U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 1996
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)
Registrant's telephone number, including area code: (561) 844-2442
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES: X NO: .
As of June 30, 1996, 17,391,700 shares of the registrant's common stock were
outstanding
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
CURRENT ASSETS:
Cash $ 334,672
Trading Securities, at fair value 107,550
Accounts Receivable, less allowance for
doubtful accounts of $80,000 763,452
Notes Receivable 186,663
Inventories 548,974
Other Current Assets 10,580
1,951,891
PROPERTY & EQUIPMENT, at cost:
Manufacturing Equipment 664,736
Leasehold Improvements 152,395
Furniture, Fixtures & Office Equipment 86,185
Vehicles 26,689
930,005
Less accumulated depreciation and amortization (228,562)
701,443
OTHER ASSETS:
License Fee, net of accumulated amortization 326,667
Investments 45,250
Deferred Tax Asset, net of valuation allowance -
Due from Officer 108,862
Other 47,545
528,324
Total Assets $ 3,181,658
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
(Continued)
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 878,035
Deposits Payable 248,985
Note Payable 250,000
Accrued Expenses 245,215
1,622,235
MINORITY INTEREST 828,027
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value; 20,000,000
shares authorized, 17,391,700 shares
issued and outstanding 173,917
Additional Paid-in Capital 1,335,016
Accumulated (Deficit) (777,537)
731,396
Total Liabilities & Shareholders Equity $ 3,181,658
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
June 30
1996 1995
Net Sales $ 2,129,002 $ 236,381
Cost of Sales 1,781,603 209,107
347,399 27,274
Selling, General and Administrative Expenses 563,756 184,319
Loss from Operations 216,357 157,045
Other Expense (Income):
Interest Income (23,341) (1,986)
Interest Expense 3,748 -
Net Gain on Trading Securities (9,592) -
Other, net (5,895) (15)
(35,080) (2,001)
Net Loss Before Income Taxes and
Minority Interest 181,277 155,044
Benefit for Income Taxes - -
Minority Interest 99,975 46,693
Net Loss $ 81,302 $ 108,351
Net Loss per Share $ .00 $ .01
Weighted Average Common Shares Outstanding 17,391,700 13,291,700
See accompanying notes to condensed consolidated financial statements.
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
June 30
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (81,302) $ (108,351)
Adjustments to reconcile net (loss) to
net cash provided by (used in)
operating activities:
Minority Interest (99,975) (46,693)
Depreciation and Amortization 47,430 27,616
(Increase) in Trading Securities (107,550) -
(Increase) Decrease in
Accounts Receivable (363,660) 21,345
Decrease (Increase) in Inventories 111,393 (34,405)
Decrease in Other Assets 223 6,310
Increase in Accounts and
Deposits Payable 79,935 145,927
(Decrease) Increase in Accrued Expenses (55,605) 30,992
Net cash (used in) operating activities (469,111) 42,741
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (143,645) (18,670)
(Increase) in Notes Receivable (72,315) -
Repayments on Notes Receivable
and Investments 873,750 -
Decrease (Increase) in Due from Officer 31,536 (9,473)
Net cash (used in) investing activities 689,326 (28,143)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Notes Payable 100,000 -
Proceeds from issuance of common stock
by majority owned subsidiary - 13,750
Cash acquired in acquisition of Clearshield - 6,484
Net cash provided by financing
activities 100,000 20,234
NET INCREASE (DECREASE) IN CASH 320,215 34,832
CASH, AT BEGINNING OF PERIOD 14,457 5,488
CASH, AT END OF PERIOD $ 334,672 $ 40,320
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 accompanying condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not include all disclosures necessary for fair presentation
of financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. The accompanying
condensed consolidated financial statements are not audited, but include
all adjustments which management considers necessary for fair
presentation of financial position, results of operations and cash flows
for the interim periods presented. The results for the interim periods
are not necessarily indicative of the results that may be expected for
the entire fiscal year.
The accounting policies followed by the Company are set forth in Note 1
of the Company's consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended March 31, 1996 which is
incorporated herein by reference.
2. NOTES RECEIVABLE
On May 22, 1996, the Company, William Leibstone Associates, Inc.("WLAI"),
William Leibstone and TTSB, Ltd., an Ohio limited liability company
("TTSB") entered into an agreement whereby TTSB purchased the WLAI note
payable to the Company dated July 14, 1995 in the amount of $941,348, in
exchange for a note from TTSB in the amount of $1,013,663. The TTSB note
bears interest at the rate of 9% per annum, payable semi-annually, is due
on May 22, 1998 and is secured by a pledge of 506,000 shares of stock in
the Company assigned to TTSB by William Leibstone, which shares are being
held by a financial intermediary on behalf of the Company. Under the
terms of the Stock Pledge Agreement of the same date between the Company
and TTSB, the Company can request partial prepayments of the note, which
prepayments will be made with the proceeds of sales of the pledged
shares. TTSB shall not be obligated to sell the pledged shares or make
the prepayment unless it receives at least $2.28 per share for the first
200,000 shares and $2.50 for the remaining shares. The Company receives
the first $2.00 per share as prepayment on the note. As of June 30,
1996, TTSB has sold 416,500 of the pledged shares, making prepayments on
the note totalling $833,000.
3. NOTES PAYABLE
Notes payable consists of the following:
(1) 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.
(2) Note payable to a shareholder dated May 22, 1996 totalling
$100,000. The note, plus accrued interest at the rate of 7% per
annum, is payable on May 22, 1997.
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 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
Company currently owns approximately 57% of Clearshield.
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.
Liquidity and Capital Resources
On May 22, 1996, the Company, WLAI, William Leibstone and TTSB, Ltd., an
Ohio limited liability company ("TTSB") entered into an agreement whereby TTSB
purchased the WLAI note payable to the Company dated July 14, 1995 in the
amount of $941,348, in exchange for a note from TTSB in the amount of
$1,013,663. The TTSB note is secured by a pledge of 506,000 shares of stock
in the Company assigned to TTSB by William Leibstone, which shares are being
held by a financial intermediary on behalf of the Company. In connection with
this agreement, William Leibstone made a loan to the Company in the amount of
$100,000.
Under the terms of the Stock Pledge Agreement of the same date between
the Company and TTSB, the Company can request partial prepayments of the note,
which prepayments will be made with the proceeds of sales of the pledged
shares. TTSB shall not be obligated to sell the pledged shares or make the
prepayment unless it receives at least $2.28 per share for the first 200,000
shares and $2.50 for the remaining shares. The Company receives the first
$2.00 per share as prepayment on the note. As of June 30, 1996, TTSB has sold
416,500 of the pledged shares, making prepayments on the note totalling
$833,000.
The loan proceeds and the repayments on the notes provide the Company
with sufficient resources to support its working capital requirements as it
enters the hurricane season, which commenced June 1. Additionally, these
resources are being used to purchase additional manufacturing equipment to
increase the Company's capacity during the peak season. The Company currently
has two production lines in operation (versus only one a year ago) and is in
process of bringing a third line on stream. The third line is expected to be
operational in the second quarter.
Results of Operations
The first quarter saw dynamic growth when compared to last year with
sales increasing by over 800%. Even with the additional production capacity
(second production line) added in the past year, the Company was unable to
keep up with demand. The Company had open orders totalling in excess of
$1,500,000 at June 30, 1996. The surge in sales from the prior year is due to
sales of the product to the do-it-yourself market through a national home
improvement chain. Sales to the home improvement chain represented 60% of
consolidated sales for the quarter versus 0% in the prior year. Tangentially,
promotion of the product through the home improvement chain resulted in
increased sales to our dealer network and direct to the consumer through our
installation subsidiary. The open order backlog will decline as the end of
the hurricane season approaches.
The improvement in sales enabled the Company to better leverage its costs
resulting in an increase in margins and a decrease in operating expenses as a
percentage of sales. Selling, general and administrative expenses increased
by approximately 200% versus the 800% increase in sales. Although not yet
profitable, the Company believes it is on the right course.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Previously reported on Form 10-K for the year ended March 31, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
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
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