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 November 30, 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. Employer
Identification Number)
incorporation or organization)
P. O. Box 615 , Glen Ridge, NJ 07028-0615
(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 November
30, 1997 was 9,849,118.
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 an 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 September 10, 1997, the
Company amended its Articles of Incorporation authorizing an
increase in the number of common shares from 4,000,000 to
10,000,000.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc (Bradford). Bradford has been
inactive from inception through July 31, 1995. On August 1,
1995, Bradford entered into a licensing agreement with Nico
Electric, A.G. in exchange for 11.3% of the common stock of
Bradford. The licensing agreement allows Bradford'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 was issued to complete the transaction.
This reduces the Company's ownership in Bradford 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 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 month period.
In addition, in connection with the public offering 550,000
class B 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 at $0.0001 per share or $5,968.
Additionally, 11,475,000 shares of the Company's common stock
were 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, reducing issued shares by
83,545,000. 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, for $0.00.
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. (G. S. Television) in the State of Delaware.
On October 3, 1996, G. S. Television received authority to do
business in the State of New Jersey. G. S. Television is a
wholly owned subsidiary of the Company and has been inactive
since its date of inception.
On October 23, 1997, the Company issued 5,850,000 shares of
common stock for cash at $0.002 per share or $11,700.
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 consists 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 November 30, 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 November 30, 1997 and November 30,
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
2nd 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 November 30, 1997 there were 6,066 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 covering
the three months period ended November 30, 1997 and November 30,
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 November 30,
1997
1996
Income Statement Data:
Revenues $ 0 $ 27,000
Other Income and (Expense) $ 86,913
$ (122,316)
Net Income (Loss) $ (110,745) $ (162,118)
Net Income (Loss) per share $ (0.02)
$ (0.04) Dividends per
share $ 0
$ 0
Weighted average shares outstanding: 4,974,718
3,999,118
Balance Sheet Data:
Total Assets
$ 2,605,116 $ 2,104,978
Retained Earnings $
1,265,556 $ 607,163
Stockholders Equity $ 2,583,516 $
1,913,423
Item 7. MANAGEMENT'S DECISIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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
prior years and continues to have a very small amount of
liabilities. Management intends to seek potential businesses to
acquire through the issuance of the Company's common stock and
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, November 30, 1997 and May 31, 1997.
Consolidated Balance Sheet at November 30, 1997 and May 31,
1997.
Consolidated Statement of Operations for the Three Months
Period
Ended November 30, 1997 and 1996.
Consolidated Statement of Operations for the Six
Months Period
Ended November 30, 1997 and 1996.
Consolidated Statement of Stockholders' Equity from
Inception Through November 30, 1997.
Consolidated Statement of Cash Flows for the Six
Months Period
Ended November 30, 1997 and 1996.
Notes to the Consolidated Financial Statements as of
November 30, 1997
and May 31, 1997.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
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 holds 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 period ended November 30, 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 directors 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 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 November 30, 1997 and November 30, 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 November 30, 1997 and
November 30, 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.
8,362,500 84%
Name of Beneficial Owner Amount of Ownership Percent of Class
All Executive Officers/Directors as a Group 8,812,500
88%
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 November 30, 1997 of
$201,615, with interest payable at the rate of 9% per annum. By
agreement between the parties, interest did not begin to accrue
on this note till January 1, 1996.
Item 14. SUBSEQUENT EVENTS
On November 10, 1997, the Company reincorporated in the State of
Delaware, to be effective December 1, 1997. Additionally, the
Company increased the number of common shares authorized to be
issued to 35,000,000 with a par value of $0.001 per share,
10,000,000 of which are preferred shares and 25,000,000 are
common shares.
Also, the Company authorized a Stock Incentive Plan (Plan) with
a maximum of 2,500,000 shares that may be issued. The purpose of
the Plan is to advance the interest of the Company and its
stockholders by providing deferred stock incentives in addition
to current compensation to certain key executives and certain
directors of the Company and of its subsidiaries who contribute
significantly to the long term performance and growth of the
Company.
PART IV
Item 15. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
Statement Name
Page No.
Report of Independent Auditors' Report - - - - - - -
- - - - - - - - - F-1
Consolidated Balance Sheet - - - - - - - - - - - -
- - - - - - - - - - - - F-2 F-3
Consolidated Statement of Operations - - - - - - -
- - - - - - - - - - F-4
Consilidated Statement of Operations - - - - - - - -
- - - - - - - - - - F-5
Consolidated Statement of Stockholders' Equity- - -
- - - - - - - - F-6 F-8
Consolidated Statement of Cash Flows - - - - - - - -
- - - - - - - - - F-9 F-10
Notes To The Consolidated Financial Statements - -
- - - - - - - - F-11 F16
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
January 15, 1998
Date
C O N T E N T S
Independent Auditors' Report - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - F-1
Consolidated Balance Sheet at November 30, 1997 and May 31, 1997
- - F-2 F-3
Consolidated Statement of Operations for the Three Months Period
Ended November 30, 1997 and 1996 - - - - - - - - - - - - -
- - - - - - - - - - F-4
Consolidated Statement of Operations for the Six Months Period
Ended November 30, 1997 and 1996 - - - - - - - - - - - - -
- - - - - - - - - - F-5
Consolidated Statement of Stockholders' Equity from
Inception through November 30, 1997- - - - - - - - - - - -
- - - - - - - - - - F-6 F-8
Consolidated Statement of Cash Flows for the Six Months Period
Ended November 30, 1997 and 1996 - - - - - - - - - - - - -
- - - - - - - - - - F9 F-10
Notes to Consolidated Financial Statements - - - - - - - - - - -
- - - - - - - - F-11 F-16
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., at November 30, 1997 and May
31, 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for the six months period
ended November 30, 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 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., at November 30, 1997 and
May 31, 1997, in conformity with generally accepted accounting
principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
January 15, 1998
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1997 AND MAY 31, 1997
ASSETS
NOVEMBER 30,1997 MAY 31, 1997
Current Assets
Cash
$ 54,284 $
60,870
Accounts Receivable
20,712 13,644
Marketable Securities - Trading - Note 4
1,676,182 1,514,986
Total Current Assets 1,751,178 1,589,500
Property and Equipment, Net - Note 3
1,947 0
Other Assets
Investment - Real Estate - Note 5
360,677 0
Receivables - Related Parties - Note 6 399,027 448,647
Accrued Interest Receivable - Note 6
74,574 48,974
Security Deposits
16,060 16,060
Organization Costs, Net
1,153 1,297
Investment - Digital Acoustic Systems Inc. - Note 1
500 500
Total Other Assets 851,991 515,478
Total Assets $ 2,605,116 ======= $ 2,104,978
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30, 1997 MAY 31, 1997
Current Liabilities
Accounts Payable
$ 6,600 $
6,600
Payables - Related Parties - Note 6
0 29,955
Notes Payable
15,000 155,000
Total Current Liabilities
21,600 191,555
Stockholders' Equity
Preferred Stock: No Par Value, Authorized 10,000,000
Shares; Issued and Outstanding, NONE - Note 1
0 0
Common Stock: Par Value $0.0001, Authorized 10,000,000
Shares; Issued and Outstanding, 9,849,118 Shares at
November 30, 1997 and 3,999,118 at May 31, 1997
985 400
Additional Paid in Capital 1,316,975 1,305,860
Retained Earnings 1,265,556 607,163
Total Stockholders' Equity 2,583,516 1,913,423
Total Liabilities and Stockholders' Equity $ 2,605,116
======= $ 2,104,978 =======
GRAYSTONE FINANCIAL SERVICES, INC
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS PERIOD ENDED NOVEMBER 30,1997 AND 1996
For the Three Months Period Ended November 30, 1997
For the Three Months Period Ended November 30, 1996
Revenues
Consulting Income $ 0 $ 27,000
Expenses
General and Administrative 197,658 66,802
Operating Loss (197,658) $ (39,802)
Other Income (Expense)
Gain on Sale of Securities
323,115 50,202
Temporary Decrease in Market Value of Securities
(249,124) (172,573)
Dividends and Interest Income
12,922 55
Interest Expense
0 0
Total Other Income (Expense)
86,913 (122,316)
Net Loss
$ (110,745) $ (162,118)
Net Loss Per Share of Common Stock $ (0.02) $
(0.04)
Weighted Average Number of Common Shares Outstanding
4,974,118 3,999,118
GRAYSTONE FINANCIAL SERVICES, INC
CONSOLIDATED STOCKHOLDERS EQUITY
FOR THE PERIOD OF INCEPTION (JUNE 24, 1986)
THROUGH NOVEMBER 30,1997
Common Shares Stock Amount Additional Paid In
Capital Retained Earnings 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
Common Shares Stock Amount Additional Paid In
Capital Retained Earnings Total
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 1,309,790
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 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
Common Shares Stock Amount Additional Paid In
Capital Retained Earnings Total
Issuance of Common Stock for Cash October 23, 1997
5,850,000 585 11,115 11,700
Net Income for the Six Months Period Ended November 30, 1997
$
$
$ 658,393 $
658,393
Balance, November 30, 1997 9,849,118 ======= $
985 ======= $ 1,316,975 ======= $ 1,265,556 =======
$ 2,583,516 =======
GRAYSTONE FINANCIAL SERVICES, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS PERIOD ENDED NOVEMBER 30,1997 AND 1996
For The Six Months Period Ended November 30, 1997 For The Six
Months Period Ended November 30, 1996
Cash Flows from Operating Activities
Net Income or Loss $ 658,393 $ (148,598)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Used in Operating Activities
Temporary (Increase) Decrease in
Marketable Securities
206,067
141,032
(Gain) Loss on Sale of Securities
(1,047,545) 2,881
Depreciation and Amortization
257 0
Changes in Operating Assets and Liabilities
(Increase) Decrease in Accounts Receivable
(7,068) (11,429)
(Increase) Decrease in Accrued Interest Receivable
(25,600)
(Increase) Decrease in Security Deposits
0 (1,175)
(Increase) Decrease in Organization Costs
(721)
Increase (Decrease) in Accounts Payable
0 (115,520)
Total Adjustments (873,889) 15,068
Net cash used in operating Activities (215,496)
(133,530)
Cash Flows from Investing Activities
Purchase of Office Equipment
(2,060) 0
Investment - Real Estate
(360,747) 0
Purchases of Marketable Securities
(1,242,902) (229,298)
Proceeds from Sale of Marketable Securities 1,923,185
278,765
Net cash flows from investing activities 317,476 49,467
For The Six Months Period Ended November 30, 1997 For The Six
Months Period Ended November 30, 1996
Cash Flows From Financing Activities
Proceeds from sale of Common Stock
11,700 0
Advances (to) from Related Companies
19,664 (14,426)
Payment on Debt
(140,000) (13,900)
Net Cash Used in Financing Activities (108,566) (28,326)
Decrease in Cash and Cash Equivalents (6,586) (112,389)
Cash and Cash Equivalents at Beginning of Period 60,870
130,448
Cash and Cash Equivalents at End of Period $ 54,284
===== $ 18,059 =====
Supplemental Information
Cash Paid for:
Interest $ 2,300 ===== $ 0
=====
Income taxes $ 0 ===== $ 0
=====
GRAYSTONE FINANCIAL SERVICES, INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS PERIOD ENDED NOVEMBER 30,1997 AND 1996
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 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 September 10,
1997, the Company amended its Articles of
Incorporation authorizing an increase in the
number of common shares from 4,000,000 to 10,000,000.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. ( Bradford). Bradford has
been inactive from inception through July 31, 1995. On August
1, 1995, Bradford entered into a licensing agreement with Nico
Electric, A.G. and/or overseas assignees in exchange for 86.7%
of the common stock of Bradford. The licensing agreement allows
Bradford'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 (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 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 month period.
In addition, in connection with the public offering 550,000
class B 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.
NOTE 1 - ORGANIZATION - (CONTINUED)
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, a New
Jersey corporation, 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, in exchange for 59,675,000 shares of the Company's
common stock at $0.0001 per share or $5,968.
Additionally, 11,475,000 shares of the Company's common stock
were 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, reducing issued shares by
83,545,000 . 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 for $0.00.
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. (G. S. Television) in the State of Delaware.
On October 3, 1996, G. S. Television 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.
On October 23, 1997, the Company issued 5,850,000 shares of
common stock for cash at $0.002 per share or $11,700.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Financial Statement Presentation
The records of the Company are maintained using the
accrual method of accounting.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. 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 November 30, 1997, May 31, 1997, 1996 and
1995, the Company had net
operating loss carryforwards of approximately $2,434,966,
$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 $0, $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 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. Property and Equipment
Property and Equipment is recorded at cost.
Depreciation is computed under the
straight line method, utilizing a 5 year estimated useful life.
Expenditures for repairs and maintenance and
minor renewal and betterments are charged to operations in the
year incurred. Major renewals and betterments
are capitalized.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and Equipment consists of the
following at November 30, 1997 and May
31, 1997:
November 30, 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 42,044 41,931
Net Book Value $ 1,947
$ 0
NOTE 4 - INVESTMENTS - MARKETABLE SECURITIES - TRADING
The following is a summary of Trading Securities
owned at November 30, 1997:
Number of
Cost Market Shares
Value
Trading Securities owned
NJS Acquisitions Corp. 327,967 $
465,168 $ 1,641,907
Reed Systems, Inc. 19,444 0
0
Great American Lumber Co. 8,695 0 0
XO Systems Corp. 195,000
97,545 23,400
Cash Account 10,875
10,875
Total
$ 573,588 $1,676,182
====== =======
The following is a summary of Trading Securities
owned at May 31, 1997:
Number
of Cost Market Shares
Value
Trading Securities owned
NJS Acquisitions Corp. 261,877 $
0 $ 1,473,058
NOTE 4 - INVESTMENTS - MARKETABLE SECURITIES - TRADING
(CONTINUED)
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 - INVESTMENT - REAL ESTATE
During July, 1997, the Company completed the
purchase of real estate located in
Stroudsburg, Pennsylvania for $360,677.
NOTE 6 - TRANSACTIONS - RELATED PARTIES
Receivables - Related Parties 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 $45,889
and $40,636 at November 30, 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 $201,615 and $408,011 at
November 30, 1997 and May 31, 1997. 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 $74,574 and $48,974 at November 30,
1997 and May 31, 1997.
Advances have been made to Digital Acoustic System
Inc., a related company in the amount of
$151,523 at November 30, 1997. The note is due on demand and
carries no interest rate.
Payables - Related Parties represent advances from
related companies in the amounts of $29,955 at
May 31, 1997 and has been paid in full at November 30, 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 6 - LEASES (CONTINUED)
Future minimum annual rentals due are as follows:
1997
$ 2,400
1998
19,200
$21,200
NOTE 7- OTHER MATTERS
Effective June 1, 1997, the Company entered into a consulting
agreement with Bridgewater
Financial 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 into 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.
NOTE 8 - SUBSEQUENT EVENTS
On November 10, 1997, the Company reincorporated in the State of
Delaware, to be effective December 1, 1997. Additionally, the
Company increased the number of common shares authorized to be
issued to 35,000,000 with a par value of $0.001 per
share, 10,000,000 of which are preferred shares and 25,000,000
are common shares.
Also, the Company authorized a Stock Incentive Plan (Plan) with
a maximum of 2,500,000 shares that may be issued. The purpose of
the Plan is to advance the interest of the Company and its
stockholders by providing deferred stock incentives in addition
to current compensation to certain key executives and certain
directors of the Company and of its subsidiaries who contribute
significantly to the long term performance and growth of the
Company.