SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDED
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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 September 30, 1995, 17,391,700 shares of the registrant's common stock
were outstanding
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
1995 1995
ASSETS
CURRENT ASSETS:
Cash $ 147,725 $ 5,488
Accounts Receivable, less allowance for
doubtful accounts of $48,000 at
September 30, 1995 and $ 0 at
March 31, 1995 170,194 9,746
Notes Receivable 973,348 108,515
Inventories 77,119 10,637
Other Current Assets 9,478 3,193
1,377,864 137,579
PROPERTY & EQUIPMENT, at cost:
Manufacturing Equipment 378,448 10,218
Leasehold Improvements 104,291 4,972
Furniture, Fixtures & Office Equipment 75,377 30,813
Vehicles 22,610 -
580,726 46,003
Less accumulated depreciation
and amortization (119,294) (9,371)
461,432 36,632
OTHER ASSETS:
License Fee, net of accumulated
amortization 339,792 -
Investments 60,000 -
Deferred Tax Asset, net of
valuation allowance - -
Due from Officer 60,560 27,203
Other 17,457 6,322
477,809 33,525
Total Assets $ 2,317,105 $ 207,736
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
September 30, March 31,
1995 1995
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 74,871 $ 13,352
Deposits Payable 124,678 -
Note Payable 200,000 -
Accrued Expenses 220,912 2,857
620,461 16,209
MINORITY INTEREST 557,929 -
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value; 20,000,000
shares authorized, 17,391,700 shares
issued and outstanding at
September 30, 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) (370,218) (128,703)
1,138,715 191,527
Total Liabilities & Shareholders Equity $ 2,317,105 $ 207,736
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended
September 30, September 30,
1995 1994 1995 1994
Net Sales $ 1,059,890 $ - $ 1,296,271 $ -
Cost of Sales 809,364 - 1,018,472 -
250,526 - 277,799 -
Selling, General
and Administrative
Expenses 511,856 - 696,175 -
Loss from Operations 261,330 - 418,376 -
Other Expense (Income):
Interest Income (17,982) (19,968)
Interest Expense - -
Other, net (4,695) (4,712)
(22,677) - (24,680) -
Net Loss Before
Income Taxes and
Minority Interest 238,653 - 393,696 -
Benefit for Income Taxes - - - -
Minority Interest 105,488 - 152,181 -
Net Loss $ 133,165 $ - $ 241,515 $ -
Net Loss per Share $ .01 $ - $ .02 $ -
Weighted Average Common
Shares Outstanding 16,812,352 - 15,061,645 -
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (241,515) $ -
Adjustments to reconcile net (loss) to
net cash provided by (used in)
operating activities:
Minority Interest (152,181)
Depreciation and Amortization 65,097
(Increase) in Accounts Receivable (132,195)
(Increase) in Inventories (46,482)
Decrease in Other Assets 19,898
Increase in Accounts and Deposits Payable 37,826
Increase in Accrued Expenses 126,114
Common stock of majority owned subsidiary
issued in exchange for services 22,953
Net cash (used in) operating
activities (300,485) -
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (126,328)
(Increase) in Notes Receivable -
(Increase) in Due from Officer (13,872)
Net cash (used in) investing
activities (140,200) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock -
Proceeds from issuance of common stock by
majority owned subsidiary 576,438
Cash acquired in acquisition of Clearshield 6,484
Net cash provided by financing
activities 582,922 -
NET INCREASE (DECREASE) IN CASH 142,237 -
CASH, AT BEGINNING OF PERIOD 5,488 -
CASH, AT END OF PERIOD $ 147,725 $ -
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 September 30, 1994 cover only
the ten day period since formation, in which no activity took place.
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.
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 September 30, 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 September 30, 1995.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories by major class are as follows:
September 30, March 31,
1995 1995
Raw Materials $ - $ -
Finished Goods 77,119 10,637
$ 77,119 $ 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 September 30, 1995 consists of a note payable to
Clearshield, Inc. amounting to $150,000 and a note payable to a
shareholder amounting to $50,000. The Clearshield, Inc. note represents
a portion of the cost of the License Agreement with the Company's
Clearshield subsidiary and provides for payment in twelve monthly
installments commencing in October 1995 with interest at eight percent.
The shareholder note was converted to common stock after the end of the
quarter.
3. LITIGATION
The Company's Clearshield subsidiary is a party in a lawsuit entitled
Clear Investments, Inc. v. Clearshield Manufacturing Corp., Case No. CL
94-5898 AF. now pending in the Circuit Court of the Fifteenth Judicial
Circuit in and for Palm Beach County, Florida, where a former director
and attorney for Clearshield, through his company, Clear Investments,
Inc. has filed suit to receive 600,000 shares of stock of Clearshield
that were originally allocated to him in May 1994. Subsequent to that
time, the former director and attorney resigned from Clearshield as
director and attorney. The Company has retained counsel and believes
they have a meritorious defense to the allegations contained in the
complaint.
Not withstanding the above, in September 1996, settlement in principe was
reached in this matter, subject to documentation and execution of a
settlement agreement. A motion was filed to abate the case and the court
has entered an order closing the file for administrative purposes, while
retaining jurisdiction for the purpose of enforcing the settlement. No
adjustments have been made in the accompanying condensed financial
statements regarding this matter.
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 condensed
consolidated financial statements for the periods ended September 30, 1994
cover only the ten day period since formation, in which no activity took
place. As such, period to period comparisons of the Company's financial
results are not available. 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 $757,403 at September 30,
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, and a note to a
shareholder, which was converted to common stock after the end of the quarter.
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. Proceeds of the Clearshield
offering are being used to add a second production line for next season..
Results of Operations
As indicated above, there are no comparable results for the quarter ended
September 30, 1994 as Archway had just been formed. The six months ended
September 30, 1995 reflects the inaugural hurricane season for the Clearshield
products. 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. The marketplace
has been 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. 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 six months ended September 30, 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
The Company's Clearshield subsidiary is a party in a lawsuit entitled
Clear Investments, Inc. v. Clearshield Manufacturing Corp., Case No. CL 94-
5898 AF. now pending in the Circuit Court of the Fifteenth Judicial Circuit in
and for Palm Beach County, Florida, where a former director and attorney for
Clearshield, through his company, Clear Investments, Inc. has filed suit to
receive 600,000 shares of stock of Clearshield that were originally allocated
to him in May 1994. Subsequent to that time, the former director and attorney
resigned from Clearshield as director and attorney. The Company has retained
counsel and believes they have a meritorious defense to the allegations
contained in the complaint.
Not withstanding the above, in September 1996, settlement in principe was
reached in this matter, subject to documentation and execution of a settlement
agreement. A motion was filed to abate the case and the court has entered an
order closing the file for administrative purposes, while retaining
jurisdiction for the purpose of enforcing the settlement.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended September 30, 1995.
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 July 14, 1995 has been filed concerning the business
combination between the Company and Archway Capital, Inc., the
change in control of the Company and the disposition of the former
textile and packaging divisions of the Company.
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 SIX MONTHS ENDED SEPTEMBER 30, 1995
Calculation of Weighted Average Number of Common Shares
Outstanding
<CAPTION>
Common Common
Weighted Average
Share Shares Days Weighted
Average 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
7,553,753
Business combination
with Archway 4,100,000 17,391,700 79
7,507,892
Balance, September 30, 1995 17,391,700
15,061,645
</TABLE>
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<ARTICLE> 5
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<PERIOD-TYPE> 6-MOS
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<PERIOD-END> SEP-30-1995
<CASH> 147725
<SECURITIES> 0
<RECEIVABLES> 1191542
<ALLOWANCES> (48000)
<INVENTORY> 77119
<CURRENT-ASSETS> 1377864
<PP&E> 580726
<DEPRECIATION> (119294)
<TOTAL-ASSETS> 2317105
<CURRENT-LIABILITIES> 620461
<BONDS> 0
0
0
<COMMON> 173917
<OTHER-SE> 964798
<TOTAL-LIABILITY-AND-EQUITY> 2317105
<SALES> 1296271
<TOTAL-REVENUES> 1296271
<CGS> 1018472
<TOTAL-COSTS> 1018472
<OTHER-EXPENSES> 696175
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (393696)
<INCOME-TAX> 0
<INCOME-CONTINUING> (241515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (241515)
<EPS-PRIMARY> (.02)
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