1 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 February 28, 1998 Commission File Number 33-0878-A
GS FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in charter)
Delaware 59 -2686448
(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)
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 February 28, 1998
was 9,849,118.
<PAGE>
PART I
Item 1. Business
History and Organization
GS Financial Services, Inc. (The Company), formerly known as Graystone
Financial Services, Inc. and 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 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
September 10, 1997, the Company amended its Articles of Incorporation author
of common shares from 4,000,000 to 10,000,000. On November 10, 1997, the
Company reincorporated in the State of Delaware, to be effective
December 1, 1997 and changed its name to GS Financial Services, Inc.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. (Bradford). Bradford has been inactive
from inception through July 31, 1995. On August 1, 1995, Bradford entered
into a licensing agreement with Nico Electric, A.G. in exchange for 11.3%
of the common stock of Bradford. The licensing agreement allows Bradford'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
complete the transaction. This reduces the Company's ownership in Bradford
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 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 month period.
In addition, in connection with the public offering 550,000 class B 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.
<PAGE>
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 were
required to be returned to the Company by certain original shareholders.
The transaction was handled as a reverse merger. Both Graystone Nash, Inc.
and Outwater and Wells, Inc. were dissolved during 1994.
On April 16, 1990, the shareholders approved a 50:1 reverse split of the
Company's common stock, reducing issued shares by 83,545,000. 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, for $0.00.
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. (G. S. Television) in the State of Delaware. On October 3, 1996,
G. S. Television received authority to do business in the State of
New Jersey. G. S. Television is a wholly owned subsidiary of the
Company and has been inactive since its date of inception.
On October 23, 1997, the Company issued 5,850,000 shares of common stock
for cash at $0.002 per share or $11,700.
On November 10, 1997, the Company reincorporated in the State of Delaware,
to be effective December 1, 1997 and changed its name to GS Financial
Services, Inc. Additionally, the Company increased the number of shares
authorized to be issued to 35,000,000 with a par value of $0.001 per share,
10,000,000 of which are preferred shares and 25,000,000 are common shares.
On November 10, 1997, the Company authorized a Stock Incentive Plan (Plan)
with a maximum of 2,500,000 shares that may be issued. The purpose of the
Plan is to advance the interest of the Company and its stockholders by
providing deferred stock incentives in addition to current compensation to
certain key executives and certain directors of the Company and its
subsidiaries who contribute significantly to the long term performance and
growth of the Company.
<PAGE>
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. The Company leases an
additional office located at 45 Wall Street, New York, NY that consists 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.
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 February 28, 1998.
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, 1997 and
November 30, 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-counte
<PAGE>
Fiscal 1998 Low Bid High Bid
1st Quarter Unknown Unknown
2nd Quarter Unknown Unknown
3rd Quarter Unknown Unknown
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 February 28, 1998 there were 6,066 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 covering the three
months period ended February 28, 1998 and February 28, 1997, 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 February 28,
1998 1997
Income Statement Data:
Revenues $ 100,000 $ 0
Other Income and (Expense) $ (727,016) $ 136,110
Net Income (Loss) $ (708,469) $ 53,685
Net Income (Loss) per share $ (0.12) $ 0.01
Dividends per share $ 0 $ 0
Weighted average shares outstanding: 5,949,118 3,999,118
February 28, 1998 May 31, 1997
Balance Sheet Data:
Total Assets $ 1,896,647 $ 2,104,978
Retained Earnings $ 557,088 $ 607,163
Stockholders Equity $ 1,875,048 $ 1,913,423
<PAGE>
Item 7. MANAGEMENT'S DECISIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of significant factors
which have affected registrant's financial position and operations.
Overall Situation
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 w
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 years and
continues to have a very small amount of liabilities. Management intends
to seek potential businesses to acquire through the issuance of the
Company's common stock and 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 g
Item 8. FINANCIAL STATEMENT AND SUPPLEMENTAL DATA
The financial statements are attached hereto commencing on Page F-1:
Audit report, February 28, 1998 and May 31, 1997.
Consolidated Balance Sheet at February 28, 1998 and May 31, 1997.
Consolidated Statement of Operations for the Three Months Period
Ended February 28, 1998 and 1997.
Consolidated Statement of Operations for the Nine Months Period
Ended February 28, 1998 and 1997.
Consolidated Statement of Stockholders' Equity from
Inception Through February 28, 1998.
Consolidated Statement of Cash Flows for the Nine Months Period
Ended February 28, 1998 and 1997.
Notes to the Consolidated Financial Statements as of February 28, 1998
and May 31, 1997.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None
<PAGE>
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 46 Director February 1, 1996 -
Present
Joseph Ben-Dak 41 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 holds the same offices in Digital Acoustic Systems Inc., a
related Company. Mr. Ackerly holds the same offices in Harp Investments,
Inc., the controlling shareholder of GS 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 Feb
ak was appointed as a Director on September 26, 1996.
Item 11. EXECUTIVE COMPENSATION
During the three months period ended February 28, 1998 and 1997,
Thomas V. Ackerly received no remuneration. No other 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
directors 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 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 purs
At February 28, 1998 and February 28, 1997, 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 February 28, 1997 and
February 28, 1997, 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. 8,362,500 84%
Name of Beneficial Owner Amount of Ownership Percent of Class
All Executive Officers/Directors as a Group 8,812,500
88%
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 February 28, 1998 of $201,915, with interest payable 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 Auditors' Report - - - - - - - - - - - F-1
Consolidated Balance Sheet - - - - - - - - - - - -- - - - - F-2 F-3
Consolidated Statement of Operations - - - - - - -- - - - - F-4
Consolidated Statement of Operations - - - - - - - - - - - - F-5
Consolidated Statement of Stockholders' Equity- - - - - - - - F-6 F-8
Consolidated Statement of Cash Flows - - - - - - - - - - - - F-9 F-10
Notes To The Consolidated Financial Statements - -- - - - - - F-11 F16
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.
GS FINANCIAL SERVICES, INC.
(s) Thomas V. Ackerly
By: Thomas V. Ackerly, President and Director
April 13, 1998
Date
<PAGE>
C O N T E N T S
Independent Auditors' Report - - - - - - - - - - - - - - - - - -
- - - - - - - - - - F-1
Consolidated Balance Sheet at February 28, 1998 and May 31, 1997-
- - F-2 F-3
Consolidated Statement of Operations for the Three Months
Period Ended February 28, 1998 and 1997- - - - - - - - - - F-4
Consolidated Statement of Operations for the Nine Months
Period Ended February 28, 1998 and 1997 - - - - - - - - - F-5
Consolidated Statement of Stockholders' Equity from
Inception (June 24, 1986) through February 28, 1998 -- - - F-6 F-8
Consolidated Statement of Cash Flows for the Three and Nine Months
Period Ended February, 1998 and 1997 - - - - - - - - - - - F9 F-10
Notes to Consolidated Financial Statements - - - - - - - F-11 F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
GS Financial Services, Inc.
Glen Ridge, New Jersey
We have audited the consolidated balance sheets of GS Financial Services,
Inc., at February 28, 1998 and May 31, 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for the
three and nine months period ended February 28, 1998 and 1997. 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 provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GS Financial Services,
Inc., as of February 28, 1998 and May 31, 1997, and the consolidated
results of its operations and its cash flows for the years then ended,
in conformity with generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
April 13, 1998
<PAGE>
BALANCE SHEET
ASSETS FEBRUARY 28,1998 MAY 31, 1997
Current Assets
Cash $ 7,730 $ 60,870
Accounts Receivable 3,862 13,644
Marketable Securities - Trading (Note 4) 1,075,437 1,514,986
Total Current Assets 1,087,029 1,589,500
Property and Equipment, Net (Note 3)
1,890 0
Other Assets
Investment - Real Estate (Note 5)
360,677 0
Receivables - Related Parties (Note 6) 349,397 448,647
Accrued Interest Receivable (Note 6)
79,574 48,974
Security Deposits
16,060 16,060
Organization Costs, Net 1,520 1,297
Investment - Digital Acoustic Systems Inc. (Note 1) 500 500
Total Other Assets 807,728 515,478
Total Assets $ 1,896,647 $ 2,104,978
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
FEBRUARY 28, 1998 MAY 31, 1997
Current Liabilities
Accounts Payable $ 6,600 $ 6,600
Payables - Related Parties (Note 6) 0 29,955
Notes Payable 15,000 155,000
Total Current Liabilities 21,600 191,555
Stockholders' Equity
Preferred Stock: No Par Value, Authorized 10,000,000
Shares; Issued and Outstanding, NONE (Note 1)
0 0
Common Stock: Par Value $0.0001, Authorized 10,000,000
Shares; Issued and Outstanding, 9,849,118 Shares at
February 28, 1998 and 3,999,118 Shares at May 31, 1997
985 400
Additional Paid in Capital 1,316,975 1,305,860
Retained Earnings 557,088 607,163
Total Stockholders' Equity 1,875,048 1,913,423
Total Liabilities and Stockholders' Equity $ 1,896,647 $ 2,104,978
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Period Ended February 28, 1998
For the Three Months Period Ended February 28, 1997
Revenues
Consulting Income $ 100,000 $ 0
Expenses
General and Administrative 81,453 82,425
Operating Income (Loss) 18,547 $ (82,425)
Other Income (Expense)
Gain on Sale of Securities 8,598 90,051
Temporary Decrease in Market Value of Securities (740,630) 38,257
Dividends and Interest Income 5,016 7,802
Interest Expense 0 0
Total Other Income (Expense) (727,016) 136,110
Net Income (Loss) $ (708,469) $ 53,685
Income (Loss) Per Share of Common Stock $ (0.12) $ (0.01)
Weighted Average Number of Common Shares Outstanding
5,949,118 3,999,118
<PAGE>
CONDOLIDATED STATEMENT OF OPERTAIONS
For the Nine Months Period Ended February 28, 1998
For the Nine Months Period Ended February 28, 1997
Revenues
Consulting Income $ 205,000 $ 113,733
Expenses
General and Administrative 390,550 201,034
Operating Loss (185,550) $ (87,301)
Other Income (Expense)
Gain on Sale of Securities 1,056,143 92,932
Temporary Decrease in Market Value of Securities
(946,696) (102,775)
Dividends and Interest Income
30,835 7,860
Interest Expense
(4,807) 0
Total Other Income (Expense) 135,475 (1,983)
Net (Loss) $ (50,075) $ (89,284)
(Loss) Per Share of Common Stock $ (0.01) $ (0.02)
Weighted Average Number of Common Shares Outstanding 5,949,118 3,999,118
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Common Shares
Stock Amount Additional Paid In Capital Retained Earnings
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 ,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 Retained Earnings 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
1,309,790
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 Loss 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 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
Common Shares
Stock Amount Additional Paid In Capital Retained Earnings
Total
Issuance of Common Stock for Cash October 23, 1997
5,850,000 $ 585 $ 11,115 $ $ 11,700
Net Loss for the Nine Months Period Ended
February 28, 1998 (50,075) (50,075)
Balance, February 28, 1998
9,849,118 $985 $ 1,316,975 $ 557,088 $ 1,875,048
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Nine Months Period Ended February 28, 1998
For The Nine Months Period Ended February 28, 1997
Cash Flows from Operating Activities
Net Income or Loss $ (50,075) $ (94,913)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Used in Operating Activities
(Increase) Decrease in
Marketable Securities 946,696 102,775
(Gain) Loss on Sale of Securities (1,056,143) 92,932
Depreciation and Amortization 363 0
Changes in Operating Assets and Liabilities
(Increase) Decrease in Accounts Receivable
9,782 (11,569)
(Increase) Decrease in Accrued Interest Receivable
(30,600) 0
(Increase) Decrease in Security Deposits
0 (1,175)
(Increase) Decrease in Organization Costs
(347) (721)
Increase (Decrease) in Accounts Payable
0 (116,240)
Total Adjustments (130,249) 66,002
Net Cash Used in Operating Activities (180,324) (28,911)
Cash Flows from Investing Activities
Purchase of Office Equipment
(2,060) 0
Investment - Real Estate (360,747) 0
Purchases of Marketable Securities (1,424,761) (645,125)
Proceeds from Sale of Marketable Securities 1,973,757 426,500
Net Cash Flows Provided by Investing Activities 186,189 (218,625)
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Nine Months Period Ended February 28, 1998
For The Nine Months Period Ended February 28, 1997
Cash Flows From Investing Activities
Proceeds from sale of Common Stock
11,700 0
Loan Proceeds 0 155,000
Advances (to) from Related Companies 69,295 (14,714)
Debt Repayments (140,000) (22,903)
Net Cash Provided by Financing Activities (59,005) 117,383
Decrease in Cash and Cash Equivalents (53,140) (130,353)
Cash and Cash Equivalents Beginning of Period 60,870 130,448
Cash and Cash Equivalents End of Period $ 7,730 $ 295
Supplemental Information
Cash Paid for:
Interest $ 4,807 $ 0
Income taxes $ 0 $ 0
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
GS Financial Services, Inc. (The Company), formerly known as Graystone
Financial Services, Inc. and 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 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
September 10, 1997, the Company amended its Articles of
Incorporation authorizing an increase in the number of common shares from
4,000,000
to 10,000,000. On November 10, 1997, the Company reincorporated in the
State of
Delaware, to be effective December 1, 1997 and changed its name to GS
Financial Services, Inc. Additionally, the
Company increased the number of shares
authorized to be issued to 35,000,000 with a par value of $0.001 per share,
10,000,000 of
which are preferred shares and 25,000,000 are common shares.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. ( Bradford). Bradford has been
inactive from inception through July 31, 1995. On August 1, 1995,
Bradford entered into a licensing agreement with Nico Electric, A.G. and/or
overseas assignees in exchange for 86.7% of the common stock of Bradford.
The licensing agreement allows Bradford's use of Nico Electric, A.G.
technology for alarms and security devices up to 6Mhz and 1Mv for
commercial use only. This
in Bradford (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 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 month period.
<PAGE>
NOTE 1 - ORGANIZATION - (CONTINUED)
In addition, in connection with the public offering 550,000 class B
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, a New Jersey
corporation, 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, in exchange for 59,675,000 shares of the Company's
common stock at $0.0001 per share or $5,968.
Additionally, 11,475,000 shares of the Company's common stock were required
to be returned to the Company by certain original shareholders.
The transaction was handled as a reverse merger. Both Graystone Nash, Inc.
and Outwater and Wells, Inc. were dissolved during 1994.
On April 16, 1990, the shareholders approved a 50:1 reverse split of the
Company's common stock, reducing issued shares by 83,545,000 .
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 for $0.00.
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. (G. S. Television) in the State of Delaware. On October 3,
1996, G. S. Television 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.
On October 23, 1997, the Company issued 5,850,000 shares of common stock fo
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 i
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
H. Property and Equipment
Property and Equipment is recorded at cost.
Depreciation is computed under the
straight line method, utilizing a 5 year estimated useful life.
Expenditures for repairs
and maintenancebalances 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 February 28, 1998, May 31, 1997, 1996 and 1995,
the Company had net operating loss carryforwards of approximately
$2,405,105, $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 $0, $776,317, $1,267,166 and $265,715 that may be offse
future capital gains.
ary 28, 1998:
Number of Cost Marke Shares Value
Trading Securities owned
NJS Acquisitions Corp. 331,880 $ 538,419 $ 1,019,601
Reed Systems, Inc. 19,444 0 0
Great American Lumber Co. 8,695 0 0
Calimont Corp. 19,500 97,545 7,313
GK Intelligent Systems 155,000 77,500 48,515
Cash Account 8 8
Total $ 713,472 $1,075,437
<PAGE>
NOTE 4 - INVESTMENTS - MARKETABLE SECURITIES - TRADING (CONTINUED)
The following is a summary of Trading Securities owned at May 31, 1997:
Number of Cost Marke Share 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
NOTE 5 - INVESTMENT - REAL ESTATE
During July, 1997, the Company completed the purchase of real
estate located in
Stroudsburg, Pennsylvania for $360,677.
NOTE 6 - TRANSACTIONS - RELATED PARTIES
Receivables - Related Parties 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 $45,889 and $40,636 at
February 28, 1998 and May 31,1997 . 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 $151,685 and $408,011 at
31, 1997. 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 notes
in the amount of $79,574 and $48,974 at February 28, 1998 and May 31, 1997.
Advances have been made to Digital Acoustic System Inc., a related
company in the
amount of $151,523 at February 28, 1998. The note is due on demand and c
arries no interest rate.
Payables - Related Parties represent advances from related
companies in the amounts of
$29,955 at May 31, 1997 and has been paid in full at February 28, 1998.
<PAGE>
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.
Future minimum annual rentals due are as follows:
1998 $ 14,400
NOTE 7- OTHER MATTERS
Effective June 1, 1997, the Company entered into a consulting agreement
with Bridgewater Financial LLP, to provide assistance in developing
clients who are
seeking access to public markets through the merger or acquisition of a
public company
or entry into trading markets through the introduction to financing
institutions or broker/dealers. The contract is for one year and the fee
for services is $100,000.
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