SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
Commission file number 0-17774
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
New York 11-1996121
(State of Incorporation) (IRS Employer Identification Number)
2001-A Australian Avenue, Riviera Beach, Florida 33404
(Address of principal executive offices) (Zip Code)
5601 Corporate Way, Suite 320, West Palm Beach, Florida 33407
(Former address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 844-2442
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: .
As of December 31, 1995, 17,391,700 shares of the registrant's common stock
were outstanding
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1995 1995
ASSETS
CURRENT ASSETS:
Cash $ 19,738 $ 5,488
Accounts Receivable, less allowance for
doubtful accounts of $67,000 at
December 31, 1995 and $ 0 at
March 31, 19995 254,053 9,746
Notes Receivable 973,348 108,515
Inventories 867,231 10,637
Other Current Assets 11,376 3,193
2,125,746 137,579
PROPERTY & EQUIPMENT, at cost:
Manufacturing Equipment 521,097 10,218
Leasehold Improvements 104,291 4,972
Furniture, Fixtures & Office Equipment 78,249 30,813
Vehicles 23,860 -
727,497 46,003
Less accumulated depreciation
and amortization (152,400) (9,371)
575,097 36,632
OTHER ASSETS:
License Fee, net of accumulated
amortization 335,417 -
Investments 60,000 -
Deferred Tax Asset, net of
valuation allowance - -
Due from Officer 58,188 27,203
Other 17,307 6,322
470,912 33,525
Total Assets $ 3,171,755 $ 207,736
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
December 31, March 31,
1995 1995
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 720,782 $ 13,352
Deposits Payable 110,105 -
Note Payable 150,000 -
Accrued Expenses 248,145 2,857
1,229,032 16,209
MINORITY INTEREST 997,949 -
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value; 20,000,000
shares authorized, 17,391,700 shares
issued and outstanding at
December 31, 1995 173,917 -
Common Stock, no par value, 20,000,000
shares authorized, 4,220,000 shares
issued and outstanding at
March 31, 1995 - 320,230
Additional Paid-in Capital 1,335,016 -
Accumulated (Deficit) (564,159) (128,703)
944,774 191,527
Total Liabilities & Shareholders Equity $ 3,171,755 $ 207,736
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended
December 31, December 31,
1995 1994 1995 1994
Net Sales $ 822,479 $ 3,640 2,118,750 $ 3,640
Cost of Sales 767,291 10,399 1,785,763 10,399
55,188 (6,759) 332,987 (6,759)
Selling, General and
Administrative Expenses 409,206 24,418 1,105,381 24,418
Loss from Operations 354,018 31,177 772,394 31,177
Other Expense (Income):
Interest Income (21,927) (1,027) (41,895) (1,027)
Interest Expense 7,577 - 7,577 -
Other, net (9,388) (8,564) (14,100) (8,564)
(23,738) (9,591) (48,418) (9,591)
Net Loss Before
Income Taxes and
Minority Interest 330,280 21,586 723,976 21,586
Benefit for Income Taxes - - - -
Minority Interest 136,339 - 288,520 -
Net Loss $ 193,941 $ 21,586 $ 435,456 $ 21,586
Net Loss per Share $ .01 $ .01 $ .03 $ .01
Weighted Average Common
Shares Outstanding 17,391,700 4,220,000 15,841,154 4,220,000
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
December 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (435,456) $ (21,586)
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Minority Interest (288,520) -
Depreciation and Amortization 102,578 4,126
(Increase) in Accounts Receivable (216,054) (3,370)
(Increase) in Inventories (836,594) (9,478)
Decrease (Increase) in Other Assets 18,150 (18,693)
Increase in Accounts and Deposits Payable 669,164 11,483
Increase in Accrued Expenses 153,347 2,600
Common stock of majority owned subsidiary
issued in exchange for services 26,333 -
Net cash (used in) operating activities (807,052) (34,918)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (273,099) (39,150)
(Increase) in Notes Receivable - (91,756)
(Increase) in Due from Officer (11,500) (10,500)
Net cash (used in) investing activities (284,599) (141,406)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock - 320,230
Proceeds from issuance of common stock by
majority owned subsidiary 1,099,417
Cash acquired in acquisition of Clearshield 6,484 -
Net cash provided by financing
activities 1,105,901 320,230
NET INCREASE (DECREASE) IN CASH 14,250 143,906
CASH, AT BEGINNING OF PERIOD 5,488 -
CASH, AT END OF PERIOD $ 19,738 $ 143,906
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
On July 7, 1995, Bernstein/Leibstone Associates, Inc.(the "Company"),
Archway Capital, Inc. ("Archway") and William Leibstone Associates, Inc.
("WLAI"), an entity owned by the former majority stockholder of the
Company, entered into an agreement to exchange shares of the Company's
common stock for shares of Archway's common stock on a one-for-one basis.
On July 14, 1995, all 13,291,700 outstanding shares of Archway were
exchanged by the shareholders for restricted shares issued by the Company
In connection with the above referenced agreement, the Company sold the net
operating assets of its textile and packaging divisions to WLAI. WLAI
issued a note to the Company in the amount of $941,348 which is secured by
1,100,000 shares of stock of the Company owned by William Leibstone. The
note is for a term of three years and bears interest at the rate of 9% per
annum, compounded quarterly. The fair value of the Company as acquired was
determined to be its net book value considering the values of the
securities exchanged and the agreement to sell the net operating assets of
the former operating divisions.
Archway was formed on September 20, 1994. As such, the consolidated
financial statements for the periods ended December 31, 1994 cover only the
period from formation, through December 31, 1994.
Archway is a holding company that was formed for the purpose of investing
in other businesses and providing management expertise in such subsidiaries
with the intention of developing new products, ideas and techniques in
areas of business clearly identified as unique or niche markets. In
October 1994, International Fire Safety Products, Inc., a wholly owned
subsidiary, was organized for the purpose of manufacturing retardant
technology products in a variety of forms. This subsidiary had limited
activity in the current year.
Effective April 1, 1995, Archway acquired a majority interest in
Clearshield, a Florida corporation in the business of manufacturing clear
polycarbonate hurricane protection panels, utilizing a three-for-one share
exchange. Archway issued 9,071,700 shares to the shareholders of
Clearshield in exchange for 3,023,900 shares of Clearshield which equaled
69% of the then issued and outstanding shares of Clearshield. The fair
value of the shares issued for the interest in Clearshield was determined
to be the net book value of the interest acquired.
The acquisitions of the Company and Clearshield by Archway have been
accounted for using the purchase method in accordance with APB Opinion No.
16. Accordingly, the accompanying Statements of Operations include the
results of operations for the Company and Clearshield from their respective
acquisition dates.
The consolidated financial statements include the accounts of Archway, its
wholly and majority owned subsidiaries, and the Company from the date of
its acquisition. All intercompany accounts and transactions have been
eliminated in consolidation. The accompanying consolidated financial
statements are not audited, but include all adjustments which management
considers necessary for fair presentation. The results for the interim
period are not necessarily indicative of the results for the entire fiscal
year.
Pro forma results of operations for the periods ended December 31, 1994,
are not presented as quarterly financial information was not prepared by
Clearshield. Refer to Form 8-K dated July 14, 1995 which contains pro
forma financial statements for the year ended March 31, 1995.
Accounts Receivable
The Company's Clearshield of Palm Beach County, Inc. subsidiary uses the
completed contract method of accounting for financial reporting purposes.
Revenues and costs are recognized when the contract is substantially
completed. Most contracts are of short duration taking only a few days
once the work commences. Contract deposits are recorded as a liability
until the contract is substantially completed. Costs incurred on contracts
in progress are not material at December 31, 1995.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories by major class are as follows:
December 31, March 31,
1995 1995
Raw Materials $ 328,235 -
Finished Goods 508,359 10,637
$ 836,594 $ 10,637
Property and Equipment
Property and equipment is recorded at cost and depreciated using the
straight line method over the estimated useful lives of the assets.
Leasehold improvements are depreciated over the shorter of the estimated
life of the asset or the term of the lease. Depreciable lives by asset
class are as follows:
Manufacturing Equipment 3 to 7 years
Leasehold Improvements 3 to 4 years
Furniture, Fixtures & Office Equipment 5 to 7 years
Vehicles 5 years
License Fee
The Company's Clearshield subsidiary has entered into a License Agreement
with Clearshield Inc., an affiliate through common shareholders, providing
exclusive rights to manufacture and distribute a patented hurricane shutter
system throughout the state of Florida. The cost of the License was
$350,000 and is being amortized over the twenty year life of the agreement.
Additionally, the License Agreement provides for the payment of a royalty
based on sales of the patented product.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements in accordance with Financial Accounting Standard
No. 109, "Accounting for Income Taxes". This accounting standard requires
the asset and liability method of accounting for income taxes and the
recognition of future tax benefits measured by enacted tax rates attributed
to deductible temporary differences, net operating loss carryforwards and
tax credits to the extent that realization of such benefits is more likely
than not. For tax return purposes, the Company and each of its
subsidiaries have net operating loss carryforwards that expire beginning in
the year 2010. Due to limitations on the utilization of loss carryforwards
and the uncertainty that the Company and its subsidiaries will be able to
utilize the temporary differences to offset future taxable income, a 100%
valuation allowance has been recorded.
2. NOTES PAYABLE
Notes payable at December 31, 1995 consists of a note payable to
Clearshield, Inc. amounting to $150,000 representing a portion of the cost
of the License Agreement with the Company's Clearshield subsidiary. The
terms of the note provide for payment in twelve monthly installments
commencing in October 1995 with interest at eight percent. No payments
have been made on this note as of December 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
On July 7, 1995, Bernstein/Leibstone Associates, Inc.(the "Company"),
Archway Capital, Inc. ("Archway") and William Leibstone Associates, Inc.
("WLAI"), an entity owned by the former majority stockholder of the Company,
entered into an agreement to exchange shares of the Company's common stock for
shares of Archway's common stock on a one-for-one basis. Effective April 1,
1995, Archway acquired a 69% majority interest in Clearshield Manufacturing
Corp., a Florida corporation in the business of manufacturing clear
polycarbonate hurricane protection panels, utilizing a three-for-one share
exchange.
The acquisitions of the Company and Clearshield by Archway have been
accounted for using the purchase method in accordance with APB Opinion No. 16.
Accordingly, the accompanying Condensed Consolidated Financial Statements are
those of Archway, including the results of operations for the Company and
Clearshield from their respective acquisition dates.
Archway was formed on September 20, 1994. As such, the consolidated
statement of operations for the nine months ended December 31, 1994 includes
only the period since formation. As such, period to period comparisons of the
Company's financial results are not necessarily meaningful. This discussion
should be read in conjunction with the Company's Condensed Consolidated
Financial Statements and Notes thereto included in Item 1 of this Form 10-Q and
Form 8-K dated July 14, 1995.
Liquidity and Capital Resources
As a result of the above discussed acquisitions, the Company's working
capital increased from $121,370 at March 31, 1995 to $896,714 at December 31,
1995. The Company owns all of its manufacturing equipment, leasing only its
facilities. The Company's only debt is an unsecured note payable to
Clearshield, Inc., an affiliate through common stockholders, related to the
License Agreement to manufacture the Clearshield product.
The Company anticipates a tight liquidity position for the near future as
it invests its resources in expanding its manufacturing capacity, supporting
its increasing working capital needs and funding its operating losses. Because
of the strong positive acceptance of the Company's product by the marketplace,
the Company was unable to meet the demand during the past hurricane season with
a single production line. The Company has added a second production line for
the next hurricane season.
Results of Operations
As indicated above, a direct comparison of the results of operations for
the periods ended December 31, 1995 and 1994 may not be meaningful due to the
acquisitions discussed above which are included only in the 1995 results of
operations. The nine months ended December 31, 1995 reflects the completion
of the inaugural hurricane season for the Clearshield products. (The hurricane
season runs from June 1 to November 30.) Developed in the spring of 1994,
there was only limited distribution of the products during the 1994 hurricane
season. During the current season, the dealer base for the products increased
and the Company began to sell the products through a limited number of stores
in a national home improvement chain, targeting the do-it-yourself market. In
spite of continued operating losses, the Company feels the past season was a
success. The marketplace was very receptive to the products with demand
exceeding production capacity. The Company anticipates continued growth in
sales as it expands its dealer base, the geographic distribution of its
products, and increases the number of stores in the national home improvement
chain from which its products are sold. Sales to date have been predominately
in the South Florida area. Additional markets include the islands of the
Caribbean, Mexico and the eastern and southern coastal areas of the United
States. All of these areas are susceptible to hurricanes and therefore have a
need for the Company's products.
During the nine months ended December 31, 1995, the Company completed the
development of a colored hurricane panel which is more cost competitive with
alternate products than the clear panel sold by the Company. The Company also
incurred sizeable costs in developing the point of sale displays and
promotional materials needed to sell its products through home improvement
stores. These development costs will not repeated as sales expand.
Interest income primarily is from interest on the note received in the sale
of the Company's former packaging and textile divisions.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Previously Reported
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of stockholders was held on December 19, 1995 to consider
the adoption of an Agreement and Plan of Merger to reincorporate the
Company as a Florida corporation by merger of the Company into a newly-
formed wholly-owned subsidiary of the Company named Safetech Industries,
Inc. A majority of the Company's shareholders approved the transaction.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated November 6, 1995 has been filed concerning the change
in the Company's certifying accountant.
SIGNATURES
Pursuant to the requirements 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.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
By: /s/ Darrell Peterson Date: October 31, 1996
Darrell Peterson, Chief Executive Officer
<TABLE>
Exhibit 11.1
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
FORM 10-Q FOR THE NINE MONTHS ENDED DECEMBER 31, 1995
Calculation of Weighted Average Number of Common Shares
Outstanding
<CAPTION>
Common Common
Weighted Average
Share Shares Days Weighted
Averag Number of
Activity Outstanding Outstanding Number of
Shares Shares Outstanding
<S> <C> <C> <C> <C>
<C>
Balance, September 20, 1994 -
Issuance of common shares 4,220,000 4,220,000 192
Balance, March 31, 1995 4,220,000 -
4,220,000
Acquisition of interest
in Clearshield 9,071,700 13,291,700 104 5,026,679
Business combination
with Archway 4,100,000 17,391,700 171 10,814,475
Balance, December 31, 1995 17,391,700
15,841,154
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 19738
<SECURITIES> 0
<RECEIVABLES> 1294401
<ALLOWANCES> (67000)
<INVENTORY> 867231
<CURRENT-ASSETS> 2125746
<PP&E> 727497
<DEPRECIATION> (152400)
<TOTAL-ASSETS> 3171755
<CURRENT-LIABILITIES> 1229032
<BONDS> 0
0
0
<COMMON> 173917
<OTHER-SE> 770857
<TOTAL-LIABILITY-AND-EQUITY> 3171755
<SALES> 2118750
<TOTAL-REVENUES> 2118750
<CGS> 1785763
<TOTAL-COSTS> 1785763
<OTHER-EXPENSES> 1105381
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7577
<INCOME-PRETAX> (723976)
<INCOME-TAX> 0
<INCOME-CONTINUING> (435456)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (435456)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
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