SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Year ended May 31, 1997 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 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
The number of shares of Common Stock outstanding as of May 31,
1997 was 3,999,118.
<PAGE>
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 and security devices up to
6Mhz and 1Mv for commercial use only. An additional 75.4% of the
common stock of Bradford-Taylor Clearinghouse, Inc. 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.
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
<PAGE>
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 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 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 $60,565,581.00 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. 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>
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 May 31, 1997.
PART II
<[AGE>
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
years ended May 31, 1997 and May 31, 1996. 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
3rd Quarter Unknown
Unknown
4th 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 May 31, 1997 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.
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following selected financial data on the Company conveying
the three months period ended May 31, 1997 and 1996, 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 Quarter Ended May 31,
1997 1996
Income Statement Data:
Revenues $ 0 $ 23,443
Other Income and (Loss) $
136,110 $ 452,121
Net Income (Loss) $ 53,685 $
359,465
Net Income (Loss) per share $ 0.01
$ NIL Dividends per share
$ 0 $
0
Weighted average shares outstanding: 3,999,118
3,999,118
Balance Sheet Data:
Total Assets
$ 2,396,977 $ 359,475
Retained Earnings (Deficit) $ 897,554
$ (758,689)
Stockholders Equity $ 2,203,814 $
547,571
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
market value of 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, May 31, 1997 and 1996.
Consolidated Balance Sheet at May 31, 1997 and 1996.
Consolidated Statements of Operations for the Year ended May
31, 1997 and 1996.
Consolidated Statement of Changes in Stockholders' Equity from
Inception through May 31, 1997.
Consolidated Statement of Cash Flows for the nine
months period ended
May 31, 1997 and 1996.
Notes to Financial Statements as of May 31, 1997 and
1996.
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 49 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 year ended May 31, 1997 and 1996, Thomas V. Ackerly
received remuneration in the amount of $9,000 and $60,500,
respectively. For the fiscal year ended May 31, 1995, no
officer, director, employee, or affiliate of the Registrant
received any remuneration. Moreover, for these periods 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 May 31, 1997 and 1996, 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 May 31, 1997 and 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 balances at May 31, 1997 and 1996, of
$448,647 and $149,996, and includes interest at the rate of 9%
per annum. By agreement between the parties, interest did 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
Consolidated Statement of Stockholders' Equity- - - - - - - -
- - - - F-5 F-6
Consolidated Statement of Cash Flows - - - - - - - - - - - - -
- - - - F-7 F8
Notes To Financial Statements - - - - - - - - - - - -
- - - - - - - - - - - - F-9 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.
(s) Thomas V. Ackerly
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 February 28, 1997
and
February 29, 1996- - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - F-2 F-3
Consolidated Statement of Operations for the
Three months and
Nine Months Periods Ended February 28, 1997
and
February 29, 1997- - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - F-4 F-5
Consolidated Statement of Changes in
Stockholders' Equity from
Inception through February 29, 1997 - - - -
- - - - - - - - - - - - - - - - - - - - F-6 F-7
Consolidated Statement of Cash Flows for the Six
Months Period Ended
February 28, 1997 and February 29, 1996- - -
- - - - - - - - - - - - - - - -- - - 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 May 31, 1997 and 1996
and the related consolidated statement of operations,
stockholders' equity and cash flows for the periods 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 May 31, 1997 and 1996, in conformity with generally
accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
August 28, 1997
ASSETS
MAY 31, 1997 MAY 31, 1996
Current Assets
Cash
$ 60,870 $
130,448
Accounts Receivable
14,206 0
Marketable Securities - Trading - Note 4
1,514,986 2,180,735
Total Current Assets 1,589,500 2,311,183
Property and Equipment Net - Note 3
0 0
Other Assets
Receivables - Related Companies - Note 5 448,647 149,996
Accrued Interest Receivable
48,974 6,166
Security Deposits
16,060 0
Organization Costs
1,297 0
Investment - Digital Acoustic Systems Inc. - Note 1
500 500
Total Other Assets 515,478 156,662
Total Assets $ 2,104,978 ======= $ 2,467,845
======
LIABILITIES AND
STOCKHOLDERS EQUITY
MAY 31, 1997 MAY 31, 1996
Current Liabilities
Accounts Payable
$ 6,600 $
122,791
Accounts Payable - Related Company - Note 5
29,955 46,327
Notes Payable
155,000 0
Total Current Liabilities
191,555 169,118
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 May 31, 1997
and May 31, 1996 400 400
Additional paid in capital 1,305,860 1,305,860
Deficit Accumulated During the Development Stage 607,163
992,467
Total Stockholders' Equity 1,913,423 2,298,727
Total Liabilities and Stockholders' Equity $ 2,104,978
======= $ 2,467,845 =======
For the Year Ended May 31, 1997 For the Year Ended May
31, 1996 For the Year Ended May 31, 1995 Retained Earnings
Accumulated During The Development Stage
Revenues
Consulting Income $ 108,154 $ 36,000 $
0 $ 144,154
Interest Income 0 0 0
232,031
Miscellaneous Income
0 0 0 45,049
Total Revenues
108,154 36,000 0 421,234
Expenses
General and
Administrative 289,382 108,065 0 834,818
Total Expenses 289,382 108,065 0 834,818
Operating Loss (181,228) $ (72,065) $ 0 $
(413,584)
Other Income and (Loss)
Gain or (Loss) on Sale of Securities 490,849 165,855 0
500,293
Dividends and Interest Income 42,886 6,213 0
49,099
Other Income - Judgment
0 0 0 371,094
Loss on Disposal of Discontinued Subsidiaries -
Graystone Nash, Incorporated and
Outwater & Wells, Inc.
0
(5,250) (1,172,556) (1,177,806)
Temporary Increase (Decrease) in Marketable
Securities
(737,811) 2,015,878 0
1,278,067
Total Other Income and (Loss)
(204,076) 2,182,696 (1,172,556) 1,020,747
Net Income or (Loss)
$ (385,304) ======= $ 2,110,631
======= $(1,172,556) ======= $ 607,163 ======
Net Income or (Loss) Per Share of Common Stock $
(0.09) === $ 0.53 === $ (0.69)
=== $ 0.15 ===
Common Shares Stock Amount Additional
Paid In Capital Retained Earnings Accumulated During the
Development Stage Total
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 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
Common Shares Stock Amount Additional Paid In
Capital Loss Accumulated During the Development Stage Total
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 year ended
May 31, 1997
(385,304) (385,304)
Balance- May 31, 1997 3,999,118 ======= $
400 === $ 1,305,860 ======= $ 607,163 ====== $
1,913,423 ======
For The Year Ended May 31, 1997
For The Year Ended May 31, 1996 For The Year Ended May
31, 1995 From Inception Through May 31, 1997
Cash Flows from Operating Activities
Net Income or Loss $ (385,304) $ 2,110,631 $ (1,172,556)
$ 607,163
Temporary (Increase) or Decrease in
Marketable Securities
737,811 (2,015,878)
0 (1,278,067)
Loss on Disposal of Subsidiaries
0 0 1,172,556 1,203,788
Gain on Sale of Securities
(490,849) 0 0 (490,849)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation
0 0 0 41,931
Changes in Operating Assets and Liabilities
(Increase) Decrease in Accounts Receivable
(14,206) 0 0 (14,206)
(Increase) Decrease in Accrued Interest Receivable
(42,808) (6,166)
(48,974)
(Increase) Decrease in Security Deposits
(16,060) 0 0 (16,060)
(Increase) Decrease in Organization Costs
(1,297) 0 (1,297)
Increase (Decrease) in Accounts Payable (116,191)
83,687 0 6,600
Total Adjustments 56,4391
(1,938,357) (1,172,556) (597,134)
Net Cash Provided (Used) by Operating Activities
(328,913) 172,274 0 10,029
Cash Flows from Investing Activities
Purchase of Office Equipment
0 0 0 (41,931)
Advances to Subsidiaries
0 0 0 (1,203,788)
Investment in Related Company
0 (500) 0 (500)
Purchases of Marketable Securities
(645,218) (164,857) 0 (711,849)
Proceeds from Sales of Marketable
Securities 1,031,814 0 0 1,031,814
Net Cash Flows from Investing Activities 386,596 (165,357) 0
(925,849)
For The Year Ended May 31, 1997
For The Year Ended May 31, 1996 For The
Year Ended May 31, 1995 From Inception Through May 31, 1997
Cash Flows From Financing Activities
Sale of Common Stock 0 75,000
0 1,300,292
Loan Proceeds
155,000 0 0 155,000
Advances to and from Related Companies
(298,651) 2,204 0 (448,647)
Advances to and from Related Company
16,390 46,327 0 (29,955)
Net Cash Provided by Financing Activities (127,261) 123,531
0 976,690
Increase (Decrease) in Cash and Cash
Equivalents (69,578) 130,448
0 60,870
Cash and Cash Equivalents at Beginning of Period 130,448
0 0 0
Cash and Cash Equivalents at End of Period $ 60,870
====== $ 130,448 ====== $ 0
===== $ 60,870 =====
Supplemental Information
Assets Purchased in Exchange for Common Stock
$ 0
===== $ 0 ===== $ 0 =====
$ 5,968 =====
Cash Paid for:
Interest $ 0 ===== $ 0
===== $ 0 ===== $
121,310 ======
Income taxes $ 0 ===== $
0 ===== $ 0 ===== $
0 =====
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 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 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 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
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.
E. Provision for Taxes
At May 31, 1997, 1996 and 1995, the Company
had net operating loss carryforwards of
approximately $2,257,794, $2,175,722, and $2,169,005 that may be
offset against future taxable income through
the years 2012, 2011 and 2009. Additionally, the
Company has available capital loss carryovers of
$776,317, $1,267,166 and 265,715 that may be
offset against future capital gains.
F. Use of Estimates
Management uses estimates and assumptions in
preparing financial statements in
accordance with generally accepted accounting principles. Those
estimates and assumptions affect
the reported amounts of amounts of assets and liabilities, the
disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could vary from the estimates that were
assumed in preparing the financial
statements.
G. Pending Accounting Pronouncements
It is anticipated that current pending
accounting pronouncements will not have an
adverse impact on the financial statements of the Company.
NOTE 3 - PROPERTY AND EQUIPMENT
May 31, May 31,
1997 1996
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 May 31, 1997:
Number of
Cost Market Shares
Value
Trading Securities owned
NJS Acquisitions Corp. 261,877 $
0 $ 1,473,058
Reed Systems, Inc. 19,444 0 0
Great American Lumber Co. 8,695 0 0
G L Intelligent Systems, Inc. 20,000
46,253 32,500
XO Systems Corp.
200,000 100,005 9,400
Cash Account 28 28
Total
$146,286 $1,514,986
====== =======
The following is a summary of trading securities
owned as of May 31, 1996:
NJS Acquisitions Corp.
397,677 $ 0 $ 2,087,804
Reed Systems, Inc.
19,444 0 0
E Data Corp.
5,000 46,187 48,125
Great American Lumber Co., Inc.
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
$ 74,223 $ 2,180,745
===== ======
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 $40,636
and $37,200 as of May 31, 1997 and 1996. Thomas
V. Ackerly, President of the Company, represents a note dated
January 1, 1991 in the original amount of
$115,000, with a balance of $448,647 and $149,996 as of May 31,
1997 and 1996. The notes are payable on demand
and include interest at the rate of 9% per
annum. By agreement with the parties, interest did not begin to
accrue on these notes till January 1,
1996. Interest is accrued on the above in the amount of $48,974
and $6,166 as of May 31, 1997 and 1996.
Additionally, the Company has advanced 0 and
NOTE 5 - TRANSACTIONS WITH RELATED PARTIES (C0NTINUED)
$28,600 to Kali Trading Co., a related company, at
May 31, 1997 and 1996. Accounts Payable -
Related Companies represents advances to and from related
companies in the amounts of $29,955 and
$46,327, respectively as of May 31, 1997 and 1996.
NOTE 6 - LEASES
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. The Company leases an
additional office located at 45 Wall Street, New
York, NY and consist of approximately 1,000 square feet. The
lease is for a one year period ending August
31, 1998, at the rate of $2,400 per month/
NOTE 7- 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 was
$108,000.
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