Securities and Exchange Commission
Washington D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 1997
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 000-18097
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BERNARD HALDANE ASSOCIATES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-2720407
------------------------------ -----------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
192 Lexington Avenue, 15th Floor, New York, New York 10016
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(address of principal executive offices)
(212) 679-3360
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: February 28, 1997
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Class Outstanding at February 28, 1997
-------------------------------- --------------------------------
Common Stock, $.00001 Par Value 1,148,865 shares
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
as of February 28, 1997 (Unaudited)
and May 31, 1996 3 - 4
Consolidated Statements of Income
(Unaudited) for the Three and Nine Months Ended
February 28, 1997 and February 29, 1996 5
Consolidated Statements of Cash Flows
(Unaudited) for the Nine Months Ended
February 28, 1997 and February 29, 1996 6
Notes to Consolidated Financial Statements
as of February 28, 1997 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION AND SIGNATURES
Signatures 9
-2-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
FEBRUARY 28, MAY 31,
1997 1996*
---------- ----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $1,722,382 $1,559,116
Short-term investments 54,856 53,146
Accounts receivable - net of allowance for doubtful
accounts of $260,000 and $170,000, respectively 388,672 329,146
Notes receivable 334,013 48,478
Due from related parties 26,840 28,039
Prepaid expenses and miscellaneous receivables 28,334 9,734
Deferred taxes 118,000 83,000
Net assets of discontinued operations -- 36,635
---------- ----------
Total current assets 2,673,097 2,147,294
---------- ----------
OTHER ASSETS:
Licenses - net of accumulated amortization of
$1,608,532 and $1,460,376, respectively 913,996 1,062,152
Equipment and fixtures - net of accumulated
depreciation of $23,477 and $19,549, respectively 34,463 20,031
Security deposits and other 60,460 60,460
Notes receivable 277,276 134,893
---------- ----------
Total other assets 1,286,195 1,277,536
---------- ----------
TOTAL ASSETS $3,959,292 $3,424,830
========== ==========
* The balance sheet at May 31, 1996 is derived from the audited financial
statements of that date.
-3-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
FEBRUARY 28, MAY 31,
1997 1996*
---------- ----------
(Unaudited)
CURRENT LIABILITIES:
Cash overdraft $ 7,146 $ 18,044
Current maturities of long-term debt 241,419 245,956
Accounts payable 98,621 56,968
Accrued expenses and other current liabilities 138,749 12,778
Income taxes payable 102,033 61,905
---------- ----------
Total current liabilities 587,968 395,651
---------- ----------
OTHER LIABILITIES:
Long-term debt 509,399 541,080
Deferred rent payable 14,719 14,719
---------- ----------
524,118 555,799
Total liabilities 1,112,086 951,450
---------- ----------
STOCKHOLDERS' EQUITY:
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 591,905 162,964
3,353,644 2,924,703
Less: Treasury stock (199,500 and
179,500 shares at cost) 506,438 451,323
---------- ----------
Total stockholders' equity 2,847,206 2,473,380
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,959,292 $3,424,830
========== ==========
* The balance sheet at May 31, 1996 is derived from the audited financial
statements of that date.
-4-
<PAGE>
<TABLE>
<CAPTION>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
---------------------------- ----------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
0REVENUES:
Royalty income $ 1,775,923 $ 1,624,003 $ 578,590 $ 516,570
Interest, dividends and other income 79,516 119,226 29,024 45,676
Sub-license income 131,140 -- 41,428 --
----------- ----------- ----------- -----------
Total revenues 1,986,579 1,743,229 649,042 562,246
----------- ----------- ----------- -----------
EXPENSES:
Payroll and related costs 313,004 269,404 124,994 98,849
Other general and administrative 820,273 623,891 313,146 181,305
Amortization 148,156 148,156 49,385 49,385
Interest 45,779 51,322 15,260 17,298
----------- ----------- ----------- -----------
Total expenses 1,327,212 1,092,773 502,785 346,837
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 659,367 650,456 146,257 215,409
PROVISION FOR INCOME TAXES 248,368 237,796 43,368 81,796
----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS 410,999 412,660 102,889 133,613
DISCONTINUED OPERATIONS:
Income (loss) from operations of travel
agency to be disposed of (net of
income taxes of $12,000, $10,000,
$-0-, and $10,000, respectively) 17,942 16,280 (21) 61,771
----------- ----------- ----------- -----------
NET INCOME $ 428,941 $ 428,940 $ 102,868 $ 195,384
=========== =========== =========== ===========
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Continuing operations $ .40 $ .34 $ .10 $ .11
Discontinued operations .02 .01 -- .05
----------- ----------- ----------- -----------
$ .42 $ .35 $ .10 $ .16
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES 1,014,347 1,240,592 1,014,686 1,220,342
=========== =========== =========== ===========
DIVIDENDS NONE NONE NONE NONE
==== ==== ==== ====
</TABLE>
.
-5-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
FEBRUARY 28, FEBRUARY 29,
1997 1996
----------- -----------
(Restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 428,941 $ 428,940
Income from discontinued operations (17,942) (16,280)
Adjustments to reconcile net income to net cash
provided by operating activities:
Expenses (income) not requiring the use of cash:
Provision for losses on accounts and notes receivable 120,000 --
Depreciation 3,928 1,300
Amortization of licenses 148,156 148,156
Interest expense - imputed 33,782 39,036
Interest income - imputed (5,458) (5,325)
Deferred income taxes (35,000) 119,000
Changes in assets and liabilities:
Accounts receivable (149,526) (76,627)
Prepaid expenses (18,600) (9,102)
Cash overdraft (10,898) --
Income taxes payable 40,128 (52,779)
Net assets of discontinued operations - net (3,580) (38,480)
Accounts payable and other current liabilities 167,624 (64,554)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 701,555 473,285
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (1,710) (352,932)
Redemption of short-term investments -- 450,876
Decrease in due from related parties 1,199 117,925
Acquisition of fixed assets (18,360) (25,461)
Additions to notes receivable (580,935) (20,000)
Payments of notes receivable 128,475 44,099
Net assets of discontinued operations - net 2,200 (500)
----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (469,131) 214,007
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (70,000) (126,000)
Purchases of treasury stock (55,115) (113,865)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (125,115) (239,865)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 107,309 447,427
CASH AND CASH EQUIVALENTS - beginning 1,615,073 835,008
----------- -----------
CASH AND CASH EQUIVALENTS - ending (includes cash
of discontinued operations of $-0- and $49,292, respectively) $ 1,722,382 $ 1,282,435
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 45,779 $ 51,322
Income taxes 263,413 182,382
</TABLE>
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<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
FEBRUARY 28, 1997
The accompanying interim consolidated financial statements are unaudited and
include the accounts of Bernard Haldane Associates, Inc. ("Haldane") and its
subsidiaries.
NOTE 1
In the opinion of management, the accompanying interim consolidated financial
statements contain all material and significant adjusting and eliminating
entries consisting only of normal recurring adjustments and eliminations
necessary to present fairly the financial condition as of February 28, 1997
and the results of operations and cash flows for the nine months then ended.
The results of operations for the nine month period ended February 28, 1997
are not necessarily indicative of the results of operations for the year
ended May 31, 1997.
NOTE 2
The Company utilizes Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," to record income taxes.
The major temporary difference which gives rise to deferred taxes is the
allowance for doubtful accounts.
NOTE 3
Net earnings per share were calculated using the modified treasury stock
method as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 428,941 $ 428,940 $ 102,868 $ 195,384
Incremental income -- 6,476 -- 2,224
---------- ---------- ---------- ----------
Total income $ 428,941 $ 435,416 $ 102,868 $ 197,608
========== ========== ========== ==========
Weighted average shares
outstanding 951,365 1,135,365 949,365 1,115,115
Incremental shares 62,982 105,227 65,321 105,227
---------- ---------- ---------- ----------
Total shares 1,014,347 1,240,592 1,014,686 1,220,342
========== ========== ========== ==========
Net earnings per share $ .42 $ .35 $ .10 $ .16
========== ========== ========== ==========
</TABLE>
NOTE 4
On May 31, 1996, the Company adopted a plan to terminate its travel agency
operations. The operations were disposed of in December 1996. The operating
results of the travel agency segment for the nine and three months ended
February 28, 1997 are shown separately in the accompanying consolidated
income statement. The 1996 consolidated statements of income and cash flows
have been restated to segregate the operating results of the travel agency
segment. Revenues of the travel agency segment, net of direct expenses
amounted to $67,027 and $-0- for the nine and three months ended February 28,
1997, respectively, and $79,383 and $89,874 for the nine and three months
ended February 29, 1996, respectively, and are not included in consolidated
revenues.
-7-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC.
ITEM 2. MANAGEMENT"S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
NINE MONTHS ENDED FEBRUARY 28, 1996
VS.
NINE MONTHS ENDED FEBRUARY 28, 1996
Royalty payments from licensee offices for the nine months and three
months periods ended February 29, 1997 totaled $1,775,923 and $578,590 as
compared to $1,624,003 and $516,570 during the same periods in the prior fiscal
year. The Company has recognized a total of $131,140 in revenues from the sale
of territorial licenses as compared to no revenues at all in the prior period.
Additional revenues for the quarter ended February 28, 1997 include
$79,516 in interest and dividend income for the nine months ended February 28,
1997 as compared to $119,226 during the nine months ended February 29, 1996.
Total revenues for the nine months ended February 28, 1997 as compared to
February 29, 1997 were $1,986,579 as compared to $1,743,329. This 14% increase
in revenues is due primarily to the growth of the Haldane system. Similar
increases in revenues were reported for the three month period increasing from
$562,246 to $649,042. The 14% gain in revenues was offset by a 21% increase in
expenses increasing from $1,092,773 to $1,327,212. The Company has had to hire
additional staff to properly oversee the Haldane operations. In addition, the
Company is incurring certain start-up costs in connection with the launch of its
First Career program, a career consulting program targeted at graduating college
seniors.
As a result of increased expenses, net income after taxes remains almost
constant at $428,941 as compared to $428,940. With fewer issued and outstanding
shares as a result of the Company's share repurchase program, net income per
share increased from $.35 per share to $.42 per share.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
FEBRUARY 28, 1997 AS COMPARED TO MAY 31, 1996
Total current assets as of February 28, 1997 were $2,673,097 as compared
to $2,147,294, an increase of 24%. More than $285,000 of this increase is
attributable to notes receivable arising from the sale of territorial licenses.
Total assets have increased from $3,424,830 to $3,959,292.
Total current liabilities increased from $395,651 to $587,968 and total
liabilities increased from $951,450 to $1,112,086. Despite this increase of
nearly 50% in current liabilities, management does not anticipate any cash flow
problems.
Management believes that the Company has sufficient revenues to finance
ongoing business activities.
9
<PAGE>
BERNARD HALDANE ASSOCIATES, INC.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 or 15(d) OF THE SECURITIES ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THIS REGISTRANT IN THE CAPACITIES INDICATED.
BERNARD HALDANE ASSOCIATES, INC.
(Registrant)
/s/ Jerold Weinger DATED: April 15, 1997
- -------------------------------- ---------------------
Jerold Weinger, president/
treasurer/director
/s/ Jeffrey G. Klein DATED: April 15, 1997
- -------------------------------- ---------------------
Jeffrey G. Klein, secretary/
director
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BERNARD HALDANE ASSOCIATES, INC. FOR THE NINE MONTHS
ENDED FEBRUARY 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 1,722,382
<SECURITIES> 54,856
<RECEIVABLES> 646,672
<ALLOWANCES> 260,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,673,097
<PP&E> 57,940
<DEPRECIATION> 23,477
<TOTAL-ASSETS> 3,959,292
<CURRENT-LIABILITIES> 587,968
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 3,353,632
<TOTAL-LIABILITY-AND-EQUITY> 3,959,292
<SALES> 0
<TOTAL-REVENUES> 1,986,579
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,327,212
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,779
<INCOME-PRETAX> 659,367
<INCOME-TAX> 248,368
<INCOME-CONTINUING> 410,999
<DISCONTINUED> 17,942
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428,941
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
