SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1996
Commission File Number 33-24663-A
GRAYSTONE FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in charter)
Florida 85-9266448
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
P. O. Box 615, Glen Ridge, NJ 07028-0615
(Address of principal executive offices)
201-746-7818 (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Par Value $0.0001
(Title and Class of each)
Indicate by check mark whether the registrant (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 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
<PAGE>
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 , or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by the court.
Yes No
The number of shares of Common Stock outstanding as of May 31,1996 was
3,999,118.
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
PART I
Item 1. Business
History and Organization
Graystone Financial Services, Inc. (The Company), formerly known as Capital
Investment Development Corp. was incorporated under the laws of the State of
Florica on June 24, 1986 with a authorized capital of 100,000,000 shares of
common stock with a par value of $.0001. On October 10, 1988 the Company
amended its Articles of Incorporation changing its name to Graystone Financial
Services, Inc.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. Bradford-Taylor Clearinghouse, Inc.
has been inactive from inception through July 31, 1995. Bradford-Taylor
Clearinghouse, Inc. entered into a licensing agreement with Nico Electric,
A.G. on August 1, 1995 in exchange for 11.3% of the common stock of
Bradford-Taylor Clearinghouse, Inc. The licensing agreement allows
Bradford-Taylor Clearinghouse, Inc.'s use of Nico Electric, A.G. technology for
alarms and was issued to complete the transaction. This reduces the Company's
ownership in Bradford-Taylor Clearinghouse, Inc. to 13.3%.
On June 24, 1986, the Company issued 20,000,000 shares of its common stock to
private investors for a total cash consideration of $20,000.
In connection with a public offering in September, 1986, the Company sold
5,500,000 shares of its common stock for $.05 per share. Expenses incurred
in connection with the public offering of $62,458 were charged against
additional paid in capital. Net proceeds from the offering were $212,542.
<PAGE>
Each share of common stock issued in connection with the public offering
included one class A warrant and one class B warrant. The purchase warrants
were exercisable over an eight month period ending may 18, 1987. Each
redeemable warrant entitled the holder to purchase one share of common stock
at a price of $.075 per share in the case of class A warrants and a price of
$.10 per share of class B warrants.
During the period ended May 31, 1987, 5,500,000 of class A warrants were
exercised at $.075 per share for a total cash consideration of $412,500. On
May 18, 1987, the class B warrants were extended for a six months period.
In addition, in connection with the public offering 550,000 wasrrants were
issued to the underwriter, which were exercised commencing September, 1987
at a price of $.055 per share or an aggregate of $30,250. The remaining
5,500,000 class B warrants were exercised during the year ended may 31, 1988
for an aggregate of $550,000.
On September 30, 1988, the Stock Purchase Agreement dated April 4, 1988
by and between the Company and Harp Investments, Inc., a privately held
New Jersey corporation, was approved by the stockholders. The agreement
provided for the Company to acquire 100% of the outstanding shares of capital
stock of Graystone Nash, Incorporated and 70% of the outstanding shares of
Outwater and Wells, Inc., (Graystone Nash owned 30% of the outstanding
shares prior to the exchange), in exchange for 59,675,000 shares of the
Additionally, 11,475,000 shares of the Company's common stock was required
to be returned to the Company by certain original shareholders. The transaction
was handled as a reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc.
censured Graystone Nash, Incorporated and its President, Thomas V. Ackerly.
The Association fined Graystone Nash, Incorporated and Thomas V. Ackerly
$1,325,000, jointly and severely, and expelled Graystone Nash, Incorporated
from membership in the Association and barred Thomas V. Ackerly from
association with a member of the Association. Thomas V. Ackerly is in
the process of appealing this decision.
Additionally, the Securities and Exchange Commission brought an action
against Graystone Nash, Incorporated and Thomas V. Ackerly, its President,
and onApril 21, 1993, a judgment was entered against the Company and Thomas
Ackerly in the amount of $60,565,581.00 plus interest beginning January 1,
1989. The action was appealed and on June 1, 1994, the judgment was
reversed. Graystone Nash, Incorporated was not represented by counsel in
the new review ordered and the judgment still stands against it. Thom view
by the Court, on July 10, 1995, the judgment and pre-judgment interest was
waived as to Thomas V. Ackerly. As a result of the above actions, the
subsidiary Graystone Nash, Incorporated was forced to close and
cease operations.
<PAGE>
Also, the subsidiary Outwater and Wells, Inc. was forced to close and cease
operations in accordance with the lockup rules of the SEC.
On April 16, 1990, the shareholders approved a 50:1 reverse split of the
Company's common stock. The reverse split reduced the authorized shares
of common stock to 4,000,000. An additional 118 fractional shares were
issued in connection with the reverse split.
On June 8, 1995, the Company issued 2,294,000 shares of its common
stock to its controlling stockholder for a total cash consideration of $75,000.
Item 2. PROPERTIES
Corporate Offices
The Company presently maintains its executive offices at 39 Lackawanna Plaza,
Room 8, Bloomfield, N.J. 07003. The Company's office space consists of
approximately 500 square feet, on a month to month basis, at the rate of
$1,000 per month. There is no written agreement.
Item 3. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
There were no matters submitted to the Shareholders of the Company during
fiscal year ended May 31, 1996.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock, $.0001 par value (Common Stock) has been
traded in the over-the-counter market on a limited and sporadic basis since
November 18, 1986. The last known high and low bid price was $1.75 as of
August 31, 1988. As far as is know there has not been any high and low bid
price for the fiscal year ended May 31, 1996 and May 31, 1995. The following
table sets forth the high and low bid price of the Common Stock for the
period indicated as quoted from the over-the-counter listing.
<PAGE>
Fiscal 1996 Low Bid High Bid
1st Quarter Unknown Unknown
2nd Quarter Unknown Unknown
3rd Quarter Unknown Unknown
4th Quarter Unknown Unknown
Fiscal 1995 Low Bid High Bid
1st Quarter Unknown Unknown
2nd Quarter Unknown Unknown
3rd Quarter Unknown Unknown
4th Quarter Unknown Unknown
As of May 31, 1996 there were 6,061 shareholders of record of the Company's
Common Stock.
Holders of common shares are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on the common
shares have been paid by the Company, nor does the Company anticipate that
dividends will be paid in the foreseeable future. Rather, the Company has
determined to utilize any earnings in the expansion of its business. Such
policy is subject to change based on current industry and market conditions,
as well as other factors beyond the control of the Company.
Item 6. SELECTED FINANCIAL DATA
The following selected financial data on the Company conveying fiscal years
1996 and 1995, should be read in conjunction with the Financial Statements
and related notes included in Item 8 of this Form 10-K.
(See "Financial Statements and Notes Thereto.")
For Year Ended May 31,
1996 1995
Income Statement Data:
Revenues $36,000 $ 0
Other Income and (Loss) $2,182,696 $(1,172,556)
Net Income (Loss) $2,182,696 $(1,172,556)
Net Income (Loss) per share $ 0.56 $ ( 0 .69)
Dividends per share $ 0 $ 0
Weighted average shares outstanding:
3,999,118 1,705,118
Balance Sheet Data:
Total Assets $2,467,845 $ 152,200
Retained Earnings (Deficit) $ 992,467 $(1,118,164)
Stockholders Equity $2,298,727 $ 113,096
<PAGE>
Item 7. MANAGEMENT'S DECISIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The following is management's discussion and analysis of significant factors
which have affected registrant's financial position and operations.
Overall Situation
On September 30, 1988, the Company entered into a stock purchase agreement
dated April 4, 1988 with Harp Investments, Inc., a privately held New Jersey
corporation. The agreement provided for the Company to acquire 100% of the
outstanding shares of capital stock of Graystone Nash, Incorporated and 70%
of the outstanding shares of Outwater and Wells, Inc. (Graystone Nash,
Incorporated owned 30% of theoutstanding shares prior to the exchange), in
exchange for 59,675,000 shares of theCompany's Common Stock.
Additionally, 11,475,000 shares of the Company's Common Stock was required
too returned to the Company by certain original shareholders. The transaction
was handled as reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc. censured
Graystone Nash, Incorporated and it's President, Thomas V. Ackerly. The
Association fined Graystone Nash, Inc.and Thomas V. Ackerly $1,325,000,
jointly and severely, and expelled Graystone Nash, Incorporated from
membership in the Association and barred Thomas V. Ackerly from association
with a member the association. Thomas V. Ackerly is in the process of
appealing this decision.
Additionally, the Securities and Exchange Commission brought an action against
Graystone Nash, Incorporated and Thomas V. Ackerly, it's President, and on
April 21, 1993 a judgment was entered against the Company and Thomas V.
Ackerly in the amount of $60,565,581.00 plus interest beginning January 1,
1989. The action was appealed and on June 1, 1994, the judgment was reversed.
Graystone Nash, Inc. was not represented by counsel in the new review ordered
and the judgment stands against it. Thomas V. Ackerly, acting as his own
counsel, presented to the Court additional information to review. Upon
review by the Court on July 10, 1995, the judgment and pre-judgment interest
was waived as to Thomas V. Ackerly. As a result of the above actions, the
subsidiary Graystone Nash, Incorporated was forced to close and cease
operations.
Also, the subsidiary Outwater and Wells, Inc. was forced to close and cease
operations in accordance with the lockup rules of the SEC.
<PAGE>
The Company's business plan is to seek potential businesses that may, in
the opinion of Management, warrant the Company's involvement. The Company
acknowledges that as a result of its limited financial resources, acquiring a
suitable business will be extremely difficult; however, the Company's
principal business objective will be to seek long term
growth potential in the business in which it participates, rather
than immediate, short term earnings. In seeking to attain its business
objectives, the Company will not restrict its search to any particular
industry. Management has no assurance that it will be
successful in its attempt to raise such capital.
Liquidity and Capital Resources
The Company has increased its assets principally by the increase in trading
securities of stocks that had little or no value in prior year and continues
to have a very small amount of liabilities. It is the intent of Management to
seek potential businesses in which to acquire through the issuance of the
Company's common stock. In addition, to make private placement of common stock
as a means of raising capital to propel the Company into new arenas of high
earnings potential. Additional funding will be necessary in order to achieve
these goals.
Item 8. FINANCIAL STATEMENT AND SUPPLEMENTAL DATA
The financial statements are attached hereto commencing on Page F-1:
Audit report, May 31, 1996 and May 31, 1995.
Balance Sheet at May 31, 1996 and May 31, 1995.
Statements of Income and Loss for the years ended May 31, 1996 and May 31,
1995.
Notes to Financial Statements for the years ended May 31, 1996 and 1995.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
Item 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
Name: Age: Position: Term:
Thomas V. Ackerly 48 President, and September 30,
Director 1988-Present
Robert A. Spira 45 Director February 1, 1996 -
Present
Mr. Thomas V. Ackerly, was elected to the Board of Directors on September 30,
1988 at which time he was appointed as President. Mr. Ackerly held the same
offices in Bradford-Taylor Clearinghouse, Inc., a subsidiary of the Graystone
Financial Services, Inc. until July 31, 1995. Mr. Ackerly holds the same
offices in Harp Investments, Inc., the controlling shareholder of Graystone
Financial Services, Inc. He currently devotes a substantial amount
of his time to the Company's business. Mr. Robert A. Spira was
appointed as a Director on February 1, 1996.
Item 11. EXECUTIVE COMPENSATION
During the fiscal year ended May 31, 1996, Thomas V. Ackerly received
remuneration in the amount of $60,500. For the fiscal year ended May 31, 1995,
no officer, director, employee, or affiliate of the Registrant received any
remuneration. Moreover, for this period the Company has had no bonus, profit
sharing plan, or other compensation plan in which the executive officers or
director are participants. The Company's director
received no fees for his services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Section 16(a) of the Securities Exchange of Act of 1934 (Exchange Act)
requires the Company's directors, officers and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Directors, officers and persons with greater than five
percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all forms they
file with the Commission pursuant to Section (16a).
At May 31, 1996 and 1995, there were issued and outstanding common shares of
the Company, the Company's only class of voting securities. The Company has no
knowledge of any arrangements which could affect the company.
The following table will identify, as of May 31,1996, the number and percentage
of outstanding shares of common stock owned by (i) each person known to the
Company who owns more than five percent of the outstanding common stock, (ii)
each officer and director of the Company, and (iii) officers and directors of
the Company as a group:
Name of Beneficial Owner Amount of Ownership Percent of Class
Harp Investments, Inc. 3,362,500 70%
Name of Beneficial Owner Amount of Ownership Percent of Class
All Executive Officers/Directors as a Group 3,362,500 70%
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Thomas V. Ackerly, President of the Company, has loaned money to and
borrowed money from the Company. Currently, Mr. Ackerly has a demand note in
the amount of $115,000, dated January 1, 1991, and includes interest at the
rate of 9% per annum. By ement between the parties, interest will not begin to
accrue on this note till January 1, 1996.
Item 14. SUBSEQUENT EVENTS
none
PART IV
Item 15. Exhibits and Reports on Form 8-K
Exhibits:
Statement Name
Report of Independent Certified Public Accountant - - - - - F-1
Balance Sheet - - - - - - - - - - - - - - - - - - - - - - - F-2
Statement of Income and Loss- - - - - - - - - - - - - - - - F-3
Statement of Stockholders' Equity - - - - - - - - - - - - - F-4-F7
Statement of Cash Flows - - - - - - - - - - - - - - - - - - F-8-F9
Notes To Financial Statements - - - - - - - - - - - - - - - F-10-F13
Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in capacities and on the dates indicated.
GRAYSTONE FINANCIAL SERVICES, INC.
By: Thomas V. Ackerly, President and Director
Date
<PAGE>
C O N T E N T S
Independent Auditors' Report - - - - - - - - - - - F-1
Balance Sheets at May 31, 1996 and 1995- - - - - - F-2
Statement of Income and Loss for the years ended
May 31, 1996 and 1995- - - - - - - - - - - - - - F-3
Consolidated Statement of Changes in
Stockholders' Equity through May 31, 1996- - - - F-4/F-7
Consolidated Statement of Cash Flows for the
years ended May 31, 1996 and 1995- - - - - - - - F-8/F-9
Notes to Consolidated Financial Statements - - - - F-10/F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Graystone Financial Services, Inc.
Glen Ridge, New Jersey
I have audited the accompanying balance sheet of Graystone
Financial Services, Inc. as of May 31, 1996 and 1995 and the
related statement of operations, stockholders' equity and
cash flows for the years then ended. These financial
statements are the responsibility of the Company's
management. My responsibility is to express an opinion on
these financial statements based on my audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. I believe that my audit of the
financial statements provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Graystone Financial Services, Inc. as of May 31,
1996 and 1995, in conformity with generally accepted
accounting principles.
Phoenix, Arizona
August 29, 1996
<PAGE>
F-1
GRAYSTONE FINANCIAL SERVICES, INC.
BALANCE SHEET
MAY 31, 1996 AND 1995
ASSETS
1996 1995
Current Assets
Cash - Note 2 $ 130,448 $ 0
Marketable Securities -
Trading - Note 4 2,180,735 0
Total Assets 2,311,183 0
Property and Equipment - Note 3
Office Furniture and Equipment 41,931 41,931
Less Accumulated Depreciation 41,931 41,931
Net Book Value 0 0
Other Assets
Receivables -
Related Companies - Note 5 149,996 152,200
Accrued Interest Receivable 6,166
Other Assets 500 0
Total Other Assets 156,662 152,200
Total Assets $ 2,467,845 $ 152,200
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 122,791 $ 39,104
Note Payable 46,327 0
Total Liabilities 169,118 39,104
Stockholders' Equity
Preferred Stock, No Par Value
Authorized 10,000,000 Shares;
Issued and Outstanding, NONE 0 0
Common Stock, Par Value $.0001
Authorized 4,000,000 shares;
Issued and Outstanding, 3,999,118
Shares at May 31, 1996 and
1,705,118 at May 31, 1995 400 171
Additional Paid-In Capital 1,305,860 1,231,089
Retained Earnings-A Deficit 992,467 (1,118,164)
Total Stockholders' Equity 2,298,727 113,096
Total Liabilities and
Stockholders' Equity $ 2,467,845 $ 152,200
========= =========
The accompanying notes are an integral part of these
financial statements.
F-2
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF INCOME AND LOSS
FOR THE YEAR ENDED MAY 31, 1996 AND 1995
AND FROM INCEPTION (JUNE 24, 1986) THROUGH
MAY 31, 1996
RETAINED
EARNINGS
YEAR YEAR ACCUMULATED
ENDED ENDED DURING THE
MAY 31, MAY 31, DEVELOPMENT
1996 1995 STAGE
Revenues
Sales $ 36,000 $ 0 $ 36,000
Interest Income 232,031
Miscellaneous Income 45,049
Total Revenues 36,000 0 313,080
Expenses
General and
Administrative 108,065 0 545,436
Total Expenses 108,065 0 545,436
Operating Loss ( 72,065) 0 (232,356)
Other Income and (Loss)
Gain or Loss on
Sale of Securities 165,855 129,444
Other Income-Judgment 371,094
Dividend and Interest 6,213 6,213
Loss on Disposal
Of Discontinued
Subsidiary -
Graystone Nash,
Incorporated (5,250) (505,067) (510,317)
Loss of Disposal
Of Discontinued
Subsidiary -
Outwater & Wells, Inc. (667,489) (667,489)
Temporary Increase in
Marketable
Securities 2,015,878 0 2,015,878
Total Other Income
and (Loss) 2,182,696 (1,172,556) 1,224,823
Net Income or Loss $2,110,631 $(1,172,556) $1,224,823
========= ========= =========
Net Loss Per Share $ 0.56 $( 0.69) )$ 0.28
==== ==== =====
The accompanying notes are an integral part of these
financial statements.
F-3
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Year Ended May 31, 1996 and
From Inception (June 24, 1986) Through May 31, 1996
Deficit
Accumulated
Common Stock Additional During The
Shares Amount Paid-In Development
Capital Stage
Sale of shares for
Cash in private
Placement at
$.001 20,000,000 $ 2,000 $ 18,000 $
Issuance of
Common stock in
Public Offering
For cash (net of
Expenses) 5,500,000 550 211,992
Issuance of
Common stock in
Connection with
The exercise of
Stock warrants 5,500,000 550 411,950
Net Loss Year
Ended
May 31, 1987 ( 29,350)
Balance -
May 31, 1987 31,000,000 3,100 641,942 ( 29,350)
Issuance of
Common stock in
Connection with
The exercise of
Stock Warrants 6,050,000 605 579,645
Net Loss Year
Ended
May 31, 1988 ( 55,625)
Balance -
May 31, 1988 37,050,000 3,705 1,221,587 ( 84,975)
Shares returned
In connection
With stock
Purchase
Agreement
September 30,
1988 (11,475,000) (1,148) 1,148
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Year Ended May 31, 1996 and
From Inception (June 24, 1986) Through May 31, 1996
Deficit
Accumulated
Common Stock Additional During The
Shares Amount Paid-In Development
Capital Stage
Issuance of
Shares in
Connection
With acquisition
of Graystone/
Nash, Inc. and
Outwater and
Wells, Inc.
On September 30,
1988 59,675,000 5,968
Net Loss Year
Ended
May 31,
1989 (( 115,097)
Balance -
May 31, 1989 85,250,000 8,525 1,222,735 (( 200,072)
50:1 Reverse
Split on
April 16,
1990 (83,545,000) (8,354) 8,354
Fractional
Shares issued
In connection
With 50:1
Reverse Split 118 0
Net Loss Year
Ended
May 31,
1990 ( 24,240)
Balance
May 31, 1990 1,705,118 171 1,231,089 (( 224,312)
The accompanying notes are an integral part of these
financial statements.
F-5
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Year Ended May 31, 1996 and
From Inception (June 24, 1986) Through May 31, 1996
Deficit
Accumulated
Common Stock Additional During The
Shares Amount Paid In Development
Capital Stage
Net Income
Year Ended
May 31,
1991 302,842
Balance -
May 31, 1991 1,705,118 171 1,231,089 78,530
Net Loss
Year Ended
May 31,
1992 ( 13,256)
Balance -
May 31, 1992 1,705,118 171 1,231,089 65,274
Net Loss
Year Ended
May 31, 1993 ( 8,343)
Balance -
May 31, 1993 1,705,118 171 1,231,089 56,931
Net Income
Year Ended
May 31, 1994 ( 2,539)
Balance -
May 31, 1994 1,705,118 171 1,231,089 54,392
Net Loss
Year Ended
May 31, 1995 ( 1,172,556)
Balance -
May 31, 1995 1,705,118 $ 171 $ 1,231,089 $( 1,118,164)
Issuance of
Shares for
Cash, June 8,
1995 2,294,000 229 74,771
The accompanying notes are an integral part of these
financial statements.
F-6
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For The Year Ended May 31, 1996 and
From Inception (June 24, 1986) Through May 31, 1996
Additional
Common Stock Paid In Retained
Shares Commom Capital Earnings
Net Income
Year Ended
May 31, 1996 2,110,631
Balance -
May 31, 1996 3,999,118 $ 400 $ 1,305,860 $ 992,467
========= === ========= =========
The accompanying notes are an integral part of these
financial statements.
F-7
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MAY 31, 1996 AND 1995 AND
FROM INCEPTION (JUNE 24, 1986) THROUGH MAY 31, 1996
RETAINED
EARNINGS
YEAR YEAR ACCUMULATED
ENDED ENDED DURING THE
MAY 31, MAY 31, DEVELOPMENT
1996 1995 STAGE
Cash Flows From
Operating Activities
Net Income or (Loss) $ 2,110,631 $ (1,172,556)$ 992,467
Temporary Increase in
Marketable
Securities (2,015,878) (2,015,878)
Loss on Disposal of
Subsidiaries 1,172,556 1,209,756
Adjustments to
Reconcile Net Income
to Net Cash Provided
By Operating
Activities
Depreciation 0 0 41,931
Changes in operating
assets and
liabilities
(Increase) Decrease
In Assets (6,166) 0 (6,166)
(Decrease) Increase
In Liabilities 83,687 0 122,791
Total Adjustments 77,521 0 (647,566)
Net Cash Flows Provided
By Operating
Activities 172,274 0 344,901
Cash Flows From Investing
Activities
Purchase of Office
Equipment (41,931)
Purchase of Securities (164,857) (164,857)
Advances to Subsidiaries 0 0 (1,203,788)
Investment in Related
Company (500) (500)
Net Cash Flows From
Investing Activities (165,357) 0 (1,411,076)
Cash Flows From Financing
Activities
Proceeds from sale of
Common Stock 75,000 0 1,300,292
Advances to and from
Related Companies 2,204 0 ( 149,996)
The accompanying notes are an integral part of these
financial statements.
F-8
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MAY 31, 1996 AND 1995 AND
FROM INCEPTION (June 24, 1986) THROUGH MAY 31, 1996
RETAINED
EARNINGS
YEAR YEAR ACCUMULATED
ENDED ENDED DURING THE
MAY 31, MAY 31, DEVELOPMENT
1996 1995 STAGE
Advances from Related
Company 46,327 0 46,327
Net Cash Provided by
Financing Activities 123,531 0 1,196,623
Increase (Decrease) in
Cash $ 130,448 $ 0 $ 0
Cash beginning of period 0 0 0
Cash end of period $ 130,448 $ 0 $ 130,448
======= ======== =========
Supplemental Information
Assets purchased in
Exchange for Common
Stock $ 0 $ 0 $ 5,968
======== ======== =========
Interest Expense Paid 0 $ 0 $ 121,310
$ ======== ======== =========
Income Taxes Paid $ 0 $ 0 $ 0
======== ======== =========
The accompanying notes are an integral part of these
financial statements.
F-9
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
MAY 31, 1996 AND 1995
NOTE 1 - ORGANIZATION
Graystone Financial Services, Inc. (The Company), formerly
known as Capital Investment Development Corp. was incorporated
under the laws of the State of Florida on June 24, 1986 with a
authorized capital of 100,000,000 shares with a par value of
$.0001. On October 10, 1988 the Company amended its Articles
of Incorporation changing its name to Graystone Financial
Services, Inc.
On March 16, 1987, the Company formed a wholly-owned
subsidiary, Bradford-Taylor Clearinghouse, Inc. Bradford-
Taylor Clearinghouse, Inc. has been inactive from inception
through July 31, 1995. Bradford-Taylor Clearinghouse, Inc.
entered into a licensing agreement with Nico Electric, A.G.
and/or overseas assignees on August 1, 1995 in exchange for
82.67% of the common stock of Bradford-Taylor Clearinghouse,
Inc. The licensing agreement allows Bradford-Taylor
Clearinghouse, Inc.'s use of Nico Electric, A.G. technology
for alarms and security devices up to 6Mhz and 1Mv for
commercial use only. This reduced the Company's ownership in
Bradford-Taylor Clearinghouse, Inc. to 13.3%.
On June 24, 1986, the Company issued 20,000,000 shares of its
common stock to private investors for a total cash
consideration of $20,000.
In connection with a public offering in September 1986, the
Company sold 5,500,000 shares of its common stock for $.05 per
share. Expenses incurred in connection with the public
offering of $62,458 were charged against additional paid in
capital. Net proceeds from the offering were $212,542.
Each share of common stock issued in connection with the
public offering included one class A warrant and one class B
warrant. The purchase warrants were exercisable over an eight
month period ending May 18, 1987. Each redeemable warrant
entitled the holder to purchase one share of common stock at a
price of $.075 per share in the case of class A warrants and a
price of $.10 per share of class B warrants.
During the period ended May 31, 1987, 5,500,000 of class A
warrants were exercised at $.075 per share for a total cash
consideration of $412,500. On May 18, 1987, the class B
warrants were extended for a six months period.
In addition, in connection with the public offering 550,000
warrants were issued to the underwriter, which were exercised
commencing September, 1987 at a price of $.055 per share or an
F-10
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
MAY 31, 1996 AND 1985
NOTE 1 - ORGANIZATION - CONTINUED)
aggregate of $30,250. The remaining 5,500,000 Class B warrants
were exercised during the year ended May 31, 1988 for an
aggregate of $550,000.
On September 30, 1988, the Stock Purchase Agreement dated
April 4, 1988 by and between the Company and Harp Investments,
Inc., a privately held New Jersey corporation, was approved by
the stockholders. The agreement provided for the Company to
acquire 100% of the outstanding shares of capital stock of
Graystone Nash, Incorporated, a New Jersey corporation engaged
in securities brokerage, trading and research, investment
banking activities and related financial services, and 70% of
the outstanding shares of Outwater and Wells, Inc, (Graystone
Nash owned 30% of the outstanding shares prior to the
exchange), a New Jersey corporation engaged in providing a
full range of securities clearance services to Graystone
Nash, Incorporated, in exchange for 59,675,000 shares of the
Company's common stock.
Additionally, 11,475,000 shares of the Company's common stock
was required to be returned to the Company by certain original
shareholders. The transaction was handled as a reverse merger.
On April 20, 1990, the National Association of Securities
Dealers, Inc. censured Graystone Nash, Incorporated and its
President, Thomas V. Ackerly. The Association fined Graystone
Nash, Incorporated and Thomas V. Ackerly $1,325,000, jointly
and severely, and expelled Graystone Nash, Incorporated from
membership in the Association and barred Thomas V. Ackerly
from association with a member of the Association. Thomas V.
Ackerly is in the process of appealing this decision.
Additionally, the Securities and Exchange Commission brought
an action against Graystone Nash, Incorporated and Thomas V.
Ackerly, its President, and on April 21, 1993 a judgment was
entered against the Company and Thomas V. Ackerly in the
amount of $60,565,581.00 plus interest beginning January 1,
1989. The action was appealed and on June 1, 1994, the
judgment was reversed. Graystone Nash, Incorporated was
not represented by counsel in the new review ordered and the
judgment still stands against. Thomas V. Ackerly, acting as
his own counsel, presented to the Court additional information
to review. Upon review by the Court, on July 10, 1995, the
judgment and pre-judgment interest was waived as to Thomas V.
Ackerly. As a result of the above actions, the subsidiary
Graystone Nash, Incorporated was forced to close and cease
operations. Graystone Nash, Incorporated discontinued it's
operations as of May 31, 1991, and the subsidiary was disposed
of on July 31, 1994, the date the corporation was dissolved by
the State of New Jersey.
F-11
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
MAY 31, 1996 AND 1995
NOTE 1 - ORGANIZATION (CONTINUED)
Also, the subsidiary Outwater and Wells, Inc., was forced to
close and cease operations in accordance with the lockup rules
of the SEC. Outwater and Wells, Inc. discontinued it's
operations as of May 31, 1991, and the subsidiary was disposed
of August 31, 1994, the date the corporation was dissolved by
the State of New Jersey.
On April 16, 1990, the shareholders approved a 50:1 reverse
split of the Company's common stock. The reverse split
reduced the authorized shares of common stock to 4,000,000. An
additional 118 fractional shares were issued in connection
with the reverse split.
On June 8, 1995, the Company issued 2,294,000 shares of its
common stock to its controlling stockholder for a total cash
consideration of $75,000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Financial Statement Presentation
The records of the Company (A Corporation) are maintained
using the accrual method of accounting.
B. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments
with a maturity of three months or less to be cash and cash
equivalents.
C. Earnings or (Loss) Per Share
Earnings or (loss) per share is computed using the weighted
average number of shares of common stock outstanding.
NOTE 3 - PROPERTY AND EQUIPMENT
May 31, May 31,
1996 1995
Machinery and Equipment 25,002 25,002
Furniture and Fixtures 16,929 16,929
41,931 41,931
Less Accumulated Depreciation 41,931 41,931
Net Book Value 0 0
Expenditures for repairs and maintenance and minor renewal
and betterments are charged to operations in the year
incurred. Major renewals and betterments are capitalized.
Depreciation is recorded under the straight line method,
utilizing a 5 year estimated useful like.
F-12
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
MAY 31, 1996 AND 1995
NOTE 3 - OTHER CURRENT ASSETS
Number of Cost Market
Shares Value
Trading Securities owned
NJS Acquisitions Corp. 397,677 0 $2,087,804
Reed Systems, Inc. 19,444 0
E Data Corp. 5,000 46,187 48,125
Great American Lumber Co. 8,695 0 0
Classic International
Entertainment, Inc. 20,630 9,554 9,036
Ambase Corporation 10,000 18,200 20,200
BNN Corporation 2,500 0 14,335
Evans Environmental Corp. 700 240 1,203
Money Market Funds 24 24 24
Cash Account 18 18
Total $2,180,735
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
Receivables - Related Companies represent advances to Harp
Investment, Inc., the controlling shareholder of the
Company in the original amount of $37,200, dated March 31,
1995, with a current balance of $34,996 as of May 31, 1996,
and Thomas V. Ackerly, President of the Company, in the
amount of $115,000, dated January 1, 1991. The notes are
payable on demand and include interest at the rate of 9%
per annum. By agreement with the parties, interest will not
begin to accrue on these notes till January 1, 1996.
Other advances from related companies amounted to $46,327
at May 31, 1996.
NOTE 5 - OTHER MATTERS
Effective February 1, 1996, the Company entered into a
consulting agreement with Chapman Spire and Carson LLC to
provide assistance in developing clients who are seeking
access to public markets through the merger or acquisition
of a public company or entry to trading markets through
the introduction to financing institutions or broker/
dealers. The contract is for one year and the fee for
services will be $108,000.
F-13
<PAGE>
