Securities and Exchange Commission
Washington D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from to
Commission file number 000-18097
BERNARD HALDANE ASSOCIATES, INC.
(Exact name of small business issuer as specified in its charter)
Florida 59-2720407
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
192 Lexington Avenue, 15th Floor, New York, New York 10016
(address of principal executive offices)
(212) 679-3360
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: November 30, 1997
Class Outstanding at November 30, 1997
Common Stock, $.00001 Par Value 1,148,865 shares
Page 1 of 11
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
as of November 30, 1997 (Unaudited)
and May 31, 1997 3 - 4
Consolidated Statements of Income
Unaudited) for the Three and Six Months Ended
November 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
(Unaudited) for the Six Months Ended
November 30, 1997 and 1996 6 - 7
Notes to Consolidated Financial Statements
(Unaudited) as of November 30, 1997 8 - 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II. OTHER INFORMATION AND SIGNATURES
Signatures 11
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
NOVEMBER 30, MAY 31,
1997 1997*
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 2,033,595 $ 1,698,099
Short-term investments 56,626 55,426
Accounts receivable - net of allowance for
doubtful accounts of $360,000 and $290,000,
respectively 333,379 419,470
Notes receivable 174,180 149,080
Due from related parties 5,235 11,001
Prepaid expenses and miscellaneous receivables 92,743 60,158
Deferred taxes 174,000 145,000
Total current assets 2,869,758 2,538,234
OTHER ASSETS:
Licenses - net of accumulated amortization of
$1,756,688 and $1,657,917, respectively 765,840 864,611
Equipment, fixtures and leasehold improvements
- net of accumulated depreciation of $36,998
and $28,871, respectively 52,311 50,831
Security deposits and other 83,101 79,103
Notes receivable 428,540 451,309
Total other assets 1,329,792 1,445,854
TOTAL ASSETS $4,199,550 $3,984,088
* The balance sheet at May 31, 1997 is derived from the audited consolidated
financial statements of that date.
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30, MAY 31,
1997 1997
(Unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 249,943 $ 235,240
Accounts payable 104,118 207,316
Accrued expenses and other current liabilities 64,200 8,147
Income taxes payable 151,633 141,510
Total current liabilities 569,894 592,213
OTHER LIABILITIES:
Long-term debt 468,266 498,839
Deferred rent payable 13,679 13,679
481,945 512,518
Total liabilities 1,051,839 1,104,731
STOCKHOLDERS' EQUITY:
Common stock ($.00001 par value; 950,000,000
shares authorized, 1,148,865 shares issued
and outstanding) 12 12
Additional paid-in capital 2,761,727 2,761,727
Retained earnings 892,410 624,056
3,654,149 3,385,795
Less: Treasury stock (199,500 and 179,500
shares at cost) 506,438 506,438
Total stockholders' equity 3,147,711 2,879,357
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,199,550 $3,984,088
* The balance sheet at May 31, 1997 is derived from the audited
consolidated financial statements of that date.
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
SIX MONTHS ENDED THREE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996 1997 1996
(Restated) (Restated)
REVENUES:
Royalty income $1,336,446 $1,197,333 $ 632,911 $ 615,158
Consulting income 15,059 - 15,059 -
Interest, dividends and
other income 85,269 50,492 31,897 26,404
Sub-license income 80,154 89,712 38,433 45,994
Total revenues 1,516,928 1,337,537 718,300 687,556
EXPENSES:
Payroll and related costs 324,810 188,010 179,421 103,200
Other general & administrative 609,295 507,127 285,905 271,599
Amortization 98,771 98,771 49,386 49,386
Interest 28,898 30,519 14,459 15,260
Total expenses 1,061,774 824,427 529,171 439,445
INCOME BEFORE PROVISION FOR
INCOME TAXES 455,154 513,110 189,129 248,111
PROVISION FOR INCOME TAXES 186,800 205,000 76,800 99,000
INCOME FROM CONTINUING
OPERATIONS 268,354 308,110 112,329 149,111
DISCONTINUED OPERATIONS:
Income from operations of
travel agency to be
disposed of (net of income
taxes of $-0-,12,000, $-0-
and $12,000, respectively) - 17,963 - 28,204
NET INCOME $ 268,354 $ 326,073 $112,329 $177,315
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Continuing operations $ .26 $ .30 $ .11 $ .15
Discontinued operations - .02 - .03
$ .26 $ .32 $ .11 $ .18
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES 1,044,492 1,014,035 1,044,492 1,005,134
DIVIDENDS NONE NONE NONE NONE
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
NOVEMBER 30,
1997 1996
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 268,354 $ 326,073
(Income) loss from discontinued operations - (17,963)
Adjustments to reconcile net income to net cash
provided by operating activities:
Expenses (income) not requiring the use of
cash:
Provision for losses on accounts and notes
receivable 70,000 80,000
Depreciation 8,127 1,574
Amortization of licenses 98,771 98,771
Interest expense - imputed 20,880 22,521
Interest income - imputed (19,794) (1,350)
Deferred income taxes (29,000) (24,000)
Changes in assets and liabilities:
Accounts receivable 16,091 (77,203)
Prepaid expenses (32,585) (5,646)
Cash overdraft - (18,044)
Accounts payable and other
current liabilities (47,145) 89,800
Income taxes payable 10,123 38,500
Net liabilities of discontinued
operations - net - (2,231)
NET CASH PROVIDED BY OPERATING ACTIVITIES 363,822 510,802
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (1,200) (1,140)
Increase in security deposits (3,998) -
(Increase) decrease in due from related
parties 5,766 (32,752)
Acquisition of fixed assets (9,607) (5,801)
Additions to notes receivable (79,903) (533,507)
Payments of notes receivable 97,366 111,051
Net assets of discontinued operations
- net - 2,200
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 8,424 (459,949)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (36,750) (49,000)
Repurchase of common stock - (55,115)
NET CASH USED IN FINANCING ACTIVITIES (36,750) (104,115)
NET CHANGE IN CASH AND CASH EQUIVALENTS 335,496 (53,262)
CASH AND CASH EQUIVALENTS - beginning 1,698,099 1,615,073
CASH AND CASH EQUIVALENTS - ending $2,033,595 $1,561,811
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
SIX MONTHS ENDED
NOVEMBER 30,
1997 1996
(Restated)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 28,898 $ 30,519
Income taxes 205,800 210,500
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOVEMBER 30, 1997
The accompanying interim consolidated financial statements are unaudited and
include the accounts of Bernard Haldane Associates, Inc. ("Haldane") and its
subsidiaries.
NOTE 1
In the opinion of management, the accompanying interim consolidated financial
statements contain all material and significant adjusting and eliminating
entries consisting only of normal recurring adjustments and eliminations
necessary to present fairly the financial condition as of November 30, 1997
and the results of operations and cash flows for the six months ended November
30, 1997. The results of operations for the six month period ended November
30, 1997 are not necessarily indicative of the results of operations for the
year ending May 31, 1998.
NOTE 2
The Company utilizes Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," to record income taxes.
The major temporary difference which gives rise to deferred taxes is the
allowance for doubtful accounts.
NOTE 3
The calculation of earnings per share for the six and three months ended
November 30, 1997 and 1996 is based on the modified treasury stock method.
NOTE 4
On May 31, 1996, the Company adopted a plan to terminate its travel agency
operations. The operations were disposed of in December 1996. The operating
results of the travel agency segment for the six and three months ended
November 30, 1996 are shown separately in the accompanying consolidated income
statement. Revenues of the travel agency segment, net of direct expenses,
amounted to $67,027 and $64,189 for the six and three months ended November
30, 1996, respectively, and are not included in consolidated revenues.
BERNARD HALDANE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOVEMBER 30, 1997
NOTE 5
Haldane hired a financial advisory company and attorneys to evaluate the
possibility of going private. Haldane's president and the former president's
spouse have offered to purchase the shares of common stock owned by the public
investors at $3 per share, which is the valuation made by the financial
advisory company in its fairness opinion. The estimated number of shares to
be purchased is approximately 205,000 shares or $615,000.
BERNARD HALDANE ASSOCIATES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
SIX MONTHS ENDED NOVEMBER 30, 1997
VS.
SIX MONTHS ENDED NOVEMBER 30, 1996
Royalty revenues from licensee offices for the six and three month periods
ended November 30, 1997 as compared to November 30, 1996 increased from
$1,197,333 and $615,148 to $1,336,446 and $632,911, an increase of
approximately 11.6% and 2.9% respectively. The Company recognized a total of
$80,154 and $38,433 in revenues from the sale of territorial licenses as
compared to $89,712 and $45,994 in the prior periods. This overall decline
of approximately 14% reflects the fact that the Haldane system has expanded
into most major metropolitan areas throughout the United States and there are
few areas left for expansion.
Additional revenues for the six and three month period ended November
30, 1997 include $85,269 and $31,897 in interest and dividend income as
compared to $50,492 and $26,404 for the six and three month period ended
November 30, 1996. This significant increase in interest and dividend income
is directly attributable to the Company's increasing cash position. The
Company also recognized $15,059 in consulting revenues.
Total revenues for the six and three months ended November 30, 1997 as
compared to November 30, 1996 were $1,516,928 and $718,300 as compared to
$1,337,537 and $687,556. This represents an increase of approximately 13% and
4.5% respectively. Management anticipates revenues remaining flat or only
marginal increases in the future as Haldane offices have already been opened
in most major metropolitan areas throughout the country and overseas expansion
has been considerably slower than anticipated.
While total revenues for the six and three month period ended November
30, 1997, net income decreased during both periods, declining from $326,073
and $177,315 to $268,354 and $112,329, a decline of approximately 21% and
32%. Income per share for the six month period ended November 30, 1997
declined from $.32 to $.26 as compared to 1996, a decline of 23%, and declined
from $.18 to $.11 per share for the three months ended November 30, 1997 as
compared to the three months ended November 30, 1996, a decline of 36%.
As the Haldane operations continue to grow, additional staff has been
hired. Payroll and related costs increased from $188,010 to $324, 810 and from
$103,200 to $179,421 for the six and three month periods ended November
30,1997 as compared to November 30, 1996. Overall, general and
administrative costs increased by over 15%, increasing from $507,127 to
$609,295 for the six months ended November 30, 1997.
Management is dissatisfied with the results of operations of its First
Career subsidiary. Since inception, the Company has committed over $500,000
to launch a career consulting program directed at college students and recent
college graduates. While management believes that the program is an excellent
product, the Company has not been able to market the product successfully to
date and has incurred significant losses which have had a significant adverse
impact on the overall operations of the Company. As a result, the Company is
seeking other ways to market the product.
LIQUIDITY AND CAPITAL RESOURCES
NOVEMBER 1997 AS COMPARED TO MAY 31, 1997
Total current assets as of November 30, 1997 were $2,869,758 as compared
to $2,538,234; an increase of 13%. Cash holdings and short term investments
increased from $1,753,525 to $2,090,221, an increase of 19%. A portion of
this increase is attributable to the Company's ability to reduce by over 25%
the outstanding accounts receivable from $419,470 to $333,379.
The Company's total assets increased by 5.4%, increasing from
$3,984,088 to $4,199,550.
Total current liabilities declined nearly 4%, declining from $592,213 to
$569,894 while total liabilities declined from $1,104,731 to $1,051,839 a
decline of approximately 5%. This decline in the liabilities is primarily
attributable to a decline of over $103,000 in accounts payable from $207,316
to $104,118.
Total stockholders equity increased from $2,879,357 to $3,147,711 an
increase of 9.3%.
Management believes that the Company has sufficient revenues to finance
ongoing business activities including a proposed purchase at a cost of $3.00
per share of the Company's shares of stock owned by non management and
nonaffiliated shareholders.
BERNARD HALDANE ASSOCIATES, INC.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 or 15(d) OF THE SECURITIES ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THIS REGISTRANT IN THE CAPACITIES INDICATED.
BERNARD HALDANE ASSOCIATES, INC.
(Registrant)
/s/Jerold Weinger DATED: January 14, 1998
JEROLD WEINGER, president/
treasurer/director
/s/Jeffrey G. Klein DATED: January 14, 1998
Jeffrey G. Klein, secretary/
director
11