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 Quarter ended August 31, 1996
Commission File Number 33-0878-A
GRAYSTONE FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in charter)
Florida 59 -2686448
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
P. O. Box 615 , Glen Ridge, NJ 070028-0615
(Address of principal executive offices)
201-746-7818
(Registrant's telephone number)
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 No X
The number of shares of Common Stock outstanding as of August 31, 1996 was
3,999,118.
PART I
Item 1. Business
History and Organization
Graystone Financial Services, Inc. (The Company), formerly known as Capital
Investment Development Corp. was incorporated under the laws of the State of
Florida on June 24, 1986 with a authorized capital of 100,000,000 shares of
common stock with a par value of $.0001. On October 10, 1988 the Company
amended its Articles of Incorporation changing its name to Graystone Financial
Services, Inc.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. Bradford-Taylor Clearinghouse, Inc.
has been inactive from inception through July 31, 1995. Bradford-Taylor
Clearinghouse, Inc. entered into a licensing agreement with Nico Electric,
A.G. on August 1, 1995 in exchange for 11.3% of the common stock of
Bradford-Taylor Clearinghouse, Inc. The licensing agreement allows
Bradford-Taylor Clearinghouse, Inc.'s use of Nico Electric, A.G. technology
for alarms and security devices up to 6 MHz and 1 MV for commercial use
only. An additional 75.4% of the common stock of Bradford-Taylor
Clearinghouse, Inc. was issued to complete the transaction. This reduces the
Company's ownership in Bradford-Taylor Clearinghouse, Inc. to 13.3%.
On June 24, 1986, the Company issued 20,000,000 shares of its common stock
to private investors for a total cash consideration of $20,000.
In connection with a public offering in September, 1986, the Company sold
5,500,000 shares of its common stock for $.05 per share. Expenses incurred in
connection with the public offering of $62,458 were charged against additional
paid in capital. Net proceeds from the offering were $212,542.
Each share of common stock issued in connection with the public offering
included one class A warrant and one class B warrant. The purchase warrants
were exercisable over an eight month period ending May 18, 1987. Each
redeemable warrant entitled the holder to purchase one share of common stock
at a price of $.075 per share in the case of class A warrants and a price of
$.10 per share of class B warrants.
During the period ended May 31, 1987, 5,500,000 of class A warrants were
exercised at $.075 per share for a total cash consideration of $412,500.
On May 18, 1987, the class B warrants were extended for a six months period.
In addition, in connection with the public offering 550,000 warrants were issued
to the underwriter, which were exercised commencing September, 1987 at a
price of $.055 per share or an aggregate of $30,250. The remaining 5,500,000
class B warrants were exercised during the year ended May 31, 1988 for an
aggregate of $550,000.
On September 30, 1988, the Stock Purchase Agreement dated April 4, 1988 by
and between the Company and Harp Investments, Inc., a privately held New
Jersey corporation, was approved by the stockholders. The agreement provided
for the Company to acquire 100% of the outstanding shares of capital stock of
Graystone Nash, Incorporated and 70% of the outstanding shares of Outwater
and Wells, Inc., (Graystone Nash owned 30% of the outstanding shares prior to
the exchange), in exchange for 59,675,000 shares of the Company's common
stock.
Additionally, 11,475,000 shares of the Company's common stock was required
to be returned to the Company by certain original shareholders. The transaction
was handled as a reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc. censured
Graystone Nash, Incorporated and its President, Thomas V. Ackerly. The
Association fined Graystone Nash, Incorporated and Thomas V. Ackerly
$1,325,000, jointly and severely, and expelled Graystone Nash, Incorporated
from membership in the Association and barred Thomas V. Ackerly from
association with a member of the Association.
Additionally, the Securities and Exchange Commission brought an action
against Graystone Nash, Incorporated and Thomas V. Ackerly, its President,
and on April 21, 1993, a judgment was entered against the Company and
Thomas V. Ackerly in the amount of $60,565,581.00 plus interest beginning
January 1, 1989. The action was appealed and on June 1, 1994, the judgment
was reversed. Graystone Nash, Incorporated was not represented by counsel in
the new review ordered and the judgment still stands against it. Thomas V.
Ackerly, acting as his own counsel, presented to the Court additional
information to review. Upon review by the Court, on July 10, 1995, the
judgment and pre-judgment interest was waived as to Thomas V. Ackerly.
As a result of the above actions, the subsidiary Graystone Nash, Incorporated
was forced to close and cease operations.
Also, the subsidiary Outwater and Wells, Inc. was forced to close and cease
operations in accordance with the lockup rules of the SEC.
On April 16, 1990, the shareholders approved a 50:1 reverse split of the
Company's common stock. The reverse split reduced the authorized shares of
common stock to 4,000,000. An additional 118 fractional shares were issued
in connection with the reverse split.
On June 8, 1995, the Company issued 2,294,000 shares of its common stock to
its controlling stockholder for a total cash consideration of $75,000.
Item 2. PROPERTIES
Corporate Offices
The Company presently maintains its executive offices at 39 Lackawanna Plaza,
Room 8, Bloomfield, N.J. 07003. The Company's office space consists of
approximately 500 square feet, on a month to month basis, at the rate of
$1,000 per month. There is no written agreement.
Item 3. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
There were no matters submitted to the Shareholders of the Company during
the three months period ended August 31, 1996.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock, $.0001 par value (Common Stock) has been
traded in the over-the-counter market on a limited and sporadic basis since
November 18, 1986. The last known high and low bid price was $1.75 as of
August 31, 1988. As far as is know there has not been any high and low bid
price for the three months period ended August 31, 1996 and 1995. The
following table sets forth the high and low bid price of the Common Stock for
the period indicated as quoted from the over-the-counter listing.
Fiscal 1997 Low Bid High Bid
1st Quarter Unknown Unknown
Fiscal 1996 Low Bid High Bid
1st Quarter Unknown Unknown
2nd Quarter Unknown Unknown
3rd Quarter Unknown Unknown
4th Quarter Unknown Unknown
As of August 31, 1996 there were 6,061 shareholders of record of the
Company's Common Stock.
Holders of common shares are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on the common
shares have been paid by the Company, nor does the Company anticipate that
dividends will be paid in the foreseeable future. Rather, the Company has
determined to utilize any earnings in the expansion of its business.
Such policy is subject to change based on current industry and market
conditions, as will as other factors beyond the control of the Company.
Item 6. SELECTED FINANCIAL DATA
The following selected financial data on the Company conveying the three
months period ended August 31, 1996 and 1995, should be read in conjunction
with the Financial Statements and related notes included in Item 8 of this Form
10-K. (See "Financial Statements and Notes Thereto.")
For Quarter Ended August 31,
1996 1995
Income Statement Data:
Revenues $ 27,000 $ 0
Other Income and (Loss) $ (122,316) $ 17,937
Net Income (Loss) $ (162,218) $ (287010)
Net Income (Loss) per share $ ( 0.04) $ ( 0 .16)
Dividends per share $ 0 $ 0
Weighted average shares outstanding: 3,999,118 3,999,118
Balance Sheet Data:
Total Assets $ 2,176,225 $ 187,315
Retained Earnings (Deficit) $ 830,349 $(1,146,174)
Stockholders Equity $ 2,298,727 $ 113,096
Item 7. MANAGEMENT'S DECISIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The following is management's discussion and analysis of significant factors
which have affected registrant's financial position and operations.
Overall Situation
On September 30, 1988, the Company entered into a stock purchase agreement
dated April 4, 1988 with Harp Investments, Inc., a privately held New Jersey
corporation. The agreement provided for the Company to acquire 100% of the
outstanding shares of capital stock of Graystone Nash, Incorporated and 70%
of the outstanding shares of Outwater and Wells, Inc. (Graystone Nash,
Incorporated owned 30% of the outstanding shares prior to the exchange), in
exchange for 59,675,000 shares of the Company's Common Stock.
Additionally, 11,475,000 shares of the Company's Common Stock was
required to be returned to the Company by certain original shareholders. The
transaction was handled as reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc.
censured Graystone Nash, Incorporated and its President, Thomas V. Ackerly.
The Association fined Graystone Nash, Incorporated and Thomas V. Ackerly
$1,325,000, jointly and severely, and expelled Graystone Nash, Incorporated
from membership in the Association and barred Thomas V. Ackerly from
association with a member the association.
Additionally, the Securities and Exchange Commission brought an action
against Graystone Nash, Incorporated and Thomas V. Ackerly, its President,
and on April 21, 1993 a judgment was entered against the Company and
Thomas V. Ackerly in the amount of $60,565,581.00 plus interest beginning
January 1, 1989. The action was appealed and on June 1, 1994, the judgment
was reversed. Graystone Nash, Incorporated was not represented by counsel in
the new review ordered and the judgment stands against it. Thomas V.
Ackerly, acting as his own counsel, presented to the Court additional
information to review. Upon review by the Court on July 10, 1995, the
judgment and pre-judgment interest was waived as to Thomas V. Ackerly. As
a result of the above actions, the subsidiary Graystone Nash, Incorporated was
forced to close and cease operations.
Also, the subsidiary Outwater and Wells, Inc. was forced to close and cease
operations in accordance with the lockup rules of the SEC.
The Company's business plan is to seek potential businesses that may, in the
opinion of Management, warrant the Company's involvement. The Company
acknowledges that as a result of its limited financial resources, acquiring a
suitable business will be extremely difficult; however, the Company's principal
business objective will be to seek long term growth potential in the business in
which it participates, rather than immediate, short term earnings. In seeking to
attain its business objectives, the Company will not restrict its search to any
particular industry. Management has no assurance that it will be
successful in its attempt to raise such capital.
Liquidity and Capital Resources
The Company has increased its assets principally by the increase in trading
securities of stocks that had little or no value in the prior year and continues
to have a very small amount of liabilities. It is the intent of Management to
seek potential businesses in which to acquire through the issuance of the
Company's common stock. In addition, to make private placement of common
stock as a means of raising capital to propel the Company into new arenas of
high earnings potential. Additional funding will be necessary in order to
achieve these goals.
Item 8. FINANCIAL STATEMENT AND SUPPLEMENTAL DATA
The financial statements are attached hereto commencing on Page F-1:
Audit report, August 31, 1996 and 1995.
Balance Sheet at August 31, 1996 and 1995.
Statements of Operations for the three months period ended
August 31, 1996 and 1995.
Notes to Financial Statements as of August 31, 1996 and 1995.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
Name: Age: Position: Term:
Thomas V. Ackerly
48 President, and Director Sep 30, 1988 - Present
Robert A. Spira
45 Director Feb 1, 1996 - Present
Mr. Thomas V. Ackerly, was elected to the Board of Directors on September
30, 1988 at which time he was appointed as President. Mr. Ackerly held the
same offices in Bradford-Taylor Clearinghouse, Inc., a subsidiary of the
Graystone Financial Services, Inc. until July 31, 1995. Mr. Ackerly holds the
same offices in Harp Investments, Inc., the controlling shareholder of
Graystone Financial Services, Inc. He currently devotes a substantial amount
of his time to the Company's business. Mr. Robert A. Spira was appointed
as a Director on February 1, 1996.
Item 11. EXECUTIVE COMPENSATION
During the three months period ended August 31, 1996, Thomas V. Ackerly
received remuneration in the amount of $0. For the fiscal year ended May 31,
1995, no officer, director, employee, or affiliate of the Registrant received
any remuneration. Moreover, for this period the Company has had no bonus,
profit sharing plan, or other compensation plan in which the executive
officers or director are participants. The Company's director received no fees
for his services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Section 16(a) of the Securities Exchange of Act of 1934 (Exchange Act)
requires the Company's directors, officers and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and
Exchange Commission. Directors, officers and persons with greater
than five percent beneficial owners are required by applicable regulations
to furnish the Company with copies of all forms they file with the
Commission pursuant to Section (16a).
At August 31, 1996 and 1995, there were issued and outstanding common
shares of the Company stock to beneficial owners and management, the
Company's only class of voting securities. The Company has no knowledge of
any arrangements which could affect the company.
The following table will identify, as of August 31, 1996, the number and
percentage of outstanding shares of common stock owned by (i) each person
known to the Company who owns more than five percent of the outstanding
common stock, (ii) each officer and director of the Company, and (iii) officers
and directors of the Company as a group:
Name of Beneficial Owner Amount of Ownership Percent of Class
Harp Investments, Inc. 3,362,500 84%
Name of Beneficial Owner Amount of Ownership Percent of Class
All Executive Officers/
Directors as a Group 3,362,500 84%
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Mr. Thomas V. Ackerly, President of the Company, has loaned money to and
borrowed money from the Company. Currently, Mr. Ackerly has a demand note
in the amount of $115,000, dated January 1, 1991, and includes interest at the
rate of 9% per annum. By agreement between the parties, interest will not begin
to accrue on this note till January 1, 1996.
Item 14. SUBSEQUENT EVENTS
none
PART IV
Item 15. Exhibits and Reports on Form 8-K
Exhibits:
Statement Name Page No.
Report of Independent
Certified Public Accountant - - - F-1
Balance Sheet - - - - - - - - - - - - - F-2
Statement of Income and Loss- - - F-3
Statement of Stockholders' Equity -F-4-F-7
Statement of Cash Flows - - - - - - F-8-F9
Notes To Financial Statements - - -F-10-F13
Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in capacities and on the dates indicated.
GRAYSTONE FINANCIAL SERVICES, INC.
By: Thomas V. Ackerly, President and Director
Date
C O N T E N T S
Independent Auditors' Report - - - - - - - - - - - - - F-1
Balance Sheets at August 31, 1996 and 1995 - - - F-2
Statement of Operations for the Years Ended
August 31, 1996 and 1995 - - - - - - - - - - - - - - F-3
Statement of Changes in Stockholders' Equity from Inception
through August 31, 1996- - - - - - - - - - - - - - - F-4 F-5
Statement of Cash Flows for the Three Months Period Ended
August 31, 1996 and 1995 - - - - - - - - - F6 F-7
Notes to Consolidated Financial Statements - - - - F-8 F-12
INDEPENDENT AUDITORS' REPORT
Board of Directors
Graystone Financial Services, Inc.
Glen Ridge, New Jersey
We have audited the accompanying balance sheet of Graystone Financial
Services, Inc. as of August 31, 1996 and 1995 and the related statement of
operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit of the financial statements
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Graystone Financial
Services, Inc. as of August 31, 1996 and 1995, in conformity
with generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
April 30, 1997
GRAYSTONE FINANCIAL SERVICES, INC.
BALANCE SHEET
AUGUST 31, 1996 AND 1995
ASSETS AUGUST 31, 1996 AUGUST 31, 1995
Current Assets
Cash $ 147 $ 11,144
Accounts Receivable 11,233 0
Marketable Securities - Trading - Note 4 2,001,608 23,187
Total Current Assets 2,012,988 34,331
Property and Equipment Net - Note 3 0 0
Other Assets
Receivables - Related Companies - Note 5 161,562 152,984
Security Deposits 1,175 0
Investment - Digital Acoustic Systems Inc. - Note 1 500 0
Total Other Assets 163,237 152,984
Total Assets $ 2,176,225 $ 187,315
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable 6,550 27,229
Accounts Payable - Related Company - Note 5 33,066 0
Total Current Liabilities 39,616 27,229
Stockholders' Equity
Preferred Stock: No Par Value, Authorized 10,000,000
Shares; Issued and Outstanding, NONE 0 0
Common Stock: Par Value $0.0001, Authorized 4,000,000;
Issued and Outstanding, 3,999,118 Shares at August 31,
1996 and August 31, 1995 400 400
Additional paid in capita; 1,305,860 1,305,860
Deficit Accumulated During the Development Stage 830,349 (1,146,174)
Total Stockholders' Equity 2,136,609 160,086
Total Liabilities and Stockholders' Equity $ 2,176,225 $ 187,315
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS PERIOD ENDED AUGUST 31, 1996
AND AUGUST 31, 1995 AND FROM INCEPTION (JUNE 24, 1986)
THROUGH AUGUST 31, 1996
For the Three Months Period Ended August 31, 1996 (Col 1)
For the Three Months Period Ended August 31, 1995 (Col 2)
Deficit Accumulated During The Development Stage (Col 3)
Revenues
Consulting Income $ 27,000 $ 0 $ 63,000
Interest Income 0 0 232,031
Miscellaneous Income 0 0 45,049
Total Revenues 27,000 0 340,080
Expenses: General and Administrative
66,802 45,947 612,238
Total Expenses 66,802 45,947 612,238
Operating Loss $ (39,802) $(45,947) $ (272,158)
Other Income and (Loss)
Gain on Sale of Securities 50,202 0 59,646
Other Income - Judgment 0 0 371,094
Loss on Disposal of Discontinued Subsidiaries -
Graystone Nash, Incorporated And
Outwater & Wells, Inc. 0 (5,250) (1,178,806)
Temporary Increase (Decrease) in Marketable
Securities (172,573) 23,187 1,843,305
Dividend Income 55 0 6,268
Total Other Income and (Loss)
(122,316) 17,937 1,102,057
Net Income or Loss (162,118) (28,010) 830,349
Net Income or (Loss) Per Share of Common Stock
$ (0.04) $ (0.16) $ 0.27
The accompanying notes are an integral part of these financial statements.
F-3
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 24, 1986)
THROUGH AUGUST 31, 1996
Common Shares (Col 1)
Stock Amount (Col 2)
Additional Paid In Capital (Col 3)
Loss Accumulated During the Development Stage (Col 4)
Total (Col 5)
Sale of shares for cash in
private placement at $.001 20,000,000 $2,000 $18,000 $0 $20,000
Issuance of common stock
public offering for cash
(net of expenses) 5,500,000 550 211,992 212,542
Issuance of common stock
in connection with the
exercise of stock warrants 5,500,000 550 411,950 412,500
Net Loss for Year Ended
May 31, 1987 (29,350) (29,350)
Balance - May 31, 1987 31,000,000 3,100 641,942 (29,350) 615,692
Issuance of common stock
in connection with the
exercise of stock warrants 6,050,000 605 579,645 580,250
Net loss year ended
May 31, 1988 (55,625) (55,625)
Balance - May 31, 1988 37,050,000 $ 3,705 $1,221,587 $(84,975) $1,140,317
Shares returned in
connection with stock
purchase agreement
September 30, 1988 (11,475,000) (1,148) 1,148 0
Issuance of shares in
connection with
acquisition of
Graystone/Nash, Inc. and
Outwater and Wells, Inc.
on September 30, 1988 59,675,000 5,968 5,968
Net loss year ended
May 31, 1989 (115,097) (115,097)
Balance - May 31, 1989 85,250,000 8,525 1,222,735 (200,072) 1,031,188
50:1 reverse split on
April 16, 1990 (83,545,000) (8,354) 8,354 0
Fractional shares issued in
connection with 50:1
reverse split 118 0 0
Net loss year ended
May 31, 1990 (24,240) (24,240)
Balance - May 31, 1990 1,705,118 171 1,231,089 (224,312) 1,006,948
Net income year ended
May 31, 1991 302,842 302,842
Balance - May 31, 1991 1,705,118 171 1,231,089 78,530 1,309,970
Net loss year ended
May 31, 1992 (13,256) (13,256)
Balance - May 31, 1992 1,705,118 171 1,231,089 65,274 1,296,534
Net loss year ended
May 31, 1993 (8,343) (8,343)
Balance - May 31, 1993 1,705,118 171 1,231,089 56,931 1,288,191
Net income year ended May 31, 1994 (2,539) (2,539)
Balance - May 31, 1994 1,705,118 171 1,231,089 54,392 1,285,652
Net loss year ended May 31, 1995 (1,172,556) (1,172,556)
Balance - May 31, 1995 1,705,118 171 1,231,089 (1,118,164) 113,096
Issuance of shares for cash,
June 8, 1995 2,294,000 229 74,771 75,000
Net income year ended
May 31, 1996 0 2,110,631 2,110,631
Balance - May 31, 1996 3,999,118 400 1,305,860 992,467 2,298,727
Net loss three months
period ended
August 31, 1996 (162,118) (162,118)
Balance - August 31, 1996 3,999,118 400 1,305,860 830,349 2,136,609
The accompanying notes are an integral part of these financial statements.
GRAYSTONE FINANCIAL SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS PERIOD ENDED AUGUST 31, 1996
AND FOR THE YEAR ENDED MAY 31, 1996 AND FROM
INCEPTION (JUNE 24, 1996) THROUGH AUGUST 31, 1996
.
For The Three Months Period Ended August 31, 1996 (Col 1)
For The Three Months Period Ended August 31, 1995 (Col 2)
From Inception Through August 31, 1996 (Col 3)
Cash Flows from Operating Activities
Net Income or Loss $ (162,118) $ (28,010) $ 830,349
Temporary (Increase) or Decrease in
Marketable Securities 172,573 (23,187) (1,843,305)
Loss on Disposal of Subsidiaries
0 0 1,209,756
Gain on Sale of Securities 50,202 50,202
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation 0 0 41,931
Changes in Operating Assets and Liabilities
(Increase) or Decrease in Accounts Receivable
(11,233) 0 (11,233)
(Increase) or Decrease in Security Deposits
(1,175) 0 (1,175)
Increase or (Decrease) in Accounts Payable
(116,241) (11,876) 6,550
Total Adjustments 94,126 (35,063) (547,274)
Net cash provided (used) by operating Activities
(67,992) (63,073) 283,075
Cash Flows from Investing Activities
Purchase of Office Equipment 0 0 (41,931)
Advances to Subsidiaries 0 0 (1,203,788)
Investment in Related Company 0 0 (500)
Purchases of Marketable Securities (300,366) 0 (399,091)
Proceeds from Sales of Marketable Securities
256,718 0 256,718
Net cash flows from investing activities
(43,648) 0 (1,388,592)
Cash Flows From Financing Activities
Proceeds from sale of Common Stock
0 75,000 1,300,292
Advances to and from Related Companies
(5,400) (783) (161,562)
Advances to and from Related Company
(13,261) 0 (33,066)
Net Cash Provided by Financing Activities
(18,661) 74,217 1,105,664
Increase (Decrease) in Cash and Cash Equivalents
(130,301) 11,144 147
Cash and Cash Equivalents at Beginning of Period
130,448 0 0
Cash and Cash Equivalents at End of Period
$147 $11,444 $ 147
Supplemental Information
Assets Purchased in Exchange for Common Stock
$ 0 $ 0 $ 5,968
Cash Paid for:
Interest $ 0 $ 0 $ 121,310
Income taxes $ 0 $ 0 $ 0
NOTE 1 - ORGANIZATION
Graystone Financial Services, Inc. (The Company), formerly known as
Capital Investment Development Corp. was incorporated under the laws
of the State of Florida on June 24, 1986 with an authorized capital of
100,000,000 shares with a par value of $.0001. On October 10, 1988 the
Company amended its Articles of Incorporation changing its name to
Graystone Financial Services, Inc.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. Bradford-Taylor Clearinghouse,
Inc. has been inactive from inception through July 31, 1995.
Bradford-Taylor Clearinghouse, Inc. entered into a licensing agreement
with Nico Electric, A.G. and/or overseas assignees on August 1, 1995 in
exchange for 82.67% of the common stock of Bradford-Taylor
Clearinghouse, Inc. The licensing agreement allows Bradford-Taylor
Clearinghouse, Inc.'s use of Nico Electric, A.G. technology for alarms
and security devices up to 6Mhz and 1Mv for commercial use only. This
reduced the Company's ownership in Bradford-Taylor Clearinghouse,
Inc. (now Digital Acoustic System Inc.) to 13.3%.
On June 24, 1986, the Company issued 20,000,000 shares of its common
stock to private investors for a total cash consideration of $20,000.
In connection with a public offering in September 1986, the Company
sold 5,500,000 shares of its common stock for $.05 per share. Expenses
incurred in connection with the public offering of $62,458 were charged
against additional paid in capital. Net proceeds from the offering were
$212,542.
Each share of common stock issued in connection with the public offering
included one class A warrant and one class B warrant. The purchase
warrants were exercisable over an eighth month period ending May 18,
1987. Each redeemable warrant entitled the holder to purchase one share
of common stock at a price of $.075 per share in the case of class A
warrants and a price of $.10 per share of class B warrants.
During the period ended May 31, 1987, 5,500,000 of class A warrants
were exercised at $.075 per share for a total cash consideration of
$412,500. On May 18, 1987, the class B warrants were extended for a
six months period.
In addition, in connection with the public offering 550,000 warrants were
issued to the underwriter, which were exercised commencing September,
1987 at a price of $.055 per share or an aggregate of $30,250. The
remaining 5,500,000 Class B warrants were exercised during the year
ended May 31, 1988 for an aggregate of $550,000.
On September 30, 1988, the Stock Purchase Agreement dated April 4,
1988 by and between the Company and Harp Investments, Inc., a
privately held New Jersey
NOTE 1 - ORGANIZATION - (CONTINUED)
corporation, was approved by the stockholders. The agreement provided
for the Company to acquire 100% of the outstanding shares of capital
stock of Graystone Nash, Incorporated, a New Jersey corporation
engaged in securities brokerage, trading and research, investment banking
activities and related financial services, and 70% of the outstanding shares
of Outwater and Wells, Inc. (Graystone Nash owned 30% of the
outstanding shares prior to the exchange), a New Jersey corporation
engaged in providing a full range of securities clearance services to
Graystone Nash, Incorporated, in exchange for 59,675,000 shares of the
Company's common stock.
Additionally, 11,475,000 shares of the Company's common stock was
required to be returned to the Company by certain original shareholders.
The transaction was handled as a reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc.
censured Graystone Nash, Incorporated and its President, Thomas V.
Ackerly. The Association fined Graystone Nash, Incorporated and
Thomas V. Ackerly $1,325,000, jointly and severely, and expelled
Graystone Nash, Incorporated from membership in the Association and
barred Thomas V. Ackerly from association with a member of the
Association.
Additionally, the Securities and Exchange Commission brought an action
against Graystone Nash, Incorporated and Thomas V. Ackerly, its
President, and on April 21, 1993 a judgment was entered against the
Company and Thomas V. Ackerly in the amount of $60,565,581 plus
interest beginning January 1, 1989. The action was appealed and on June
1, 1994, the judgment was reversed. Graystone Nash, Incorporated was
not represented by counsel in the new review ordered and the judgment
still stands against it. Thomas V. Ackerly, acting as his own counsel,
presented to the Court additional information to review. Upon review by
the Court, on July 10, 1995, the judgment and pre-judgment interest was
waived as to Thomas V. Ackerly. As a result of the above actions, the
subsidiary Graystone Nash, Incorporated was forced to close and cease
operations. Graystone Nash, Incorporated was forced to close and
cease operations. Graystone Nash, Incorporated discontinued its
operations as of May 31, 1991, and the subsidiary was disposed of on
July 31, 1994, the date the corporation was dissolved by the State of
New Jersey.
Also, the subsidiary Outwater and Wells, Inc., was forced to close and
case operations in accordance with the lockup rules of the SEC.
Outwater and Wells, Inc. discontinued its operations as of May 31,
1991, and the subsidiary was disposed of August 31, 1994, the date the
corporation was dissolved by the State of New Jersey.
NOTE 1 - ORGANIZATION - (CONTINUED)
On April 16, 1990, the shareholders approved a 50:1 reverse split of the
Company's common stock. The reverse split reduced the authorized
shares of common stock to 4,000,000. An additional 118 fractional
shares were issued in connection with the reverse split.
On June 8, 1995, the Company issued 2,294,000 shares of its common
stock to its controlling stockholder for a total cash consideration of
$75,000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Financial Statement Presentation
The records of the Company (A Corporation) are maintained using the
accrual method of accounting.
B. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a
maturity of three months or less to be cash and cash equivalents.
C. Earnings or (Loss) Per Share
Earnings or (loss) per share is computed using the weighted
average number of shares of common stock outstanding.
NOTE 3 - PROPERTY AND EQUIPMENT
August 31, August 31,
1996 1995
Machinery and Equipment 25,002 25,002
Furniture and Fixtures 16,929 16,929
41,931 41,931
Less Accumulated Depreciation 41,931 41,931
Net Book Value 0 0
Expenditures for repairs and maintenance and minor renewal and
betterments are charged to operations in the year incurred. Major
renewals and betterments are capitalized. Depreciation is recorded
under the straight line method, utilizing a 5 year estimated
useful life.
NOTE 4 - OTHER CURRENT ASSETS
The following is a summary of Trading Securities owned as of August 31, 1996:
Number of Cost Market
Shares Value
Trading Securities owned
NJS Acquisitions Corp. 397,677 $ 0 $2,087,804
Reed Systems, Inc. 19,444 0
E Data Corp. 5,000 46,187 48,125
Great American Lumber Co. 8,695 0 0
Classic International
Entertainment, Inc. 20,630 9,554 9,036
Ambase Corporation 10,000 18,200 20,200
BNN Corporation 2,500 0 14,33
Evans Environmental Corp. 700 240 1,203
Money Market Funds 24 24 24
Cash Account 18 18
Total $2,001,608
The following is a summary of trading securities owned as of August 31, 1995:
ATC Capital Group Limited 61,832 0 $ 23,187
Reed Systems, Inc. 97,221 0 0
Great American Lumber Co., Inc. 8,695 0 0
Total $ 23,187
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
Receivables - Related Companies represent advances to Harp Investment, Inc.,
the controlling shareholder of the Company in the original amount of $37,200,
dated March 31, 1995, with a balance of $46,562 and $37,200 as of August 31,
1996 and 1995. At August 31, 1995, Bradford Taylor Clearinghouse, Inc. had
been advanced $784. Thomas V. Ackerly, President of the Company, is a note
dated January 1, 1991 in the original amount of $115,000, with a balance of
$115,000 as of August 31, 1996 and 1995. The notes are payable on demand
and include interest at the rate of 9% per annum.By agreement with the parties,
interest will not begin to accrue on these notes till January 1, 1996.
NOTE 5- OTHER MATTERS
Effective February 1, 1996, the Company entered into a consulting agreement
with Chapman Spire and Carson LLC to provide assistance in developing clients
who are seeking access to public markets through the merger or acquisition of a
public company or entry to trading markets through the introduction to financing
institutions or broker/dealers. The contract is for one year and the fee for
services will be $108,000.