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 August 31, 1998
---------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number 000-18097
---------
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
----------------------------------------------------------
(address of principal executive offices)
(212) 679-3360
--------------
(Issuer's telephone number)
Not Applicable
--------------
(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: August 31, 1998
---------------
Class Outstanding at August 31, 1998
----- ------------------------------
Common Stock, $.00001 Par Value 1,148,865 shares
Page 1 of 10
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
as of August 31, 1998 (Unaudited)
and May 31, 1998 3 - 4
Consolidated Statements of Income
for the Three Months Ended
August 31, 1998 and 1997 (Unaudited) 5
Consolidated Statements of Cash Flows
for the Three Months Ended
August 31, 1998 and 1997 (Unaudited) 6
Notes to Consolidated Financial Statements
(Unaudited) as of August 31, 1998 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION AND SIGNATURES
Signatures
Exhibit
-2-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
AUGUST 31, MAY 31,
1998 1998*
--------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,495,206 $ 1,693,220
Short-term investments 110,202 108,908
Accounts receivable - net of allowance for doubtful accounts of $223,000 and
$180,000 respectively (includes receivables from related parties of
$183,274 and $100,635, respectively) 475,805 315,436
Notes receivable - net of allowance for credit losses
of $19,200 and $15,000, respectively, current portion 93,761 89,855
Due from related parties 29,498 8,887
Prepaid expenses and miscellaneous receivables 158,112 185,957
Prepaid income taxes 57,351 -
Deferred income taxes 143,000 126,000
------------ ------------
Total current assets 2,562,935 2,528,263
------------ ------------
OTHER ASSETS:
Licenses - net of accumulated amortization of
$1,904,197 and $1,870,372, respectively 753,801 787,626
Equipment, fixtures and leasehold improvements -
net of accumulated depreciation of $49,673
and $46,165, respectively 48,812 48,374
Security deposits and other 100,825 115,820
Notes receivable - net of allowances for credit losses of $115,300 and
$119,500, respectively (includes receivables from related parties of
$39,402 and
$44,060, respectively) 422,270 448,115
------------ ------------
Total other assets 1,325,708 1,399,935
------------ ------------
TOTAL ASSETS $ 3,888,643 $ 3,928,198
============ ============
</TABLE>
*The consolidated balance sheet at May 31, 1998 is derived from the audited
financial statements of that date.
-3-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
AUGUST 31, MAY 31,
1998 1998*
--------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 44,438 $ 42,437
Accounts payable 132,848 127,314
Accrued expenses and other current liabilities 41,022 32,135
Income taxes payable - 62,313
------------ ------------
Total current liabilities 218,308 264,199
------------ ------------
OTHER LIABILITIES:
Long-term debt 587,116 599,135
Deferred rent payable 23,437 23,437
------------ ------------
610,553 622,572
Total liabilities 828,861 886,771
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock ($.00001 par value; 950,000,000
shares authorized, 1,148,865 shares issued) 12 12
Additional paid-in capital 2,761,727 2,761,727
Retained earnings 804,481 786,126
------------ ------------
3,566,220 3,547,865
Less: Treasury stock (199,500 shares at cost) 506,438 506,438
------------ ------------
Total stockholders' equity 3,059,782 3,041,427
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,888,643 $ 3,928,198
============ ============
</TABLE>
*The consolidated balance sheet at May 31, 1998 is derived from the audited
financial statements of that date.
-4-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED AUGUST 31,
---------------- -------------
1998 1997
---------------- -------------
<S> <C> <C>
REVENUES:
Royalty income (includes royalty income from
related parties of $66,890 and $73,997, respectively) $ 649,421 $ 703,535
Consulting income 178,405 2,100
Interest, dividends and other income 20,153 29,922
Sub-license income - 41,721
---------- -----------
Total revenues 847,979 777,278
---------- -----------
EXPENSES:
Payroll and related costs 276,335 145,389
Other general and administrative 375,251 231,944
Amortization 33,825 49,385
Bad debt expense 43,000 40,000
Advertising 76,446 30,096
Interest 12,767 14,439
---------- -----------
Total expenses 817,624 511,253
---------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 30,355 266,025
PROVISION FOR INCOME TAXES 12,000 110,000
---------- -----------
NET INCOME $ 18,355 $ 156,025
========== ===========
EARNINGS PER SHARE:
Basic $ .02 $ .16
===== =====
Diluted $ .02 $ .15
===== =====
</TABLE>
-5-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED AUGUST 31,
---------------- --------------
1998 1997
---------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,355 $ 156,025
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Expenses (income) not requiring the use of cash:
Provision for losses on accounts receivable 43,000 40,000
Depreciation 3,508 3,918
Amortization of licenses 33,825 49,385
Interest expense - imputed 12,767 10,440
Interest income - imputed (1,736) (5,038)
Deferred income taxes (17,000) (17,000)
Changes in assets and liabilities:
Accounts receivable (203,369) (42,167)
Prepaid expenses and miscellaneous receivables 27,845 (6,439)
Prepaid income taxes (57,351) -
Accounts payable and other current liabilities 14,421 (74,595)
Income taxes payable (62,313) (54,077)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (188,048) 60,452
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (1,294) (600)
Decrease in due from related parties (20,611) (41,543)
Acquisition of fixed assets (3,946) (4,713)
Addition to notes receivable - (65,472)
Payments of notes receivable 23,675 41,323
Security deposits 14,995 -
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 12,819 (71,005)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt (22,785) (14,700)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (22,785) (14,700)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (198,014) (25,253)
CASH AND CASH EQUIVALENTS - beginning 1,693,220 1,698,099
------------ ------------
CASH AND CASH EQUIVALENTS - ending $ 1,495,206 $ 1,672,846
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 12,767 $ 14,439
Income taxes 113,806 176,500
</TABLE>
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<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998
(UNAUDITED)
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
August 31, 1998 and the results of operations and cash flows for the three
months ended August 31, 1998. The results of operations for the three month
period ended August 31, 1998 are not necessarily indicative of the results
of operations for the year ended May 31, 1999.
NOTE 2
Certain reclassifications have been made to the consolidated financial
statements for the three months ended August 31, 1997 in order to conform
with the current year's presentation.
NOTE 3
The Company utilizes Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," to record income taxes.
The components of the deferred tax asset are the allowances for doubtful
accounts and credit losses.
NOTE 4
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings per
Share" which is effective for periods ending after December 15, 1997. The
Companies adopted this new standard in the year ended May 31, 1998. Prior
period earnings per share were restated to conform to this new
pronouncement.
-7-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998
(UNAUDITED)
NOTE 4 (CONTINUED)
Earnings per share for the three months ended Ausust 31, were calculated
using the treasury stock method as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Numerator
---------
Income from continuing operations $ 18,355 $ 156,025
Less: Preferred dividends - -
----------- -----------
Income available to common stockholders
used in basic EPS 18,355 156,025
Impact of potential common shares - -
----------- -----------
Income available to common stockholders after
assumed conversion of dilutive securities $ 18,355 $ 156,025
=========== ===========
Denominator
-----------
Weighted average number of common shares
outstanding used in basic EPS 949,365 949,365
Impact of potential common shares:
Stock options 61,954 88,280
----------- -----------
Weighted number of common shares and dilutive
potential common shares used in dilutive EPS 1,011,319 1,037,645
=========== ===========
Basic EPS $ .02 $ .16
===== =====
Diluted EPS $ .02 $ .15
===== =====
</TABLE>
NOTE 5
In February 1998, the Companies filed an application to withdraw its common
shares from the public market. Such application is under review by the
Securities and Exchange Commission.
Certain of the Companies' stockholders offered to purchase the shares of
common stock owned by the public investors at $3 per share, which
represents the valuation made by a financial advisory company in its
fairness opinion. The number of shares to be purchased is 217,695 shares or
$653,085.
-8-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
THREE MONTHS ENDED AUGUST 31, 1998
VS.
THREE MONTHS ENDED AUGUST 31, 1997
Royalty payments from licensee offices for the three month period ended
August 31, 1998 totaled $649, 421 as compared to $703,535 during the same period
in the prior fiscal year. This represents a decrease of nearly 8% in royalty
revenue despite an increase in the number of licensee offices. During this same
period the Company recognized $178,405 in consulting income from the operation
of several company owned Haldane offices which were acquired when the licensee
terminated the license of a prior licensee. During the same period in the prior
calendar quarter the Company recognized $2,100 in consulting revenues. (Company
owned offices report revenues as consulting income and do not pay royalties.)
The Company did not recognize any revenues from the sale of territorial licenses
as compared to $41,721 during the three month period ended August 31, 1997.
Additional revenues for the quarter ended August 31, 1998 include
$20,153 in interest and dividend income as compared to $29,922 during the three
month period ended August 31, 1997. This decrease in interest income is directly
attributable to the Company's declining cash position.
Total revenues for the three months ended August 31, 1998 as compared
to August 31, 1997 were $847,979 as compared to $777,278. This 9% increase in
revenues is directly attributable to the fact that the Company was required to
operated several Haldane offices and does not reflect an increase in
profitability. In fact, net income has declined significantly due to an increase
in expenses from $511,253 to $817,624, an increase of approximately 60%.
-9-
<PAGE>
Income before taxes decreased fro $266,025 to $30,355; a decline of
more than 76%. Payroll and general and administrative costs increased from
$145,389 to $276,335, an increase of 90%; while general and administrative
expenses increased from $231,944 to $375,251, an increase of 62%. These
increased costs were primarily attributable to the costs incurred by the company
in assuming certain preexisting obligations of the terminated licensed offices
and additional fees and costs incurred in operating these terminated licenses
offices as company owned Haldane offices. Net income after taxes for the three
months ended August 31, 1998 totaled $18,355 as compared to $156,025 for the
three months ended August 31, 1997. Income per share of common stock declined
from $ .16 to $ .02.
With the anticipated sale of all company owned offices to be completed
in the Company's second quarter, management anticipates a significant reduction
in operating expenses and anticipates improved operating results.
LIQUIDITY AND CAPITAL RESOURCES
August 31, 1998 AS COMPARED TO MAY 31, 1998
Total current assets as of August 31, 1998 were $2,562,935 as compared
to $2,528,263, an increase of 1%. Cash and cash equivalents declined from
$1,693,220 to $1,495,205, while short term investments increased from $108,908
to $110,202 and accounts receivable increased nearly 50%, from $315,436 to
$475,805.
The Company reported the value of its license, equipment, and other
non-current assets of $1,325,708 as compared to $1,399,935 and total assets of
$3,888,643 as compared to $3,928,198 a decline of approximately 1%.
Total current liabilities declined from $264,199 to $218,308 and total
liabilities declined from $886,771 to $828,861, a decrease of approximately 7%.
-10-
<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: October 21, 1998
- ----------------------------- ---------------------
JEROLD WEINGER, President/
Treasurer/Director
/s/ Jeffrey G. Klein Dated: October 21, 1998
- ----------------------------- ---------------------
Jeffrey G. Klein, Secretary/
Director
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S UNAUDITED BALANCE SHEET AS OF AUGUST 31,
1998 AND UNAUDITED STATEMENT OF OPERATIONS FOR THE THREE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-1-1998
<PERIOD-END> AUG-31-1998
<CASH> 1,495,206
<SECURITIES> 110,202
<RECEIVABLES> 811,766
<ALLOWANCES> 242,200
<INVENTORY> 0
<CURRENT-ASSETS> 2,562,935
<PP&E> 98,485
<DEPRECIATION> 49,673
<TOTAL-ASSETS> 3,888,643
<CURRENT-LIABILITIES> 218,308
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 3,059,770
<TOTAL-LIABILITY-AND-EQUITY> 3,888,643
<SALES> 847,979
<TOTAL-REVENUES> 847,979
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 804,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,767
<INCOME-PRETAX> 30,355
<INCOME-TAX> 12,000
<INCOME-CONTINUING> 18,355
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,355
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
