SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended November 30, 1996
Commission File Number 33-0878-A
GRAYSTONE FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in charter)
Florida 59 -2686448
(State or other jurisdiction of (I.R.S. Employer
Identification Number)
incorporation or organization)
P. O. Box 615 , Glen Ridge, NJ 070028-0615
(Address of principal executive offices)
201-746-7818
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports
requiredto 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 No X
The number of shares of Common Stock outstanding as of November
30, 1996 was
3,999,118.
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 Florida 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 a
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 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 ompany 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 C
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.
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 it. Thom eview 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.
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.
On September 19, 1996, the Company incorporated G.S. Television
Productions, Inc. (The Corporation) in the State of Delaware. On
October 3,
1996, the Corporation received authority to do business in the
State of
New Jersey. The Corporation is a wholly owned subsidiary of the
Company
and has been inactive since its date of inception.
Item 2. PROPERTIES
Corporate Offices
The Company presently maintains its executive offices at 39
Lackawanna
Plaza, Room 8, Bloomfield, NJ 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
the three months period ended November 30, 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 known there has not been any
high and
low bid price for the three months period ended November 30,
1996 and 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.
Fiscal 1997 Low Bid
High Bid
1st Quarter Unknown
Unknown
2nd Quarter Unknown
Unknown
Fiscal 1996 Low Bid
High Bid
1st Quarter Unknown
Unknown
2nd Quarter Unknown
Unknown
3rd Quarter Unknown
Unknown
4th Quarter Unknown
Unknown
As of November 30, 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
the three months period ended November 30, 1996 and 1995, should
be read
in conjunction with the Financial Statements and related notes
included in
Item 8 of this Form 10-Q. (See "Financial Statements and Notes
Thereto.")
For Quarter Ended November 30,
1996 1995
Income Statement Data:
Revenues $ 81,555 $ 0
Other Income and (Loss) $ (15,777) $ 5,250
Net Income (Loss) $ 13,520 $
(25,227)
Net Income (Loss) per share $ NIL
$ NIL
Dividends per share $
0 $ 0
Weighted average shares outstanding: 3,999,118
3,999,118
Balance Sheet Data:
Total Assets $
2,189,302 $ 234,746
Retained Earnings (Deficit) $ 843,869
$(1,175,783)
Stockholders Equity $ 2,150,129 $
130,477
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 the outstanding shares prior to the
exchange), 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 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.
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 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.
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
the 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, November 30, 1996 and 1995.
Consolidated Balance Sheet at November 30, 1996 and 1995.
Consolidated Statements of Operations for the three months
period and
the six months periods ended November 30, 1996 and
1995.
Consolidated Statement of Changes in Stockholders' Equity from
Inception through November 30, 1996
Consolidated Statement of Cash Flows for the six
months period ended
November 30, 1996 and 1995
Notes to Financial Statements as of November 30,
1996 and 1995.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
Name: Age: Position: Term:
Thomas V. Ackerly 48 President,
and September 30, 1988
Director Present
Robert A. Spira 45
Director February 1, 1996
Present
Joseph Ben-Dak 40 Director
September 26, 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 and G.S. Television
Productions, 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. Mr. Joseph Ben-Dak
was appointed as a Director on September 26, 1996.
Item 11. EXECUTIVE COMPENSATION
During the three months period ended November 30, 1996, Thomas
V. Ackerly received remuneration in the amount of $0. For the
fiscal year ended May 31, 1996, 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 directors
receive no fees for their 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 November 30, 1996 and 1995, there were issued and outstanding
common shares of the Company stock to beneficial owners and
management, 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 November 30, 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 84%
Name of Beneficial Owner Amount of Ownership Percent of Class
All Executive Officers/Directors as a Group 3,362,500
84%
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, with a current balance at November 30, 1996 of
$117,900, and includes interest at the rate of 9% per annum. By
agreement 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
Page No.
Report of Independent Certified Public Accountant - - - -
- - - - - F-1
Consolidated Balance Sheet - - - - - - - - - - - - - - -
- - - - - - - - - F-2 F-3
Consolidated Statement of Income and Loss- - - - - - - -
- - - - - - F-4 F-5
Consolidated Statement of Stockholders' Equity- - - - - - - - -
- - F-6 F-7 Consolidated
Statement of Cash Flows - - - - - - - - - - - - - - - - F-8
F9
Notes To Financial Statements - - - - - - - - - - - - - -
- - - - - - - - - F-10 F14
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
C O N T E N T S
Independent Auditors' Report - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - F-1
Consolidated Balance Sheets at November 30, 1996
and 1995-- - - - - - - - F-2 F-3
Consolidated Statement of Operations for the
Three months and
Six Months Periods Ended November 30, 1996
and 1995 - - - - - - - - - F-4 F-5
Consolidated Statement of Changes in
Stockholders' Equity from
Inception through November 30, 1996 - - - - -
- - - - - - - - - - - - - - - - - - F-6 F-7
Consolidated Statement of Cash Flows for the Six
Months Period Ended
November 30, 1996 and 1995- - - - - - - - - -
- - - - - - - - - - - - - - - - -- - - F8 F-9
Notes to Consolidated Financial Statements - - - -
- - - - - - - - - - - - - - - - - - F-10 F-14
INDEPENDENT AUDITORS' REPORT
Board of Directors
Graystone Financial Services, Inc.
Glen Ridge, New Jersey
We have audited the accompanying consolidated balance sheet of
Graystone Financial Services, Inc. as of November 30, 1996 and
1995 and the related consolidated statement of operations,
stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we 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. We believe that our audit of the
financial statements provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Graystone Financial Services,
Inc. as of November 30, 1996 and 1995, in conformity with
generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
June 20, 1997
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
NOVEMBER 30, 1996 NOVEMBER 30, 1995
Current Assets
Cash $
18,059 $ 61,359
Accounts Receivable 11,429 0
Marketable Securities - Trading - Note 4 1,987,356
23,187
Total Current Assets 2,016,844 84,546
Property and Equipment Net - Note 3 0 0
Other Assets
Receivables - Related Companies - Note 5 170,062 150,200
Security Deposits
1,175 0
Organization Costs
721 0
Investment - Digital Acoustic Systems Inc. - Note 1
500 0
Total Other Assets 172,458 150,200
Total Assets $ 2,189,302 $ 234,746
<PAGE>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS EQUITY
NOVEMBER 30, 1996 NOVEMBER 30, 1995
Current Liabilities
Accounts Payable $ 7,272 $ 6,053
Accounts Payable - Related Company - Note 5 31,901
98,216
Total Current Liabilities
39,173 104,269
Stockholders' Equity
Preferred Stock: No Par Value, Authorized 10,000,000
Shares; Issued and Outstanding, NONE 0 0
Common Stock: Par Value $0.0001, Authorized 4,000,000;
Issued and Outstanding, 3,999,118 Shares at November 30,
1996 and November 30, 1995 400 400
Additional Paid in Capital 1,305,860 1,305,860
Deficit Accumulated During the Development Stage
843,869 (1,175,783)
Total Stockholders' Equity 2,150,129 130,477
Total Liabilities and Stockholders' Equity $ 2,189,302 $
234,746
<PAGE>
CONSOLIDTED STATEMENT OF OPERATIONS
For the Three Months Period Ended November 30, 1996
For the Three Months Period Ended November 30, 1995
For the Six Months Period Ended November 30, 1996
For the Six Months Period Ended November 30, 1995
Deficit Accumulated During The Development Stage
Revenues
Consulting Income $ 81,155 $ 0 $
108,155 $ 0 $ 171,155
Interest Income 0 0 0 0
232,031
Miscellaneous Income 0 0 0
0 45,049
Total Revenues 81,155 0 108,155
0 448,235
Expenses
General and
Administrative 51,858 30,477 118,660 75,556 730,896
Total Expenses 51,858 30,477 118,660 75,556 730,896
Operating Loss 29,297 (30,477) $ (10,505) (75,556)$
(282,661)
Other Income and (Loss)
Gain or (Loss) on Sale of
Securities (47,321) 0 2,881 0 225,643
Other Income - Judgment 0 0 371,094
Loss on Disposal of
Discontinued
Subsidiaries -
Graystone Nash,
Incorporated And
Outwater & Wells, Inc. 0 5,250 0 (5,250)
(1,178,806)
Temporary Increase
(Decrease) in
Marketable
Securities 31,541 0 (141,032) 23,187
1,702,273
Dividend Income 3 0 58
0 6,326
Total Other Income and
(Loss) (15,777) 5,250 (138,093)
17,937 1,126,530
Net Income or Loss $ 13,520 $ (25,227) $
(148,598) $ (57,619) $ 843,869
Net Income or (Loss)
Per Share of Common Stock $ NIL $ NIL $ (0.04)
$ (0.01) $ 0.17
<PAGE>
STATEMENT OF STOCKHOLERS EQUITY
1. Common Shares
2. Stock Amount
3. Additional Paid In Capital
4. Loss Accumulated During the Development Stage
5. Total
1 2 3 4 5
Sale of shares for cash in
private placement at $.001 20,000,000 $2,000 $18,000 $
$ 20,000
Issuance of common stock
public offering for cash
(net of expenses) 5,500,000 550
211,992 212,542
Issuance of common stock
in connection with the
exercise of stock warrants 5,500,000 550 411,950
412,500
Net Loss for Year Ended
May 31, 1987
(29,350) (29,350)
Balance - May 31, 1987 31,000,000 3,100 641,942
(29,350) 615,692
Issuance of common stock
in connection with the
exercise of stock warrants 6,050,000 605 579,645
580,250
Net loss year ended
May 31, 1988
(55,625) (55,625) Balance - May 31, 1988 37,050,000
$3,705 $1,221,587 $(84,975) $1,140,317 Shares returned
in
connection with stock
purchase agreement
September 30, 1988 (11,475,000)
(1,148) 1,148 0
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
5,968
Net loss year ended
May 31, 1989
(115,097) (115,097)
Balance - May 31, 1989 85,250,000
8,525 1,222,735 (200,072) 1,031,188 50:1 reverse split on
April 16, 1990 (83,545,000) (8,354) 8,354
0
<PAGE>
STATEMENT OF STOCKHOLERS EQUITY
1. Common Shares
2. Stock Amount
3. Additional Paid In Capital
4. Loss Accumulated During the Development Stage
5. Total
1 2 3 4 5
Fractional shares issued in
connection with 50:1
reverse split 118 $ 0
$ $ $ 0
Net loss year ended
May 31, 1990
(24,240) (24,240)
Balance - May 31, 1990 1,705,118
171 1,231,089 (224,312) 1,006,948
Net income year ended
May 31, 1991
302,842 302,842
Balance - May 31, 1991 1,705,118 171 1,231,089 78,530
1,309,970
Net loss year ended
May 31, 1992
(13,256) (13,256)
Balance - May 31, 1992 1,705,118 171 1,231,089 65,274
1,296,534
Net loss year ended
May 31, 1993
(8,343) (8,343)
Balance - May 31, 1993 1,705,118 171 1,231,089 56,931
1,288,191
Net income year ended
May 31, 1994
(2,539) (2,539)
Balance - May 31, 1994 1,705,118 171 1,231,089 54,392
1,285,652
Net loss year ended
May 31, 1995
(1,172,556) (1,172,556)
Balance - May 31, 1995 1,705,118 171
1,231,089 (1,118,164) 113,096
Issuance of shares for cash,
June 8, 1995 2,294,000 229 74,771
75,000
Net income year ended
May 31, 1996 0
2,110,631 2,110,631 Balance - May 31, 1996 3,999,118
400 1,305,860 992,467 2,298,727
Net loss six months
period ended
November 30, 1996
(148,598) (148,598) Balance-November 30,
1996 3,999,118 $ 400 $ 1,305,860 843,869 $ 2,150,129
<PAGE>
STATEMENT OF CASH FLOWS
1. For The Six Months Period Ended November 30, 1996
2. For The Six Months Period Ended November 30, 1995
3. From Inception Through November 30, 1996
Cash Flows from Operating Activities
Net Income or Loss $ (148,598) $ (28,010) $ 843,869
Temporary (Increase) or Decrease in
Marketable Securities 141,032
(23,187) (1,702,273)
Loss on Disposal of Subsidiaries 0 0
1,095,336
Gain on Sale of Securities 2,881
225,643
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 Accounts Receivable (11,429) 0 (11,429)
(Increase) Decrease in Security Deposits (1,175) 0
(1,175)
(Increase) Decrease in Organization Costs (721) (721)
Increase (Decrease) in Accounts Payable
(115,520) (11,876) 7,271
Total Adjustments 15,068 (35,063) (345,417)
Net cash provided (used) by operating Activities
(133,530) (63,073) 498,452
Cash Flows from Investing Activities
Purchase of Office Equipment
0 0 (41,931)
Advances to Subsidiaries
0 0 (1,203,788)
Investment in Related Company 0 0 (500)
Purchases of Marketable Securities (229,298) 0
(675,070)
Proceeds from Sales of Marketable Securities 278,765
0 278,765
Net cash flows from investing activities 49,467 0 (1,642,524)
Cash Flows From Financing Activities
Proceeds from sale of Common Stock
0 75,000 1,300,292
Advances to and from Related Companies
(14,426) (783) 31,901
Advances to and from Related Company (13,900)
0 (170,062)
Net Cash Provided by Financing Activities (28,326) 74,217
1,162,131
Increase (Decrease) in Cash and Cash Equivalents (112,389)
11,144 18,059
Cash and Cash Equivalents at Beginning of Period 130,448
0 0
Cash and Cash Equivalents at End of Period $ 18,059 $
11,444 $ 18,059
<PAGE>
Supplemental Information
Assets Purchased in Exchange for Common Stock $ 0
$ 0 $ 5,968
Cash Paid for:
Interest $ 0 $ 0 $
121,310
Income taxes $ 0 $ 0
$ 0
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 an
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. (now
Digital Acoustic System 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 eighth 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
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
NOTE 1 - ORGANIZATION - (CONTINUED)
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.
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 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. 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
was forced to close and cease operations. Graystone Nash,
Incorporated discontinued its 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.
Also, the subsidiary Outwater and Wells, Inc., was forced to
close and case operations in accordance with the lockup rules of
the SEC. Outwater and Wells, Inc. discontinued its 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.
NOTE 1 - ORGANIZATION - (CONTINUED)
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.
On September 19, 1996, the Company incorporated G. S. Television
Productions, Inc. (The Corporation) in the State of Delaware. On
October 3, 1996, the Corporation received authority to do
business in the State of New Jersey. The Corporation is a wholly
owned subsidiary of the Company and has been inactive since its
date of incorporation.
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. Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of the
Company and its wholly owned subsidiary, G.S. Television
Productions, Inc. (Inactive since its date of
incorporation September 19, 1996). Intercompany transactions and
balances have been eliminated in
consolidation.
D. 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
November 30, November 30,
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 life.
NOTE 4 - OTHER CURRENT ASSETS
The following is a summary of Trading Securities
owned as of November 30, 1996:
Number
of Cost Market Shares
Value
Trading Securities owned
NJS Acquisitions Corp. 374,377 $
0 $ 1,965,479
Reed Systems, Inc. 19,444 0
Great American Lumber Co. 8,695 0 0
Strategies USA, Inc.
100,000 21,875 21,875
Cash Account 2 2
Total
$1,987,356
The following is a summary of trading securities
owned as of November 30, 1995:
ATC Capital Group Limited
61,832 0 $ 23,187
Reed Systems, Inc.
97,221 0 0
Great American Lumber Co., Inc.
8,695 0 0
Total
$ 23,187
NOTE 5 - 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 balance of $39,496
and $37,200 as of November 30, 1996 and 1995.
Thomas V. Ackerly, President of the Company, is a note dated
January 1, 1991 in the original amount of
$115,000, with a balance of $115,000 and $117,900 as of November
30, 1996 and 1995. 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.
Interest is accrued on the above in the amount of $6,166 as of
November 30, 1996. Additionally, the Company has
advanced $6,500 to Kali Trading Co., a related
company.
NOTE 6- 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.
<PAGE>
