained a $3,000,000 non-recourse receivable owed to Artmovement, of which $100,000 was received in 1999 and $200,000 in the first half of 2000. As of September 30, the original debtor terminated the remaining portion of the receivable. During the quarter, the majority shareholder of the Company agreed to assume the obligations of the debtor for the remaining $2,700,000 subscription receivable for an additional period of one year to provide the funding. Based on our current plan of operation we anticipate that our monthly operating expenditures will increase and will average approximately $30,000 per month for the next twelve months. Operating expenditures include administrative expenses, web site development, and professional fees. These amounts are merely estimates, and we can provide no assurance that unexpected expenses will not shorten the period of time within which our funds may be utilized. We have reduced our operating budget accordingly so that we will have enough cash to operate through June 2001. We have reduced our expenditures on marketing and business development, and are operating at a level significantly below that required to fully execute our business plan. By operating under such a restricted budget, we may not be able to proceed with our long-term business plan and marketing strategy as originally intended. We will continue to operate on a reduced budget until we raise additional funds to execute our business plan. In April 2001, we entered into a letter of intent with Crescent Services Corporation ("Crescent"), a company currently seeking protection under Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas, to acquire certain assets of Crescent subject to the bankruptcy court's approval. In connection therewith, we will perform a reverse stock split on approximately 5-for-1 basis, and issue convertible preferred stock which is convertible into approximately 90% of the post-split shares of our outstanding common stock, in exchange for $600,000 cash. Of the $600,000, $150,000 will be used to acquire certain assets of Crescent, and the remainder will be used for general working capital purposes. In addition, our majority shareholder will return to Berens Industries, approximately 7,000,000 shares, on a post-split basis, in exchange for the cancellation of a subscription receivable. There is no assurance that the bankruptcy court will approve this acquisition or that we will otherwise be able to close on the transaction. If we are unable to close on the transaction, we will be required to curtail our expansion, seek other external financing, or otherwise bring cash flows into balance. If the acquisition does note close or we are not able to raise additional funding, we may have to limit our operations to an extent that we cannot presently determine. The effect on our business may include the sale of our assets, the curtailment of business operations, or the cessation of business operations. Currently, we do not generate significant revenues from the services that we provide and do not expect to generate significant revenues for the foreseeable future. Although we have no commitments for capital, we may raise additional funds through: - public offerings of equity securities or convertible debt, - private offerings of equity or debt securities, or - other sources. Stockholders should assume that any additional funding that we obtain would cause substantial dilution to current stockholders. In addition, we may be unable to raise additional funds on favorable terms, if at all. Our capital requirements will depend on numerous factors, including our website development and marketing efforts and the economic impact of competing websites. Our ability to achieve profitability will depend on our ability to successfully make the transformation from a development stage enterprise to a commercially viable Internet business. We can make no assurance that we will be able to successfully make that transition. The report from our independent accountants, included in our Annual Report on Form 10-KSB, includes an explanatory paragraph, which describes substantial doubt concerning our ability to continue as a going concern, without continuing additional contributions to capital. We may incur losses for the foreseeable future due to the significant costs associated with website development and marketing activities which will be necessary for successful commercialization of Artmovement.com. See "Financial Statements - Report of Independent Accountants" included in our annual report on Form 10-KSB for the year ended December 31, 2000. PART II Pursuant to the Instructions to Part II of the Form 10-QSB, Items 1, and 3-5 are omitted. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS The following information sets forth certain information for all securities we issued during the quarter ended March 31, 2001, without registration under the Act, excluding any information "previously reported" as defined in Rule 12b-2 of the Securities Exchange Act of 1934. There were no underwriters in any of these transactions, nor were any sales commissions paid thereon. Through March 31, 2001, we issued to our chief executive officer and our chief technical officer, 1,275,000 shares of common stock for services rendered, and 100,000 shares of common stock for services rendered, respectively. We believe the transactions were exempt from registration pursuant to Section 4(2) of the Securities Act, as both officers are accredited investors, and since the transactions were non-recurring and privately negotiated. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are to be filed as part of this Form 10-QSB: EXHIBIT NO. IDENTIFICATION OF EXHIBIT ____________________ (b) Reports on Form 8-K. None. SIGNATURES ---------- In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the undersigned, thereunto duly authorized. Berens Industries, Inc. Date: May 21, 2001 //s// Marc I. Berens ----------------------- Marc I. Berens, Chief Executive Officer and Principal Financial Officer