SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10K-SB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file
May 31, 1996 number
000-18097
BERNARD HALDANE ASSOCIATES, INC.
--------------------------------
(Exact name of Registrant as specified in its charter)
QUANTUM VENTURES GROUP, INC.
(Former Name of Registrant)
Florida 59-2720407
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
192 Lexington Avenue, 15th Floor, New York, New York 10016
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(Address of Principal Executive Offices)
444 Park Avenue South, Suite 503, New York, New York 10016
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(Former address of principal executive offices)
Registrant's telephone number: (212) 679-3360
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- - ------------------- -------------------
COMMON NASDAQ
Securities registered pursuant to Section 12(g) of the Act.
COMMON
(Title of Class)
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Indicate by check mark whether the Registrant (i) 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 (ii) has been subject to such filing
requirements for the past 90 days.
YES X NO
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The aggregate market value of the voting stock held by nonaffiliates of
the Registrant is approximately $1,051,600* (as of July 31, 1996.)
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO N/A X
---- ---- ----
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of this Registrant's
classes of common stock, as of the latest practical date: 1,148,865 shares of
common stock issued and outstanding as of May 31, 1996. (Includes 179,500
treasury shares.)
DOCUMENTS INCORPORATED BY REFERENCE
Company's Registration Statement filed on Form S-18, File No. 000-18097.
Annual Report on Form 10-K for the year ended May 31, 1993.
Annual Report on Form 10-K for the year ended May 31, 1989.
*Based upon market value of $2.59 per share, representing the average of
the low bid and ask prices of Registrant's common stock on July 31, 1996 as
reported by NASDAQ.
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Item 1. Business
(a) General Development of Business
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Bernard Haldane Associates, Inc. (the "Company") f/k/a Quantum Ventures
Group, Inc. owns the worldwide licensing rights to the Bernard Haldane name and
system of career consulting. The Bernard Haldane organization operates through
offices in the United States and Canada offering career consulting,
out-placement and job search services under the Bernard Haldane name. Today
there are 69 Bernard Haldane offices operating in the United States and Canada.
During the Company's last fiscal year, 12 new licensee offices were
opened. Management intends to open additional licensee offices, and where
applicable, offer franchise offices. There are currently no company owned
Haldane offices and management does not currently anticipate opening any company
owned Haldane offices. The Company has been looking into opportunities to open
licensed offices in the United Kingdom. The Company is also developing a
specially designed career consulting program to be offered to graduating college
students through its newly created, wholly owned subsidiary, First Career Corp.
(See the narrative description of Business, Item 1(c) for a more detailed
description of the operations of CSMC and the Bernard Haldane operations.)
(b) Financial Information about Industry Segments
---------------------------------------------
The Company's principal and sole business activity after terminating its
retail travel agency, Quantum Tours International, is providing career
consulting and advisory services under the Bernard Haldane name. Bernard Haldane
operations generated royalty revenues of $2,244,818 and generated income before
taxes of $841,768, for the Company's last fiscal year.
(c) Narrative Description of Business
---------------------------------
The Bernard Haldane system offers its clients a program designed to
prepare and teach its clients a means to achieve individual career advancement
and personal development. The Bernard Haldane system (the "System") instructs
clients on the dynamics of their own human potential and how to cope with
adverse changes in their occupational life through individualized counselling
sessions which normally last from three to twelve weeks.
Bernard Haldane earned a P.H.D. in Humanities. In 1946 he developed a
program to assist U.S. military officers in acquiring civilian jobs following
World War II. Dr. Haldane also launched this program in universities in the New
York area.
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The initial Haldane office was opened in New York in 1947 under the name
"Executive Job Counselors", and by 1948, Dr. Haldane was operating career
consulting offices in Boston and Washington, D.C. In 1958, Dr. Haldane changed
the Company's name from Executive Job Counselors to Bernard Haldane, which it
and its licensees have used since that time.
The current system of licensing Bernard Haldane offices began in the
1960s, with licensee offices in New York, Chicago and Philadelphia. The system
of Haldane licensee office expanded significantly in the 1970s and early 1980s.
In 1986 Dan Bruce, a licensee who operated several Haldane offices, and the
owner and principal shareholder of DRB Ltd., acquired from Career Productivity
Inc., an entity owned by Dr. Bernard Haldane, the principal rights, names, and
methods relating to "Individual Career Counseling Services" on a worldwide
basis, including the name "Haldane" and variations thereof, although excluding
certain activities relating to the personal activities of Dr. Haldane. In
consideration for the transfer of these rights, DRB agreed to pay $14,000 per
month for ten years and $7,000 per month for an additional ten years (the latter
amount to be adjusted beginning the eleventh year by 5% per year to "reflect an
inflation factor". To secure such payments, DRB granted CPI a security interest
in the names, methods, rights, sublicenses, etc. conveyed therewith.
In September 1989, there were approximately thirty seven Haldane offices
operating throughout the United States and Canada. In most cases these licensee
offices paid a royalty fee equal to five percent (5%) of gross cash revenues to
the license holder (DRB). Total royalty revenues received by DRB for the year
ended 1988 totalled approximately $450,000.
In September 1989, the Company formed Career Services Management Corp.
("CSMC"). CSMC was an 80% owned subsidiary of the Company. In February 1995 the
Company acquired all shares of stock owned by the five minority shareholders in
exchange for the issuance of a total of 75,000 shares of the Company's common
stock. During the past year as part of the Company's stock repurchase program, a
total of 45,000 of these shares have been repurchased at an average cost of
$2.50 per share.
In September 1989, CSMC acquired all of the issued and outstanding shares
of stock of DRB for $1.25 million payable, $1 million at closing and $250,000
pursuant to a promissory note payable to Dan Bruce which provided for payment of
principal and interest at the rate of eight percent (8%) per annum. The
principal balance on the note was to be amortized over a period of ten years
with the entire unpaid principal balance due in 1992. Mr. Bruce has subsequently
extended this obligation and under its current terms provides for payment of
interest only on the remaining outstanding principal balance of $200,000 payable
monthly at a rate of eight percent (8%) per annum. The entire unpaid principal
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balance is due January, 1997.
In addition to the payment of the $1.25 million for the DRB shares, DRB
remains obligated to make monthly payments of $7,000 per month until July 2006
(previous to July, 1996, these payments were $14,000 per month) to B+E
Partnership. At the time of acquisition of DRB Ltd. these payments were being
made by DRB Ltd. to Career Productivity Inc., whose owner was Bernard Haldane.
Subsequent thereto, Career Productivity Inc. sold this obligation due from DRB
to B+E Partnership. One of the partners of B+E Partnership is Dan Bruce, the
previous owner of DRB Ltd. The obligation of DRB to pay B+E Partnership is
secured by the Haldane license. Should DRB default on its obligation, DRB would
forfeit all rights to the use of the Haldane name and system of career
consulting. Mr. Bruce is not involved in either DRB's or the Company's current
operations.
As of May 31, 1996, there were 69 Bernard Haldane offices operating
throughout the United States and Canada. The Company does not currently operate
any Haldane offices. However, several licensee offices are owned by entities in
which Jerold Weinger, the Company's president and chief executive officer serves
as either an officer, director or shareholder. Any Haldane office opened in a
new territory is subject to payment of a licensing fee to DRB Ltd. at the
prevailing licensing rate. Licensees may open additional licensed offices within
an existing territory without payment of any new licensing fees. Offices
purchased from existing licensees were not subject to payment of any territorial
fee to DRB. (See "Certain Transactions")
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THE BERNARD HALDANE SYSTEM
The Bernard Haldane System (the "System") offers its clients a
sophisticated vocational program which can be utilized for career advancement,
job hunting and self satisfaction. Most clients utilize the program as a means
to facilitate their job search or career development.
Some of the services offered included:
Appraisal of client's qualifications.
Development of client's career goals.
Training clients to establish immediate and long-range
objectives in relation to career goals.
Developing a marketing program for the client.
Developing a program to assist in establishing
appropriate interview contacts.
Preparation for interviews.
Development of effective interview techniques to induce job offers.
Counseling on salary negotiations and fringe benefits. Assistance in
reviewing and assessing job offers.
Future career planning.
Consultation, as needed concerning organizational, political and
interpersonal skills related to career advancement. Continued assistance
for up to three years with client's career development.
The System aids the client in developing the skills and tools necessary to
conclude a successful job search. The offices provide professional guidance
through the actual search process and provides assistance until the client has
found a suitable position. The System is taught on an individualized basis with
the client working with a professional career adviser who guides and supports
the client through this process.
The Bernard Haldane offices will assist and support the client in three
ways; tangibly, psychologically and motivationally. "Tangibly" includes several
aspects, such as researching companies via computer data bases, annual reports
and brochures, so the client has an understanding of the potential of the
company's background and who possibly to contact. The client undergoes a
debriefing regarding the interviews he has went on in order to ascertain what
the client has or has not learned. The client is advised as to the next
appropriate action to take. The psychological and motivational support is a
combination of the whole process as it is a part of the procedure to re-motivate
the client from the frustrations and anxieties of the interview process and
unemployment. The Bernard Haldane Office will work and support the client until
he/she has accepted the position of his/her choice within the contractual
limitations.
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Each office has the flexibility in the way it may conduct the System.
However, the offices must comply with the overall System guidelines.
Once the client has commenced the new employment and/or position, he/she
enters into the follow-up phase of the program. A client should return to BHA
approximately 90 days after completion of the marketing phase so his career
position can be assessed and to determine the client's attitudes and the way the
client has progressed in to this new position. From this point the client can
draw upon the System and support services when and if needed for the duration of
the contract.
Client Fees
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A typical client pays fees set by the individual office in cash or based
on a payment plan over a period of several months. Fees for the Haldane program
typically cost from $3,500 to $7,500. Fees are payable upon commencement.
Licensee offices may, at their discretion, accept installment payments. The
Company does not provide the sublicensee with financing.
Sub-licensee Fees
- - -----------------
Sub-licensees (those owners/operators of the individually licensed Haldane
offices) typically pay a royalty fee of either 5% or 6% of gross revenues to
DRB. Royalty payments are due only on money actually collected. New territorial
licenses are granted for a term of 20 years. Prospective sublicensees typically
pay a sublicensing fee to DRB of approximately $25,000 for the right to operate
a Haldane license in a designated area. This fee may be paid in full at the time
of executing the license or over a period of time.
The Bernard Haldane Operations
- - ------------------------------
The Haldane offices are generally located in suburban metropolitan area.
The size of each office varies considerably from one licensee to another.
Average monthly rents vary considerably depending upon the city and location of
each office. A typical Haldane office employs two consultants, two advisors, one
administrative receptionist and one client support staffer. The consultants and
advisors are paid on a commission basis. The administrative receptionist and
client support staffer are paid a salary. However, some offices may employ more
or less according to demand.
The Company believes its relationship with the independent sublicensees
good and sponsors an annual conference in which owners, consultants and advisors
are invited to attend. The Company coordinates a national advertising program
for the benefit of all offices in the BHA organization and through
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advertisements in such publications as the National Business Employment Weekly
and The Wall Street Journal. The Company also provides initial and ongoing
seminars for career advisors and consultants as well as a company newsletter.
Some of the licensee offices utilize television and radio to supplement the
present advertising.
Jerold Weinger serves as the President, Chairman of the Board and Chief
Executive Officer of the Company and oversees the Haldane operations.
Proposed Activities
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The continued success of the Bernard Haldane operations is largely
dependent upon the number and success of local licensees. As a result, Haldane's
strategy is to continue the growth of its current activities through selective
expansion of licensee offices. During the Company's last fiscal year 12 new
licensee offices were opened. No territorial licensing fees were generated from
opening these offices. However, the Company will receive its normal royalty
payments from revenues generated by these offices. As the value of the Bernard
Haldane name increases, Management hopes to open additional offices in new
territories which will pay an initial licensing fee to DRB Ltd. in addition to
the monthly royalty. Management has determined that the program of career
consulting developed by Dr. Haldane, can be adapted and marketed in Europe.
Management has been exploring the possibility of granting licensing rights to
operate Haldane offices in the United Kingdom. While there can be no assurance
that the Company will be able to identify prospective licensees who can launch
the Haldane program, management remains optimistic that during the next fiscal
year, that there will be a licensed Haldane office in the United Kingdom.
In conjunction with the planned expansion of licensee offices, DRB intends
to register as a franchisor in those states which require registration and offer
franchise offices. (See "Government Regulations".) The Company's franchise
circular has been filed and approved by the New York Attorney General's office.
Some of the licensee owned offices currently provide out- placement
services to clients. Management has found that many large national and regional
companies require the services of a skilled out-placement company to assist
discharged employees to meet their goals and explore the market place for new
job opportunities. In furtherance of these objectives, Management has developed
an out-placement service, called OUTFLEX, which is coordinated by the executive
offices and operated through the various licensee offices. Due to the unique
nature of out- placement services, the nationwide Haldane Operations have met
with limited success in the out-placement field. However, individual Haldane
offices have met with varying degrees of profitability in the out-placement
field. There are currently no plans for DRB to actively pursue an out-placement
program.
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During the past year, management has determined that graduating college
students lack the training and skills to successfully embark on their employment
search. In furtherance thereof, the Company has formed a wholly owned
subsidiary, First Career Corp., which has developed a career consulting program
aimed specifically at graduating college students. The program was first test
marketed at Syracuse University and has been discussed with several Haldane
licensees who have expressed an interest in marketing the program to college
students. It is anticipated that the First Career program should become
operational in the coming fiscal year.
Competition
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Management believes that Bernard Haldane provides a unique service to its
clients which is unmatched by so-called job placement agencies which attempt to
match clients with prospective employees as opposed to the Haldane system which
provides individualized career consulting services.
Nationwide there are several large career out-placement agencies including
Drake Beam Moran, Right Associates and Lee Hecht Harrison and Associates which
compete with Haldane to provide corporate out-placement and counseling services.
The focus of these companies is out-placement services marketed to corporations
and not the individual client which is the primary focus of Haldane. However, as
Haldane expands in the out-placement field, Haldane organizations will compete
more directly with these entities.
The career consulting and employment service market is highly fragmented,
and no single company possesses a major share of the market. Although there are
hundreds of career consulting, job placement and employment service companies,
most are very small and operate in a single market.
The large number of employment services and career consulting
organizations is a result of the low barriers to entry in the industry. However,
most companies remain small because expansion requires a continued increase in
working capital.
The competitive structure within each local marketing area is unique. In
most major markets, many of the large job placement publicly traded companies
will be present, and in addition, there will be several large local competitors
which operate only in that market. Competition is also provided by governmental
entities, such as state employment offices.
The Company's marketing strategy is to promote its services in local
markets primarily through print advertising. Some licensee offices have utilized
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radio and television advertising with varying degrees of success. DRB has
prepared television commercials for use by the individual licensee offices and
makes these commercials available at no charge. Advertising in The Wall Street
Journal and National Business Employment Weekly provide the Haldane system with
national exposure. Each one of the sub-licensee offices, the owner/operators of
the individual licensee offices, contribute to the cost of advertising in the
National Business Employment Weekly.
Career consulting agencies in the U.S. are not regulated by any particular
federal laws. However, some states require registration and/or licensing.
Government Restrictions
- - -----------------------
Career consulting and job placement organizations have become an
increasingly regulated field, particularly by the states. Several states
prohibit the payment of an advance fee prior to securing a new job. While the
Bernard Haldane system does not advertise as a job placement agency some states
could construe the Haldane operations as falling within their statutory
guidelines and accordingly, restrict operations in that state or, prohibit the
payment of any advance fees. Such regulation may adversely affect the operations
of the licensee offices.
All Bernard Haldane offices are subject to state and the Federal Trade
Commission's guideline on advertising and unfair and deceptive trade practices.
Prior to CSMC's acquisition of DRB several of these offices were cited for
violations of these provisions. Management believes that the licensee offices
are currently in compliance will all applicable guidelines.
The Federal Trade Commission and some states may view, the payment of a
royalty fee, the basis of which is the granting of a right to operate a business
using the payee's name, program or system as constituting a franchise
relationship. The fee may be a set sum for the right to operate the business or,
the royalty payment may be based upon the payee's revenues or a combination of
both.
The Federal Trade Commission has promulgated its own rules regarding the
sale of franchisee locations which are formally entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures". These rules provide in part that prior to the sale of a franchise,
the franchisor must deliver to the franchisee a disclosure document. Filing of
the franchise documents with the FTC is not required prior to soliciting sales
of the franchise. Certain states may or may not have similar disclosure and/or
registration requirements. During the past fiscal year, the Company's franchise
document has been approved by the New York Attorney General's office.
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In those states where the granting of a license for the right to operate a
Bernard Haldane office may constitute a franchise, DRB intends to enter into
franchise agreements with current licensees, and if necessary under the state
statutes, DRB will offer current licensees the right of rescission. Management
is of the opinion that the potential liability for violation of any state or
federal statute relating to the sale of a franchise is not material. The System
of DRB licensed Bernard Haldane offices has been in existence since the 1960s. A
majority of the current sublicensees acquired their license from DRB Ltd. prior
to the Company's acquisition of its Haldane license. Even assuming any
sublicensee has a private right of rescission, the applicable statute of
limitations has expired for these private actions. The Company expects to incur
no additional costs of any significance relating to this situation.
Employees
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The Company employs two full time employees. Additional staffing
requirements are handled by temporary staffing agencies.
Travel Services
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In October 1992, the Company formed Quantum Tours International ("QTI")
f/k/a/ QV Financial Services, Inc., QTI is a full service travel agency licensed
in the state of Florida as a seller of travel. QTI provides commissionable
travel services for air, hotel, car, cruise and other means of travel.
Despite income of $19,996 on revenues of $95,474 during the past fiscal
year, management has determined that corporate assets and resources would be
better allocated by focusing exclusively on the Haldane and First Career
operations. As a result, upon completion of its upcoming tour, QTI will cease
operations.
Item 2. Properties
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The Company's executive and corporate offices are currently located at 192
Lexington Avenue, New York, New York 10016. The Company currently leases
approximately 7,000 square feet of space at a cost of approximately $9,900 per
month. The Company subleases approximately 72% of this space, at the same cost
per square foot, to entities in which Mr. Weinger is associated. Net monthly
lease cost to the Company after payment by the subtenants is approximately
$2,800 per month.
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Item 3. Legal Proceedings
- - --------------------------
There are currently no pending or threatened material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
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NONE
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matter.
- - ------------------------------------------------------------------------------
(a) Market Information
------------------
The Company's common stock is currently traded on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") under the symbol
"BHAL". There is limited trading actively in the Company's securities and there
can be no assurance a regular trading market for the Company's common stock will
be sustained.
The following table sets forth, for the period indicated, the bid price
range of the Company's common stock:
Common Stock
High Bid Low Bid
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1993
- - ----
Quarter Ended February 28, 1993 $1.00 $ .875
Quarter Ended May 31, 1993 $1.00 $ .875
Quarter Ended August 31, 1993 $1.625 $ .875
Quarter Ended November 30, 1993 $2.00 $1.310
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1994 High Bid Low Bid
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Quarter Ended February 28, 1994 $2.87 $2.00
Quarter Ended May 31, 1994 $3.00 $2.00
Quarter Ended August 31, 1994 $2.75 $2.50
Quarter Ended November 30, 1994 $2.75 $2.625
1995
- - ----
Quarter Ended February 28, 1995 $2.50 $2.620
Quarter Ended May 31, 1995 $2.25 $2.25
Quarter Ended August 31, 1995 $2.56 $2.43
Quarter Ended November 30, 1995 $2.53 $2.43
1996
- - ----
Quarter Ended February 28, 1996 $2.87 $2.43
Quarter Ended May 31, 1996 $2.56 $2.43
Period Ended July 31, 1996 $2.43 $2.43
(Prices quoted reflect a prior 100:1 reverse stock split and a 4:1 reverse stock
split in May 1992.)
Such market quotations reflect the high bid and low prices as reflected by
NASDAQ or by prices, without retail mark-up, mark-down or commissions and may
not necessarily represent actual transactions. The following companies serve as
market makers for the Company's securities: Josephthal Lyon & Ross, Tasin & Co.,
Carr Securities and Howe, Barnes Investments Inc.
(b) Holders
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As of July 31, 1996, there were approximately 1350 holders of record of
the Company's common Stock.
(c) Dividends
---------
The Company has not paid any cash dividends since its inception and the
Board of Directors does not contemplate doing so in the near future. Any
decisions as to future payment of dividends will depend on the earnings and
financial position of the Company and such other factors as the Board of
Directors deems relevant.
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Item 6. Selected Financial Data
- - --------------------------------
Summary of Operations:
For the Years Ended May 31, 1996, 1995, 1994, 1993 and 1992.
1996 1995 1994 1993 1992
(Restated) (Restated) (Restated)
Revenue
Royalty
Income $2,244,818 $ 1,747,988 $ 1,214,091 $ 959,395 $ 739,933
Sublicense
Income $ $ 104,214 $ 99,625 $ 19,229 $ 46,124
---------
Other
Income $ $ 35,400 $ $ $
--------- -------- --------
Interest
Income $ 99,621 $ 49,785 $ 14,062 $ 12,464 $ 19,879
Total
Revenues $2,344,439 $ 1,937,387 $ 1,327,778 $ 991,088 $ 805,936
Net Income
(Loss) $ 533,440 $ 699,105 $ 206,074 $ (86,670) $ (90,515)
Net Income
(Loss per
Share of
Common Stock) $ 0.44 $ 0.61 $ 0.20 $ (.09) $ (.10)
Restated for discontinued operations of retail travel agency.
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SUMMARY OF BALANCE SHEET AS OF MAY 31
1996 1995 1994 1993 1992
(Restated) (Restated) (Restated)
CURRENT ASSETS $2,147,294 $2,007,844 $1,128,480 $ 731,440 $ 579,799
Other Assets $1,277,536 $1,504,467 $1,529,655 $1,697,903 $2,060,903
TOTAL ASSETS $3,424,830 $3,512,311 $2,658,135 $2,429,343 $2,640,702
CURRENT LIABILITIES
Account Payable
and other Current
Liabilities $ 149,695 $ 213,660 $ 157,424 $ 137,096 $ 103,400
Current Maturities
of Long Term Debt $ 245,956 $ 315,951 $ 307,065 $ 298,860 $ 314,395
Other Liabilities $ 555,799 $ 591,437 $ 702,988 $ 810,053 $ 952,903
Stockholder's
Equity $2,473,380 $2,391,263 $1,490,658 $1,183,334 $1,270,004
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $3,424,830 $3,512,311 $2,658,135 $2,429,343 $2,640,702
Restated for discontinued operations of retail travel agency.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- - --------------------------------------------------------------------------------
of Operations
- - -------------
Management is pleased with the results of operations for the past year.
Royalty revenues increased by over 28% during the past year increasing from
$1,747,988.00 to $2,244,818. During the past year, management has concentrated
on opening new licensed offices. However, the Company did not generate any
revenues from the sale of territorial rights as compared to $104,214 the prior
fiscal year.
Management believes that the number of Haldane offices will continue to
increase as current licensees expand their operations and new licensees or
franchisees are secured. Management anticipates opening a licensed Haldane
office in the United Kingdom this coming year. In addition, the Company hopes to
launch its program of career consulting for college graduates under the "First
Career" name. This, combined with the growing strength of the Haldane name and
organization in the field of career consulting and out-placement services,
should result in increasing revenues.
Management has determined to focus exclusively on expanding the Haldane
system, and given the poor performance of Quantum Tours over the past several
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years, the Company intends to close Quantum Tours upon completion of QTI's
outstanding tour commitments. As a result, the Company's prior years financial
statements have been adjusted to reflect the discontinued operations.
LIQUIDITY CAPITAL RESOURCES
As of May 31, 1996 the Company had $2,147,294 in current assets as
compared to $2,007,844 on May 31, 1995.
Accounts receivable for 1996 total $329,146 as compared to $269,067 in
1995. This increase is directly attributable to the increasing royalty revenues
generated from the Haldane operation. The Company has also recorded $83,000 for
deferred taxes as compared to $172,000 in 1995 due to the elimination of the
Company's net operating loss carryforward. Total assets decreased from
$3,512,311 to $3,424,830.
Current liabilities decreased from $529,611 as of May 31, 1995 to $395,651
as of May 31, 1996 due primarily to the satisfaction of an arbitration
proceeding instituted by a former licensee. Long term debt was reduced from
$587,037 to $541,080.
For 1996, cash flow from operating activities totalled $746,509 as
compared to $885,897 in 1995 and $452,673 in 1974.
The Company believes that its current cash position and working capital
are sufficient to meet its operational requirements for the coming year. Royalty
revenues from licensee offices and the sale of territorial rights to the Bernard
Haldane offices are expected to be sufficient to meet the Company's ongoing
operational expenses. Management does not anticipate the need for any
significant capital expenditures in the coming year which would require any
third party financing. Nor does the Company believe that there is any material
risk of any sublicensee seeking rescission pursuant to any technical violations
of state franchising statutes.
RESULTS OF OPERATION
The Company reported income from continuing operations of $513,444 on
revenues of $2,344,439, and net income,inclusive of discontinued operations of
QTI, totalling $533,440 during the fiscal year ended May 31, 1996. This compares
to a net income of $699,105 on revenues of $1,937,387 for the fiscal year ended
May 31, 1995 and net income of $178,074 on revenues of $1,327,778. Royalty
income from Haldane offices increased from $1,214,091 in 1994 to $1,747,988 in
1995 and $2,244,818 in 1996. This 28% increase from 1995 to 1996 in royalty
revenue can be attributable primarily to two factors;
16
<PAGE>
1. An increase in the number of sublicensee offices operating this
year as compared to last year; and
2. Increased royalty revenues attributable to an increase in the
number of clients serviced by the Haldane offices and increased fees for
providing the consulting services.
Payroll, general and administrative costs increased from $878,633 in 1995
to $1,147,271. This increase can be attributable to increased costs and expenses
associated with the operations, management and oversight of the Haldane
operations, increased costs and payroll expenses at the Company's executive
offices as well as costs associated with the development of the FIrst Career
college program.
Advertising expenditures increased from $46,805 in 1995 to $73,538. The
increase in advertising expense is due to the Company's commitment to support
the Bernard Haldane sublicensees by promoting the Bernard Haldane name
throughout the country.
Income before taxes was $841,768 as compared to $728,806 in 1995. However,
net income after taxes declined from $699,105 to $533,440. The significant
decline in after tax net income was due to a tax liability of $328,324. During
the prior year(s) the Company was able to utilize carryforward tax losses. All
carryforward tax losses have been utilized and the Company was liable for
federal and state income taxes at the prevailing rates on current income.
The Company anticipates revenues to increase in the coming year as the
existing Haldane offices become more profitable. The opening of additional
licensee or franchisee offices will generate additional royalty revenues and
territorial fees. In addition, the Company anticipates that the introduction of
First Career to graduating college students will generate additional revenues
for the Company.
Management does not at this time anticipate opening any company owned
offices. However, management does not wish to foreclose this option should the
opportunity arise.
Item 8. Financial Statements and Supplementary Data
- - ----------------------------------------------------
17
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Reports F-2
Consolidated Balance Sheets
May 31, 1996 and 1995 F-3 - F-4
Consolidated Statements of Income
Years Ended May 31, 1996, 1995 and 1994 F-5 - F-6
Consolidated Statements of Changes in Stockholders' Equity
Years Ended May 31, 1996, 1995 and 1994 F-7
Consolidated Statements of Cash Flows
Years Ended May 31, 1996, 1995 and 1994 F-8 - F-9
Notes to Consolidated Financial Statements F-10 - F-24
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Bernard Haldane Associates, Inc.
We have audited the accompanying consolidated balance sheets of Bernard Haldane
Associates, Inc. and Subsidiaries as of May 31, 1996 and 1995 and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended May 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bernard Haldane
Associates, Inc. and Subsidiaries as of May 31, 1996 and 1995 and the results of
their operations and their cash flows for each of the three years in the period
ended May 31, 1996, in conformity with generally accepted accounting principles.
/s/ Miller, Ellin & Company
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
August 14, 1996
F-2
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31,
-----------------------
1996 1995
--------- ---------
(Restated)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,559,116 756,737
Short-term investments 53,146 450,876
Accounts receivable - net of allowance for doubtful
accounts of $170,000 in 1996 and $110,000 in 1995 329,146 269,067
Notes receivable (Note 2) 48,478 53,803
Due from related parties (Note 11) 28,039 260,000
Prepaid expenses and miscellaneous receivables 9,734 28,722
Deferred taxes (Note 7) 83,000 172,000
Net assets of discontinued operations (Note 12) 36,635 16,639
---------- ----------
Total current assets 2,147,294 2,007,844
---------- ----------
OTHER ASSETS:
Licenses - net of accumulated amortization of
$1,460,376 in 1996 and $1,262,835 in 1995 (Note 3) 1,062,152 1,259,693
Equipment, fixtures and leasehold improvements -
net of accumulated depreciation of $19,549 in
1996 and $18,119 in 1995 20,031 --
Security deposits and other 60,460 62,360
Notes receivable (Note 2) 134,893 182,414
---------- ----------
Total other assets 1,277,536 1,504,467
---------- ----------
TOTAL ASSETS $3,424,830 $3,512,311
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
F-3
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MAY 31,
------------------------
1996 1995
---------- -----------
(Restated)
<S> <C> <C>
CURRENT LIABILITIES:
Cash overdraft $ 18,044 $ --
Current maturities of long-term debt (Note 3) 245,956 315,951
Accounts payable 56,968 37,895
Accrued expenses and other current liabilities (Note 9) 12,778 114,381
Income taxes payable 61,905 61,384
----------- -----------
Total current liabilities 395,651 529,611
----------- -----------
OTHER LIABILITIES:
Long-term debt (Note 3) 541,080 587,037
Deferred rent payable 14,719 4,400
----------- -----------
555,799 591,437
Total liabilities 951,450 1,121,048
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY (Note 5):
Common stock ($.00001 par value; 950,000,000 shares
authorized, 1,148,865 shares issued and
outstanding) 12 12
Additional paid-in capital 2,761,727 2,761,727
Retained earnings (deficit) 162,964 (370,476)
----------- -----------
2,924,703 2,391,263
Less: Treasury stock (179,500 shares at cost) (Note 6) 451,323 --
----------- -----------
Total stockholders' equity 2,473,380 2,391,263
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,424,830 $ 3,512,311
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
F-4
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
----------------------------------------
1996 1995 1994
----------- ---------- -----------
(Restated) (Restated)
<S> <C> <C> <C>
REVENUES:
Royalty income $ 2,244,818 $ 1,747,988 $ 1,214,091
Interest, dividends and other income 99,621 49,785 14,062
Sub-license income 104,214 99,625
Gain on sale of investment (Note 1) -- 35,400 --
----------- ----------- -----------
Total revenues 2,344,439 1,937,387 1,327,778
----------- ----------- -----------
EXPENSES:
Payroll and related costs 362,554 337,207 330,641
Other general and administrative 784,717 541,426 449,631
Amortization 197,541 197,541 197,544
Advertising 73,538 46,805 33,282
Interest 68,558 75,602 88,807
Lawsuit judgment (Note 9) 15,763 10,000 104,381
----------- ----------- -----------
Total expenses 1,502,671 1,208,581 1,204,286
----------- ----------- -----------
INCOME BEFORE INCOME TAXES (CREDITS) 841,768 728,806 123,492
INCOME TAXES (CREDITS) (Note 7) 328,324 (2,000) (69,000)
----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 513,444 730,806 192,492
DISCONTINUED OPERATIONS (Note 12):
Income (loss) from operations of travel
agency to be disposed of (net of income
taxes of $8,000, $-0- and $-0-) 19,996 (31,701) (14,418)
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 533,440 699,105 178,074
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
FOR INCOME TAXES PRIOR TO 1994 -- -- 28,000
----------- ----------- -----------
NET INCOME $ 533,440 $ 699,105 $ 206,074
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
F-5
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-----------------------------------
1996 1995 1994
----------- ---------- ---------
(Restated) (Restated)
<S> <C> <C> <C>
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Continuing operations $ .43 $ .64 $ .19
Discontinued operations .01 (.03) (.02)
Cumulative effect of accounting change - - .03
----- ----- ------
$ .44 $ .61 $ .20
===== ===== ======
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 1,227,894 1,161,347 1,014,729
========= ========= =========
DIVIDENDS NONE NONE NONE
==== ==== ====
</TABLE>
The accompanying notes are an integral part of these statements
F-6
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK,
$.00001 PAR
VALUE, AUTHORIZED
950,000,000 SHARES ADDITIONAL RETAINED TREASURY STOCK
------------------- PAID-IN EARNINGS -----------------
SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNT TOTAL
---------- ------ ------------ ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - June 1, 1993 914,622 $ 9 $ 2,458,980 $(1,275,655) -- $ -- $ 1,183,334
Issuance of shares as compensation
(Note 4) 55,000 -- 98,750 -- -- -- 98,750
Exercise of stock options (Note 5) 10,000 1 2,499 -- -- -- 2,500
Net income for the year ended
May 31, 1994 -- -- -- 206,074 -- -- 206,074
Rounding of shares 243 -- -- -- -- -- --
--------- --- ----------- ----------- ------- --------- -----------
BALANCE - MAY 31, 1994 979,865 10 2,560,229 (1,069,581) -- -- 1,490,658
Exercise of stock options (Note 5) 94,000 1 201,499 -- -- -- 201,500
Issuance of shares on acquisition of
minority interest of subsidiary
(Note 1) 75,000 1 (1) -- -- -- --
Net income for the year ended
May 31, 1995 -- -- -- 699,105 -- -- 699,105
--------- --- ----------- ----------- ------- --------- -----------
BALANCE - MAY 31, 1995 1,148,865 12 2,761,727 (370,476) -- -- 2,391,263
Repurchase of common stock (Note 6) -- -- -- -- 179,500 (451,323) (451,323)
Net income for the year ended
May 31, 1996 -- -- -- 533,440 -- -- 533,440
--------- --- ----------- ----------- ------- --------- -----------
BALANCE - MAY 31, 1996 1,148,865 $12 $ 2,761,727 $ 162,964 179,500 $(451,323) $ 2,473,380
========= === =========== =========== ======= ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements
F-7
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
----------------------------------
1996 1995 1994
--------- --------- ---------
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 533,440 $ 699,105 $ 206,074
(Income) loss from discontinued operations (19,996) 31,701 14,418
Adjustments to reconcile net income to net
cash provided by operating activities:
Expenses (income) not requiring the use of cash:
Cumulative effect of accounting change -- -- (28,000)
Provision for losses on accounts
and notes receivable 97,469 34,866 2,640
Depreciation 1,430 3,623 3,625
Amortization of licenses 197,541 197,541 197,544
Gain on sale of investment -- (35,400) --
Interest expense - imputed 52,048 60,935 69,140
Interest income - imputed (6,403) (6,994) (6,981)
Issuance of common stock as compensation -- -- 98,750
Deferred income taxes 89,000 (75,000) (69,000)
Changes in assets and liabilities:
Accounts receivable (141,548) (115,359) (31,580)
Prepaid expenses 18,988 (28,628) 5,906
Cash overdraft 18,044 -- --
Accounts payable and other current liabilities (82,009) 61,986 19,578
Deferred rent payable 10,319 (1,350) 750
Net assets of discontinued operations - net (21,814) 58,871 (30,191)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 746,509 885,897 452,673
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (302,138) (625,876) --
Redemption of short-term investments 699,868 175,000 --
(Increase) decrease in due from related parties 231,961 (260,000) --
Acquisition of fixed assets (21,461) -- --
Proceeds from sale of investment -- 5,000 --
Additions to notes receivable (20,000) (181,213) (105,000)
Payments of notes receivable 63,249 64,650 83,104
Security deposits 1,900 (55,586) --
Net assets of discontinued operations - net (500) -- (3,908)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 652,879 (878,025) (25,804)
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements
F-8
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt $ (168,000) $ (168,000) $ (168,000)
Exercise of employee stock options -- 201,500 2,500
Repurchase of common stock (451,323) -- --
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (619,323) 33,500 (165,500)
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 780,065 41,372 261,369
CASH AND CASH EQUIVALENTS - beginning 835,008 793,636 532,267
----------- ----------- -----------
CASH AND CASH EQUIVALENTS - ending
(includes cash of discontinued operations of
$55,957, $78,271 and $19,401, respectively) $ 1,615,073 $ 835,008 $ 793,636
=========== =========== ===========
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Receipt of notes receivable on sale of investment $ -- $ 30,000 $ --
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 68,558 $ 75,602 $ 88,807
Income taxes 238,876 15,542 --
</TABLE>
The accompanying notes are an integral part of these statements
F-9
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
--------------------
Bernard Haldane Associates, Inc. ("Haldane") was incorporated on July 1986
in the State of Florida to seek potential business opportunities. Since
inception, Haldane acquired or formed the businesses described below
collectively referred to as the "Companies."
Andover Equities Corp. ("Andover") was incorporated on July 25, 1988 in the
State of Florida to seek potential business opportunities. Andover filed a
Registration Statement pursuant to the Securities Act of 1933 which was
declared effective on May 11, 1989. In July 1989, Haldane distributed as a
dividend 3,672,994 shares of Andover from its 18,230,000 shares of Andover
to Haldane shareholders of record on October 10, 1988. Andover had no
operations and negligible book value and accordingly, no value had been
attributed to the dividend. As of May 31, 1994 and 1993, Haldane owned
14,577,006 shares of Andover which was approximately eighty percent of
Andover's 18,250,000 shares issued and outstanding. In April 1995, Haldane
sold 14,000,000 of its shares of Andover to a group of four unrelated
investors for cash and notes totalling $35,000, resulting in a gain of
$35,400, which has been included in operations for the year ended May 31,
1995. At May 31, 1995, Haldane's investment in Andover, which represents
approximately 3% of the issued and outstanding shares, is carried at cost
and consequently Andover is not included in the consolidated balance sheet
at that date. The results of operations of Andover through the date of sale
are included in the consolidated statements of operations for the year ended
May 31, 1995. Andover was a totally inactive subsidiary with no assets,
revenues and insignificant expenses.
On September 21, 1989, Haldane acquired 80% of the outstanding shares issued
of Career Services Management Corp. ("CSM") for $800 in cash. CSM is
currently inactive but previously derived counseling fee income for
consulting and advisory services under the name of Haldane. Prior to 1992,
CSM operated six U.S. offices which were sold (see Note 4). On February 2,
1995, Haldane acquired the remaining 20% of the outstanding shares of CSM
for 75,000 shares of Haldane.
DRB Ltd. ("DRB") is an entity that owns worldwide rights to the name and
methods of Haldane, an individual career counseling and advisory service. On
September 21, 1989, CSM acquired all of the issued and outstanding shares of
DRB for $1,250,000 consisting of $1,000,000 in cash and a note payable in
the amount of $250,000 due to Dan R. Bruce. DRB revenues consist primarily
of royalties collected pursuant to sub-licensing agreements with
sub-licensees which operate 65 Haldane offices in locations in the United
States and Canada. DRB continues to sell territorial rights. During 1996,
1995 and 1994, DRB recognized revenues of approximately $-0-, $100,000, and
$100,000, respectively, for the sale of territorial rights (see Note 2).
The acquisitions were accounted for using the purchase method of accounting.
The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values; accordingly, the purchase
price was allocated to the license and is being amortized based on a
percentage of revenues.
F-10
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Nature of Operations (Continued)
--------------------
Quantum Tours International, Inc. ("QT"), a Florida corporation, is a
wholly-owned subsidiary of Haldane and operates as a full service travel
agency whose net assets approximate 1% of the consolidated amount. On May
31, 1996, the Company adopted a plan to discontinue this segment (see Note
12).
After giving effect to the restatement for discontinued operations, the
Company's operations consist of only one business segment, career consulting
and advisory services.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Haldane and
its subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
-------------------------
The Companies consider all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Concentrations of Credit Risk
-----------------------------
The Companies maintain their cash balances with various financial
institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured balances aggregate
approximately $1,363,000 and $450,000 at May 31, 1996 and 1995,
respectively.
The Companies' short-term investments include certificates of deposit of
financial institutions with high credit ratings, which mature within one
year. This investment policy limits the Companies' exposure to
concentrations of credit risk.
Equipment, Fixtures and Leasehold Improvements
----------------------------------------------
Equipment and fixtures are being depreciated primarily on the straight-line
basis over a five year life. Leasehold improvements are being amortized over
the life of the lease.
F-11
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996. 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Licenses
--------
Licenses acquired, valued at approximately $1,200,000, are being amortized
over a ten year period using the straight-line method. In addition, the cost
of acquisitions in excess of fair market value of assets acquired amounting
to approximately $1,250,000 has been allocated to licenses, and is being
amortized at five percent of counseling fee and fifty percent of
sub-licensing fee income. However, such amortization will not be less than
the calculation based on a twenty year amortization period. Annually the
Company reviews the carrying value and the amortization of its intangible
assets and does not believe that there has been any impairment in the
carrying value of the licenses as royalty revenues are increasing and the
sale of additional territorial rights will generate additional revenues for
the Company.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value
of an asset may not be recoverable. SFAS No. 121 is effective for fiscal
years beginning after December 15, 1995 and in the opinion of management,
its adoption will not have an effect on the Company's consolidated financial
statements.
Deferred Rent Payable
---------------------
Deferred rent payable represents the excess of recognized rent expense over
scheduled lease payments which will be credited to future operations.
Revenue Recognition
-------------------
DRB recognizes royalty revenue based on a percentage (5% to 6%) of gross
collections on counseling fees of the sub-license or the minimum royalty
fee, whichever is greater. DRB also recognizes revenues on the sale of
territory rights to sub-licenses at the time the contract is completed and
when no further services are required by DRB. Allowances for doubtful
accounts have been provided for any potential losses.
QT recognizes revenue when the tour has commenced. Revenue received prior to
the commencement of the tour is deferred and recorded as unearned revenue.
F-12
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net Earnings (Loss) Per Common and Common Equivalent Share
----------------------------------------------------------
For the years ended May 31, 1996, 1995 and 1994, net earnings per common and
common equivalent share are based on the weighted average number of common
shares and common equivalent shares arising from dilutive stock options
using the modified treasury stock and treasury stock methods. Fully diluted
earnings per common and common equivalent shares were the same as for the
primary calculation. Outstanding warrants have not been included as their
effect would be antidilutive and they expired on December 23, 1994.
Realizability of a Deferred Tax Asset
-------------------------------------
The Company has recorded a deferred tax asset of $83,000. Realization is
dependent on generating sufficient taxable income. Although realization is
not assured, management believes it is more likely than not that all of the
deferred tax asset will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if future
taxable income is not sufficient.
NOTE 2 - NOTES RECEIVABLE
Notes receivable at May 31, consist of the following:
1996 1995
-------- --------
Various non-interest bearing notes receivable in
connection with the sale of sub-licenses (Note 1) $100,500 $154,500
LaSalle Consulting - receivable in equal monthly
installments of $2,097 through April 2002, with
interest at 24% 79,640 85,000
Note receivable - employee/stockholder in 36 equal
monthly installments of $589 through October 1998,
including interest at 6% 16,111 -
Notes receivable in connection with the sale of
Andover stock (Note 1), due April 1997,
with annual interest at 10% due in quarterly
installments commencing April 1995 30,000 30,000
-------- --------
226,251 269,500
F-13
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 2 - NOTES RECEIVABLE (CONTINUED)
1996 1995
-------- --------
Less: Unamortized discounted interest
imputed at 8% to 10% on the above non-interest
bearing notes $ 7,880 $ 14,283
-------- --------
218,371 255,217
Less: Allowance for credit losses on the above
non-interest bearing notes (see below) 35,000 19,000
-------- --------
183,371 236,217
Less: Current portion 48,478 53,803
-------- --------
$134,893 $182,414
======== ========
The amounts due over the next five years, net of imputed interest of $7,880,
are as follows:
Year Ending May 31,
-------------------
1997 $ 48,478
1998 37,259
1999 24,054
2000 18,781
2001 22,902
Subsequent 31,897
--------
$183,371
========
F-14
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 2 - NOTES RECEIVABLE (CONTINUED)
In fiscal 1995, the Companies adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," (SFAS
No. 114) and Statement of Financial Accounting Standards No. 118 "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures"
(SFAS No. 118) which requires that impaired loans be measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or at market price or the fair value of the
collateral if the loan is collateral dependent. Notes receivable at May 31,
consist of the following:
1996 1995
-------- --------
Notes receivable - impaired $122,620 $140,217
Less: Allowance for credit losses 35,000 19,000
87,620 121,217
Notes receivable - not impaired
and no allowance for credit losses 95,751 115,000
-------- --------
$183,371 $236,217
======== ========
The Company recognizes interest income on impaired loans on actual cash
received with interest imputed at 8% to 10%.
The average recorded investment in impaired loans and the interest income
recognized during the years ended May 31, 1996 and 1995 were approximately
$131,000 and $10,000 and $121,000 and $7,000, respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt at May 31, consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
B&E Partnership - payable for ten years at $14,000 per
month commencing July 1, 1986 and $7,000 per month
commencing July 1, 1996 for ten years. Secured by a
license agreement. This note is non-interest bearing. $ 854,000 $ 1,022,000
Dan R. Bruce - principal amount of $200,000 due January
1997 with interest due in monthly payments of $1,333.
The note is secured by a license agreement and currently
bears interest at an annual rate of eight percent. 200,000 200,000
------------ ------------
Total debt obligations 1,054,000 1,222,000
Less: Unamortized discounted interest imputed at eight
percent on the above non-interest bearing loan. 266,964 319,012
------------ ------------
Total present value of debt 787,036 902,988
Less: Current portion 245,956 315,951
------------ ------------
$ 541,080 $ 587,037
============ ============
</TABLE>
F-15
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 3 - LONG-TERM DEBT (CONTINUED)
The non-current portion of long-term debt as of May 31, 1996 is payable as
follows:
Year Ending May 31,
-------------------
1998 $ 42,240
1999 45,746
2000 49,543
2001 53,655
2002 58,108
Subsequent 291,788
--------
$541,080
========
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Leases
------
Haldane rented its executive office in New York City under a lease expiring
in December 1996. In April 1995, Haldane entered into a new lease
arrangement for new office premises for a term of ten years to commence when
construction was completed and the premises occupied. Haldane occupied the
premises in October 1995 and sublets approximately 70% to related entities.
In addition, Haldane sublets its prior office premises under a sublease
expiring in December 1996.
The following is a schedule by years of future minimum rental payments and
sublease income under these leases (rounded to thousands):
Minimum
Rental Sublease
Year Ending May 31, Payments Income
------------------- -------- ------
1997 $ 138,000 $102,000
1998 119,000 86,000
1999 119,000 86,000
2000 119,000 86,000
2001 128,000 92,000
Subsequent 577,000 414,000
---------- --------
$1,200,000 $866,000
========== ========
F-16
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 4 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Rent expense, net of rental income of approximately $30,000, $-0- and $-0-,
charged to operations for the years ended May 31, 1996, 1995 and 1994
amounted to approximately $31,000, $19,000 and $28,000, respectively.
Licensing
---------
In those states where the granting of a license for the right to operate a
Haldane office may constitute a franchise arrangement, DRB intends to
register as a franchisor. DRB may also be subject to regulatory sanctions in
these states for failing to register as a franchisor prior to the granting
of a franchise license. DRB intends to enter into franchise agreements with
current licensees, and if necessary under the state statutes, DRB will offer
current licensees the right of recission. Management is of the opinion that
the potential liability for violation of any state or federal statute
relating to the sale of a franchise and in the aggregate is not material to
the consolidated financial statements. The Company to date has incurred
approximately $58,000 of legal costs in connection with this matter. The
Company expects to incur no additional costs of any significance relating to
this matter.
Consulting Agreements
---------------------
On June 9, 1993, Haldane entered into a one year consulting agreement with
an unrelated third party. Haldane agreed to compensate the consultant with
80,000 shares of common stock; 20,000 shares were issued both on August 4,
1993 and September 20, 1993. On January 12, 1994, the agreement was
terminated. On the same date, a new one year agreement was executed whereby
the consultant received 15,000 shares, which were issued on February 8,
1994, and options to acquire 250,000 shares of common stock at prices
ranging from $2.25 to $3.50 per share. These securities and options have
been registered pursuant to an S-8 Registration Statement filed with the
Securities and Exchange Commission in February 1994. Consulting expense of
$98,750 was recorded for the issuance of 55,000 shares of stock for the year
ended May 31, 1994. A total of 89,000 options have been exercised during the
year ended May 31, 1995.
On August 1, 1995, Haldane entered into a consulting agreement, with a
company whose president was Haldane's former president, for a period of five
years. Compensation under the agreement is as follows: $62,000 the first
year, $69,000 the second year, $74,000 the third year, $83,000 the fourth
year and $90,000 the fifth year. In addition, Haldane agreed to provide to
the consultant a leased automobile and reimburse all approved expenses.
F-17
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS
Stock Options
-------------
The stock option transactions for the three fiscal years ended May 31, are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Outstanding - beginning of year (exercisable at a price of
$.25 to $3.50 per share) 326,000 355,000 65,000
Granted at $1.75 to $3.50 per share 60,000 65,000 300,000
Exercised at prices ranging from $.25 to $2.25 per share - (94,000) (10,000)
------- ------- -------
Outstanding - end of year (exercisable at a price range of
$.25 to $3.50 per share) 386,000 326,000 355,000
======= ======= =======
Exercisable - end of year 386,000 326,000 255,000
======= ======= =======
</TABLE>
During the years ended May 31, 1996 and 1995, options to acquire 60,000 and
65,000 shares, respectively, were granted to directors and employees of the
Company at market value. A director exercised 5,000 options during the year
ended May 31, 1995.
In 1995, Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," was issued and is effective for fiscal years
beginning after December 15, 1995. This statement requires footnote
disclosure of the pro forma impact on net earnings and earnings per share of
the compensation cost that would have been recognized if the fair value of
all stock-based awards was recorded in the income statement. The Company
will adopt the disclosure provisions of this statement in 1997.
Warrants
--------
In connection with the initial public offering in February 1987, 75,000,000
units were sold at a price of $.01 per unit. Each unit consisted of one
share of common stock, one Class A Redeemable Stock Purchase Warrant, one
Class B Redeemable Stock Purchase Warrant and one Class C Redeemable Stock
Purchase Warrant. Each Class A, Class B and Class C Warrant entitles the
holder to purchase one share of common stock at an exercise price of $8, $10
and $12, respectively.
On December 23, 1994 all of the warrants expired.
F-18
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 6 - TREASURY STOCK
In October 1995 and March 1996, the Board of Directors authorized the
Company to repurchase outstanding shares of its common stock at fair market
value from various shareholders. As of May 31, 1996, the Company repurchased
179,500 shares at fair market value with prices ranging from $2.49 to $2.53
per share.
NOTE 7 - INCOME TAXES
Deferred Income Taxes
---------------------
Effective June 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
the use of the liability method of accounting for income taxes. The
liability method measures deferred income taxes by applying enacted
statutory rates in effect at the balance sheet date to the differences
between the tax bases of assets and liabilities and their reported amounts
in the financial statements. The resulting deferred tax asset or liability
is adjusted to reflect changes in tax laws as they occur.
The effect of adopting SFAS No. 109 on income before cumulative effect of
accounting change for the year ended May 31, 1994 was an increase of $69,000
($.07 per share).
Deferred income taxes reflect temporary differences in reporting assets and
liabilities for income tax and financial accounting purposes. These
temporary differences arise primarily from the allowance for doubtful
accounts and net operating losses.
The components of the net deferred tax asset as of May 31, are as follows:
1996 1995
---- ----
Allowance for doubtful accounts $83,000 $ 53,000
Net operating loss - 119,000
------- --------
$83,000 $172,000
======= ========
The net deferred tax assets of $83,000 and $172,000 are shown as current
assets in the consolidated balance sheets. No valuation allowance has been
provided.
Income Taxes
------------
Provision for income taxes for the years ended May 31, consists of the
following:
1996 1995 1994
-------- -------- ---------
Current:
Federal $163,448 $ - $ -
State and local 75,876 73,000 -
-------- -------- --------
239,324 73,000 -
Deferred:
Federal 93,000 231,000 43,000
State and local (4,000) - -
Change in valuation allowance - (306,000) (112,000)
-------- -------- --------
$328,324 $ (2,000) $(69,000)
======== ======== ========
F-19
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 7 - INCOME TAXES (CONTINUED)
Income Taxes (Continued)
------------
Reconciliation of statutory rate to effective income tax rate on continuing
operations for the years ended May 31, is as follows:
1996 1995 1994
------- -------- -------
At federal statutory rates 34.0 34.0 34.0
Effect of:
State income taxes, net of federal benefit 7.9 9.8 5.5
Permanent differences .7 - -
Tax benefit of operating loss carryforwards (2.6) (33.1) (31.8)
Overaccrual of prior year taxes (1.0) - -
Change in valuation allowance - (10.7) (63.6)
----- ------ ------
Total 39.0 - (55.9)
===== ====== ======
The Companies file consolidated tax returns and had available at May 31,
1995 unused operating loss carryforwards of approximately $400,000 for
income tax reporting purposes which were utilized to offset 1996 taxable
income. Haldane had no taxable federal income for the years ended May 31,
1995 and 1994; therefore, no federal income tax liability or expense
provision has been recorded for those years. The only significant difference
between income tax and financial reporting is the allowance for doubtful
accounts.
NOTE 8 - RETIREMENT PLANS
The Companies have simplified employee pension (SEP) agreements with all
full-time employees who are at least twenty-one years old and have performed
services for at least three of the preceding five years. Such agreements
provide for discretionary contributions by the employer. For the years ended
May 31, 1996, 1995 and 1994, the Companies contributed $29,750, $41,424 and
$47,405, respectively.
F-20
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 9 - LAWSUIT JUDGMENT
A former sub-licensee initiated an arbitration against DRB before the
American Arbitration Association claiming damages for DRB's alleged breach
of sub-license agreement and interference with a consulting agreement. An
arbitration hearing was held in April 1994 and on June 14, 1994, the former
sub-licensee was awarded $104,381. The entire amount of $104,381 plus
interest of $10,000 was accrued as of May 31, 1995. In January 1996, DRB
paid $130,144.
NOTE 10 - GEOGRAPHIC AREAS
The Companies received royalty revenue from five Canadian franchisees in the
aggregate amounts of $158,572, $114,221 and $68,718 for the years ended May
31, 1996, 1995 and 1994, respectively. All other revenues are from United
States services.
Included in accounts receivable at May 31, 1996 and 1995 are amounts owed by
the Canadian franchisees of $93,088 and $15,293, respectively (see Note 11).
NOTE 11 - RELATED PARTY TRANSACTIONS
A principal officer and director of Haldane owns and operates nine Haldane
offices, five in Canada and four in the United States. Royalty fees for the
years ended May 31, 1996, 1995 and 1994 amounted to $243,760, $165,129 and
$145,513, respectively and are included in royalty income in the
consolidated statements of income. DRB is owed from these offices $105,325
and $22,079 as of May 31, 1996 and 1995, respectively, which is reflected in
accounts receivable.
From time to time the Company advances funds to several entities whose
officer and director is also an officer and director of Haldane. The average
monthly balance during fiscal 1996 of such advances amounted to
approximately $375,000. At May 31, 1996, the balance of such advances was
approximately $14,000 and in addition, the Companies were owed $14,000 for
miscellaneous reimbursable expenses from these entities.
Interest earned on advances for the year ended May 31, 1996 at 8% per annum
amounted to approximately $30,000.
F-21
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 12 - DISCONTINUED OPERATIONS
On May 31, 1996, the Company adopted a plan to terminate its travel agency
operations. The anticipated disposal date is November 1996.
The components of net assets of discontinued travel agency operations
included in the consolidated balance sheets at May 31, are as follows:
1996 1995
------- --------
Cash and cash equivalents $55,957 $ 78,271
Prepaid expenses 4,240 4,558
Property and equipment - net 635 1,060
Other assets 2,200 1,700
Accounts payable (3,225) (6,450)
Income taxes payable (8,000) -
Deferred income (15,172) (62,500)
------- --------
Net assets $36,635 $ 16,639
======= ========
The operating results of the travel agency segment for the year ended May
31, 1996 are shown separately in the accompanying consolidated income
statement. The 1995 and 1994 consolidated statements have been restated to
segregate the operating results of the travel agency segment. Net revenues
of the travel agency segment for 1996, 1995 and 1994 amounted to $95,474,
$68,047 and $126,606, respectively, and are not included in net sales in the
accompanying consolidated income statements.
Management estimates a gain on disposal of the discontinued operations of
approximately $23,000 (net of income taxes of $12,000) which represents the
expected operating gains during the phase-out period from June 1, 1996
through November 1996 and will be recognized when earned. Management does
not anticipate any gain or loss on disposal of assets.
F-22
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts at which cash, accounts receivable, short-term notes receivable,
due from related parties, accounts payable and other current liabilities are
presented in the balance sheets approximate their fair value due to their
short maturities. The following table presents the carrying amounts and fair
values at May 31, 1996 and 1995 for long-term notes receivable and debt:
1996 1995
-------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Long-term notes receivable $ 135,000 $ 129,000 $ 182,000 $ 179,000
========= ========= ========= =========
Long-term debt $ 541,000 $ 570,000 $ 587,000 $ 616,000
========= ========= ========= =========
The fair value of long-term notes receivable and debt has been determined
based on discounted cash flow using a market rate of interest at the balance
sheet date as applicable to comparable notes and debt.
F-23
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
NOTE 14 - EARNINGS PER SHARE
Net Earnings Per Common
and Common Equivalent Share
-----------------------------
<TABLE>
<CAPTION>
Net earnings per share for the years ended May 31, were calculated using the modified treasury
stock method as follows:
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Earnings
Income from continuing operations $ 513,444 $ 730,806 $ 192,492
Modified Treasury Stock Method
Incremental income after the application of assumed
proceeds toward repurchase of 20% of the outstanding
common shares at the average market price and the
reduction of debt, net of applicable income taxes 11,452 6,845 --
---------- ---------- ----------
Adjusted earnings $ 524,896 $ 737,651 $ 192,492
========== ========== ==========
Shares
Weighted average number of common shares outstanding 1,105,442 1,070,365 1,014,729
Additional shares assuming conversion of:
Stock options and warrants utilizing the modified
treasury stock method 122,452 90,982 --
---------- ---------- ----------
Number of common and common equivalent shares 1,227,894 1,161,347 1,014,729
========== ========== ==========
Earnings per common and common equivalent share
from continuing operations $.43 $.64 $.19
==== ==== ====
Fully diluted earnings per common and common equivalent share were the same.
</TABLE>
F-24
<PAGE>
Item 9. Changes in and Disagreements with Accountants Accounting and Financial
- - --------------------------------------------------------------------------------
Disclosure
- - ----------
NONE
Item 10. Directors and Executive Officers of Registrant
- - --------------------------------------------------------
The executive officers and Directors of the Company are as follows:
Name Age Position
- - ---- --- --------
Jerold P. Weinger 50 President, Chief Executive
Officer, Treasurer and Director
Jeffrey G. Klein 41 Secretary and Director
Jerold P. Weinger was elected as a director of the Company in May of
1989 and currently serves as the Company's President, Chief Executive Officer,
Treasurer and Chairman of the Board. In September 1991, 266 Washington
Associates, a New York real estate general partnership in which Mr. Weinger
serves as one of the general partners, filed a voluntary petition in bankruptcy
with the United States Bankruptcy Court for the eastern district of New York.
This action was subsequently dismissed. Since March 1992, Mr. Weinger has served
as the vice president and director of several different privately held companies
which operate Bernard Haldane licensed offices. Since November 1991, Mr. Weinger
has also served as the Chairman of the Board of Lauren & Associates, a New York
based entity engaged as a temporary employment agency. Since June 1987, Mr.
Weinger has served as vice president of STAT Staffing Inc., a New Jersey
corporation which provides temporary nursing care to institutions. From February
1989 until June 1987, Mr. Weinger has served as the Vice President, Secretary
and Director of Euromed, Inc., a New Jersey based company. During this time he
also served as Vice President of Euromed's wholly-owned operating subsidiary,
C.M.S. Europe Limited, which distributed medical products in Europe. From 1984
until December 31, 1987, Mr. Weinger was associated with Brooks Weinger Robbins
& Leeds Inc. ("Brooks"), formerly a registered broker-dealer, and from January
1987 until January 1988, served as Chief Executive Officer of such firm.
On or about January 1987, an action was commenced in United States
District Court for the Southern District of New York [87 Civil 593
(RWS)(U.S.D.C., S.D.N.Y.)] by the Securities and Exchange Commission ("SEC")
against, inter alia, Jerold Weinger.
The SEC action alleged that Mr. Weinger violated Section 17(a) of the
Securities Act of 1933, as amended (the "1933 Act"), and Sections 10(b) and
18
<PAGE>
15(c) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
Rules 10(b)-5, 10(b)-6 and 15(c)-2 thereunder, in connection with certain
initial public offerings in which Mr. Weinger had participated as an employee of
Brooks, Hamburger, Satnick, Inc., formerly a registered-dealer. (Brooks,
Hamburger, Satnick Inc. is not a predecessor to Brooks, Weinger, Robbins & Leeds
Inc.) On or about January 1987, without admitting or denying any of the SEC
allegations, Mr. Weinger consented to the entry of a Final Judgement of
Injunction enjoining Mr. Weinger from further violations of said Sections 17(a),
10(b) and 15(c) and Rules 10b-5, 10b-6 and 15cl-2.
On February 9, 1987, the SEC issued an Order Instituting Public
Proceedings, Making Findings and Imposing Remedial Sanctions Pursuant to
Sections 15(d) and 19(h) of the Securities Exchange Act of 1934 (File No.
3-6790) against Jerold Weinger et al. The allegations against Mr. Weinger
included willfully violating Section 17(a) of the 1933 Act, Section 10(b) of the
1934 Act and Rules 10b-5 and 10b-6 thereunder, as well as willfully aiding and
abetting violations of Section 15(c) of the 1934 Act and Rule 15cl-2 thereunder.
Without admitting or denying the SEC allegations, Mr. Weinger consented to the
entry of an Order suspending him from association with any broker, dealer,
investment company, investment advisor or municipal securities dealer in any
capacity for a consecutive 90 day period (which period has expired).
On January 4, 1989, the District Business Conduct Committee for District
No. 12 of the National Association of Securities Dealers, Inc. ("NASD") filed a
complaint (No. NY-7010) before the NASD against Jerold P. Weinger et al. The
Complaint alleges that Mr. Weinger, while associated with Brooks Weinger
violated Article III, Section 1 of the NASD's Rules of Fair Practice by his
failure to become registered as a general securities principal (notwith standing
that he was registered as a financial and operations principal at such time),
despite his alleged active engagement in the management of the firm's investment
banking and securities business. Without admitting or denying any of the
allegations contained in the Complaint, Mr. Weinger has agreed to the entry of
an order requiring Weinger take and pass the Series 24 General Securities
Principal examination prior to applying for association with any NASD member
and, that Mr. Weinger is suspended in all capacities from association with any
NASD member for a period of ninety (90) days which period has since expired.
Mr. Weinger received a B.B.A. from Pace University and a M.S. from
Brooklyn College.
Jeffrey G. Klein, has served as Secretary and a Director of the Company
since its inception. Mr. Klein is a practicing attorney in Boca Raton, Florida.
From 1986-1989, Mr. Klein served as president and a Director of Unity Publishers
Corp., a publisher of financial newsletters. During this time, Unity was giving
19
<PAGE>
away shares of stock in publicly held companies as a gift for subscribing to its
newsletter. Some states and the Securities and Exchange Commission have deemed
this to be a prohibited transaction and in those states, the newsletter and Mr.
Klein are subject to Cease and Desist Orders in reference to the distribution of
the stock as a gift for subscribing to the newsletter. Unity was named as a
Defendant in an action brought by the Securities and Exchange Commission and is
a signator to a Final Judgment of Permanent Injunction. From 1986 through 1988,
Mr. Klein also served as Secretary and Director of Capital Investment
Development Corp., a company which went public pursuant to a "Blind Pool"
offering. From January 1985 through 1986, Mr. Klein served as in-house counsel
to First Commonwealth Financial Corp., InfoData, Inc. and Newsletter Management
Corp., all of which were located in Boca Raton, Florida. From 1983 through 1985,
Mr. Klein was affiliated with the law offices of Gerald Beyer, Esq., Fort
Lauderdale, Florida, and during 1983, Mr. Klein was employed by Arthur Andersen
& Co., Fort Lauderdale, Florida. Prior thereto, Mr. Klein was a practicing
attorney in Pittsburgh, Pennsylvania. Mr. Klein received his J.D. and M.B.A.
degrees from the University of Pittsburgh and a B.A. from Boston University.
Directors of the Company hold their offices until the next annual meeting
of the Company's stockholders and until their successors have been duly elected
and qualified or until their earlier resignation, removal from office or death.
There are no committees of the Board of Directors.
Officers of the Company serve at the pleasure of the Board of Directors and
until the first meeting of the Board of Directors following the next annual
meeting of the Company's stockholders and until their successors have been
chosen and qualified.
Item 11. Executive Compensation
- - --------------------------------
Mr. Weinger, the Company's President, oversees the Bernard Haldane
operations and in consideration thereof, receives annual compensation of
$200,000 and devotes his full time to the operations of the Company. The Company
has established a Simplified Employee Benefit Plan, (the "Plan"). During the
past year Mr. Weinger received $22,500 pursuant to this Plan. The terms and
conditions of Mr. Weinger's employment are reviewed annually by the Board of
Directors.
Mr. Klein has received compensation from the Company of approximately
$40,000 for legal services rendered.
Directors of the Company may receive a fee of $100 for each Board of
Directors meeting attended and are reimbursed for all reasonable expenses
incurred in connection with their attendance at such meetings. No director fees
were paid during the last fiscal year.
20
<PAGE>
The following table sets forth the compensation of the company's three (3)
officers for the last three (3) fiscal years:
ANNUAL COMPENSATION
NAME
AND PRINCIPAL ANNUAL LONG TERM
POSITION YEAR COMPENSATION COMPENSATION
- - --------------------------------------------------------------------------------
JEROLD WEINGER,
VICE PRESIDENT 1996 $222,500 ((1)) ((2))
1995 $202,105 ((1)) ((2))
1994 $235,250 ((1)) ((2))
JEFFREY KLEIN
SECRETARY 1996 $ 40,000 ((2))
1995 $ 37,500 ((2))
1994 $ 36,000 ((2))
((1)) Includes $31,875, $35,250 and $22,500 pursuant to the Company's Simplified
Employee Benefit Plan in 1994, 1995 and 1996.
((2)) During the year ended May 31, 1996, Mr. Weinger and Mr. Klein were granted
options to purchase 25,000 and 5,000 shares of the Company's common stock at an
exercise price of $2.50 per share. During the year ended May 31, 1995, Mr.
Weinger and Mr. Klein were granted options to purchase 25,000 and 7,500 shares
of the Company's common stock at an exercise price of $2.50 per share. During
the year ended May 31 1994, Mr. Weinger and Mr. Klein were granted options to
purchase 20,000 and 5,000 shares of the Company's common stock at an exercise
price of $1.75 per share.
21
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
- - ------------------------------------------------------------------------
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned on July 31, 1996 (i) by each person who is known
by the Company to own beneficially more than 5% of the Company's Common Stock,
(ii) by each of the Company's Directors, and (iii) by all executive officers and
Directors as a group.*
Renee Nadel 270,000 27.85%(4)
7885 Ayr Court
Boca Raton, Florida
33496
Jeffrey G. Klein (3) 10,000 1.03%(4)
2600 North Military Trail
Suite 270
Boca Raton, Florida 33431
Lilli Weinger 279,750 28.85%(4)
4 Woodgreen Place
Rockville Center, NY 11570
Jerold P. Weinger (1)(2)(3) 69,770 7.19%(4)
192 Lexington
15th Floor
New York, New York 10016
All executive officers
and Directors as a
Group (2 persons) (2)(3) 79,770 8.22%(4)
- - ------------------------------
*As of June 30, 1996
(1) Does not give effect to shares of stock owned by the children of Mr. Weinger
whose ownership he disclaims.
(2) Does not give effect to those shares owned by Lilli Weinger, the spouse of
Jerold Weinger.
(3) Does not give effect to shares of stock issuable to Mr. Weinger and Mr.
Klein upon exercise of stock options. (See Certain Transactions). Mr. Weinger
has been granted options to purchase a total of 95,000 shares of stock. Mr.
Klein has been granted the options to purchase a total of 17,500 shares of the
Company's common stock. Assuming exercise of the foregoing options, the
respective share of ownership would be 16.9% for Mr. Weinger and would be 2.8%
for Mr. Klein.
(4) Does not take into account 179,500 shares of treasury stock.
22
<PAGE>
Item 13. Certain Relationships and Related Transactions
- - --------------------------------------------------------
The Company was incorporated under the laws of the state of Florida on
July 22, 1986, and shortly thereafter Joel S. Nadel, Bruce E. Mates and Jeffrey
G. Klein subscribed for 275,000, 275,000 and 7,500 shares of the Company's
Common Stock, respectively, for an aggregate consideration of $22,500 or $.0001
per share. (After giving affect to a 100:1 reverse stock split and a subsequent
4:1 reverse stock split).
On or about September 1989, Bruce Mates sold his 276,250 shares to Lilli
Weinger pursuant to a private sale of the Company's stock. Subsequent thereto,
Mrs. Weinger gifted 20,000 shares of the Company's stock to an unaffiliated
third party. Lilli Weinger is the wife of Jerold Weinger. On or about September
1990, Mr. Nadel gifted his 270,000 shares of stock in the Company to Renee
Nadel, his wife.
During the year 1996, pursuant to a resolution of the Board of Directors.
The Company redeemed from the shareholders, a total of 179,500 shares of the
Company's common stock at an average cost of between $2.49 and $2.53 per share,
including 5,000 shares of common stock owned by Jeffrey Klein.
On May 31, 1996, a majority of the Company's shareholders pursuant to a
recommendation of the Company's Board of Directors, granted the Company's two
officers, Mr. Weinger and Mr. Klein, options to purchase 25,000 shares, and
5,000 shares respectively, of the Company's common stock at an exercise price of
$2.50 per share. The Company also granted options for 25,000 shares of the
Company's common stock to Windsor Consulting Inc., a key consultant, and 5,000
shares of common stock to Donna Quartierro, a key employee. The options were
granted to the foregoing at an exercise price of $2.50 per share. The exercise
price represented the average between the low and high bid for the Company's
common stock on May 31, 1996.
On May 31, 1995, a majority of the Company's shareholders pursuant to a
recommendation of the Board of Directors, granted to the Company's officers,
including Joel Nadel, the Company's former president, and Donna Quartierro,
options to purchase shares of the Company's common stock at an exercise price of
$2.50 per share. The exercise represented the average between the low and high
bid for the Company's common stock on May 31, 1995. A total of 25,000 options
were granted to both Mr. Nadel and Mr. Weinger, and 7,500 options were granted
to Mr. Klein and Ms. Quartierro. The options are issuable for a period of ten
years from the date of issuance.
On September 3, 1993, the Company's Shareholders pursuant to a
recommendation of the Board of Directors, granted to the company's officers and
Donna Quartierro, a key employee, options to purchase shares of the Company's
23
<PAGE>
common stock at any exercise price of $1.75. The exercise price represented the
average between the low and high bid for the Company's common stock on September
3, 1994 the date of issuance. A total of 20,000 options were granted to Mr.
Nadel and Mr. Weinger and 5,000 options were issued to Mr. Klein and Ms.
Quartierro. The options are exercisable for a period of ten years from the date
of issuance. Previous thereto on December 18, 1990, Messieurs Nadel, Weinger and
Klein were issued options the purchase 25,000, 25,000 and 5,000 shares
respectively at an exercise price of $.25 per share. Also on December 18, 1990,
options to purchase 5,000 shares of the Company's common stock at an exercise
price of $.25 per share were issued to Donna Quartierro and Phillip Nadel.
All stock options and exercise price thereof reflect at 4:1 reverse split.
In January 1994 the Company entered into an investment relations contract
with Kent Broussard which provides in part for Mr. Broussard to provide certain
investment and financial advisory services in consideration for the issuance of
15,000 shares of the Company's common stock upon execution of the agreement, an
option to acquire an additional 150,000 shares of common stock at a price of
$2.25 per share exercisable on or after January 15, 1994, an option to acquire
50,000 shares of common stock at $3.25 per share exercisable on or after March
15, 1994, an option to acquire 50,000 shares of common stock on or after May 15,
1994 and an option to acquire 50,000 shares of common stock at a price of $3.50
per share exercisable after November 30, 1994.
The Company has filed a Form S-8 with the Securities and Exchange
Commission registering all shares to be issued pursuant to this Agreement. As of
May 31, 1996 104,000 shares have been issued pursuant to this Agreement and all
options issued pursuant to this Agreement will be terminated this coming fiscal
year.
In June 1993, the Company entered into a similar investment relations
consultant agreement (the "Agreement")with Starion Capital Group, Inc.
("Starion") which provided in part for Starion to provide certain financial and
investment advisory services in consideration for the issuance of 80,000 shares
of the Company's common stock over a period of nine months. Subsequent thereto,
the Company filed a Form S-8 Registration Statement of the Securities with the
Securities and Exchange Commission registering all shares of the stock to be
issued pursuant to the "Agreement". This agreement has been terminated by the
Company without liability. prior to its termination, a total of 20,000 shares
were issued to Starion. Kent Broussard serves as the president of Starion.
In April 1995, The Company sold 14,000,000 of its shares of Andover
Equities Corp. to a group of four individual investors for cash and notes
totalling $35,000. - Payment on the notes remains due and outstanding.
24
<PAGE>
In February 1995, the Company acquired the remaining 20% of the
outstanding shares of common stock of Career Services Management Corp. in
exchange for the issuance of a total of 75,000 shares of the Company's common
stock. Of these 75,000 shares, 45,000 shares have been redeemed pursuant to the
Company's stock redemption program at an average cost of $2.50 per share..
PART IV
Item 14. Exhibits, Financial Statements Schedule and Reports on Form 8-K
- - -------------------------------------------------------------------------
(a) Documents filed as part of this report
(1) Financial Statements.
Reports of Independent Certified Public Accountants.
Comparative Consolidated Balance Sheets - as of May 31, 1996
and May 31, 1995.
Comparative Consolidated Statement of Operations for the years
ended May 31, 1996, 1995, and 1994.
Comparative Consolidated Statements of Changes in Stockholders'
Equity for the years ended May 31, 1996, 1995, 1994 and 1993.
Comparative Consolidated Statements of Cash Flows for the
Years ended May 31, 1996, 1995 and 1994.
Notes to Financial Statements.
(2) Financial Statements Schedule.
All schedules for which provision is made in applicable
regulations and regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
25
<PAGE>
INCORPORATED
EXHIBIT # DESCRIPTION BY REFERENCE TO
- - --------- ----------- ---------------
3(a) -Certificate of Incorporation* Exhibit 3(a) filed as part of the
Company's Registration Statement
on Form S -18 ,File No. 000-18097
.
3(b) -By-Laws* Exhibit 3(b) filed as part of the
Company's Registration Statement
on Form S-18, File No. 000-18097.
4(a) -Form of certificate Exhibit 4(a) filed as part of the
evidencing shares of Common Company's Registration Statement
Stock. on Form S-18, File No. 000-18097.
4(b) -Form of Class A Redeemable Exhibit 4(b) filed as part of the
Common Stock Purchase Warrant* Company's Registration Statement
on Form S-18, File No. 000-18097.
4(c) -Form of Class B Redeemable Exhibit 4(c) filed as part of the
Common Stock Purchase Warrant* Company's Registration Statement
on Form S-18, File No. 000-18097,
4(d) -Form of Class C Redeemable Exhibit 4(d) filed as part of the
Common Stock Purchase Warrant.* Company's Registration Statement
on Form S-18, File No. 000-18097.
4(e) -Form of Warrant Agency Exhibit 4(e) filed as part of the
Agreement between Registrant Company's Registration Statement
and American Stock Transfer Co.* on Form S-18, File No. 000-18097.
4(f) -Form of Warrant issued by Exhibit 4(f) filed as part of the
Registrant to Brooks, Weinger, Company's Registration Statement
Robbins and Leeds Inc.* on Form S-18, File No. 000-18097.
10(a) -Letter of Intent between Exhibit 10(e) Annual Report on
Registrant and DRB, Ltd.*** Form 10-K for the year ended May
31, 1989.
10(b) -Stock Purchase Agreement Exhibit 10(F) Annual Report on
between Career Service Form 10-K for the year ended May
Management Corp. and D.R.B. 31, 1989.
Ltd.****
21 -Subsidiaries of Registrant Filed as an Exhibit herewith
(c) Reports on Form 8-K
-------------------
No report on Form 8-K was filed during the three month period ended
May 31, 1996.
26
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BERNARD HALDANE ASSOCIATES, INC.
By:/s/ Jerold Wienger
--------------------------------
JEROLD WEINGER
PRESIDENT/TREASURER
DATED: 9/28/96
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has ben signed below on those dates by the following persons on behalf of
this Registrant in the capacities indicate.
By:/s/ Jerold Wienger
--------------------------------
JEROLD WEINGER
PRESIDENT/TREASURER
DATED: 9/28/96
---------
/s/ Jeffrey G. Klein
- - -----------------------------------
JEFFREY G. KLEIN
SECRETARY/DIRECTOR
DATED: 9/28/96
---------
27
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT
- DRB LTD. -
- QUANTUM TOURS INTERNATIONAL INC. -
- FIRST CAREER CORP. -
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BERNARD HALDANE ASSOCIATES, INC. FOR THE FISCAL YEAR
ENDED MAY 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 1,559,116
<SECURITIES> 53,146
<RECEIVABLES> 499,146
<ALLOWANCES> 170,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,147,294
<PP&E> 39,580
<DEPRECIATION> 19,549
<TOTAL-ASSETS> 3,424,830
<CURRENT-LIABILITIES> 395,651
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 2,473,368
<TOTAL-LIABILITY-AND-EQUITY> 3,424,830
<SALES> 0
<TOTAL-REVENUES> 2,344,439
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,558
<INCOME-PRETAX> 841,768
<INCOME-TAX> 328,324
<INCOME-CONTINUING> 513,444
<DISCONTINUED> 19,996
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 533,440
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
