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 November 30, 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
--------------
(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: November 30, 1998
-----------------
Class Outstanding at November 30, 1998
----- --------------------------------
Common Stock, $.00001 Par Value 1,148,865 shares
Page 1 of 11
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
as of November 30, 1998 (Unaudited)
and May 31, 1998 3 - 4
Consolidated Statements of Income
(Unaudited) for the Three and Six Months Ended
November 30, 1998 and 1997 5
Consolidated Statements of Cash Flows
(Unaudited) for the Six Months Ended
November 30, 1998 and 1997 6 - 7
Notes to Consolidated Financial Statements (Unaudited)
as of November 30, 1998 8 - 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION AND SIGNATURES
Signatures 14
</TABLE>
-2-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
NOVEMBER 30, MAY 31,
1998 1998*
----------------- ------------
(Unaudited) (Restated)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,497,807 $ 1,693,220
Short-term investments 111,497 108,908
Accounts receivable - net of allowance for doubtful accounts of $265,000 and
$180,000, respectively (includes receivables from related parties of
$429,369 and $100,635, respectively) 691,928 315,436
Notes receivable - net of allowance for credit losses of
$29,100 and $15,000, respectively, current portion 119,095 89,855
Due from related parties - 8,887
Prepaid expenses and miscellaneous receivables 155,048 185,957
Deferred taxes 173,000 126,000
------------ ------------
Total current assets 2,748,375 2,528,263
------------ ------------
OTHER ASSETS:
Licenses - net of accumulated amortization of
$1,938,022 and $1,870,372, respectively 719,976 787,626
Equipment, fixtures and leasehold improvements - net of
accumulated depreciation of $53,181 and $46,165, respectively 45,304 48,374
Security deposits and other 76,347 115,820
Notes receivable - net of allowance for credit losses of
$138,400 and $119,500, respectively, (includes receivables
from related parties of $56,089 and $44,060, respectively) 431,926 448,115
------------ ------------
Total other assets 1,273,553 1,399,935
------------ ------------
TOTAL ASSETS $ 4,021,928 $ 3,928,198
============ ============
</TABLE>
*The balance sheet at May 31, 1998 is derived from the audited consolidated
financial statements of that date.
-3-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOVEMBER 30, MAY 31,
1998 1998*
------------------ ------------
(Unaudited) (Restated)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 46,498 $ 42,437
Accounts payable 113,030 127,314
Accrued expenses and other current liabilities 40,913 32,135
Income taxes payable 21,849 62,313
Due to related parties 10,611 -
------------ ------------
Total current liabilities 232,901 264,199
------------ ------------
OTHER LIABILITIES:
Long-term debt 574,465 599,135
Deferred rent payable 23,437 23,437
------------ ------------
597,902 622,572
------------ ------------
Total liabilities 830,803 886,771
------------ ------------
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 2,738,015 2,738,015
Retained earnings 959,536 809,838
------------ ------------
3,697,563 3,547,865
Less: Treasury stock (199,500 shares at cost) 506,438 506,438
------------ ------------
Total stockholders' equity 3,191,125 3,041,427
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,021,928 $ 3,928,198
============ ============
</TABLE>
*The balance sheet at May 31, 1998 is derived from the audited consolidated
financial statements of that date.
-4-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
------------------------- ---------------------------
1998 1997 1998 1997
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES:
Royalty income (includes royalty income from
related parties of $163,112, $140,686, $96,222
and $66,689, respectively) $ 1,339,039 $ 1,336,446 $ 689,618 $ 632,911
Consulting income 485,852 15,059 307,447 12,959
Interest, dividends and other income (losses) 16,856 53,278 (3,297) 23,356
Sub-license income (includes sub-license income
from related parties of $18,419, $-0-, $18,419
and $-0-, respectively) 36,839 80,154 36,839 38,433
------------ ------------ ---------- ----------
Total revenues 1,878,586 1,484,937 1,030,607 707,659
------------ ------------ ---------- ----------
EXPENSES:
Payroll and related costs 536,847 324,810 260,512 179,421
Other general and administrative 721,471 451,886 346,220 219,942
Amortization 67,650 98,771 33,825 49,386
Bad debt expense 118,000 70,000 75,000 30,000
Advertising 158,792 55,418 82,346 25,322
Interest 25,328 28,898 12,561 14,459
------------ ------------ ---------- ----------
Total expenses 1,628,088 1,029,783 810,464 518,530
------------ ------------ ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 250,498 455,154 220,143 189,129
PROVISION FOR INCOME TAXES 100,800 186,800 88,800 76,800
------------ ------------ ---------- ----------
NET INCOME $ 149,698 $ 268,354 $ 131,343 $ 112,329
============ ============ ========== ==========
EARNINGS PER SHARE:
Basic $ .16 $ .28 $ .14 $ .12
============ ============ ========== ==========
Diluted $ .15 $ .26 $ .13 $ .11
============ ============ ========== ==========
</TABLE>
-5-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 149,698 $ 268,354
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 and notes receivable 118,000 70,000
Depreciation 7,016 8,127
Amortization of licenses 67,650 98,771
Loss on sale of offices 19,478 -
Interest expense - imputed 25,328 20,880
Interest income - imputed (3,480) (19,794)
Deferred income taxes (47,000) (29,000)
Changes in assets and liabilities:
Accounts receivable (461,492) 16,091
Prepaid expenses and miscellaneous receivables 30,909 (32,585)
Accounts payable and other current liabilities (5,506) (47,145)
Income taxes payable (40,464) 10,123
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (139,863) 363,822
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (2,589) (1,200)
Decrease in due from related parties 19,498 5,766
Acquisition of fixed assets (3,946) (9,607)
Additions to notes receivable (86,839) (79,903)
Payments of notes receivable 49,268 97,366
Security deposits 14,995 (3,998)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (9,613) 8,424
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (45,937) (36,750)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (45,937) (36,750)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (195,413) 335,496
CASH AND CASH EQUIVALENTS - beginning 1,693,220 1,698,099
------------ ------------
CASH AND CASH EQUIVALENTS - ending $ 1,497,807 $ 2,033,595
============ ============
</TABLE>
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<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Receipt of note receivable on sale of office $ 5,000 $ -
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 25,328 $ 28,898
Income taxes 153,406 205,800
</TABLE>
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<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOVEMBER 30, 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
November 30, 1998 and the results of operations and cash flows for the six
months ended November 30, 1998. The results of operations for the six month
period ended November 30, 1998 are not necessarily indicative of the
results of operations for the year ending May 31, 1999.
NOTE 2
Certain reclassifications have been made to the 1997 consolidated financial
statements in order to conform to 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.
-8-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOVEMBER 30, 1998
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.
Earnings per share for the six and three months ended November 30, were
calculated using the treasury stock method as follows;
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
November 30, November 30,
---------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Numerator
---------
Income from continuing operations $ 149,698 $ 268,354 $ 131,343 $ 112,329
Less: Preferred dividends - - - -
------------ ------------- ------------ ------------
Income available to common
stockholders used in basic EPS 149,698 268,354 131,343 112,329
Impact of potential common shares - - - -
------------ ------------- ------------ ------------
Income available to common
stockholders after assumed
conversion of dilutive securities $ 149,698 $ 268,354 $ 131,343 $ 112,329
============ ============= ============ ============
Denominator
-----------
Weighted average number of common
shares outstanding used in basic EPS $ 949,365 $ 949,365 $ 949,365 $ 949,365
Impact of potential common shares:
Stock options 70,567 72,880 77,863 65,488
------------ ------------- ------------ ------------
Weighted number of common shares
and dilutive potential common
shares used in dilutive EPS $ 1,019,932 $ 1,022,245 $ 1,027,228 $ 1,014,853
============ ============= ============ ============
Basic EPS $.16 $.28 $.14 $.12
==== ==== ==== ====
Diluted EPS $.15 $.26 $.13 $.11
==== ==== ==== ====
</TABLE>
-9-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOVEMBER 30, 1998
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.
NOTE 6
Additional paid-in capital and retained earnings at May 31, 1997 have been
adjusted to record the cumulative equity of minority interests in losses
for the period 1989 through February 1995, not previously recorded. On
February 2, 1995 such interests were purchased through the issuance of
75,000 shares of common stock. The error had no effect on net income for
years subsequent to May 31, 1995.
-10-
<PAGE>
BERNARD HALDANE ASSOCIATES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
SIX MONTHS ENDED NOVEMBER 30, 1998
VS.
SIX MONTHS ENDED NOVEMBER 30, 1997
Royalty revenues from licensee offices for the six and three month periods
ended November 30, 1998 as compared to November 30, 1997 increased from
$1,336,446 and $632,911 to $1,339,039 to $689,618, an increase of approximately
of less than 1% and 8% respectively. The Company recognized $485,852 and
$307,447 in consulting revenues as compared to $15,059 and $12,959 during the
six and three month period ended November 30, 1997. This increase of
approximately $470,000 and $294,000 for the respective periods is the direct
result of the Company assuming operations of four Haldane offices where the
sublicensee has defaulted. As of November 30, 1998, all but one of these offices
has been transferred to licensees within the Haldane organization. The Company
generated $36,839 from the sale of territorial offices for the three and six
month period ended November 30, 1998 as compared to $80,154 and $38,433 for the
six and three months ended November 30, 1997. This overall decline of
approximately 54% reflects the fact that the Haldane system has expanded into
most major metropolitan areas throughout the United States and there are few
areas left for expansion and those areas which are left, have a smaller
population base.
Additional revenues (losses) for the six and three month period ended
November 30, 1998 include $16,856 and ($3,297) in interest, dividend and other
income as compared to $53,278 and $23,356 for the six and three month period
ended November 30, 1997.
Total revenues for the six and three months ended November 30, 1998 as
compared to November 30, 1997 were $1,878,586 and $1,030,607 as compared to
$1,484,937 and $707,659. This represents an increase of approximately 26% and
45% respectively. Management anticipates total royalty income remaining flat or
generating only marginal increases in the future as Haldane offices have already
been opened in most major metropolitan areas throughout the country and overseas
expansion has been considerably slower than anticipated. In addition, total
revenues will likely decline as the Company transfers any remaining company
owned offices.
While total revenues increased for the six and three month period ended
November 30, 1998, net income for the six month period ended November 30, 1998
as compared to the comparable period in 1997 declined from $268,354 to $149,698
and for the three months ended November 30, 1998 increased from the prior period
in 1997 from $112,329 to $131,343. Income per share for the six month period
ended November 30, 1998 declined from $.28 to $.16 as compared to 1997, a
decline of approximately 43%, yet increased from $.12 to $.14 per share for the
three months
-11-
<PAGE>
ended November 30, 1998 as compared to the three months ended November 30, 1997.
Management attributes these conflicting trends in net income to the fact that by
the end of the period ended November 30, 1998, the Company was operating only
one Company owned office and was not required to incur the additional costs and
operating expenses associated with the operation of a company owned office.
Payroll and related costs increased from $324,810 to $536,847 and from
$179,421 to $260,512 for the six and three month periods ended November 30,1998
as compared to November 30, 1997. Overall, general and administrative costs
increased by nearly 60%, increasing from $451,886 to $721,471 for the six months
ended November 30, 1998 and from $219,942 to $346,220 for the three months ended
November 30, 1997 as compared to November 30, 1998. These increases are due
primarily to the increased costs associated with operating company owned Haldane
offices. With the sale of three of these offices and hoped for sale of the last
company owned Haldane office, management anticipates a significant decline in
these expenses.
Bad debt for the six months ended November 30, 1998 as compared to November
30, 1997 increased from $70,000 to $118,000. The Company's advertising expense
nearly tripled from $55,418 to $158,792. This increase of over $100,000 is
almost entirely attributable to costs associated with the operation of the
company owned Haldane offices.
Management remains dissatisfied with the results of operations of its First
Career subsidiary. Since inception, the Company has committed over $500,000 to
launch a career consulting program directed at college students and recent
college graduates. While management believes that the program is an excellent
product, the Company has not been able to market the product successfully to
date and has incurred significant losses which have had a significant adverse
impact on the overall operations of the Company. As a result, the Company is
seeking other ways to market the product.
-12-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
NOVEMBER 30, 1998 AS COMPARED TO MAY 31, 1998
Total current assets as of November 30, 1998 were $2,748,375 as compared to
$2,528,263; an increase of 8.7%. Cash holdings and short term investments
decreased from $1,802,128 to $1,609,304, a decrease of approximately 10%. The
Company's total assets increased by 2.3%, increasing from $3,928,198 to
$4,021,928.
Total current liabilities declined nearly 12%, declining from $264,199 to
$232,901 while total liabilities declined from $886,771 to $830,803, a decline
of approximately 7%.
Total stockholders equity increased from $3,041,427 to $3,191,125 an
increase of 4.9%.
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 nonaffiliated
shareholders.
Year 2000 Compliance
The Company's systems are Year 2000 ("Y2K") compliant. The cost of such
compliance by the Company was less than $10,000. The Y2K compliance issue is the
result of computer programs being written using two digits rather than four to
define the applicable year. Computer programs that have time sensitive software
may recognize a date using "00" as the year 1900 rather than 20000. This could
result in a systems failure or miscalculations causing disruption of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
-13-
<PAGE>
The Company does not know if its licensees are Y2K compliant but believe
that there will be no material adverse impact upon the Company if an individual
licensee's office is not Y2K compliant.
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)
JEROLD WEINGER DATED: January 19, 1999
- -----------------------------
JEROLD WEINGER, president/
treasurer/director
JEFFREY G. KLEIN
- ----------------------------- DATED: January 19, 1999
Jeffrey G. Klein, secretary/
director
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED BALANCE SHEET AS OF NOVEMBER 30, 1998 AND UNAUDITED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> May-31-1999
<PERIOD-START> Jun-01-1998
<PERIOD-END> Nov-30-1998
<CASH> 1,497,807
<SECURITIES> 111,497
<RECEIVABLES> 1,105,123
<ALLOWANCES> 294,100
<INVENTORY> 0
<CURRENT-ASSETS> 2,748,375
<PP&E> 98,485
<DEPRECIATION> 53,181
<TOTAL-ASSETS> 4,021,928
<CURRENT-LIABILITIES> 232,901
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 3,191,113
<TOTAL-LIABILITY-AND-EQUITY> 4,021,928
<SALES> 1,878,586
<TOTAL-REVENUES> 1,878,586
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,602,760
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,328
<INCOME-PRETAX> 250,498
<INCOME-TAX> 100,800
<INCOME-CONTINUING> 149,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,698
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
