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, 1997
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. EmployerIdentification 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 X No
The number of shares of Common Stock outstanding as of August
31, 1997 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
6Mhz and 1Mv 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.
Both Graystone Nash, Inc. and Outwater and Wells, Inc. were
dissloved during 1994.
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.
On September 19, 1996, the Company incorporated G.S. Television
Productions, Inc. (The Corporation) in the State of Delaware. On
October 3, 1996, the Corporation received authority to do
business in the State of New Jersey. The Corporation is a wholly
owned subsidiary of the Company and has been inactive since its
date of inception.
Item 2. PROPERTIES
Corporate Offices
The Company presently maintains its executive offices at 39
Lackawanna Plaza, Room 8, Bloomfield, NJ 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. The Company leases an additional office
located at 45 Wall Street, New York, NY that consist of
approximately 1,000 square feet. The lease is for a one year
period ending August 31, 1998, at the rate of $2,400 per month.
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, 1997.
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
known there has not been any high and low bid price for the
three months period ended August 31, 1997 and August 31, 1996.
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 1998 Low Bid High Bid
1st Quarter Unknown Unknown
Fiscal 1997 Low Bid High Bid
1st Quarter Unknown Unknown
2nd Quarter Unknown Unknown
3rd Quarter Unknown Unknown
4th 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, 1997 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 well 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, 1997 and August 31,
1996, should be read in conjunction with the Financial
Statements and related notes included in Item 8 of this Form
10-Q. (See "Financial Statements and Notes Thereto.")
For Quarter Ended August 31,
1997 1996
Income Statement Data:
Revenues $ 105,000 $ 27,000
Other Income and (Loss) $778,084 $ (122,316)
Net Income (Loss) $ 780,966 $ (162,118)
Net Income (Loss) per share $ 0.20 $ (0.04)
Dividends per
share $ 0 $ 0
Weighted average shares outstanding:
3,999,118 3,999,118
Balance Sheet Data:
Total Assets $ 2,725,989 $ 2,104,978
Retained Earnings (Deficit) $ 1,388,129 $ 607,163
Stockholders Equity $ 2,694,389 $ 1,913,423
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
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 years 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, 1997 and August 31, 1996.
Consolidated Balance Sheet at August 31, 1997 and August 31,
1996.
Consolidated Statements of Operations for the three months
period ended August 31, 1997 and August 31, 1996.
Consolidated Statement of Changes in Stockholders' Equity from
Inception through February 28, 1997.
Consolidated Statement of Cash Flows for the three
months period ended August 31, 1997 and August 31, 1996.
Notes to Financial Statements as of August 31, 1997
and August 31, 1996.
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 49 President,and
September 30, 1988 -
Director Present
Robert A. Spira 46 Director
February 1, 1996 -
Present
Joseph Ben-Dak 41 Director
September 26, 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 Digital Acoustic Systems
Inc., a related Company. Mr. Ackerly holds the same offices in
Harp Investments, Inc., the controlling shareholder of Graystone
Financial Services, Inc and G.S. Television Productions, 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. Mr. Joseph Ben-Dak was appointed
as a Director on September 26, 1996.
Item 11. EXECUTIVE COMPENSATION
During the three months periods ended August 31, 1997 and 1996,
Thomas V. Ackerly received no remuneration. No other officer,
director, employee, or affiliate of the Registrant received any
remuneration. Moreover, for these periods 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 directors receive no fees for their 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, 1997 and August 31, 1996, 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, 1997 and
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, with a current balance at August 31, 1997 of
$512,499, with interest payable 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
Consolidated Balance Sheet - - - - - - - - - - - - - F-2 F-3
Consolidated Statement of Income and Loss- - - - - F-4 F-5
Consolidated Statement of Stockholders' Equity- - - - F-6 F-7
Consolidated Statement of Cash Flows - - - - - - - - - F-8 F9
Notes To Financial Statements - - - - - - - - - - - - - - F-10 F14
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.
(s) Thomas V. Ackerly
By: Thomas V. Ackerly, President and Director
October 10, 1997 Date
C O N T E N T S
Independent Auditors' Report - - - - F-1
Consolidated Balance Sheets at August 31, 1997
and August 31, 1996 - - F-2 F-3
Consolidated Statement of Operations for the
Three Month Period Ended August 31, 1997, and 1996 - - F-4
Consolidated Statement of Changes in
Stockholders' Equity from
Inception through August 31, 1997- - - - F-5 F-7
Consolidated Statement of Cash Flows for the Three
Months Period Ended August 31, 1997, and 1996 - - - F8 F-9
Notes to Consolidated Financial Statements - - - - F-10 F-14
INDEPENDENT AUDITORS' REPORT
Board of Directors
Graystone Financial Services, Inc.
Glen Ridge, New Jersey
We have audited the accompanying consolidated balance sheet of
Graystone Financial Services, Inc. as of August 31, 1997 and May
31, 1997 and the related consolidated statement of income,
stockholders' equity and cash flows for the three months period
ended August 31, 1997 and for the year ended May 31, 1997. 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 consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Graystone Financial Services,
Inc. as of August 31, 1997 and May 31, 1997, in conformity with
generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
October 10, 1997
BALANCE SHEET
ASSETS AUGUST 31, 1997 MAY 31, 1997
Current Assets
Cash
$ 70,890 $ 60,870
Accounts Receivable
15,712 13,644
Marketable Securities - Trading - Note 4
1,848,971 1,514,986
Total Current Assets 1,935,573 1,589,500
Property and Equipment Net - Note 3
2,004 0
Other Assets
Receivables - Related Companies - Note 5
708,925 448,647
Accrued Interest Receivable
61,774 48,974
Security Deposits
16,060 16,060
Organization Costs 1,153 1,297
Investment - Digital Acoustic Systems Inc. - Note 1
500 500
Total Other Assets 788,412 515,478
Total Assets $ 2,725,989 $2,104,978
LIABILITIES AND
STOCKHOLDERS EQUITY
AUGUST 31, 1997 MAY 31, 1997
Current Liabilities
Accounts Payable $ 6,600 $ 6,600
Accounts Payable - Related Company - Note 5
0 29,955
Notes Payable 25,000 155,000
Total Current Liabilities 31,600 191,555
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,
1997 and May 31, 1997 400 400
Additional paid in capital 1,305,860 1,305,860
Deficit Accumulated During the Development Stage
1,388,129 607,163
Total Stockholders' Equity 2,694,389 1,913,423
Total Liabilities and Stockholders' Equity
$ 2,725,989 $ 2,104,978
For the Three Months Period Ended August 31, 1997
For the ThreeMonths Period Ended August 31, 1996
Revenues
Consulting Income $ 105,000 $ 27,000
Total Revenues 105,000 27,000
Expenses
General and Administrative 102,118 66,802
Total Expenses 102,118 66,802
Operating Income or (Loss) 2,882 $ (39,802)
Other Income and (Expense)
Gain on Sale of Securities 724,430 50,202
Temporary Increase (Decrease) in Market Value of
Securities 43,057 (172,573)
Dividends and Interest Income 12,897 55
Interest Expense (2,300) 0
Total Other Income and (Loss) 778,084 (122,316)
Net Income or (Loss) $ 780,966 (162,118)
Net Income or (Loss) Per Share of Common Stock
$ 0.20 $ (0.04)
Common Shares Stock Amount Additional Paid In Capital Retained Earnings
Accumulated During the
Development Stage Total
Sale of shares for cash in
private placement at
$.001 20,000,000 $2,000 $18,000 $ $ 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 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 ende
d 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 year ended
May 31, 1997 (385,304) (385,304)
Balance- May 31, 1997 3,999,118 400 1,305,860 607,163 1,913,423
Net Income for the Three
Months Peirod Ended August 31, 1997 780,966 780,966
Balance, August 31, 1997
3,999,118 $ 400 $ 1,305,860 $ 1,388,129 $ 2,694,389
For The Three Months Period Ended August 31, 1997
For The Three Months Period Ended August 31, 1996
Cash Flows from Operating Activities
Net Income or Loss $ 780,966 $ (162,118)
Adjustments to Reconcile Net Income
to Net Cash Provided byOperating Activities
Temporary (Increase) or Decrease in
Marketable Securities (43,057) 172,573
Gain on Sale of Securities (724,430) (50,202)
Depreciation and Amortization 201 0
Changes in Operating Assets and Liabilities
(Increase) or Decrease in Accounts Receivable
(2,068) (11,233)
(Increase) or Decrease in Security Deposits
0 (1,175)
Increase or (Decrease) in Accounts Payable
0 (116,241)
Total Adjustments 769,354 (6,278)
Net cash provided (used) by operating Activities
11,612 (168,396)
Cash Flows from Investing Activities
Purchase of Office Equipment
(2,060) 0
Advances to Related Parties (273,078) 0
Purchases of Marketable Securities (816,346) (199,962)
Proceeds from Sales of Marketable Securities
1,249,849 256,718
Net cash flows from investing activities 158,363 56,756
Cash Flows From Financing Activities
Proceeds from sale of Common Stock 0 0
Advances to and from Related Companies
(29,955) (5,400)
Payment on Debt (130,000) 0
Net Cash Provided by Financing Activities (159,955) (18,661)
Increase (Decrease) in Cash and Cash Equivalents 10,020 (130,301)
Cash and Cash Equivalents at Beginning of Period 60,870 130,448
Cash and Cash Equivalents at End of Period
$ 70,890 $ 147
Supplemental Information
Cash Paid for:
Interest $ 2,300 $ 0
Income taxes $ 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 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
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.
Both Graystone Nash, Inc. and Outwater and Wells, Inc. were
dissolved during 1994.
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.
On September 19, 1996, the Company incorporated G. S. Television
Productions, Inc. (The Corporation) in the State of Delaware. On
October 3, 1996, the Corporation received authority to do
business in the State of New Jersey. The Corporation is a wholly
owned subsidiary of the Company and has been inactive since its
date of incorporation.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Financial Statement Presentation
he 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.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of the
Company and its wholly owned subsidiary, G.S. Television
Productions, Inc. (Inactive since its date of
incorporation September 19, 1996). Intercompany transactions and
balances have been eliminated in
consolidation.
D. Earnings or (Loss) Per Share
Earnings or (loss) per share is computed using
the weighted average number of shares of
common stock outstanding.
E. Provision for Taxes
At August 31, 1997, May 31, 1997, 1996 and
1995, the Company had net operating loss
carryforwards of approximately $2,244,315, $2,257,794,
$2,175,722, and $2,169,005 that
may be offset against future taxable income through the years
2012, 2011 and 2009. Additionally, the
Company has available capital loss carryovers of
$51,887, $776,317, $1,267,166 and 265,715 that may be
offset against future capital gains.
F. Use of Estimates
Management uses estimates and assumptions in
preparing financial statements in
accordance with generally accepted accounting principles. Those
estimates and assumptions affect
the reported amounts of amounts of assets and liabilities, the
Disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could vary from the estimates that were
assumed in preparing the financial statements.
G. Pending Accounting Pronouncements
It is anticipated that current pending
accounting pronouncements will not have an
Adverse impact on the financial statements of the Company.
NOTE 3 - PROPERTY AND EQUIPMENT
August 31, May 31,
1997 1997
Machinery and Equipment $ 27,062 $ 25,002
Furniture and Fixtures 16,929 16,929
43,991 41,931
Less Accumulated Depreciation 41,987 41,931
Net Book Value $ 2,000
$ 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, 1997:
Number of Cost Market
Shares Value
Trading Securities owned
NJS Acquisitions Corp. 326,860 $ 433,980 $ 1,716,015
Reed Systems, Inc. 19,444 0 0
Great American Lumber Co. 8,695 0 0
G K Intelligent Systems, Inc. 25,000 16,933 29,700
XO Systems Corp. 85,000 42,505 42,500
Cash Account 2,275 2,275
Total $ 61,714 $1,848,970
<PAGE.
The following is a summary of Trading Securities
owned as of May 31, 1997:
Number of Cost Market Shares Value
Trading Securities owned
NJS Acquisitions Corp. 261,877 $ 0 $ 1,473,058
Reed Systems, Inc. 19,444 0 0
Great American Lumber Co. 8,695 0 0
G L Intelligent Systems, Inc. 20,000 46,253 32,500
XO Systems Corp. 200,000 100,005 9,400
Cash Account 28 28
Total $146,286 $1,514,986
NOTE 5 - TRANSACTIONS WITH RELATED PARTIES
Receivables - Related Companies represent advances to Harp
Investment, Inc., the controllingshareholder of the Company
in the original amount of $37,200,
dated March 31, 1995, with a balance of $40,786
and $40,636 as of August 31, 1997 and May 31,
1997 . Thomas V. Ackerly, President of the Company, represents
a note dated January 1, 1991 in the original
amount of $115,000, with a balance of $512,499 and $448,647 as
of May 31, 1997 and 1996. The notes are payable on
demand and include interest at the rate of 9% per
annum. By agreement with the parties, interest did not begin to
accrue on these notes till January 1, 1996.
Interest is accrued on the above notes in the amount of
$61,774 and $48,974 as of August 31, 1997 and May 31,
1997. Accounts Payable - Related Companies
represents advances from related companies in the amounts of
$29,955 at May 31, 1997 and advances to
related companies in the amount of $155,640 at August
31, 1997.
NOTE 6 - LEASES
The Company presently maintains its executive
offices at 39 Lackawanna Plaza, Room 8,
Bloomfield, NJ 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. The Company leases an
additional office located at 45 Wall Street, New
York, NY and consist of approximately 1,000 square feet. The
lease is for a one year period ending August
31, 1998, at the rate of $2,400 per month.
NOTE 7- OTHER MATTERS
Effective June 1, 1997, the Company entered into a consulting
agreement with
BridgewaterFinancial LLP 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 is $100,000.