Commission file number :333-62994
| Florida | 41-1964282 | |
| (State or jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
| June 30, 2004 | June 30, 2005 | |
| ASSETS | ||
| Current Assets | $2,358 | $1,340 |
| Cash | $2,358 | $1,340 |
| Investment, money market | ||
| Total Current Assets | $2,358 | $1,340 |
| TOTAL ASSETS | $2,358 | $1,340 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current Liabilities: | ||
| Accounts Payable | $2,300 | $1,040 |
| Total Current Liabilities | 2,300 | 1,040 |
| Shareholders' Equity: | ||
| Common shares, No Par Value 80,000,000 and 30,000,000 shares authorized; and 8,000,000 and 6,309,400 shares issued and outstanding | 243,527 | 227,532 |
| Preferred stock, $.0 Par Value, 3,000,000 shares authorized; and 0 shares issued and outstanding | ||
| Additional paid in capital | ||
| Retained earnings (Deficit) | (243,469) | (227,232) |
| TOTAL SHAREHOLDERS' EQUITY | 58 | 300 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $2,358 | $ 1,340 |
The accompanying notes are an integral part of these financial statements.
| Six Months Ended June 30, 2004 | Six Months Ended June 30, 2003 | |
| REVENUE | ||
| Interest Income | 0 | 0 |
| TOTAL REVENUES | 0 | 0 |
| EXPENSES: | ||
| Salaries | 3,840 | 2,040 |
| Regulatory Fees | 150 | 150 |
| Professional Expenses | 5,258 | 3,545 |
| Other Expenses | 402 | 685 |
| TOTAL EXPENSES | 9,677 | 7,920 |
| Income (Loss) Before Income Taxes | (9,677) | (7,920) |
| Provision for Income Taxes | 0 | 0 |
| Net Income (Loss) | $(9,677) | $(7,920) |
| Net Income (Loss) per Share of Common Stock | $(0.00) | $(0.00) |
| Basic | $(0.00) | $(0.00) |
| Diluted | $(0.00) | $(0.00) |
| Weighted Average Number of Common Shares Outstanding | ||
| Basic | 7,592,228 | 6,083,733 |
| Diluted | 8,146,448 | 6,637,953 |
| Six Months Ended June 30, 2004 | Six Months Ended June 30, 2003 | |
| Cash Flows from Operating Activites | ||
| Net Income (Loss) | $(9,677) | $(7,920) |
| Adjustment to Reconcile Net Income (Loss) to Net Cash (Used In) Provided by Operating Activities | ||
| Increase in Accounts Payable | (1,465) | 984 |
| Adjustments Not Requiring Outlay of Cash: | ||
| Common Shares Issued for Compensation | 6,740 | 4,040 |
| Net Cash (Used In) Operating Activities | (1,472) | (2,896) |
| Cash Flows from Investing Activities | ||
| Net Cash (Used In) Investing Activities | 0 | 0 |
| Cash Flows from Financing Activities | ||
| Net Cash Provided by Financing Activities | 2,176 | 2,500 |
| Net Increase (Decrease) in Cash and Cash Equivalents | (704) | (396) |
| Cash and Cash Equivalents at Beginning of Period | 1,654 | 1,736 |
| Cash and Cash Equivalents at End of Period | $2,538 | $1,340 |
| PREFERRED SHARES | STOCK AMOUNT | COMMON SHARES | STOCK AMOUNT | ADDITIONAL PAID-IN CAPITAL | RETAINED EARNINGS DEFICIT | |
| BALANCE December 31, 1999 | 50 | $1 | 4,490 | $45 | $358,721 | ($258,676) |
Preferred stock, cash dividend; | (33,441) | |||||
| Net income for year | 24,426 | |||||
| BALANCE December 31, 2000 | 50 | $1 | 4,490 | $45 | $358,721 | ($267,691) |
| March 16, 2001 Acquisition of Bernard, Lee & Edwards Securities, Inc. by BAE. | ||||||
| Shares owned by BAE shareholders | 1,177,100 | 64,756 | 15,021 | |||
| Shares issued to BLE shareholders | 1,247,500 | 87,043 | ||||
| Recapitalization of BLE | (50) | (1) | (4,490) | (45) | (358,721) | 287,697 |
| Issuance of shares for services | 775,200 | 117,270 | ||||
| Net Income (Loss) for year | (161,410) | |||||
| BALANCE December 31, 2001 (audited) | 0 | $0 | 3,199,800 | $269,039 | $0 | ($176,431) |
| Issuance of shares for services | 333,000 | 13,322 | ||||
| Net Income (Loss) for period | (9,015) | |||||
| BALANCE March 31, 2002 | 0 | $0 | 3,532,800 | 282,361 | $0 | (185,446) |
| April 11, 2002 Spin-off of BLE to shareholders | (87,045) | 5,540 | ||||
| May 18, 2002 Issued 4,100,000 shares in an S-8 Registration for consulting and other corporate services | 4,100,000 | 41,000 | ||||
| Issued shares in a 1 for 3 forward split | 1,177,600 | 11,776 | ||||
| Issued shares for services | 53,200 | 528 | ||||
| Net Income (Loss) for period | (64,722) | |||||
| BALANCE June 30, 2002 | 8,863,400 | $248,622 | (244,628) | |||
| August 2, 2002 Cancellation of S-8 shares | (3,850,000) | $(38,500) | ||||
| October 31, 2002 Sale of shares | 100,000 | $1,000 | ||||
| Issuance of shares for services | 819,200 | $18,180 | ||||
| Net Income (Loss) for year | (94,322) | |||||
| BALANCE December 31, 2002 (audited) | 5,546,600 | $220,992 | $(219,312) | |||
| Issuance of shares for services | 204,000 | 2,040 | ||||
| Net Income (Loss) for period | $(3,177) | |||||
| BALANCE December 31, 2003 (audited) | 7,108,400 | $234,611 | $(233,792) | |||
| Sale of shares | 217,602 | 3,540 | ||||
| Issuance of shares for services | 673,998 | 6,740 | ||||
| Net Income (Loss) for period | (9,677) | |||||
| BALANCE June 30, 2004 | 8,000,000 | $243,527 | $(243,469) |
The accompanying notes are an integral part of these financial statements.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Bernard, Allan & Edwards, Inc. was incorporated on February 7, 2000 in the State of Florida as Internet-Estreet.Com, Inc. On March 16, 2001, the shareholders approved the change of the name to Bernard, Allan & Edwards, Inc. In May, 2002 the Company divested its only operating subsidiary and has not conducted any business since then.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and to obtain additional financing as may be required.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.
ESTIMATES
The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash approximates fair value due to the short maturity of these instruments. None of the financial instruments are held for trading purposes.
DEPRECIATION
Equipment is carried at cost. Depreciation is computed using the straight line method for financial reporting purposes over a period of five years.
INCOME TAXES
Deferred income taxes are provided for temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax laws and rates for the years when the differences are expected to reverse.
NET INCOME (LOSS) PER SHARE OF COMMON STOCK
As of December 31, 2000, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", which specifies the method of computation, presentation, and disclosure for earnings per share. SFAS No. 128 requires the presentation of two earnings per share amounts, basic and diluted. Basic earnings per share is calculated using the average number of common shares outstanding . Diluted earnings per share is computed using the weighted average number of common shares outstanding, stock options and warrants using the treasury stock method. Approximately 554,220 options and warrants were outstanding as of March 31, 2003 and March 31, 2002, respectively, but were not included in the computation of the diluted earnings per share as the effect would be antidulitive.
NOTE 2 - PREFERRED STOCK
The Company is authorized to issue 3,000,000 shares of no par value preferred stock. No shares have been issued to date.
NOTE 3 - CAPITALIZATION -- PRIVATE PLACEMENT
A private offering memorandum, dated July 1, 2000 provided for the sale of up to 250,000 units with an effective date of July 1, 2000. The offering price of a unit was $.40 and consisted of one share of common stock, one warrant A to purchase eight shares of common stock and one warrant B to purchase two and one-half shares of common stock. The agency agreement to offer the units for sale was signed with Bernard, Lee & Edwards Securities, Inc., a Company related through common ownership. The agreement for a payment of a 10% commission was for a period of ninety days. The offering closed during September, 2000 with the sale of 177,100 units. Warrant A gives the holder the right to acquire eight shares of the Company's common stock for each warrant A at an exercise price of $1.25 per share. Warrant B gives the holder the right to acquire two and one-half shares of the Company's common stock for each warrant B at an exercise price of $4.00 per share. The warrants cannot be exercised until the effective da te of the registration statement being filed with the Securities and Exchange Commission for the purpose of registering the common stock and warrants. Warrant A will expire twelve months from said effective date, and warrant B will expire eighteen months from said date. The warrants will remain effective during the exercise period, and the Company's board of directors has the right to extend expiration dates as long as the registration statement filed with the SEC is kept current.
On August 6, 2002, the Board of Directors extended the expiration date of the A & B warrants to February 14, 2004 and August 14, 2004, respectively. On December 1, 2003 the board of directors extended the expiration date of the A & B warrants to February 14, 2006 and August 14, 2006 respectively. The Company will have the right to call the warrants upon thirty days written notice to warrant owners, and it will pay $.02 per warrant for each warrant not exercised. Warrant A cannot be called unless the bid price of the Company's common stock is $2.00 or higher for a period of twenty consecutive trading days, and warrant B cannot be called unless the bid price of the common stock is $5.00 or higher for twenty consecutive trading days.
INCENTIVE STOCK OPTION PLAN
The Board of Directors has approved on March 16, 2001 and the shareholders have approved the plan to grant 1,000,000 options to purchase 1,000,000 common shares of the Company's stock. No options have been granted as of this date.
NOTE 4 - INCOME TAXES
Significant components of deferred income taxes are as follows:
| Net Operating Loss | $243,469 | |
| Total Deferred Tax Asset | 97,500 | |
| Less Valuation Allowance | 97,500 | |
| Net Deferred Tax Asset | $ 0 |
The Company has assessed its past earnings history and trends and expiration dates of carry forwards and has determined that it is more than likely that no deferred tax assets will be realized. A valuation allowance of $97,500 as of June 30, 2004 is maintained on deferred tax assets, which the Company has determined to be more than likely not realized at this time. The Company will continue to review this valuation on an annual basis and make adjustments as appropriate.
As of June 30, 2004, the Company had a consolidated net operating loss carry forward of $243,469. The net operating loss can be carried forward to offset future taxable income and will expire between December 31, 2020 and December 31, 2024.
NOTE 5 - PURCHASE OF SUBSIDIARY
The Board of Directors, on March 16, 2001, approved a plan to acquire Bernard, Lee & Edwards Securities, Inc. This acquisition facilitated the Company's plans to offer, besides accounting services, financial planning, variable annuities, mutual funds and investment banking which were all classified as securities. The Company acquired all of the outstanding common and preferred stock in exchange for 1,247,500 shares of its common stock. Bernard, Lee & Edwards Securities, Inc. had 500 shares of 8% cumulative and convertible preferred stock outstanding. It also had a note receivable from a company, both of which were owned by a company whose principal stockholder and president was also a stockholder and the Chief Executive Officer of Bernard, Allan & Edwards, Inc. As an inducement to the preferred stockholder to forgive all unpaid cumulative preferred dividends and to reduce the note receivable from $25,000 to $15,000, the Company issued warrants to purchase 200,000 shares of the Company's common stock at t he exercise price of $4.50 for a period of three years from the effective date of the SEC registration with the understanding that the underlying shares to be issued upon the exercise of the warrants were to be registered with the SEC filing. On August 6, 2002 the board of directors extended the expiration date of the 200,000 warrants to February 14, 2006. On December 1, 2003, the Board of Directors extended the expiration date of the 200,000 warrants to February 14, 2008.
This combination was accounted for as a purchase. Due to the fact that the shareholders of Bernard, Lee & Edwards Securities, Inc. exchanged their shares for over 51% of the common stock of Bernard, Allan & Edwards, Inc. outstanding at the time, Bernard, Lee & Edwards Securities, Inc. is the accounting predecessor.
NOTE 6- CONTRACTS FOR SERVICES
The Board of Directors, on March 16, 2001, approved a consulting agreement with a certified public accountant named Allan B. Dombrow. Mr. Dombrow, as a long-time practitioner in South Florida, has agreed to be involved in identifying and evaluating accounting firms that may be acquired. The agreement commenced February 14, 2002, the effective date of the SEC registration for the Company. In exchange for his services, Mr. Dombrow received 100,000 shares of common shares as initial compensation. The shares were valued at $.40 per share and the value of the initial compensation is $40,000. The shares were transferred to Mr.Dombrow at $.40 per share.
During the years ended December 31, 2001, 2002, 2003 and during 2004, several officers of the Company received shares in lieu of salaries. The shares were transferred to the officers of the Company in 2001 at $.50 per share, during the first quarter of 2002 at $.04 per share, and thereafter at .01 per share.
NOTE 7 - SPIN OFF OF SUBSIDIARY
On April 3, 2002, the shareholder of Bernard, Allan & Edwards, Inc. approved the spin off of Bernard, Lee & Edwards Securities, Inc. to its shareholders. As such, this report shows the financial position and results of operations for Bernard, Allan & Edwards, Inc. only.
NOTE 8 - SECURITIES REGISTRATION
On May 16, 2002, the Company issued 4,100,000 shares of common stock in an S-8 registration to have free trading shares available for consulting and other corporate matters. 250,000 shares were issued to the Company attorney for services rendered at $.01 per share and 3,850,000 shares are to be held in trust by the attorney. On August 2, 2002 the 3,850,000 shares held in trust were cancelled, returned to treasury, and are no longer outstanding.
NOTE 9 - COMMON STOCK SPLIT
On May 18, 2002, the Company issued 1,177,633 shares of common stock in a one for three forward split. The shareholders approved, also on May 16, 2002, an increase in the company's authorized shares from 30,000,000 to 80,000,000 shares of no par value common stock.
NOTE 10 - PROPOSED MERGER
On April 2, 2004, a letter of intent was signed with a privately owned company. Under the letter of intent, the company would merge into Bernard, Allan & Edwards, Inc. Bernard, Allan & Edwards, Inc. would be the surviving corporation and then change its name to the name of the private company. Under the terms of the Agreement, approved by both the Board of Directors and shareholders on April 22, 2004, the shareholders of Bernard, Allan and Edwards, Inc. will retain 4,000,000 shares and the Company will issue 19,800,000 shares to the shareholders in exchange for the shares they now own in the company being acquired. The completion of the transaction is subject to certain financing conditions which as of the date of this Report have not been fulfilled.
Item 2. Management's Plan of Operation.
On April 11, 2002 the Board of Directors of Bernard, Allen & Edwards, recommended, and the shareholders approved, a spin-off of Bernard, Lee & Edwards Securities, Inc. to the shareholders of record of Bernard, Allen & Edwards, Inc. The board of directors of Bernard, Lee & Edwards Securities, Inc. on April 15, 2002 notified its clearing broker, JB Oxford & Co. of its intention to discontinue its operations on May 15, 2002.
Since May 15, 2002 Bernard, Allan & Edwards has no operating subsidiaries and no source of revenue.
Liquidity
At June 30, 2004 Bernard, Allan & Edwards had $2,358 in cash and cash equivalents, no trade receivables, and accounts payable of about $2,300.
Commissions, and all other income categories, declined substantially from the first quarter of 2002 due to the disposition of the companys only operating subsidiary in 2002 and have been zero for several reporting periods:
| Six Months Ended June 30, 2004 | Six Months Ended June 30, 2003 | |
| Commission Income | $0 | $0 | Trading Income | 0 | 0 | Interest income | 0 | 0 | Other Income | 0 | 0 | TOTAL REVENUE | $0 | $0 |
Although the company has no source of revenues it also does not have any recurring cash expenses except as may be required for professional accounting costs and fees related to SEC filings, such as this report. The company has in the past, and intends to satisfy its cash needs by making small non-public offerings of its common stock to management or existing shareholders on a case by case basis. We anticipate paying non-accounting professional and consulting fees, if any, in common stock.
Managements plan of operation for the next several months is to seek a business combination with an operating company. On April 2, 2004, a letter of intent was signed with a privately held company. Under the letter of intent the private company would merge into Bernard, Allan & Edwards and Bernard, Allan & Edwards would be the surviving corporation, which would change its name to and conduct the business of the private company. The proposed merger is conditioned upon the private company obtaining certain financing before the merger can be finalized. At the date of this Report those conditions are not fulfilled.
Item 3. Controls and Procedures
As of the last day of the period covered by this report, an evaluation was performed by management under the supervision and with the participation of the Companys Chief Executive Officer (CEO)/ Chief Financial Officer (CFO) of the effectiveness of the Companys disclosure controls and procedures. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding managements control objectives. Based on that evaluation, the Companys president and only officer who performs the duties of CEO/CFO concluded that the Companys disclosure controls and procedures were effective in timely alerting them to material information required to be disclosed by the Company in the reports that it files or submits under the exchange Act and in assuring the Company that such information is recorded, processed, summarized and reported within the time periods specified by the SECs rules and forms. There were no material changes in the Companys internal controls over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
Bernard, Allan & Edwards, Inc. issued the following securities for cash with respect to Heartland Diversified Industries, Inc. and in lieu of cash compensation for the period from April 1, 2004 to June 30, 2004 for the named individuals.
| Date | Title | Number of Shares | Price per Share | Purchaser |
| April 9, 2004 | Common | 217,602 | $0.01 | Heartland Diversified Industries |
| April 9, 2004 | Common | 60,000 | $0.01 | Peter Amaral |
| April 9, 2004 | Common | 230,000 | $0.01 | Michael McLaughlin |
| April 9, 2004 | Common | 30,000 | $0.01 | Jim Oberst |
The issuance of these shares was exempt from registration in reliance on Section 4(2) of the Securities Act. The purchasers had a prior business relationship with the issuer, no general media was used in the offerings, and the purchasers are financially sophisticated investors with knowledge and experience in financial and business matters and were capable of evaluating the merits and risks of the prospective investment, and had full access to, or were otherwise provided with, all relevant information reasonably necessary to evaluate the prospects for success of Bernard, Allan & Edwards and other relevant factors before making an investment.
The following information is being provided pursuant to Rule 463 (17 CFR 230.463) of the Securities Act of 1933.
This use of proceeds information relates to the registration statement which became effective on February 14, 2002, Commission File No. 333-62994. The self-underwritten offering described in that registration statement has not commenced because the issuer has not completed at the date of this report all the steps necessary to have its securities quoted on the NASDAQ OTCBB.
The issuer, Bernard, Allan & Edwards, Inc., did not incur from the effective date of the registration statement to the ending date of the report period any expenses for its account in connection with the issuance and distribution of the securities registered.
Item 3. Defaults upon Senior Securities
NA
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the period covered by the ending date of this report.
Item 5. Other Information.
NA
Item 6. Exhibits and Reports on Form 8-K
Section 302 Certification
Section 906 Certification
No reports on Form 8-k were filed during this reporting period.
Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Based on his evaluation of the Company's disclosure controls and procedures conducted as of the end of the period covered by this report on Form 10-QSB, Michael McLaughlin, Sr., the Company's Chief Executive Officer/ Chief Financial Officer, has concluded that he is the only individual involved in the Company's disclosure process. The Company has no formal procedures in place for processing and assembling information to be disclosed in the Company's periodic reports. The Company's system is designed so that information is retained by the Company and relayed to counsel and the Company's accountants as it becomes available. The Company's principal executive officer and principal financial officer believes that as of the end of the period being reported, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the require d time periods.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes in the Company's internal control over financial reporting have come to managements attention during the Company's last fiscal quarter that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
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.
BERNARD, ALLAN & EDWARDS, INC.
(Registrant)
Date: August 12, 2004
Michael McLaughlin, President
/s/ Michael McLaughlin, President
