<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: SEPTEMBER 30, 1998 Commission File Number: 0-28720
SECURITIES RESOLUTION ADVISORS, INC.
(Exact name of small business issuer as specified in its charter)
ROSE INTERNATIONAL LTD.
(Former name of small business issuer)
DELAWARE 73-1479833
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
80 SEAVIEW BLVD., PORT WASHINGTON, NY 11050
(Address of principal executive office)
7633 E. 63RD PLACE, SUITE 220, TULSA, OKLAHOMA 74133
(Former address of principal executive office)
(516) 625-4040
(Issuer's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes...X.... No........
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the close of the period covered by this report.
COMMON STOCK $0.01 PAR VALUE 14,525,000
---------------------------- ----------
Class Outstanding at
September 30, 1998
Transitional Small Business Disclosure Format: Yes ; No X
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SECURITIES RESOLUTION ADVISORS, INC.
INDEX
Page
No.
----
PART I. Financial Information
Item 1. Condensed Balance Sheets - 3
September 30, 1998 and December 31, 1997
Condensed Statements of Operations - 4
Three and Nine Months Ended September 30, 1998 and 1997
Condensed Consolidated Statement of Stockholders' Equity - 5
Nine Months Ended September 30, 1998
Condensed Consolidated Statements of Cash Flows - 6-7
Nine Months Ended September 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements - 8-11
Nine Months Ended September 30, 1998 and 1997
Item 2. Management's Discussion and Analysis 12
PART II. Other information 13
2
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SECURITIES RESOLUTION ADVISORS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 176,872 $ 226,300
Marketable equity securities 2,516 --
Receivables, net 518,446 512,662
----------- -----------
Total current assets 697,834 738,962
Property and equipment, net 86,226 98,045
Equity securities held for investment 690,000 --
Other 18,906 20,433
----------- -----------
$ 1,492,966 $ 857,440
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 17,112 $ 18,586
Taxes payable -- 5,200
----------- -----------
17,112 23,786
Due to shareholder 23,697 50,000
Minority interest 142,405 2,037
STOCKHOLDERS' EQUITY
Common stock 145,250 9,753
Paid-in capital 1,843,329 657,396
Retained earnings (deficit) 119,173 114,468
----------- -----------
2,107,752 781,617
Stock subscription receivable (798,000) --
----------- -----------
Total stockholders' equity 1,309,752 781,617
----------- -----------
$ 1,492,966 $ 857,440
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
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SECURITIES RESOLUTION ADVISORS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 110,375 $ 133,025 $ 358,147 $ 313,847
DIRECT COSTS 37,820 30,350 114,855 91,370
------------ ------------ ------------ ------------
GROSS PROFIT 72,555 102,675 243,292 222,477
OTHER EXPENSE (INCOME)
Selling, general and administrative expense 83,513 103,578 244,137 218,333
Interest expense -- 1,000 -- 3,000
Unrealized loss (gain) on marketable equity securities (397) -- (380) --
Interest and other income (2) -- (4) --
------------ ------------ ------------ ------------
83,114 104,578 243,753 221,333
------------ ------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST (10,559) (1,903) (461) 1,144
INCOME TAX EXPENSE (BENEFIT) (979) -- -- --
------------ ------------ ------------ ------------
EARNINGS BEFORE MINORITY INTEREST (9,580) (1,903) (461) 1,144
MINORITY INTEREST 1,813 -- 5,166 --
------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ (7,767) $ (1,903) $ 4,705 $ 1,144
============ ============ ============ ============
NET EARNINGS (LOSS) PER SHARE $ (0.001) $ (0.000) $ 0.000 $ 0.000
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 14,525,000 14,525,000 14,525,000 14,525,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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SECURITIES RESOLUTION ADVISORS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Stock
Common Stock Paid-in Subscription Retained
Shares Par Value Capital Receivable Earnings Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 9,753,000 $ 9,753 $ 657,396 $ -- $ 114,468 $ 781,617
Recapitalization (1,753,000) $ 70,247 $ (215,781) $ (145,534)
------------ ------------ ------------ ------------ ------------ ------------
8,000,000 $ 80,000 $ 441,615 $ -- $ 114,468 $ 636,083
Acquire Rose International Ltd 6,525,000 $ 65,250 $ 1,401,714 $ (798,000) $ -- $ 668,964
Net earnings (loss) $ 4,705 $ 4,705
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, September 30, 1998 14,525,000 $ 145,250 $ 1,843,329 $ (798,000) $ 119,173 $ 1,309,752
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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SECURITIES RESOLUTION ADVISORS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 4,705 $ 1,144
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 14,865 11,080
Minority interest (5,166) --
Changes in assets and liabilities:
Marketable equity securities (380) --
Receivables (534) (212,278)
Other assets (3,626)
Accounts payable and accrued liabilities (36,131) 15,721
--------- ---------
Net cash provided by (used in) operating activities (22,641) (187,959)
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures (1,519) (63,451)
Acquisition of Rose International Ltd. 1,035 --
--------- ---------
Net cash provided by (used in) investing activities (484) (63,451)
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Sale of common stock -- 570,775
Obligations paid by shareholder 23,697 --
Repayment of stockholder loan (50,000) --
--------- ---------
Net cash provided by (used in) financing activities (26,303) 570,775
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (49,428) 319,365
CASH AND CASH EQUIVALENTS, beginning of period 226,300 27,800
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 176,872 $ 347,165
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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SECURITIES RESOLUTION ADVISORS, INC.
STATEMENTS OF CASH FLOWS, CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
--------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid None $ 3,000
========= =========
Income taxes paid $ 5,200 None
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
The acquisition of the Accord Group, Inc. was accounted for as a reverse
acquisition, utilizing the purchase method of accounting. The assets of
Rose International Ltd. were recorded at their fair value as follows:
Marketable equity securities $ 2,136
Accounts receivable 5,250
Marketable equity securities held for investment 690,000
Liabilities assumed (29,457)
Minority shareholders (668,964)
---------
Cash received in acquisition $ 1,035
=========
</TABLE>
See accompanying notes to consolidated financial statements.
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SECURITIES RESOLUTION ADVISORS, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION - On July 8, 1998, Rose
International Ltd. ("Rose"), a Delaware corporation, changed their name to
Securities Resolution Advisors, Inc. ("SRAD") as a result of the
acquisition of The Accord Group, Inc. ("Accord"), a Delaware corporation,
on June 5, 1998. The acquisition was accounted for utilizing the purchase
method of accounting as a reverse acquisition, with Accord being the
survivor for accounting purposes. The consolidated financial statements of
SRAD include the accounts of SRAD since its acquisition effective June 1,
1998, its 82.02% subsidiary Accord and the majority owned subsidiaries of
Accord, which include Securities Resolution Advisors, Inc. ("SRA"), a
wholly owned subsidiary and Kurel, an eighty percent owned subsidiary,
(collectively referred to as the "Company"). All material intercompany
accounts and transactions have been eliminated. Minority interest includes
the 17.98% of Accord and the 20% of Kurel owned by minority shareholders.
The financial statements included in this report have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission for interim reporting and include all adjustments
(consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation. These financial
statements have not been audited. The balance sheet at December 31, 1997
included in this report has been derived from the audited balance sheet of
The Accord Group, Inc.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that the
disclosures contained herein are adequate to make the information
presented not misleading. However, these financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report for the year ended December 31,
1997, which is included in the Company's Form 10-KSB. The audited
financial statement of Accord is included in the Company's Form 8-K/A
dated June 5, 1998. The financial data for the interim periods presented
may not necessarily reflect the results to be anticipated for the complete
year. Certain reclassifications of the amounts presented for the
comparative period have been made to conform to the current presentation.
NATURE OF BUSINESS - The Company, through SRA, services the investing
community who have lost money due to the advice, lack of fiduciary
responsibility or fraudulent practices of brokers and broker dealers. Such
practices include unauthorized trading, churning, unsuitable investments,
stock manipulation, misrepresentation of a company's financial status,
etc. SRA advises its customers as to an appropriate course of action in
regard to arbitration, as well as, settlement with brokers and brokerage
firms. If an action is warranted, SRA will prepare all necessary
documentation in order to file an arbitration action with the appropriate
regulatory agency. All services are rendered on a contingency basis.
CASH EQUIVALENTS - The Company considers all liquid investments with
original maturities of three months or less to be cash equivalents.
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MARKETABLE EQUITY SECURITIES - Marketable equity securities are comprised
of trading securities held for short-term investment purposes and equity
securities available for sale. These securities are stated at fair value,
with the change in fair value during the period included in earnings for
trading securities and as a component of stockholders' equity for equity
securities available for sale. Realized gains or losses on marketable
securities are calculated based on the first-in, first-out method of
accounting.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization are
calculated using the straight-line method over the estimated useful life
or remaining lease term for leasehold improvements. Renewals and
betterments are capitalized to the related asset. Repairs and maintenance
are charged to expense as incurred.
INCOME TAXES - Deferred income taxes are recognized for income and expense
items that are reported for financial reporting purposes in different
years than for income tax purposes.
USE OF ESTIMATES AND FAIR VALUE DETERMINATION - The process of preparing
financial statements in conformity with generally accepted accounting
principles requires the use of estimates and assumptions regarding certain
types of assets, liabilities, revenues and expenses. Such estimates
primarily relate to unsettled transactions and events as of the date of
the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
NET EARNINGS PER SHARE - Net earnings per share amounts are computed using
the weighted average number of shares outstanding during the period. Fully
diluted earnings per share is presented if the assumed conversion of
common stock equivalents results in material dilution.
B. ACQUISITION
On June 5, 1998, SRAD completed the acquisition of Accord in a transaction
accounted for as a reverse acquisition, utilizing the purchase method of
accounting, wherein the assets of SRAD were recorded at fair value and the
operations of Accord have become the historical operations of the Company.
SRAD issued 8,000,000 shares of its $.01 par value common stock to three
individuals in exchange for 8,000,000 shares (82.02%) of the $.001 par
value common stock of Accord. The assets acquired and liabilities assumed
are listed in the Statement of Cash Flows.
C. MARKETABLE SECURITIES
As of September 30, 1998, the Company has an investment in marketable
equity securities, which are classified as trading securities. As of
September 30, 1998 the cost of $14,682 exceeded the fair value of the
securities by $12,165.
D. COMMON STOCK AND COMMON STOCK OPTIONS
On August 7, 1995 the Board of Directors of the Company authorized an
Incentive Stock Option Plan (the "Plan") which for a term of ten years
provides that one million shares of the Company's common stock be reserved
for issuance to selected key employees and consultants. The Plan is to be
administered by a compensation committee composed of two directors of the
Company, and this committee may grant no more than three hundred thousand
shares of common stock to any one individual at a price based on the fair
market value of the shares at the date of grant. The grant may be
exercised over a ten year period, in not less than one thousand share lots
and when
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exercised, the stock must be held for six months prior to sale. Only the
person to whom the option is granted may exercise the options and the
Board of Directors may modify the Plan at any time. At June 30, 1998 the
Company had granted options outstanding totaling 450,000 shares for ten
years at an exercise price of $1.00 per share in accordance with the Plan,
none of which had been exercised.
On August 10, 1995 the Board of Directors adopted a 1995-1996 Nonstatutory
Stock Option Plan for its officers, directors, key employees and
consultants reserving 500,000 common shares for this option plan, which
expired December 31, 1996. The options may be granted at prices determined
by the compensation committee, which administers this plan, and may be
exercised upon grant and paid for at the discretion of the Compensation
Committee, with any unpaid amounts for shares received being evidenced by
promissory notes. At June 30, 1998 the Company had outstanding grants
which totaled 355,000 shares at an average exercise price of $2.11 per
share, none of which had been exercised.
Common stock options do not have an impact on primary earnings per share
or fully diluted earnings per share as the average trading price and the
ending trading price has approximated or been less than the lowest
exercise price of the common stock options.
E. INCOME TAXES
The Company follows SFAS No. 109, "Accounting for Income Taxes".
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. SFAS No.
109 requires that a valuation allowance be established to reduce deferred
tax assets to the amount that is more likely than not to be realized.
Deferred income taxes result primarily from temporary differences in
recognizing net operating losses for tax and financial reporting purposes.
Any future tax benefit of net operating loss carryforwards has been fully
reserved due to the uncertainty of the benefits being realized.
10
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL - The Company had working capital of $680,722 as of
September 30, 1998 as compared to working capital of $715,176, a decline
of $34,454. The majority of the decline is the result of repayment of a
loan from a shareholder in the amount of $50,000 offset by the $23,697 of
obligations of the Company which were paid by the shareholder.
During the nine months ended September 30, 1998, the Company experienced a
decrease in cash and cash equivalents in the amount of $49,428, which
consisted primarily of the repayment of a stockholder loan in the amount
of $50,000. During the nine months ended September 30, 1997 the Company
sold common stock for $570,775 and utilized $63,451 to acquire property
and equipment. The Company also utilized the majority of the remaining
cash as working capital to finance its expanded business.
During the nine months ended September 30, 1998, the Company incurred
$1,519 for capital expenditures. No additional capital expenditures are
planned at this time unless the Company is required to add additional
personnel to service expanded business.
RESULTS OF OPERATIONS - The operations of the Company are all within one
segment and involve services to the investing community who have lost
money due to the advice, lack of fiduciary responsibility or fraudulent
practices of brokers and broker dealers.
REVENUES AND DIRECT COSTS
During the nine-month period ended September 30, 1998, revenues were 14%
higher than in the corresponding 1997 period. This is the result of an
increase in staff during the three-month period ended March 31, 1997 as a
result of additional work demand. Revenues during the three-month period
ended September 30, 1998 were 17% lower than in the corresponding 1997
period. Direct costs were 32% of revenue during the nine-month period
ended June 30, 1998 as compared to 29% during the same 1997 period. Direct
costs were 34% of revenue during the three-month period ended September
30, 1998 as compared to 23% during the same 1997 period. During the nine
months ended September 30, 1998, the Company has increased its work
volume, however, due to the contingent nature of their fee income, their
revenue during the quarter ended September 30, 1998 was lower than for the
same 1997 period.
OTHER EXPENSE (INCOME)
During the nine-month period ended September 30, 1998, selling, general
and administrative expense amounted to $244,137 or 68% of revenues as
compared to $218,333 or 70% of revenues during the same 1997 period. The
increase in these costs was due to the additional work demand noted above.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K - None during the quarter ended September 30,
1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SECURITIES RESOLUTION ADVISORS, INC.
Date: November 18, 1998 By: /s/ Richard Singer II
----------------- ------------------------------
Richard Singer II
President and Principal
Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 1998 AND FOR THE NINE MONTH PERIOD THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB FOR THE QUARTER
ENDED SEPTEMBER 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 176,872
<SECURITIES> 2,516
<RECEIVABLES> 518,446
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 697,834
<PP&E> 125,643
<DEPRECIATION> 39,417
<TOTAL-ASSETS> 1,492,966
<CURRENT-LIABILITIES> 40,809
<BONDS> 0
0
0
<COMMON> 145,250
<OTHER-SE> 1,164,502
<TOTAL-LIABILITY-AND-EQUITY> 1,492,966
<SALES> 358,147
<TOTAL-REVENUES> 358,147
<CGS> 114,855
<TOTAL-COSTS> 144,855
<OTHER-EXPENSES> 244,137
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,705
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,705
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
