SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED).
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO
FEE REQUIRED).
For the transition period from to
Commission file number 000-17468
-----------------------
GREENSTONE ROBERTS ADVERTISING, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2250305
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
ONE HUNTINGTON QUADRANGLE
SUITE 1C14
MELVILLE, NEW YORK 11747
(Address of principal executive offices) (Zip Code)
(516) 249-2121
Registrant's telephone number, including area code
-------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
- ---------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) 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 (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
$2,861,301 AS OF JANUARY 6, 1997
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
<PAGE>
COMMON STOCK, $0.01 PAR VALUE -- 7,474,418 SHARES
(AS OF JANUARY 6, 1997)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Registrant's 1997 Annual
Meeting of Shareholders will be incorporated into Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS.
GENERAL
The Registrant was incorporated under the laws of the State of New York on
February 25, 1972 under the name Greenstone Ad Agency, Inc. and subsequently
changed its name to Greenstone & Rabasca Advertising, Inc. On December 16, 1988,
the Registrant amended its Certificate of Incorporation to increase the number
of shares of Common Stock authorized to 30,000,000, par value $.01 per share,
and to change its name to Greenstone Rabasca Roberts, Inc. Its stock was first
sold to the public on February 13, 1989. At their annual meeting on April 5,
1991, the Registrant's shareholders approved the Registrant's name change to
Greenstone Roberts Advertising, Inc.
The Registrant is a full service advertising agency which analyzes and
provides advertising for its clients, and plans and creates advertising for
dissemination through various media such as television, radio, newspapers,
magazines and billboards. The Registrant has developed expertise in such related
areas of marketing, consultation, direct mail advertising, market and product
research, design and production of merchandising and sales promotion programs
and materials, corporate identification, public relations and investor
relations. The Registrant creates an advertising program within the limits
imposed by the client's advertising budget or its annual retainer. The
commission for advertising services in the industry and for the Registrant is
generally 15% of the gross charge (commonly referred to as "billings") for
purchasing advertising space or time.
The Registrant operates offices in Long Island, New York and in Miami and
Orlando, Florida. The Registrant believes, based on management's knowledge of
and experience in the market, that it is the largest advertising agency in Long
Island, New York in terms of commissions and fee revenues, and has a strong base
in the Florida market. The Registrant's success in these areas is based on its
established reputation and expertise in representing clients in businesses such
as vitamins, minerals and nutritional supplements, personal care and food
products, computer hardware and software, financial services, telecommunication
services, cleaning and safety products, wine and spirits, healthcare and
education. In the past fifteen years, the Registrant has received many of the
advertising industry's most recognized awards including ANDY's, CLIO's and ONE
SHOW's. Also in the past fifteen years, the Registrant has received in excess of
one hundred "Best on Long Island" awards for its creativity in advertisements
and collateral materials.
The strategy of the Registrant's General Advertising Division is to
concentrate on servicing medium and large- size accounts that are seeking the
personalized service, attention and continuity of relationships with top
management and creative personnel that the Registrant offers and that larger
advertising firms based in major metropolitan areas are not always able to
provide. The Registrant plans to continue to expand its business by focusing on
such accounts and through possible acquisitions of other advertising agencies in
Long Island, Florida and in other metropolitan markets.
On August 8, 1996, Greenstone Roberts Advertising/Florida Inc., a wholly
owned subsidiary of the Registrant acquired a minority interest in The Gothard
Group, Inc., a Miami-based public relations agency. The Registrant merged its
existing public relations business and its Hispanic Division into the Gothard
Group, and renamed the new company Gothard/Greenstone Roberts, Inc. This newly
combined agency will provide general and crisis management public relations
services including corporate, product and financial to a broad range of clients
and industries. It also has particular public relations and marketing expertise
in the Diversity Markets including the Afro-American and Hispanic communities.
Gothard/Greenstone Roberts, Inc. provides its services both to the Registrant's
existing clients and to its own clients.
SOLICITATION OF NEW BUSINESS
The Registrant has been in business for 24 years and believes it is well
known in the Long Island marketplace, and is also well known in the South
Florida and Orlando marketplaces. The Registrant generally obtains new accounts
through referrals or by identifying prospects through market research in product
and service industries in which the Registrant does not have a conflicting
account. The Registrant solicits prospective accounts through personal contacts
and presentations by agency principals, backed by a team of creative and media
personnel. The initial step in the selection process normally involves preparing
a capability study demonstrating the Registrant's ability to service the
prospective account. Following the submission of a capability study, advertisers
generally seek presentations from a limited number of agencies. In soliciting
new clients, the Registrant often incurs expenses prior to obtaining such
accounts, and there is no assurance that the Registrant will be able to obtain
such accounts or, if the accounts are obtained, that such expenses will be
reimbursed by the client. The Registrant considers the potential revenue from a
new account when determining the appropriate level of expenses for such
presentations. The period of time required by the Registrant to obtain a new
account and generate revenues therefrom may range from two weeks to several
months.
REVENUES
The primary sources of the Registrant's revenues are commissions earned
from advertising placed with the various media and service fees for creative
time. Clients pay the Registrant the full media charges for these
advertisements, and the Registrant, in turn, pays the media, less an agency
commission which is generally 15% of the gross media charges. The billing and
paying procedures established by the Registrant with its clients, whether by
written agreement or course of practice, require that payment be received from
the client in sufficient time for the Registrant to make the corresponding
payment to the related media. Normally, payments are received by the Registrant
within 30 to 60 days of invoice. Service fees for inside creative and
typesetting time are established on a case-by-case basis. The Registrant also
receives a service fee on its outside purchases of production materials (such as
photography and printing) for clients, which fee is generally 20% over the cost
of such purchases. In some cases, fees are generated in lieu of commissions on
media and markup on outside purchases of production materials.
Gothard/Greenstone Roberts, Inc. generates substantially all of its
revenues from hourly fees and retainers which generally range from $1,000 to
$20,000 per month per client. Gothard/Greenstone Roberts, Inc. has had between
15 and 20 clients on retainer over the last 24 months. Gothard/Greenstone
Roberts, Inc. also derives a small portion of its revenues from production work
done on behalf of clients, which may include production of press kits, mailings,
financial reports and other items.
CLIENTS
The Registrant and its subsidiary consider their relations with their
clients to be good. Due to the nature of the business, however, any client could
at some time in the future reduce its advertising budget, or transfer to another
agency all or part of its advertising presently placed through the Registrant
and its subsidiary. Representation of a client does not necessarily mean that
all advertising for such client is handled by the Registrant and/or its
subsidiary exclusively. In some cases, the Registrant and its subsidiary handle
the advertising of only a portion of a client's products or services.
For the twelve months ended October 31, 1996, one of the Registrant's
clients (Twin Laboratories Inc.) represented 15% of the Registrant's
consolidated revenues. In addition, the Registrant's five largest clients
represented 44% of consolidated revenues for that period and the Registrant
depends upon a core of approximately 30 clients from which it obtains the bulk
of its consolidated revenues.
Advertising industry clients can terminate their relationship with the
Registrant on relatively short notice, typically 60 to 90 days. While the loss
of the entire business of the largest client might have a material effect upon
the revenues of the Registrant, because the business represents revenues from
different divisions of this client, the Registrant believes that it is unlikely
that the entire business of this client would be lost at the same time. The
Registrant can terminate at any time personnel working directly on the accounts
to reduce its overhead.
SUPPLIERS
The Registrant internally produces substantially all of the materials
required for its clients. Services and materials such as photography, printing
and film material are generally purchased from outside vendors on behalf of
clients. The Registrant does not maintain any written contracts with its
suppliers. Substantially all of such suppliers are located in Long Island and
Florida.
SEASONALITY
Historically, first quarter operating results have been losses because of
the timing of certain major clients' budgetary cycles.
GOVERNMENT REGULATION
Federal, state and local governments and governmental agencies in recent
years have adopted statutes and regulations affecting the advertising activities
of advertising agencies and their clients. For example, statutes and regulations
have prohibited television advertising for certain products and regulated the
form and content of certain types of advertising for many consumer products. The
Federal Trade Commission ("FTC") has also required proof of accuracy of
advertising claims with respect to various products and, in its enforcement
policies, is seeking to establish more stringent standards with respect to
advertising practices. The FTC has the authority to investigate and to institute
proceedings against advertisers and their advertising agencies for deceptive
advertising. The effect of the advertising business of future application of
existing statues or regulations, or the extent, nature or effect of future
legislation or regulatory activity with respect to advertising, cannot be
predicted.
No claims or enforcement actions have been instituted against the
Registrant to date and the Registrant believes that is in compliance in all
material respects with all applicable regulations. The Registrant maintains
errors and omissions insurance and the Registrant believes that such coverage
would adequately protect it in the event claims are made by governmental
agencies or others against the Registrant and its subsidiary. In addition, the
Registrant has a hold harmless clause in most agreements with clients.
EMPLOYEES
As of October 31, 1996, the Registrant employed 77 persons, 75 on a
full-time basis, including 25 in account management, 6 in media, 16 in
production, 9 in creative services and 21 in general administration and finance.
The Registrant believes its future success will depend, in part, on its
ability to recruit and retain highly skilled management and creative personnel
upon whom it has depended in the past. Professional personnel in the advertising
industry normally do not enter into employment contracts and are free to move
from one agency to another. There is substantial competition for qualified
employees, although there is a large pool of such persons in the New York
Metropolitan area. The Registrant, because of the competitive nature of the
advertising business, has required almost all personnel to execute Employee
Restrictive Covenant Agreements, which provide generally that when such employee
leaves the employ of the Registrant voluntarily, for a period of one year such
employee is prohibited from soliciting and accepting business from the
Registrant's clients and from trying to persuade any of the Registrant's other
employees to sever their employment with the Registrant.
None of the Registrant's employees is represented by a labor union. The
Registrant has experienced no work stoppages and believes that its employee
relations are good. In order to recruit and retain key personnel, the Registrant
has a wide range of employee benefit plans.
COMPETITION
The advertising industry and other marketing communications businesses are
highly competitive. Agencies of all sizes strive to attract new clients or
additional assignments or accounts from existing clients. In addition, many
companies have in-house departments which handle all or a portion of their
advertising and/or public relations requirements.
The Registrant must compete with other agencies to maintain existing client
relationships and to obtain new clients. Competition in the advertising industry
depends to a large extent on the client's perception of the quality of an
agency's "creative product". As the Registrant has expanded its operations it
has had to compete more frequently against larger advertising agencies. These
larger agencies generally have substantially greater financial resources,
personnel and facilities than the Registrant and many of them are large
conglomerates and/or have an international clientele. The Registrant has signed
agreements with non-affiliated agencies in Europe, S.E. Asia and Latin America
in order to provide its existing and future clients with a seamless method to
communicate their advertising message worldwide. Although the Registrant
believes it is able to compete on the basis of the quality of its product,
service, personal relationships with clients and reputation, there can be no
assurance that the Registrant will be able to maintain its current position in
the industry.
ITEM 2. PROPERTIES.
The Registrant does not own any real property. All offices are located on
leased premises. The Registrant considers its offices ample for its present
needs. The following table provides data on the offices of the Registrant.
Annual Approximate Lease
OFFICES LOCATION BASE RENT SQUARE FEET EXPIRATION DATE
New York One Huntington Quadrangle $433,252 16,371 6/30/98
Melville, New York
Florida Sun Bank Center $191,578 9,309 11/30/99
Orlando, Florida
ITEM 3. LEGAL PROCEEDINGS.
On January 10, 1995, the Registrant filed a civil action in the United
States District Court for the Eastern District of New York against a former
client, Gold Star Cruises of Galveston, L.C., and various related parties "(Gold
Star)". The complaint seeks payment of amounts for advertising fees and expenses
for services provided to Gold Star and not paid as a result of the alleged
breach by Gold Star of its agreement with the Registrant's subsidiary. The
complaint also seeks relief for damages resulting form an alleged scheme to
defraud the Registrant by Gold Star. As of this date, the courts are reviewing a
motion to dismiss brought by Gold Star's attorneys. It is the Registrant's
belief that this motion to dismiss will be denied.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
There were no matters submitted to a vote of the shareholders of the
Registrant during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Registrant's Common Stock is traded in the over-the-counter market and
is quoted on NASDAQ under the symbol GRRI.
The following table sets forth the high and low closing bid quotations for
the Registrant's Common Stock as reported by NASDAQ for the periods indicated.
These quotations represent bid prices between dealers, do not include retail
markups, markdowns or commissions, and do not necessarily represent actual
transactions.
Common Stock Closing Bid Prices For
FISCAL YEAR ENDED OCTOBER 31,
1996 1995
HIGH LOW HIGH LOW
First Quarter 15/32 3/8 15/32 7/16
Second Quarter 15/32 11/32 15/32 3/8
Third Quarter 1/2 11/32 1/2 3/8
Fourth Quarter 17/32 13/32 1/2 3/8
The Registrant's Common Stock was held by approximately 308 shareholders of
record as of January 6, 1997.
The Registrant has never paid a cash dividend on its Common Stock and does
not contemplate paying cash dividends on its Common Stock in the foreseeable
future.
ITEM 6. SELECTED FINANCIAL DATA.
FIVE-YEAR SELECTED FINANCIAL DATA
The selected historical financial data presented below has been derived
from consolidated financial statements audited by Arthur Andersen LLP,
independent public accountants. The selected historical financial data should be
read in conjunction with the consolidated financial statements, related notes
and other financial information included elsewhere in this document.
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
-----------------------------
1996 1995 1994 1993 1992
------------------------ --------- ---------- -----------
STATEMENT OF
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Commissions and Fees $ 8,960,983 $ 9,685,169 $10,507,754 $11,191,293 $12,166,931
Net income/(loss) $ 53,828 $ (211,062) $ 4,122 $ (466,735) $ 663,177
Net income/(loss) per $ 0.01 $ (0.02) $ 0.00 $ (0.05) $ 0.07
common share
Average shares
outstanding 7,919,473 9,536,318 9,536,318 9,536,318 49,985,104
BALANCE SHEET DATA:
Total assets $14,334,357 $ 13,596,373 $ 13,075,318 $12,861,865 $15,904,743
Long-term debt $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 AS COMPARED TO
THE FISCAL YEAR ENDED OCTOBER 31, 1995.
Consolidated commission and fee revenue decreased $724,186 or 7% from
$9,685,169 for the fiscal year ended October 31, 1995 to $8,960,983 for the
fiscal year ended October 31, 1996. $570,315 of the revenue decrease is
attributable primarily to the closing of the recruitment division. The remaining
decrease in consolidated revenues is due to the loss of clients partially offset
by increased activity from new and existing clients.
Salaries and related costs decreased 13% from $6,921,093 for the fiscal
year ended October 31, 1995 to $6,014,572 for the fiscal year ended October 31,
1996. The decrease is the result of a reduction in staffing and in part due to
the closing of the recruitment division. Salaries and related costs as a percent
of revenues decreased from 71% for the year ended October 31, 1995 to 67% for
the year ended October 31, 1996, also due in part to the closure of the
recruitment division.
Other operating costs decreased $207,652 or 7% as management continues its
efforts to control costs in various operating areas.
Interest income, net decreased $71,455 due primarily to the use of funds to
repurchase 2,061,900 shares of the Company's common stock.
Income/(loss) before provision/(benefit) for income taxes increased
$318,532 from a loss of $218,390 for the year ended October 31, 1995 to income
of $100,142 for the year ended October 31, 1996. The increase is the result of
management efforts to reduce and control costs as discussed above.
The effective tax rate for the tax provision of $46,314 is 46.2%. This is
primarily the result of certain expenses that are permanently non-deductible for
income tax purposes.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995 AS COMPARED TO
THE FISCAL YEAR ENDED OCTOBER 31, 1994.
Consolidated commission and fee revenue decreased $822,585, or 8% from
$10,507,754 for the fiscal year ended October 31, 1994 to $9,685,169 for the
fiscal year ended October 31, 1995. Although increased activity with existing
clients and the addition of new clients generated a 2% and 10% increase
respectively in commission and fee revenue, this was more than offset by lost
clients which accounted for a 20% decrease in revenues, particularly the
residual effect of losing Royal Caribbean Cruises Ltd.
Salaries and related costs decreased 4% from $7,197,734 for the fiscal year
ended October 31, 1994 to $6,921,093 for the fiscal year ended October 31, 1995.
The decrease is the result of a reduction in staffing in response to the
decreased activity during the year with a number of the Company's clients,
partially offset by additional staff to support new accounts and salary
increases. Salary and related costs as a percent of revenue increased to 71% for
the fiscal year ended October 31, 1995, from 68% for the fiscal year ended
October 31, 1994, mainly the result of decreased revenue for the fiscal year.
Other operating expenses decreased $222,589 or 7% mainly due to
management's efforts to control costs.
Interest income, net, increased $50,583 as a result of higher average cash
balances during the fiscal year as well as higher average yields resulting from
investments made in U.S. Treasury bills and notes.
(Loss)/income before provision/(benefit) for taxes decreased $272,772 from
a profit of $54,382 for the fiscal year ended October 31, 1994 to a loss of
$218,390 for the fiscal year ended October 31, 1995. These results are mainly
due to the reduction in revenue as discussed above.
The effective tax rate for the tax benefit of $7,328 is approximately 3%.
This is primarily the result of certain expenses that are permanently
non-deductible for income tax purposes and an IRS audit assessment for
approximately $20,000 which closes tax years 1992, 1993 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased by $1,088,424 to $2,939,590 at
October 31, 1996 as compared to $4,028,014 at October 31, 1995, due primarily to
the use of funds to repurchase 2,061,900 shares of the Company's common stock on
January 19, 1996.
Cash and cash equivalents decreased $630,890 from $3,184,620 at October 31,
1995 to $2,553,730 at October 31, 1996. The cash and cash equivalents balance
decrease was the result of the Company's repurchase of its own capital stock,
timing of receipts on accounts receivable and purchase of capital assets,
partially offset by the timing of payments of its accounts payable.
It should be noted that the Registrant recognizes commission as a
percentage of expenditures incurred for clients. Therefore, the accounts
receivable balance does not relate only to the commissions and fees shown on the
income statement, but also represents receivables for the total of the
production costs and media purchased for clients. Similarly, the accounts
payable balance includes payables for production costs and media incurred on
behalf of clients.
The Registrant has available an unused committed line of credit from a bank
of $3,000,000 at October 31, 1996. Subsequent to year end, the Company secured a
$5,000,000 line of credit with another bank. In connection with the new line of
credit, the Company intends to terminate its original line of credit which was
to expire April 30, 1997. Management believes that its current working capital
levels will be sufficient to meet the Registrant's liquidity and working capital
requirements for the foreseeable future. The Registrant does not anticipate any
material increases of capital expenditures or other requirements which will
adversely affect its liquidity. PART III
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements filed as part of this Report commence following
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item is omitted from this Report as the
Registrant intends to file its definitive proxy statement no later than 120 days
after the end of the fiscal year covered by this Report, and the information to
be included therein is included herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is omitted from this Report as the
Registrant intends to file its definitive proxy statement no later than 120 days
after the end of the fiscal year covered by this Report, and the information to
be included therein is included herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is omitted from this Report as the
Registrant intends to file its definitive proxy statement no later than 120 days
after the end of the fiscal year covered by this Report, and the information to
be included therein is included herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
(i) Report of Independent Public Accountants
(ii) Consolidated Balance Sheets
(iii) Consolidated Statements of Operations
(iv) Consolidated Statements of Shareholders' Equity
(v) Consolidated Statements of Cash Flows
(vi) Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
(i) Report of Independent Public Accountants on Schedule
(ii) Schedule II - Valuation and Qualifying Accounts
(b) Exhibits:
NUMBER DESCRIPTION
3.1 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Registration Statement on Form S-18
(Registration No. 33-26372 NY)).
3.2 By-laws of the Registrant (incorporated by reference to Exhibit 3.2 of
the Registrant's Registration Statement on Form S-18 (Registration No. 33-26372
NY)).
10.1 *1988 Stock Option Plan (incorporated by reference to Exhibit 10.6 of
the Registrant's Registration Statement on Form S-18 (Registration No. 33-26372
NY)).
10.2 *Amendment No. 1 to the 1988 Stock Option Plan dated February 7, 1990
(incorporated by reference to Exhibit 10.6 of the Registrant's Form 10-K for the
fiscal year ending October 31, 1990)).
10.3 Lease agreements between the Registrant and We're Associates dated
September 28, 1987 (incorporated by reference to Exhibit 10.4 and 10.5 of the
Registrant's Registration Statement on Form S-18 (Registration No. 33-26372
NY)).
10.4 Second and third modifications of lease agreements between the
Registrant and We're Associates dated February 14, 1989 and July 7, 1989,
respectively (incorporated by reference to Exhibit 10.8 of the Registrant's Form
10-K for the fiscal year ending October 31, 1990).
10.5 Lease agreements between the Registrant and Wyncreek Partners, Ltd.
dated April 17, 1989 and the first and second amendments dated June 29, 1989 and
April 10, 1990, respectively (incorporated by reference to Exhibit 10.10 of the
Registrant's Form 10-K for the fiscal year ending October 31, 1990).
10.6 * Employment agreement between the Registrant and Ronald M. Greenstone
dated December 31, 1994. (Incorporated by reference to Exhibit 10.6 of the
Registrant's Form 10-K for the fiscal year ending October 31, 1994).
10.7 * Employment agreement between the Registrant and Gary C. Roberts dated
December 31, 1995.
10.8 Fifth and sixth amendments of lease agreements between the Registrant and
We're Associates dated June 13, 1990 and June 18, 1991, respectively
(incorporated by reference to Exhibit 10.11 of the Registrant's Form 10-K for
the fiscal year ending October 31, 1991).
10.9 Third amendment of lease agreement between the Registrant and Wyncreek
Partners, Ltd. dated January 19, 1991 (incorporated by reference to Exhibit
10.12 of the Registrant's Form 10-K for the fiscal year ending October 31,
1991).
10.10 Fourth and fifth amendments of lease agreement between the Registrant and
Wyncreek Partners, Ltd. dated January 22, 1992 and May 12, 1992 (incorporated by
reference to Exhibit 10.10 of the Registrant's Form 10-K for the fiscal year
ending October 31, 1992).
10.11 Lease agreement between the Registrant and Lincoln-Sun Center Ltd.
dated September 4, 1992 (incorporated by reference to Exhibit 10.11 of the
Registrant's Form 10-K for the fiscal year ending October 31, 1992).
10.12 Sixth amendment of lease agreement between the Registrant and
Wyncreek Partners, Ltd. dated August 26, 1993 (incorporated by reference to
Exhibit 10.12 of the Registrant's Form 10-K for the fiscal year ending October
31, 1993).
21 Subsidiaries of the Registrant.
(c) Reports on Form 8-K:
There were no reports on Form 8-K filed during the fiscal year ended
October 31, 1996.
*Indicates a Management Contract or a Compensatory Plan or Arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 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 in the City of Melville, State of
New York on January 27, 1997.
Greenstone Roberts Advertising, Inc.
By: __________________________
Ronald M. Greenstone
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated.
_____________________________ Chairman of the Board, Chief January 27, 1997
Ronald M. Greenstone Executive Officer, (principal
executive officer) and Director
_____________________________ President, Chief Operating January 27, 1997
Gary C. Roberts Officer and Director
_____________________________ Senior Vice President, Chief January 27, 1997
Leonard Schrift Financial Officer, Treasurer
_____________________________ Director January 27, 1997
Anthony V. Curto
_____________________________ Director January 27, 1997
Richard Projain
_____________________________ Director January 27, 1997
Martin Sussman
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
NUMBER
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of October 31, 1996 and 1995 F-2
Consolidated Statements of Operations for the years ended
October 31, 1996, 1995 and 1994 F-3
Consolidated Statements of Shareholders' Equity for
the years ended October 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the years ended
October 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-6 to F-11
Index to Supplemental Schedule S-1
Report of Independent Public Accountants on Schedule S-2
Schedule II - Valuation and Qualifying Accounts S-3
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the consolidated financial statements or
notes thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Greenstone Roberts
Advertising, Inc.:
We have audited the accompanying consolidated balance sheets of Greenstone
Roberts Advertising, Inc. (a New York corporation) and subsidiary as of October
31, 1996 and 1995 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the financial position of Greenstone Roberts
Advertising, Inc. and subsidiary as of October 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1996, in conformity with generally accepted
accounting principles.
New York, New York
January 9, 1997
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, OCTOBER 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,553,730 $3,184,620
Short-term investments 302,422 1,121,015
Accounts receivable, net of allowance for bad debts
of $380,994 and $377,723, respectively 8,756,598 7,016,706
Billable production orders in process, at cost 828,020 532,600
Deferred income tax benefit 180,918 272,328
Receivable from affiliate 50,000 -
Other current assets 123,406 111,105
TOTAL CURRENT ASSETS 12,795,094 12,238,374
Furniture, Equipment and Leasehold Improvements,
at cost, less accumulated depreciation and
amortization of $2,285,948 and $1,883,435,
respectively 929,103 891,987
Investment in affiliate,
net of accumulated amortization of $5,112 210,926 -
Deferred Income Tax Benefit 65,202 60,000
Goodwill and Other Assets, net of accumulated
amortization of $303,679 and $239,873, respectively 334,032 406,012
---------- ----------
TOTAL ASSETS $14,334,357 $13,596,373
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $9,370,546 $7,658,037
Accrued liabilities 484,958 552,323
---------- ----------
TOTAL CURRENT LIABILITIES 9,855,504 8,210,360
Long-Term Debt 250,000 250,000
Deferred Income Tax Liability - 53,109
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value, 1,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.01 par value, 30,000,000 shares
authorized, 10,600,000 shares issued 106,000 106,000
Additional paid-in capital 3,600,692 3,600,692
Retained earnings 1,876,787 1,822,959
Less: Treasury stock, 3,125,582 and 1,063,682
shares at cost, respectively (1,354,626) (446,747)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY 4,228,853 5,082,904
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,334,357 $13,596,373
----------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES FROM COMMISSIONS
AND FEES $8,960,983 $9,685,169 $10,507,754
---------- ---------- -----------
EXPENSES:
Salaries and related costs 6,014,572 6,921,093 7,197,734
Other operating expenses 2,934,848 3,142,500 3,365,089
Interest income, net (88,579) (160,034) (109,451)
------- --------- ---------
8,860,841 9,903,559 10,453,372
---------- --------- ----------
INCOME/LOSS BEFORE PROVISION/
(BENEFIT) FOR INCOME TAXES 100,142 (218,390) 54,382
Provision/(Benefit) for Income Taxes 46,314 (7,328) 50,260
---------- ------- ------
NET INCOME/(LOSS) $ 53,828 $(211,062) $ 4,122
--------- -------- -----
NET INCOME/(LOSS) PER COMMON SHARE $ 0.01 $ (0.02) $ 0.00
------------ ----------- ----
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 7,919,473 9,536,318 9,536,318
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
Common Stock Additional Treasury Stock
Number of Paid-in Retained Number of
Shares Amount Capital Earnings Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - OCTOBER 31, 1993 10,600,000 $106,000 $3,600,692 $2,029,899 1,063,682 $(446,747) $5,289,844
---------- -------- ---------- ---------- --------- ---------- ----------
Net income - - - 4,122 - - 4,122
--------- ------- -------- ------------- ------- ---------- ----------
BALANCE - OCTOBER 31, 1994 10,600,000 106,000 3,600,692 2,034,021 1,063,682 (446,747) 5,293,966
---------- ------- --------- ---------- --------- --------- ----------
Net (loss) - - - (211,062) - - (211,062)
--------- ------- -------- --------- --------- -------- -----------
BALANCE - OCTOBER 31, 1995 10,600,000 106,000 3,600,692 1,822,959 1,063,682 (446,747) 5,082,904
---------- ------- ---------- --------- --------- -------- -----------
Treasury Stock Purchased - - - - 2,061,900 (907,879) (907,879)
Net income - - - 53,828 - - 53,828
--------- ------- -------- ---------- ------- --------- -----------
BALANCE - OCTOBER 31, 1996 10,600,000 $106,000 $3,600,692 $1,876,787 3,125,582 $(1,354,626) $4,228,853
---------- -------- ---------- ---------- --------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income/(loss) $ 53,828 $(211,062) $ 4,122
Adjustments to reconcile net income/(loss) to net cash
provided by/(used in) operating activities:
Depreciation and amortization 471,432 451,723 438,737
Equity earnings in Affiliate 8,961 - -
Provision for doubtful accounts 1,419 51,907 129,057
Deferred income tax benefit 86,208 (104,675) (227,653)
Deferred income tax liability (53,109) (19,019) 168,303
Increases/(decreases) in cash resulting from changes
in operating assets and liabilities:
Change in accounts receivable (1,741,311) 72,445 (1,831,889)
Change in billable production orders in process, at cost (295,420) 150,276 186,672
Change in income tax receivable - - 64,859
Change in other current assets (12,300) 916 30,210
Change in notes receivable (50,000) 150,000 -
Change in other assets 8,174 4,816 (753)
Change in accounts payable 1,712,508 478,342 279,547
Change in accrued liabilities (67,365) 272,794 (142,344)
-------- -------- --------
Net cash provided by/(used in) operating activities 123,025 1,298,463 (901,132)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (439,629) (279,169) (253,116)
Maturity/purchase of short-term investments 818,593 1,159,032 (2,280,047)
Purchase of Investment in Affiliate (225,000) - -
Net cash provided by/(used in) investing activities 153,964 879,863 (2,533,163)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Treasury Stock (907,879) - -
Net cash provided by/(used in) financing activities (907,879) - -
Net (decrease)/increase in cash and cash
equivalents (630,890) 2,178,326 (3,434,295)
Cash and cash equivalents at beginning of year 3,184,620 1,006,294 4,440,589
--------- --------- ---------
Cash and cash equivalents at end of year $2,553,730 $3,184,620 $1,006,294
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
<PAGE>
The accompanying consolidated financial statements include the accounts of
Greenstone Roberts Advertising, Inc. and its 100% owned subsidiary, Greenstone
Roberts Advertising Florida, Inc. (together the "Company"). All intercompany
balances and transactions have been eliminated.
RECOGNITION OF COMMISSION AND FEE REVENUE
Substantially all revenues are derived from commissions for placement of
advertisements in various media and for production of advertisements and
marketing materials. Such revenues are recognized as billed. Billings are
generally rendered upon insertion date for print media, job completion date for
production costs, and air date for broadcast media.
CONCENTRATION OF CREDIT RISK
The Company provides advertising and marketing services to a wide range of
clients who operate in many industry sectors. The Company grants credit to all
qualified clients, but does not believe it is exposed to any undue concentration
of credit risk to any significant degree.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1996
presentation.
CASH EQUIVALENTS
For purposes of the consolidated balance sheets and consolidated statements
of cash flows, the Company considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents, including commercial paper, certificates of deposit and money
market mutual funds. Cash equivalents as of October 31, 1996 and 1995 were
$1,075,529 and $2,891,281, respectively.
SHORT-TERM INVESTMENTS
Effective November 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). SFAS No. 115 established the accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. In connection with the
adoption of this pronouncement, the Company's debt securities have been
classified as held to maturity and are stated at amortized cost which, due to
the nature of the securities, approximates market value. The adoption of SFAS
No. 115 had an immaterial effect on the Company's financial statements.
Short-term investments include Commercial paper, Treasury bills, and notes
with maturities of three months and greater, with yields ranging from 5.25% to
6.5%.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the useful lives of the assets as
follows:
Furniture 5 - 7 years
Equipment 5 - 7 years
Leasehold improvements Lease term or useful life,
whichever is shorter
GOODWILL
Goodwill represents the excess of cost over the net assets acquired and is
amortized on a straight-line basis over 10 years. Managment periodically
assesses whether there has been an impairment in the carrying value of the
excess of cost over the net assets acquired, by comparing current and projected
annual undiscounted cash flows with the related annual amortization. In the
event there is an impairment of goodwill, management would reduce the carrying
value to an amount equal to the projected discounted cash flow of the underlying
assets.
<PAGE>
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires the use of the asset and liability method of
accounting for income taxes and deferred income taxes are recorded to reflect
the tax consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each year-end.
USE OF ESTIMATES
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 those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March of 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".
SFAS No. 121 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 amount of an asset
may not be recoverable.
In October of 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123") "Accounting
for Stock-Based Compensation". SFAS No. 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans as well as
transactions in which any entity issues equity instruments to acquire goods or
services from non-employees.
SFAS No. 121 and SFAS No. 123 are effective for fiscal years beginning
after December 15, 1995, although earlier adoption is permitted. The Company
does not believe that the adoption of SFAS No. 121 or SFAS No. 123 will have a
material adverse effect on the Company's consolidated financial statements.
<PAGE>
2. INVESTMENT IN AFFILIATE:
On August 8, 1996, Greenstone Roberts Advertising Florida, Inc., a
wholly-owned subsidiary of Greenstone Roberts Advertising, New York acquired a
49% interest in The Gothard Group, Inc., a Miami-based public relations agency.
Greenstone Roberts merged its existing public relations business and its
Hispanic Division into The Gothard Group and renamed the new company
Gothard/Greenstone Roberts, Inc. ("Gothard"). The Company is accounting for its
interest in Gothard under the Equity method of accounting. The excess of
purchase price over the net worth of the acquired interest will be amortized
over ten years.
On August 27, 1996, the Company entered into a loan agreement with Gothard
and advanced $50,000. It is anticipated that the loan will be repaid during
fiscal 1997.
3. LINE OF CREDIT AGREEMENTS:
The Company has an unsecured $3,000,000 line of credit with a bank which
expires April 30, 1997. Borrowings against this line bear interest at the rate
of prime plus 1/2% per annum. The Company did not borrow against the line during
fiscal 1996 and 1995. Subsequent to year end, the Company secured a $5,000,000
line of credit with another bank. In connection with the new line of credit, the
Company intends to terminate its original line of credit.
4. LONG-TERM DEBT:
Long-term debt consists of a note payable relating to the acquisition of
certain assets of an advertising agency in February 1992. The note, by its
terms, was payable in two equal installments of $125,000 in February 1993 and
1994, respectively. The Company believes that due to certain misrepresentations
by the seller in connection with the business of this agency, a significant
adjustment in the purchase price is required. Accordingly, the Company has
forgone any payment of the note payable until a fair settlement is agreed. The
entire note payable balance has therefore been included in long-term debt. Any
adjustment to the purchase price would result in a reduction to long-term debt
and other assets.
5. INCOME TAXES:
The (benefit)/provision for income taxes included in the accompanying
consolidated statements of operations consists of the following:
October 31, October 31, October 31,
1996 1995 1994
---- ---- ----
CURRENT:
Federal $19,121 $50,863 $ 5,324
State (5,906) 65,503 71,117
------- ------ ------
13,215 116,366 76,441
------- ------- ------
DEFERRED:
Accelerated depreciation (13,255) (10,538) 2,363
Employee bonus - - (8,438)
Allowance for bad debts (1,301) (15,579) (1,270)
Goodwill amortization (10,177) (11,230) 6,450
Vacation accrual 30,651 (34,263) (1,451)
Various accrued liabilities and
other 27,181 (20,973) 4,958
State NOL carry forward - (31,111) (28,793)
----------- -------- --------
33,099 (123,694) (26,181)
------- --------- --------
TOTAL $46,314 $ (7,328) $50,260
------- ---------- -------
<PAGE>
The Company has a state net operating loss (NOL) carryforward in Florida of
approximately $52,000 as of October 31, 1996. The NOL carryforward is due to
losses incurred by the Company's 100% owned subsidiary. The carryforward, which
management expects will be fully utilized, expires as follows:
YEAR AMOUNt
2009 $21,000
2010 $31,000
The deferred income tax benefit and deferred income tax liability reflected
in the accompanying consolidated balance sheets represent differences in the
timing of the recognition of certain income and expenses for income tax and
financial reporting purposes. The primary sources of these differences are bad
debt deductions, depreciation, certain goodwill amortization, vacation accruals
and state NOL carryforwards.
The following table reconciles the Federal Statutory rate to the Company's
effective rate:
October 31, October 31, October 31,
1996 1995 1994
Tax (benefit)/provision computed
at statutory rate 22.0% (31.3%) 15.0%
State tax, net of Federal tax effect 2.0% 2.3% 66.1%
Non-deductible expenses 16.3% 12.8% 11.3%
Other 5.9% 12.8% _____
------ -----
46.2% (3.4%) 92.4%
----- ------ -----
The effective tax rate in fiscal 1996 of 46.2% is primarily the result of
certain expenses that are permanently non-deductible for income tax purposes.
The effective tax rate in fiscal 1995 of (3.4%) was primarily the result of
certain expenses that were permanently non-deductible for income tax purposes
and an IRS audit assessment for approximately $20,000 which closed tax years
1992, 1993 and 1994.
In fiscal 1994, the effective tax rate of approximately 92.4% resulted
primarily from the Company's state tax provision. During that year, the Company
incurred a loss at its Florida subsidiary for which a tax benefit was recorded
at 5.5%. Operations in New York State were profitable which required a provision
for New York State taxes at a rate of approximately 12%. On a consolidated
basis, the net income was significantly less than New York State income, thereby
resulting in an effective tax rate significantly higher than the statutory rate.
Income taxes paid during fiscal 1996, 1995 and 1994 were $77,428, $143,228
and $0, respectively.
6. SAVINGS PLAN:
The Company adopted a 401(k) Savings Plan ("Savings Plan") as of August 1,
1984. The Savings Plan covers all employees with one or more years of service.
The Company matches employee contributions utilizing a percentage determined at
the discretion of management. Such percentage was 15% of employee contributions
for fiscal 1996, 1995 and 1994. The Company's fiscal October 31, 1996, 1995 and
1994 Savings Plan contributions were $22,900, $32,496 and $39,630, respectively.
7. SIGNIFICANT CUSTOMERS:
For the year ended October 31, 1996, business from one customer represented
15% of the Company's consolidated revenues. In addition, the Company's five
largest clients represented 44% of consolidated revenues for that period and the
Company depends upon a core of approximately 30 clients from which it obtains
the bulk of its consolidated revenues. For the year ended October 31, 1995,
business from one customer represented 15% of consolidated revenues. For the
year ended October 31, 1994, business from a company which is no longer a
customer represented 11% of consolidated revenues.
<PAGE>
8. COMMITMENTS AND CONTINGENCIES:
LEASES
At October 31, 1996, the Company was committed under operating leases,
principally for office space, through fiscal 2000.
Rent expense was $843,216, $841,826 and $809,499, for the years ended
October 31, 1996, 1995 and 1994, respectively. Future minimum rents under terms
of the existing leases are as follows:
FISCAL
1997 $636,296
1998 $492,149
1999 $212,385
2000 $ 17,771
STOCK OPTION PLAN
In December 1988, the Board of Directors approved the adoption of the 1988
Stock Option Plan (the "Plan"). The Plan was amended in 1990 to increase the
number of common shares reserved for issuance to key employees, including
officers and directors who are also employees, from 600,000 to 900,000 shares.
All options are granted at no less than 100% of the fair market value on the
date of grant.
Options granted expire six years from the date of grant, and are
exercisable in varying amounts up to three years, at which time all options
granted become exercisable. Options that are unexercised are canceled
immediately if the holder ceases to be an employee of the Company.
The following is a summary of activity and information relating to shares
subject to option under the Plan:
<TABLE>
<CAPTION>
Number of Shares
UNDER OPTION
<S> <C>
BALANCE, October 31, 1994 at exercise prices from $0.46875 to $0.50 815,000
Options granted at exercise prices of $0.46875 to $0.53 22,500
Options canceled at exercise prices of $0.46875 to $0.53 (193,500)
BALANCE, October 31, 1995 at exercise prices from $0.46875 to $0.53
644,000 Options granted at exercise price of $0.47 per share
49,000 Options canceled at exercise prices of $0.47 to $0.53
per share (164,000)
BALANCE, October 31, 1996 at exercise prices of $0.46875 to $0.53
per share 529,000
</TABLE>
As of October 31, 1996 there were 529,000 options excercisable and 371,000
options available for grant.
EMPLOYMENT AGREEMENTS
As of January 1, 1996 and January 1, 1995, the Company renewed employment
agreements with its two executive officers. The employment agreements provide
for aggregate annual compensation of $665,000, and expire December 31, 1997. The
agreements also provide for incentive compensation equivalent to an aggregate
amount of 5% of income before provision for income taxes.
LITIGATION
The Company is involved in legal matters arising from the ordinary course
of business. In management's opinion, any unfavorable outcome associated with
these matters would not have a material adverse effect on the Company's
consolidated financial statements.
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
INDEX TO SUPPLEMENTAL SCHEDULE
Page
NUMBER
<PAGE>
Report of Independent Public Accountants on Schedule S-2
Schedule II - Valuation and Qualifying Accounts S-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders of Greenstone Roberts
Advertising, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Greenstone Roberts Advertising, Inc.
and subsidiary included in this filing and have issued our report thereon dated
January 9, 1997. Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The schedule
listed in the accompanying index is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
New York, New York
January 9, 1997
<PAGE>
SCHEDULE II
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
Description Balance at Charged to
Allowance for Bad Debts beginning costs and Recovery/ Balance at
FISCAL YEAR ENDED OF YEAR EXPENSES DEDUCTIONS END OF YEAR
October 31, 1994 $336,332 $129,057 $137,524 $327,865
October 31, 1995 $327,865 $ 51,907 $ 2,049 $377,723
October 31, 1996 $377,723 $ 1,419 $ (1,852) $380,994
This schedule should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
<PAGE>
EXHIBIT INDEX
Exhibit 21
Subsidiaries of the Registrant
NAME OF SUBSIDIARY STATE OF INCORPORATION % OWNERSHIP
Greenstone Roberts Florida 100%
Advertising, Florida, Inc.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 2,553,730
<SECURITIES> 302,422
<RECEIVABLES> 9,137,592
<ALLOWANCES> (380,994)
<INVENTORY> 0
<CURRENT-ASSETS> 12,795,094
<PP&E> 3,215,051
<DEPRECIATION> (2,285,948)
<TOTAL-ASSETS> 14,334,357
<CURRENT-LIABILITIES> 9,855,504
<BONDS> 250,000
0
0
<COMMON> 106,000
<OTHER-SE> 4,228,853
<TOTAL-LIABILITY-AND-EQUITY> 14,334,357
<SALES> 0
<TOTAL-REVENUES> 8,960,983
<CGS> 0
<TOTAL-COSTS> 6,014,572
<OTHER-EXPENSES> 2,934,848
<LOSS-PROVISION> 3,271
<INTEREST-EXPENSE> (88,579)
<INCOME-PRETAX> 100,142
<INCOME-TAX> 46,314
<INCOME-CONTINUING> 53,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,828
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
