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, 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 or 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
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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, 1998
Class Outstanding at February 28, 1998
------------------------------- --------------------------------
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, 1998 (Unaudited)
and May 31, 1997 3 - 4
Consolidated Statements of Operations
(Unaudited) for the Three and Nine Months Ended
February 28, 1998 and 1997 5
Consolidated Statements of Cash Flows
(Unaudited) for the Nine Months Ended
February 28, 1998 and 1997 6
Notes to Consolidated Financial Statements
(Unaudited) as of February 28, 1998 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
<TABLE>
<CAPTION>
FEBRUARY 28, MAY 31,
1998 1997*
----------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,973,924 $ 1,698,099
Short-term investments 107,226 55,426
Accounts receivable - net of allowance for doubtful
accounts of $215,000 and $290,000, respectively 314,658 419,470
Notes receivable 171,381 149,080
Due from related parties - 11,001
Prepaid expenses and miscellaneous receivables 124,490 60,158
Deferred taxes 113,000 145,000
------------ ------------
Total current assets 2,804,679 2,538,234
------------ ------------
OTHER ASSETS:
Licenses - net of accumulated amortization of
$1,806,073 and $1,657,917, respectively 716,455 864,611
Equipment, fixtures and leasehold improvements -
net of accumulated depreciation of $41,207
and $28,871, respectively 48,102 50,831
Security deposits and other 83,100 79,103
Notes receivable 407,361 451,309
------------ ------------
Total other assets 1,255,018 1,445,854
------------ ------------
TOTAL ASSETS $ 4,059,697 $ 3,984,088
============ ============
</TABLE>
* The balance sheet at May 31, 1997 is derived from the audited consolidated
financial statements of that date.
-3-
<PAGE>
<TABLE>
<CAPTION>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
FEBRUARY 28, MAY 31,
1998 1997*
----------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 251,870 $ 235,240
Accounts payable 160,410 207,316
Accrued expenses and other current liabilities 17,857 8,147
Income taxes payable 41,155 141,510
Due to related parties 23,795 -
------------ ------------
Total current liabilities 495,087 592,213
------------ ------------
OTHER LIABILITIES:
Long-term debt 454,729 498,839
Deferred rent payable 13,679 13,679
------------ ------------
468,408 512,518
------------ ------------
Total liabilities 963,495 1,104,731
------------ ------------
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 840,901 624,056
------------ ------------
3,602,640 3,385,795
Less: Treasury stock (199,500 shares at cost) 506,438 506,438
------------ ------------
Total stockholders' equity 3,096,202 2,879,357
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,059,697 $ 3,984,088
============ ============
</TABLE>
* The balance sheet at May 31, 1997 is derived from the audited consolidated
financial statements of that date.
-4-
<PAGE>
<TABLE>
<CAPTION>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
------------------------------ -------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Royalty income $ 1,832,983 $ 1,775,923 $ 496,537 $ 578,590
Consulting income 69,275 - 54,216 -
Interest, dividends and other income 121,163 79,516 35,894 29,024
Sub-license income 99,402 131,140 19,248 41,428
------------ ------------ ---------- ---------
Total revenues 2,122,823 1,986,579 605,895 649,042
------------ ------------ ---------- ---------
EXPENSES:
Payroll and related costs 486,284 313,004 161,474 124,994
Other general and administrative 1,084,608 820,273 475,313 313,146
Amortization 148,156 148,156 49,385 49,385
Interest 43,406 45,779 14,508 15,260
------------ ------------ ---------- ---------
Total expenses 1,762,454 1,327,212 700,680 502,785
------------ ------------ ---------- ---------
INCOME (LOSS) BEFORE PROVISION
(CREDIT) FOR INCOME TAXES 360,369 659,367 (94,785) 146,257
PROVISION (CREDIT) FOR INCOME TAXES 143,524 248,368 (43,276) 43,368
------------ ------------ ---------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 216,845 410,999 (51,509) 102,889
DISCONTINUED OPERATIONS:
Income (loss) from operations of travel
agency to be disposed of (net of
income taxes of $-0-, $10,000,
$-0-, and $10,000, respectively) - 17,942 - (21)
------------ ------------ ---------- ---------
NET INCOME (LOSS) $ 216,845 $ 428,941 $ (51,509) $ 102,868
============ ============ ========== =========
NET EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARE:
Continuing operations $.21 $.40 $(.05) $.10
Discontinued operations - .02 - -
------- ----- -------- ----
$.21 $.42 $(.05) $.10
======= ===== ======== ====
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES 1,047,783 1,014,347 1,044,492 1,014,686
========= ========= ========= =========
DIVIDENDS NONE NONE NONE NONE
==== ==== ==== ====
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
-----------------------------------
FEBRUARY 28, FEBRUARY 28,
1998 1997
-------------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 216,845 $ 428,941
Income from discontinued operations - (17,942)
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 206,929 120,000
Depreciation 12,336 3,928
Amortization of licenses 148,156 148,156
Interest expense - imputed 31,320 33,782
Interest income - imputed (28,690) (5,458)
Deferred income taxes 32,000 (35,000)
Changes in assets and liabilities:
Accounts receivable (64,741) (149,526)
Prepaid expenses and miscellaneous receivables (64,332) (18,600)
Cash overdraft - (10,898)
Accounts payable and other current liabilities (37,196) 167,624
Income taxes payable (100,355) 40,128
Net assets of discontinued operations - net - (3,580)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 352,272 701,555
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (51,800) (1,710)
Increase in security deposits (3,997) -
Decrease in due from related parties 34,796 1,199
Acquisition of fixed assets (9,607) (18,360)
Additions to notes receivable (104,465) (580,935)
Payments of notes receivable 117,426 128,475
Net assets of discontinued operations - net - 2,200
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (17,647) (469,131)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (58,800) (70,000)
Repurchase of common stock - (55,115)
------------- -------------
NET CASH USED IN FINANCING ACTIVITIES (58,800) (125,115)
------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 275,825 107,309
CASH AND CASH EQUIVALENTS - beginning 1,698,099 1,615,073
------------- -------------
CASH AND CASH EQUIVALENTS - ending (includes cash
of discontinued operations of $-0- and $49,292, respectively) $ 1,973,924 $ 1,722,382
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 45,406 $ 45,779
Income taxes 207,302 263,413
</TABLE>
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<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
FEBRUARY 28, 1998
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, 1998 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, 1998 are not necessarily indicative of the results of
operations for the year ending May 31, 1998.
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
The calculation of earnings per share for the nine and three months ended
February 28, 1998 and 1997 is based on the modified treasury stock method.
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
statement of operations. 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 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, 1998
VS.
SIX MONTHS ENDED FEBRUARY 28, 1998
Royalty revenues from licensee offices for the nine month period ended
February 28, 1998 as compared to February 28, 1997 increased from $1,775,923 to
$1,832,983, an increase of approximately 3.2%. However revenues for the three
month period ended February 28, 1998 as compared to February 28, 1997 declined
from $649,042 to $605,895, a decline of approximately 7%. This decline in
royalty revenues is primarily attributable to two factors:
1. DRB LTD placed a licensee, owning four offices, in default and as a
result, the Company took over operations of the offices. The Company will
continue to own and operate these offices through wholly owned subsidiaries
until such time as qualified licensees can be identified.
2. A licensee owning six offices left the organization owing DRB
approximately $150,000 in royalties and territorial fees. Management intends to
file suit against this licensee and once a qualified licensee is identified,
reopen the Haldnae offices in those markets.
As a result of operating the four offices, Haldane recognized
consulting fee revenues of $54,216 for the three months ended February 28, 1998.
Interest and dividend income increased from $79,516 to $121,163 for the nine
months ended February 28, 1998 and from $29,024 to $35,894 for the three months
ended February 28, 1998.
The Company recognized a total of $99,402 and $19,248 in revenues
from the sale of territorial licenses as compared to $131,140 and $41,428 in the
prior periods. This overall decline of approximately 24% reflects the fact that
the Haldane system has expanded into most major metropolitan areas throughout
the United States and except for reopening offices in those areas occupied by
former licensees, there are few metropolitan areas available for expansion in
the continental United States.
-8-
<PAGE>
Total revenues for the nine month period ended February 28, 1998 as
compared to the same period in the prior year were $2,122,823 as compared to
$1,986,579 an increase of nearly 7% However, total revenues for the three month
period declined from $649,092 to $605,895, a decline of nearly 7%. This decline
in revenues is attributable primarily to the problems experienced by the Company
with two prior licensees.
Net income for the nine month period ended February 28, 1998 was
$360,369 as compared to $659,,367 for the same period in 1997 and for the three
months ended February 28, 1998 the Company incurred a loss of $94,785 as
compared to a gain of $145,257 for the prior period. This loss during the
Company's most recent fiscal quarter is attributable primarily to an increase in
general and administrative expenses from $820,273 to $1,084,608. Most of this
increase can be attributable to costs incurred by the Company in operating
Haldane offices in those territories where the licensee was in default and DRB
assumed operational responsibilities for the offices. Income per share for the
nine month period ended February 28, 1998 declined from $.40 to $.21 as compared
to 1997, a decline of 50%, and declined from a profit of $.10 per share to a
loss of $.05 per share for the three months ended February 28, 1998 as compared
to the three months ended February 28, 1997, a decline of 150%.
Management remains dissatisfied with the results of operations of First
Career. Since inception, the Company has committed over $600,000 to launch a
career consulting program directed at college students and recent college
graduates. These expenditures have had a significant adverse impact on the
overall operations of the Company. While management believes that the program is
an excellent product, the Company has not been able to market the product
successfully and has entered into a joint marketing agreement with Kaplan
Education Centers to market and promote the program. Results to date have been
inconclusive.
LIQUIDITY AND CAPITAL RESOURCES
FEBRUARY 28, 1998 AS COMPARED TO MAY 31, 1997
Total current assets as of February 28, 1998 were $2,804,679 as
compared to $2,538,234; an increase of 10%. Cash holdings and short term
investments increased from $1,753,525 to $2,081,150, an increase of 18%. A
portion of this increase is attributable to the Company's ability to reduce by
33% the
-9-
<PAGE>
outstanding accounts receivable from $419,470 to $314,658.
The Company's total assets increased by 2%, increasing from $3,984,088
to $4,059,697.
Total current liabilities declined nearly 20%, declining from $592,213
to $495,087 while total liabilities declined from $1,104,731 to $963,495 a
decline of approximately 13%. This decline in the liabilities is almost
exclusively attributable to a decline of approximately $100,000 in income taxes
payable from $141,510 to $41,155.
Total stockholders equity increased from $2,879,357 to $3,096,202 an
increase of 7.5%.
Management believes that the Company has sufficient revenues to finance
ongoing business activities including a proposed purchase at a cost of $3.00 per
share of the Company's shares of stock owned by non management and nonaffilated
shareholders.
-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)
___________________________ DATED:_______________
JEROLD WEINGER, president/
treasurer/director
___________________________ DATED:_______________
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 FEBRUARY 28,
1998 AND UNAUDITED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-1-1997
<PERIOD-END> FEB-28-1998
<CASH> 1,973,924
<SECURITIES> 0
<RECEIVABLES> 529,658
<ALLOWANCES> 215,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,804,679
<PP&E> 89,309
<DEPRECIATION> 41,207
<TOTAL-ASSETS> 4,059,697
<CURRENT-LIABILITIES> 495,087
<BONDS> 0
12
0
<COMMON> 0
<OTHER-SE> 3,096,190
<TOTAL-LIABILITY-AND-EQUITY> 4,059,697
<SALES> 0
<TOTAL-REVENUES> 2,122,823
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,719,048
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,406
<INCOME-PRETAX> 360,369
<INCOME-TAX> 143,524
<INCOME-CONTINUING> 216,845
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 216,845
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
