<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 000-22681
FINANTRA CAPITAL, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 13-3571419
--------------------------------- -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
150 SOUTH PINE ISLAND ROAD, SUITE 500
PLANTATION, FLORIDA 33324
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(954) 577-9225
-----------------------------------------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
None
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of Class)
COMMON STOCK PURCHASE WARRANTS
------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 14,472,940 shares of Common
Stock, $.01 par value per share, at April 27, 2000.
This Amendment No. 1 to Form 10-KSB for Finantra Capital, Inc., a
Delaware corporation (the "Company"), for the year ended December 31, 1999 (the
"1999 Form 10-KSB"), is being filed to correct two typographical errors relating
to the Company contained in Part I of the 1999 Form 10-KSB, to correct one
typographical error relating to stockholder matters contained in Part II of the
1999 Form 10-KSB, to disclose the information required by Part III of Form
10-KSB and to correct certain immaterial errors contained in the 1999 audited
Financial Statements of the Company included and originally filed as part of the
Company's 1999 Form 10-KSB.
PART I
ITEM 1. BUSINESS
In the section captioned "Ameri-Cap Business Finance Group Operations -
Factoring Operations" set forth in Item 1 of the 1999 Form 10-KSB, it was
originally reported that the Company, through its American Factors Group, Inc.
subsidiary, entered into a $7 million credit facility with FINOVA. This credit
facility, in fact, is $4 million. Accordingly, the first sentence of the third
paragraph of the section captioned "AmeriCap Business Finance Group Operations -
Factoring Operations" set forth in Item 1 of the 1999 Form 10- KSB is hereby
amended in its entirety to read as follows:
"For purposes of providing Ameri-Cap Factors with the capital necessary
to finance its factoring operations, the Company, through its American
Factors Group, Inc. subsidiary, entered into a $4 million credit facility
(the "Factoring Facility") with FINOVA Capital Corporation ("FINOVA")."
In the section captioned "Ameri-Cap Consumer Finance Group Operations -
Mortgage Banking Operations" set forth in Item 1 of the 1999 Form 10-KSB, it was
originally reported that the Company has obtained a $10 million warehouse line
of credit from Republic Bank. This line of credit, in fact, is $5 million.
Accordingly, the first sentence of the third paragraph of the section captioned
"Ameri-Cap Consumer Finance Group Operations - Mortgage Banking Operations" set
forth in Item 1 of the 1999 Form 10-KSB is hereby amended in its entirety to
read as follows:
"In order to provide Ameri-Cap Mortgage with the financial capacity to
originate its mortgage loans, the Company has obtained a $10 million
warehouse line of credit from Suntrust Bank and a $5 million warehouse
line of credit from Republic Bank."
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
In Item 5 of the 1999 Form 10-KSB, it was originally reported that the
Company satisfied out of its working capital approximately $300,000 of cash
redemption obligations arising from the Rescission Offer. In fact, the Company
satisfied out of its working capital approximately $100,000 of cash redemption
obligations arising from the Rescission Offer. Accordingly, the last sentence of
the last paragraph of Item 5 of the 1999 Form 10-KSB is hereby amended in its
entirety to read as follows:
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"At the expiration of the Rescission Offer, the Company had received
valid written acceptances from the holders of approximately 54,000 shares
of Common Stock and approximately 20,000 Warrants acquired in the IPO,
resulting in a cash redemption obligation which was satisfied by the
Company out of its working capital of approximately $100,000."
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- ----------------------------
Robert D. Press 35 Chairman of the Board and Chief
Executive Officer
Charles Litt 51 President and Director
Maynard J. Hellman 54 General Counsel and Director
Arthur J. Press 70 Director
Evaldo F. Dupuy 55 Director
Thomas W. Dwyer 38 Director
Alyce B. Schreiber 35 Executive Vice President,
Secretary and Director
Vern E. Landeck 41 Chief Financial Officer
ROBERT D. PRESS has served as Chairman of the Board of the Company
since August 1997 and as Chief Executive Officer and a Director of the Company
since its inception in September 1993. From September 1993 through May 1999, Mr.
Press also served as President of the Company. Mr. Press devotes all of his
business time and efforts to the affairs of the Company. From June 1990 to
August 1993, Mr. Press served as President of Premier Lease Concepts, Inc., the
Company's predecessor. In addition, from 1989 to 1997, Mr. Press served as
President of Performance Capital Management, Inc., a holding company controlled
in part by Mr. Press, which had interests in brokerage and investment
management, and since October 1992, as President of Medley Group, Inc., a
principal stockholder of the Company ("Medley Group"). Mr. Press also served,
from 1991 to July 1997, as a licensed registered representative of PCM
Securities Limited, L.P., an NASD registered broker-dealer. Mr. Press holds a
B.A. degree in Economics from Brandeis University. From 1984 to 1986, Mr. Press
worked as a full-time trading systems consultant to several major Wall Street
firms, including The Longview Group. In 1986, Mr. Press joined Chemical Bank,
N.A. ("Chemical Bank") as an internal consultant in trading and capital markets,
and later in 1986, Mr. Press joined in the formation of Chemical Bank's Interest
Rate Arbitrage trading group, of which Mr.
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Press became the principal trader responsible for the global trading and
investment decisions of a multi- billion dollar portfolio. Mr. Press holds
Series 7 and 63 professional securities licenses. Mr. Press is the son of Arthur
J. Press, a Director of the Company.
CHARLES LITT has served as President and a Director of the Company
since May 1999. From 1996 to May 1999, Mr. Litt served as Vice President and
General Counsel for First Sierra Financial, Inc. ("First Sierra"), a publicly
held specialty finance company. Mr. Litt's responsibilities at First Sierra
included the negotiation of vendor program agreements and the structuring of
major leasing and finance transactions. From 1993 to 1996, Mr. Litt served as
President of Kinnard Capital Corporation, a subsidiary of Kinnard Investments, a
Minneapolis based investment company with broker dealer and financial focused
subsidiaries. Prior to 1993, Mr. Litt served in various positions for Banc One
Leasing Corporation.
MAYNARD J. HELLMAN has served as a Director of the Company since
January 1997 and as General Counsel of the Company since January 1999. From
January 1988 to December 1998, Mr. Hellman served as managing partner of the
Coral Gables, Florida based law firm of Hellman & Mass. From 1983 until 1988,
Mr. Hellman was engaged in the private practice of law and prior thereto, Mr.
Hellman served as a partner in the Miami, Florida law firm of Gilbert,
Silverstein and Hellman. Mr. Hellman holds a J.D. degree from the University of
Miami School of Law and a B.B.A degree in Accounting from the University of
Miami School of Business Administration.
ARTHUR J. PRESS has served as a Director of the Company since January
1998. Prior to his retirement in 1987, Mr. Press served as the Vice President of
Commercial Lending for Chemical Bank. Mr. Press is the father of Robert D.
Press, the Chairman of the Board and Chief Executive Officer of the Company.
EVALDO F. DUPUY has served as a Director of the Company since July
1998. Since 1989, Mr. Dupuy has served as a principal of Coast Partners
Securities, Inc., a boutique investment banking firm specializing in asset
backed and debt related facilities for its clients. Mr. Dupuy is a member of the
Florida Premium Finance Association, Florida Automobile Dealers Association,
Florida Mortgage Brokers Association and the Asset Based Lender Association.
THOMAS W. DWYER has served as a Director of the Company since March
1999. Since 1994, Mr. Dwyer has served as Vice President of Fuji Capital Markets
Corp., a derivatives trading house owned by Fuji Bank Tokyo. In addition, since
1998, Mr. Dwyer has served as a director of Securities Arbitrage Consulting
Group, a Chicago based risk software company.
ALYCE B. SCHREIBER has served as a Director and Executive Vice
President of the Company since March 1999 and as Vice President and Secretary of
the Company since November 1995. From June 1995 to October 1995, Ms. Schreiber
served as director of Club Operations for The Jockey Club, a Miami, Florida
resort. From December 1994 to May 1995, Ms. Schreiber worked in the business
development department of Sky Scientific, Inc., a publicly held entity with
subsidiaries in natural resources. From September 1991 to September 1994, Ms.
Schreiber served as Vice President and Secretary of the Company. Prior thereto,
Ms. Schreiber served as a tax specialist for Laventhol and Horwath, a certified
public accounting firm. Ms. Schreiber holds a J.D. degree from Cardozo School of
Law and a B.B.A. degree in Accounting from the Boston University School of
Management.
VERN E. LANDECK has served as Chief Financial Officer of the Company
since April 2000. From July 1997 to March 2000, Mr. Landeck served as Chief
Financial Officer of Prime Capital Corporation, a NASDAQ company engaged in the
commercial specialty finance business ("Prime"). From May 1996 to June 1997, Mr.
Landeck served as Vice President and Treasurer of Prime. From 1988 to 1996, Mr.
Landeck served as President of Atlantic Capital Exchange, Inc., a Chicago,
Illinois and Fairfax, Virginia based equipment financing company founded by Mr.
Landeck.
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During Fiscal 1999, none of the Company's executive officers,
Directors, or to the Company's knowledge, any beneficial owners of more than 10%
of the Company's outstanding shares of Common Stock failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934,
as amended.
The Company's Board of Directors has established Audit and Compensation
Committees. The Audit Committee meets with the management to consider the
adequacy of the internal controls of the Company and the objectivity of the
Company's financial reporting. The Audit Committee also meets with the Company's
independent accountants and with appropriate Company financial personnel about
these matters. The Compensation Committee administers the Company's 1997 Stock
Option Plan (the "Option Plan") and makes recommendations to the Board of
Directors with respect to the compensation of management. The Audit and
Compensation Committees are comprised of Messrs. Hellman, Dupuy, Press and Dwyer
and Ms. Schreiber.
The Company's Directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes, for the years indicated, all
compensation earned by or paid to the Company's Chief Executive Officer and to
each of the Company's other executive officers whose total annual salary and
bonus for Fiscal 1999 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION(S) YEAR SALARY BONUS COMPENSATION(1) OPTIONS (#)
- ------------------------------ ---- ------ ----- --------------- -----------
<S> <C> <C> <C> <C> <C>
Robert D. Press.................................. 1999 $275,000 $402,500(2) -- 117,500
Chairman and Chief Executive Officer 1998 $225,000 $195,750(2) -- 25,000
1997 $ 60,000 -- -- --
Charles Litt..................................... 1999(3) $156,250 -- $18,750(4) 200,000
President
Maynard J. Hellman............................... 1999(5) $180,000 -- -- 100,000
General Counsel
</TABLE>
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(1) Other than the compensation described herein, the Company did not pay such
executive officer any fringe benefits, perquisites or other compensation
in excess of the lesser of $50,000 or 10% of such executive officer's
salary and bonus during the years indicated.
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(2) Pursuant to Mr. Press' employment agreement with the Company, as amended,
Mr. Press was issued an aggregate of 160,000 shares and 120,000 shares of
the Company's Common Stock, respectively, during Fiscal 1999 and Fiscal
1998. The shares issued during Fiscal 1999 had an aggregate fair market
value, at their respective dates of issuance, of $342,500. The shares
issued during Fiscal 1998 had an aggregate fair market value, at their
respective dates of issuance, of $150,750.
(3) Mr. Litt joined the Company as its President in May 1999. Prior thereto,
Mr. Litt was not affiliated with the Company.
(4) Represents the aggregate amount of a monthly automobile and furnished
apartment allowance paid to Mr. Litt.
(5) Mr. Hellman began serving as General Counsel to the Company in January
1999. Prior thereto, Mr. Hellman was a Director but not an executive
officer or employee of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
to the executive officers listed in the Summary Compensation Table above during
Fiscal 1999.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO
NAME UNDERLYING EMPLOYEES IN EXERCISE PRICE EXPIRATION
- ---- OPTIONS GRANTED FISCAL YEAR (1) ($/SHARE) DATE
--------------- --------------- --------- ----
<S> <C> <C> <C> <C>
Robert D. Press 42,500 7.8% 3.025 03/24/04
25,000 4.6% 3.230 04/01/04
25,000 4.6% 5.115 07/01/04
25,000 4.6% 4.130 10/01/04
Charles Litt 100,000 18.4% 2.875 04/16/02
100,000 18.4% 3.310 12/31/02
Maynard J. Hellman 18,750 3.4% 3.000 01/01/04
25,000 4.6% 2.750 03/29/04
18,750 3.4% 2.940 04/01/04
18,750 3.4% 4.680 07/01/04
18,750 3.4% 3.750 10/01/04
</TABLE>
- --------------------------
(1) Based on options to purchase an aggregate of 543,500 shares of Common Stock
granted during Fiscal 1999 under the Company's Option Plan.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert D. Press -- -- 92,500/50,000 $306,175/ --
Charles Litt -- -- 100,000/100,000 $331,000/$331,000
Maynard J. Hellman -- -- 137,000/37,500 $455,125/ --
</TABLE>
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(1) Assumes a per share fair market value equal to $3.31, the last reported
sale price for shares of the Company's Common Stock in the
over-the-counter market on December 31, 1999.
COMPENSATION OF DIRECTORS
Each non-employee Director of the Company receives a fee of $500 for
each meeting (or Committee meeting) attended, together with reimbursement of
reasonable expenses incurred in attending such meeting.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of Messrs. Press, Litt,
Hellman and Landeck and Ms. Schreiber. The Company is not a party to any other
employment agreements.
Pursuant to Mr. Press' employment agreement with the Company, as
amended, Mr. Press has agreed to serve as Chairman of the Board and Chief
Executive Officer of the Company. This employment agreement expires on December
31, 2006 (subject to earlier termination for cause). Mr. Press' employment
agreement further provides for Mr. Press to be paid an annual salary of $350,000
per annum beginning January 1, 2000, with such annual salary increasing 10% per
annum thereafter. In addition, Mr. Press is entitled to receive a minimum cash
bonus of $75,000 for Fiscal 2000. Mr. Press is also entitled to receive 50,000
shares of Common Stock following the close of each calendar quarter during
Fiscal 2000 and 25,000 shares of Common Stock following the close of each
calendar quarter thereafter. Mr. Press' employment agreement also provides for
the annual grant to him of 100,000 incentive stock options under the Company's
Option Plan. These options have and shall have a six month vesting period and
are and will be exercisable over the five year period following their grant at a
price equal to 110% of the fair market value for shares of the Company's Common
Stock on the date of grant. In addition, Mr. Press' employment agreement
provided for the Company's issuance to him, during January, 2000, of 1,400,000
shares of Common Stock (such shares being subject to return and forfeiture at
the rate of 200,000 shares per year for each year, or portion thereof,
commencing January 1, 2000 and ending December 31, 2006, that Mr. Press fails to
remain in the employ of the Company as a result of his voluntary termination or
termination for cause). Moreover, Mr. Press' employment agreement requires the
Company, during the term of Mr. Press' employment, to distribute to Mr. Press 5%
of the gross value of all mergers and acquisitions completed by the Company
after December 15, 1999, such sum being paid in shares of the Company's Common
Stock based upon the average bid price for shares of the Company's Common Stock
during the ten consecutive trading days prior to the
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closing of the merger or acquisition. Subject to eligibility requirements, Mr.
Press is entitled to participate in all medical, stock option, pension and other
benefit plans that the Company may establish from time to time for its senior
management generally. Mr. Press' employment agreement is terminable by the
Company for cause (i.e., conviction of a felony, willful misconduct, dishonesty
or material breach of the agreement) at any time or in the event that Mr. Press
becomes disabled and, as a result, is unable to perform his duties under his
employment agreement for more than 60 consecutive days or for more than 90 days
during any 12-month period.
Pursuant to Mr. Litt's employment agreement with the Company, Mr. Litt
has agreed to serve as President of the Company. This employment agreement
expires on May 16, 2004 (subject to earlier termination for cause or
disability). Mr. Litt shall be paid an annual salary under this agreement of
$250,000. Mr. Litt was granted 100,000 stock options in connection with the
execution of his employment agreement and, pursuant to his employment agreement,
shall be granted an additional 100,000 stock options on each December 31 during
the term of the agreement. All such options have and shall have a six month
vesting period, an exercise period of 36 months following their date of grant
and an exercise price equal to the fair market value for shares of the Company's
Common Stock on their date of grant less the maximum allowable discount which
will not create income to Mr. Litt or an expense to the Company. In addition,
the Company provides Mr. Litt with a furnished apartment and an automobile
during the term of his employment. Mr. Litt may nonetheless terminate his
affiliation with the Company and continue to receive benefits and compensation
under his employment agreement for the lesser of 24 months following his
termination of employment or the remaining term under his employment agreement
if the Company is convicted of a felony within which Mr. Litt had no knowledge
or complicity, or an officer, Director or employee of the Company is convicted
of a felony and the Company, notwithstanding Mr. Litt's request, refuses to
discharge such person, or the Company requires Mr. Litt to relocate his
residence from Atlanta, Georgia to South Florida. Subject to eligibility
requirements, Mr. Litt is entitled to participate in all medical, stock option,
pension and other benefit plans the Company may establish from time to time for
its senior management generally. Mr. Litt has agreed, generally, not to compete
with the Company during the term of his employment and for the 18-month period
immediately thereafter.
Pursuant to Mr. Hellman's employment agreement with the Company, as
amended, Mr. Hellman has agreed to serve as General Counsel to the Company,
giving and rendering legal services. This employment agreement expires on
December 31, 2004, subject to (i) automatic annual extensions unless written
notice of expiration is provided by Mr. Hellman or the Company and (ii) earlier
termination for cause or disability. Mr. Hellman's salary for Fiscal 1999 under
this agreement was $180,000. Commencing with Fiscal 2000, Mr. Hellman's salary
increases annually by the lesser of the then cost of living increase, if any, or
5%. Mr. Hellman was granted 75,000 incentive stock options in connection with
the execution of his employment agreement and, pursuant to his employment
agreement, shall be granted an aggregate of 75,000 incentive stock options
during each year of his employment agreement. All such incentive stock options
have and shall have a six month vesting period and are and will be exercisable
over the five year period following their grant at a price equal to the fair
market value for shares of the Company's Common Stock at the date of grant. In
addition, Mr. Hellman's employment agreement requires the Company, during the
term of Mr. Hellman's employment, to distribute to Mr. Hellman 2.5% of the gross
value of all mergers and acquisitions completed by the Company after December
16, 1999, such sum being paid in shares of the Company's Common Stock based upon
the average bid price for shares of the Company's Common Stock during the ten
consecutive trading days prior to the closing of the merger or acquisition.
Subject to eligibility requirements, Mr. Hellman is entitled to participate in
all medical, stock option, pension and other benefit plans the Company may
establish from time to time for its senior management generally.
Pursuant to Ms. Schreiber's employment agreement with the Company, Ms.
Schreiber has agreed to serve as Executive Vice President of the Company. This
employment agreement expires on December 31, 2002 (subject to earlier
termination for cause or disability). Ms. Schreiber's annual salary for Fiscal
1999
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under this agreement was $85,000, and such salary increases annually by $5,000
increments during the term of her employment agreement. Ms. Schreiber's
employment agreement further provides that she will be granted an aggregate of
50,000 incentive stock options during each year of her employment agreement. All
such incentive stock options have and shall have a six month vesting period and
are and will be exercisable over the five year period following their grant at a
price equal to the fair market value for shares of the Company's Common Stock at
the date of grant. Subject to eligibility requirements, Ms. Schreiber is
entitled to participate in all medical, stock option, pension and other benefit
plans the Company may establish from time to time for its senior management
generally. Ms. Schreiber has agreed, generally, not to compete with the Company
during the term of her employment and for the 18-month period immediately
thereafter.
Pursuant to Mr. Landeck's employment agreement with the Company, Mr.
Landeck has agreed to serve as Chief Financial Officer of the Company. This
employment agreement expires on March 31, 2003 (subject to earlier termination
for cause or disability). Mr. Landeck's annual salary under this agreement is
$175,000. In addition, Mr. Landeck is eligible to participate in an Executive
Bonus Pool to be established by the Company during Fiscal 2000. Mr. Landeck's
employment agreement further provides that he will be granted an aggregate of
75,000 incentive stock options during each year of his employment agreement. All
such incentive stock options have and shall have a six month vesting period and
are and will be exercisable over the three year period following their grant at
a price equal to the fair market value for shares of the Company's Common Stock
at the date of grant. Subject to eligibility requirements, Mr. Landeck is
entitled to participate in all medical, stock option, pension and other benefit
plans the Company may establish from time to time for its senior management
generally. Mr. Landeck has agreed, generally, not to compete with the Company
during the term of his employment and for the 24 month period immediately
thereafter.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information known to the Company
as of April 27, 2000 relating to the beneficial ownership of shares of the
Company's Common Stock by (i) each person known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding shares of
Common Stock, (ii) each Director, (iii) each executive officer and (iv) all
Directors and executive officers of the Company as a group. Unless otherwise
indicated, the address of each person listed is 150 South Pine Island Road,
Suite 500, Plantation, Florida 33324:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- --------------------------------- ---------------------------- ------------------------------
<S> <C> <C>
Medley Group, Inc. 1,005,090(2) 6.94%
Robert D. Press 4,050,148(2)(3) 26.81%
Arthur J. Press 47,336(4) *
1268 Hemlock Farms
Hawley, PA 18428
Maynard Hellman 1,119,500(5) 7.38%
Charles Litt 102,000(6) *
Evaldo F. Dupuy 70,000(7) *
3911 Riviera Drive
Coral Gables, FL 33134
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Thomas W. Dwyer 46,240(8) *
2 Hathaway Drive
Princeton Junction, NJ 08550
Alyce B. Schreiber 95,100(9) *
Vern Landeck -0-(10) -0-
Herb Black
46 Belvedere Place 1,350,000 9.33%
Westmont, Quebec
Canada H341G6
All Directors and executive
officers as a group (8 persons) 5,530,324(2-10) 34.29%
</TABLE>
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* Represents less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Annual Report
upon the exercise or conversion of options, warrants or other convertible
securities. Each beneficial owner's percentage ownership is determined by
assuming that options, warrants or other convertible securities that are
held by such person (but not those held by any other person) and that are
exercisable or convertible within 60 days from the date of this Annual
Report have been exercised or converted. Unless otherwise noted, the
Company believes that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock beneficially
owned by them.
(2) Mr. Press, the Chief Executive Officer and Chairman of the Board of the
Company, may be deemed to control Medley Group. As such, Mr. Press may be
deemed to own beneficially all Common Stock of the Company beneficially
owned by Medley Group.
(3) Includes 456,590 shares of Common Stock issuable upon the conversion of
2,136,844 shares of Series A Preferred Stock of the Company (the "Series A
Preferred Stock") owned by Mr. Press. Also includes (i) 9,500 shares of
Common Stock issuable upon the exercise of certain warrants that are
exercisable at any time on or prior to September 30, 2000 at $1.50 per
share, (ii) 25,000 shares of Common Stock issuable upon the exercise of
certain options that are exercisable at any time on or prior to December
31, 2003 at $3.30 per share, (iii) 42,500 shares of Common Stock issuable
upon the exercise of certain options that are exercisable at any time on or
prior to March 29, 2004 at $3.025 per share, (iv) 25,000 shares of Common
Stock issuable upon the exercise of certain options that are exercisable at
any time on or prior to April 3, 2004 at $3.23 per share, (v) 25,000 shares
of Common Stock issuable upon the exercise of certain options that are
exercisable at any time on or prior to July 1, 2004 at $5.115 per share,
(vi) 25,000 shares of Common Stock issuable upon the exercise of certain
options that are exercisable at any time on or prior to October 3, 2004 at
$4.13 per share and (vii) 25,000 shares of Common Stock issuable upon the
exercise of certain options exercisable after June 3, 2000, but on or prior
to January 3, 2005, at $5.37 per share. Does not include an additional
25,000 shares of Common Stock issuable upon the exercise, after October 3,
2000, but on or prior to April 3, 2005, of certain options at $5.37 per
share. Pursuant to Mr. Press' employment agreement with the Company, up to
1,400,000 of these shares are subject to return and forfeiture at the rate
of 200,000 shares per year for each year, or portion thereof, commencing
January 1, 2000 and ending December 31, 2006, that Mr. Press fails to
remain in the employ of the Company as a result of his voluntary
termination or termination for cause. Robert D. Press is the son of Arthur
J. Press. Robert Press disclaims beneficial ownership over all shares of
Common Stock beneficially owned by Arthur J. Press.
(4) These shares are owned by an affiliate of Mr. Press. Includes 21,925 shares
of Common Stock issuable upon the conversion of 102,500 shares of Series A
Preferred Stock owned by an affiliate of Mr. Press and 10,000 shares of
Common Stock issuable upon the exercise of certain warrants that are
exercisable at any time on or prior to
- 10 -
<PAGE> 11
November 12, 2002 at $2.875 per share. Arthur J. Press is the father of
Robert D. Press. Mr. Press disclaims beneficial ownership owner all shares
of Common Stock beneficially owned by Robert D. Press.
(5) Includes 500,000 shares of Common Stock issuable upon the exercise of
certain warrants exercisable until December 31, 2002 at $2.50 per share,
(ii) 75,000 shares of Common Stock issuable upon the exercise of certain
options that are exercisable at any time on or prior to December 17, 2003
at $2.50 per share, (iii) 18,750 shares of Common Stock issuable upon the
exercise of certain options that are exercisable at any time on or prior to
January 1, 2004 at $3.00 per share, (iv) 25,000 shares of Common Stock
issuable upon the exercise of certain options that are exercisable at any
time on or prior to March 29, 2004 at $2.75 per share, (v) 18,750 shares of
Common Stock issuable upon the exercise of certain options that are
exercisable at any time on or prior to April 3, 2004 at $2.94 per share,
(vi) 18,750 shares of Common Stock issuable upon the exercise of certain
options that are exercisable at any time on or prior to July 1, 2004 at
$4.68 per share, (vii) 18,750 shares of Common Stock issuable upon the
exercise of certain options that are exercisable at any time on or prior to
October 3, 2004 at $3.75 per share and (viii) 18,750 shares of Common Stock
issuable upon the exercise of certain options exercisable after June 3,
2000, but on or prior to January 3, 2005, at $3.438 per share. Does not
include 382,500 shares of Common Stock the Company is contractually
obligated to issue to Mr. Hellman in annual installments through 2003
arising out of Mr. Hellman's sale to the Company of his interest in certain
of the Company's subsidiaries and a Florida based title insurance company
or an additional 18,750 shares of Common Stock issuable upon the exercise,
after October 3, 2000, but on or prior to April 3, 2005, of certain options
at $4.88 per share.
(6) Includes 100,000 shares of Common Stock issuable upon the exercise of
certain options that are exercisable at any time on or prior to April 16,
2002 at $2.875 per share, but does not include 100,000 shares of Common
Stock issuable upon the exercise, after June 30, 2000, but on or prior to
December 31, 2002, of certain options at $3.31 per share.
(7) Includes 50,000 shares of Common Stock issuable upon the exercise of
certain warrants that are exercisable at any time on or prior to June 8,
2001 at $1.25 per share and 10,000 shares of Common Stock issuable upon the
exercise of certain warrants that are exercisable at any time on or prior
to November 12, 2002 at $2.875 per share.
(8) Represents shares of Common Stock issuable upon the conversion of 169,419
shares of Series A Preferred Stock owned by Mr. Dwyer. Includes 10,000
shares of Common Stock issuable upon the exercise of certain warrants that
are exercisable at any time on or prior to November 12, 2002 at $2.875 per
share.
(9) Includes 10,000 shares of Common Stock issuable upon the exercise of
certain options that are exercisable at any time on or prior to June
30,2000 at $1.20 per share, (ii) 12,000 shares of Common Stock issuable
upon the exercise of certain options that are exercisable at any time on or
prior to August 10, 2000 at $2.00 per share, (iii) 28,000 shares of Common
Stock issuable upon the exercise of certain options that are exercisable at
any time on or prior to November 16,2000 at $2.00 per share, (iv) 12,500
shares of Common Stock issuable upon the exercise of certain options that
are exercisable at any time on or prior to March 31, 2001 at $3.00 per
share, (v) 12,500 shares of Common Stock issuable upon the exercise of
certain options that are exercisable at any time on or prior to June 30,
2001 at $4.63 per share and (vi) 12,500 shares of Common Stock issuable
upon the exercise of certain options that are exercisable at any time on or
prior to September 30, 2001 at $3.94 per share. Does not include 12,500
shares of Common Stock issuable upon the exercise, after June 30, 2000, but
on or prior to December 30,2002, of certain options at $2.938 per share and
12,500 shares of Common Stock issuable upon the exercise, after September
30, 2000, but on or prior to March 31, 2003, of certain options at $5.00
per share.
(10) Excludes 18,750 shares of Common Stock issuable upon the exercise, after
October 3, 2000, but on or prior to April 3, 2003, of certain options at
$3.55 per share.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1996, the Company sold Maynard Hellman, General Counsel and
a Director of the Company, in consideration for $100,000, warrants to purchase
up to 1,000,000 shares of Common Stock of the Company (the "1996 Warrants"). The
1996 Warrants were exercisable until July 22, 2002 at an exercise price of $5.00
per share. In October 1998, Mr. Hellman provided the Company with a $150,000
bridge loan. The current outstanding principal balance thereunder is $100,000
and is payable on June 30, 2000. In
- 11 -
<PAGE> 12
connection with this bridge loan, the Company and Mr. Hellman agreed to
terminate the 1996 Warrants and the Company issued Mr. Hellman warrants to
purchase, at anytime through December 2002, up to 500,000 shares of Common Stock
at an exercise price of $2.50 per share.
In connection with the IPO, the Company issued 15,000 shares of Common
Stock to Mr. Robert Press, Chairman of the Board and Chief Executive Officer of
the Company, in satisfaction of certain redemption obligations of the Company
owing to him with respect to 15,000 other shares of Common Stock. These shares
of Common Stock were originally transferred and assigned by Medley Group to Mr.
Press in January 1996 in consideration for services performed by Mr. Press on
behalf of the Company . Also, in connection with the IPO, the Company issued Mr.
Press and an affiliate of Mr. Arthur J. Press, a Director of the Company,
approximately 13,740, and 2,880 shares of Common Stock, respectively, in
satisfaction of approximately $75,590, and $15,860 of declared but unpaid Series
A Preferred Stock dividends owing them.
During the second quarter of 1998, the Company provided Medley Group a
financial accommodation in consideration for $150,000 per annum. This fee is
payable each year the Company continues to extend such financial accommodation.
Specifically, the Company posted a $1.475 million standby letter of credit on
behalf of Medley Group. This letter of credit was posted for the purpose of
securing the performance of certain equipment leases sold by Medley Group to an
unrelated party. The Company's financial exposure under this letter of credit
has been collateralized by the pledge by Medley Group to the Company of 750,000
shares of the Company's Common Stock owned by Medley Group, which Common Stock,
for purposes of the pledge, has an agreed upon value of $2.50 per share.
During December 1998, the Company agreed to forgive an outstanding loan
in the then outstanding amount of $68,000 made to Mr. Robert Press at the rate
of 20% per year beginning during Fiscal 1999.
On December 31, 1999, the Company entered into an agreement with Medley
Group pursuant to which, among other things, the manner in which the then
$663,089.24 outstanding intercompany debt owing to the Company by Medley Group
was scheduled for repayment. Specifically, Medley Group paid the Company $50,000
upon the execution of such agreement and agreed to pay the Company the remaining
balance by December 31, 2004.
During January 1999, the Company, through Ameri-Cap Mortgage, acquired
from Mr. Maynard Hellman, 80% of the outstanding capital stock of Suncoast Title
Company, Inc., a Florida title insurance company ("Suncoast"), for 50,000 shares
of the Company's Common Stock. The Company has agreed to acquire the remaining
outstanding capital stock of Suncoast from Mr. Hellman through 2003 for an
aggregate of 50,000 additional shares of Common Stock.
During February 1999, the Company, through its Ameri-Cap Factors
subsidiary, acquired from Mr. Hellman .6% of the outstanding capital stock of
Ameri-Med Financial Services, Inc., a Florida medical receivable financing
business ("Ameri-Med Financial"), for 140,000 shares of Common Stock. Ameri-Cap
Factors previously owned 80% of the outstanding capital stock of Ameri-Med
Financial. The Company has agreed, beginning in February 2000, and in February
of each year thereafter through 2004, to acquire an additional .6% of the
capital stock of Ameri-Med Financial owned by Mr. Hellman for 35,000 additional
shares of Common Stock.
During February 1999, the Company acquired from Mr. Hellman the right
to exchange Mr. Hellman's 7% interest in Ameri-Cap Mortgage for 400,000 shares
of Common Stock. The Company has agreed to exchange 1.4% of Mr. Hellman's
interest in Ameri-Cap Mortgage annually, beginning in February 2000, for 80,000
shares of Common Stock.
Except as set forth in this Item 12 or in the Executive Compensation
section of this Annual Report, during the last two fiscal years of the Company,
there has not been any transaction or series of transactions
- 12 -
<PAGE> 13
to which the Company was or is a party in which the amount involved exceeded or
exceeds $60,000 and in which any Director, executive officer, holder of more
than 5% of the Company's Common Stock or any member of the immediate family of
any of the foregoing persons had or will have a direct or indirect material
interest.
ITEM 13. EXHIBITS
The following are filed as part of this Report:
(a) FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Certified Public Accountants F-2
Consolidated Balance Sheet at December 31, 1999 F-4
Consolidated Statements of Operations for each of the two
years in the period ended December 31, 1999 F-5
Consolidated Statements of Changes in Stockholders' Equity
for each of the two years in the period ended
December 31, 1999 F-6
Consolidated Statements of Cash Flows for each of the
two years in the period ended December 31, 1999 F-7
Notes to Consolidated Financial Statements F-9
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
None
(c) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation of the Company
(the "Restated Certificate") (Incorporated by reference to
Exhibit 3.1 to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form SB-2 (File No. 333-24937)).
3.2 Certificate of Amendment to the Restated Certificate
(Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30,
1998).
3.3 Certificate of Designation, Rights and Preferences relating to
shares of the Company's Series A 10% Convertible Preferred Stock
(Incorporated by reference to Exhibit 3.2 to Post-Effective
Amendment No. 2 to the Company's Registration Statement on Form
SB-2 (File No. 333- 24937)).
3.4 Certificate of the Powers, Designations, Preferences and Rights
of the Company's Series B Preferred Stock ( Incorporated by
reference to Exhibit 3.4 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998).
3.5 Certificate of Designation, Rights and Preferences relating to
shares of the Company's Series C 6% Convertible Preferred Stock
(Incorporated by reference to Exhibit 3.1 to Amendment No. 2 to
the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1999).
- 13 -
<PAGE> 14
3.6 By-Laws of the Company (Incorporated by reference to Exhibit 3.3
to Post-Effective Amendment No. 2 to the Company's Registration
Statement on Form SB-2 (File No. 333-24937)).
4.1 Specimen Common Stock Certificate (Incorporated by reference to
Exhibit 4.1 to Post- Effective Amendment No. 2 to the Company's
Registration Statement on Form SB-2 (File No. 333-24937)).
4.2 Specimen Warrant Certificate (included as Exhibit A to Exhibit
4.3) (Incorporated by reference to Exhibit 4.2 to Post-
Effective Amendment No. 2 to the Company's Registration
Statement on Form SB-2 (File No. 333-24937)).
4.3 Warrant Agency Agreement, dated December 1997, between the
Company and American Stock Transfer & Trust Company
(Incorporated by reference to Exhibit 4.3 to Post-Effective
Amendment No. 2 to the Company's Registration Statement on Form
SB-2 (File No. 333- 24937)).
10.1 Employment Agreement, dated as of March 1, 1998 between Robert
D. Press and the Company (Incorporated by reference to Exhibit
10.1 to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997).
10.2 Amendment, dated December 31, 1998, to Employment Agreement
between Robert D. Press and the Company (Incorporated by
reference to Exhibit 10.2 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998).
10.3 Second Amendment to Employment Agreement, dated December 15,
1999, between Robert D. Press and the Company.
10.4 Employment Agreement, dated December 23, 1998, between the
Company and Maynard J. Hellman (Incorporated by reference to
Exhibit 10.33 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998).
10.5 Amendment No. 1 to Employment Agreement, dated December 16,
1999, between Maynard J. Hellman and the Company.
10.6 Employment Agreement, dated as of January 4, 1999, between Alyce
Schreiber and the Company.
10.7 Employment Agreement, dated as of May 16, 1999, between Charles
Litt and the Company.
10.8 Employment Agreement, dated April 1, 2000, between Vern Landeck
and the Company.
10.9 Loan and Security Agreement, dated May 8, 1998, between
Ameri-Cap Factors and FINOVA (Incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on Form 10- KSB for
the year ended December 31, 1997).
10.10 Continuing Corporate Guaranty, dated May 8, 1998, issued by the
Company to FINOVA (Incorporated by reference to Exhibit 10.29 to
the Company's Annual Report on Form 10- KSB for the year ended
December 31, 1997).
10.11 Mortgage Loan Warehousing and Security Agreement, dated March
26, 1999, among Suntrust Bank, Miami, National Association,
Ameri-Cap Mortgage, Ameri-Cap Lending Corp. and
- 14 -
<PAGE> 15
Ameri-Cap Mortgage Services, Inc. (Incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 1999).
10.12 Stock Purchase Agreement, dated October 1999, among the Company,
TAC, Travelers and the Shareholders of Travelers (Incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended March 31, 1999).
10.13 First Amendment, dated October 1999, to Stock Purchase Agreement
dated October 1999, among the Company, TAC, Travelers and the
Shareholders of Travelers (Incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999).
10.14 Loan and Security Agreement, dated September 23, 1999, between
FINOVA and TAC, TLC and Trace, as amended (Incorporated by
reference to Exhibit 10.1 to Amendment No. 2 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended September
30, 1999).
10.15 Securities Purchase Agreement, dated as of November 5, 1999,
among the Company, Esquire Trade & Finance Inc., Austinvest
Anstalt Balzers, Nesher Inc., Amro International, S.A., Altra
Trading & Investments Ltd., Ellis Enterprises and Ronald Nash
(Incorporated by reference to Exhibit 10.2 to Amendment No. 2 to
the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1999).
10.16 Form of Preferred Warrant (Incorporated by reference to Exhibit
10.3 to Amendment No. 2 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1999).
10.17 Loan and Security Agreement, dated as of November 5, 1999,
between TAC and BHC (Incorporated by reference to Exhibit 10.4
to Amendment No. 2 to the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999).
10.18 Form of Travelers Warrant (Incorporated by reference to Exhibit
10.5 to Amendment No. 2 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1999).
10.19 Form of Finantra Warrant (Incorporated by reference to Exhibit
10.6 to Amendment No. 2 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1999).
10.20 Gateway Consumer Finance Contracts Program, effective as of
January 6, 2000, between the Company, TAC and Gateway
(Incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K for an event dated January 6, 2000).
10.21 Stock Pledge Agreement, dated December 24, 1997, between Medley
Group and the Company (Incorporated by reference to Exhibit
10.30 to the Company's Annual Report on Form 10- KSB for the
year ended December 31, 1997).
10.22 Letter Agreement, dated December 24, 1997, between Medley Group
and the Company (Incorporated by reference to Exhibit 10.31 to
the Company's Annual Report on Form 10- KSB for the year ended
December 31, 1997).
10.23 Promissory Note, dated February 4, 1998, issued by Robert D.
Press to the Company in the principal amount of $60,000
(Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended March 31,
1998).
- 15 -
<PAGE> 16
10.24 Promissory Note, dated March 9, 1998, issued by Tract 4, Inc. to
the Company in the principal amount of $200,000 (Incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1998).
10.25 Stock Purchase Agreement, dated December 31, 1998, between
Ameri-Cap Mortgage, Maynard J. Hellman and the Company
(Incorporated by reference to Exhibit 10.34 to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1998).
10.26 Stock Exchange Agreement, dated December 16, 1998, between
Maynard J. Hellman, AmeriCap Factors and the Company
(Incorporated by reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1998).
10.27 Stock Exchange Agreement, dated December 16, 1998, between
Maynard J. Hellman and the Company (Incorporated by reference to
Exhibit 10.36 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998).
10.28 Warrant for 500,000 shares of Common Stock, dated October 16,
1998, issued by the Company to Maynard J. Hellman (Incorporated
by reference to Exhibit 10.37 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998).
10.29 Agreement, dated December 31, 1998, between the Company and
Medley Group (Incorporated by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10- KSB for the year ended
December 31, 1998).
10.30 Lease Agreement, dated November 4, 1998, between SKW II Real
Estate Partnership and the Company (Incorporated by reference to
Exhibit 10.39 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998).
10.31 The Company's 1997 Stock Option Plan (Incorporated by reference
to Exhibit 10.06 to PostEffective Amendment No. 2 to the
Company's Registration Statement on Form SB-2 (File No.
333-24937)).
16 Letter from Daszkal, Bolton, Manela, Devlin & Company
(Incorporated by reference to Exhibit 16 to the Company's
Current Report on Form 8-K for an event dated January 24, 2000).
21 Operating Subsidiaries of the Company
27 Financial Data Schedule
- 16 -
<PAGE> 17
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
FINANTRA CAPITAL, INC.
Date: April 28, 2000 By: /s/ ROBERT D. PRESS
--------------------------------------
Robert D. Press, Chairman of the Board
Date: April 28, 2000 By: /s/ VERN E. LANDECK
-------------------------------------
Vern E. Landeck, Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, as amended, this
Amendment has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ ROBERT D. PRESS Chairman of the Board and Chief Executive Officer April 28, 2000
- ----------------------
Robert D. Press
/s/ CHARLES LITT President and Director April 28, 2000
- ----------------------
Charles Litt
/s/ MAYNARD J. HELLMAN General Counsel and Director April 28, 2000
- ----------------------
Maynard J. Hellman
/s/ ARTHUR J. PRESS Director April 28, 2000
- ----------------------
Arthur J. Press
/s/ EVALDO F. DUPY Director April 28, 2000
- ----------------------
Evaldo F. Dupuy
/s/ THOMAS W. DWYER Director April 28, 2000
- ----------------------
Thomas W. Dwyer
/s/ ALYCE B. SCHREIBER Executive Vice President, Secretary and Director April 28, 2000
- ----------------------
Alyce B. Schreiber
</TABLE>
- 17 -
<PAGE> 18
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Consolidated Financial Statements:
Reports of Independent Certified Public Accountants F-2
Consolidated Balance Sheet at December 31, 1999 F-4
Consolidated Statement of Operations for each of the two years
in the period ended December 31, 1999 F-5
Consolidated Statements of Changes in Stockholders' Equity for
each of the two years in the period ended December 31, 1999 F-6
Consolidated Statements of Cash Flows for each of the two years
in the period ended December 31, 1999 F-7
Notes to Consolidated Financial Statements F-9
<PAGE> 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Finantra Capital, Inc.
In our opinion, based on our audit and the report of other auditors, the
accompanying consolidated balance sheet and the related consolidated statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Finantra Capital, Inc. and its
subsidiaries at December 31, 1999, and the results of their operations and their
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States. 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 did not audit the
financial statements of Ameri-Cap Mortgage Group, Inc., an 80%-owned subsidiary,
which statements reflect total assets of $7.7 million at December 31, 1999 and
total revenues of $3.2 million for the year then ended. Those statements were
audited by other auditors whose report thereon has been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for
Ameri-Cap Mortgage Group, Inc., is based solely on the report of the other
auditors. We conducted our audit of these statements in accordance with auditing
standards generally accepted in the United States, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit and the report of other auditors provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
March 30, 2000
F-2
<PAGE> 20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Finantra Capital, Inc. and subsidiaries
We have audited the consolidated balance sheet of Finantra Capital, Inc.
and subsidiaries, as of December 31, 1998, and the related accompanying
consolidated statements of operations, changes in stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the management of Finantra Capital, Inc. and subsidiaries.
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 audits 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 Finantra Capital, Inc. and
subsidiaries, as of December 31, 1998, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
Daszkal Bolton Manela Devlin & Co.
Boca Raton, Florida
March 12, 1999
F-3
<PAGE> 21
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and cash equivalents $ 1,214,315
Certificate of deposit-restricted 1,450,000
Loans available for sale 6,065,166
Finance receivables, net 38,172,653
Lease receivables, net 1,232,854
Other receivables, net 668,661
Due from related parties 1,756,474
Property and equipment, net 573,810
Goodwill, net 10,998,940
Other assets 4,402,647
------------
Total assets $ 66,535,520
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 2,657,068
Client reserves 4,030,180
Client payouts 1,251,541
Credit balances of factoring clients 840,632
Lines of credit 29,843,029
Notes payable and other interest bearing obligations 8,610,309
Notes payable - related parties 30,000
Capital leases 109,643
------------
Total liabilities 47,372,402
------------
Commitments and contingencies (Note 20)
Stockholders' equity:
Preferred stock, $.01 par value; 15,000,000 shares authorized,
3,231,784 issued:
Series A redeemable convertible preferred stock,
2,728,004 shares issued and outstanding 27,279
Series B convertible preferred stock, $.01 par value,
500,000 shares authorized; 500,000 shares issued and outstanding 5,000
Series C 6% convertible preferred stock, $.01 par value,
3,800 shares authorized; 3,780 shares issued and outstanding 38
Common Stock, $.01 par value, 50,000,000 shares authorized;
9,329,161 shares issued and outstanding 93,291
Additional paid-in capital 25,388,036
Accumulated deficit (6,350,526)
------------
Total stockholders' equity 19,163,118
------------
Total liabilities and stockholders' equity $ 66,535,520
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 22
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Broker fees and gains on sales of mortgage loans $ 3,222,823 $ 529,137
Finance income 2,716,763 276,199
Factoring fee income 1,476,019 889,791
Leasing income 367,458 3,440,434
Servicing income 682,611 --
Consulting and advisory fees 972,000 308,470
Medical billing fees 531,025 709,521
Other income 1,635,315 3,581,388
------------ ------------
Total revenues 11,604,014 9,734,940
------------ ------------
EXPENSES:
Compensation and employee benefits 6,306,211 4,186,001
Consulting and marketing fees 1,443,738 230,031
Leasing and equipment cost -- 3,189,162
Occupancy and equipment 1,767,899 370,326
Legal and accounting 455,350 454,113
Interest expense 1,389,295 201,276
Provision for credit losses 482,727 1,107,269
Indirect loan expenses 420,006 --
Other expenses 1,229,765 949,054
------------ ------------
Total expenses 13,494,991 10,687,232
------------ ------------
Loss before income taxes and minority interest (1,890,977) (952,292)
Income tax benefit 355 65,960
Minority interest in net (income) loss of consolidated
subsidiaries 9,776 (11,749)
------------ ------------
Net loss (1,880,846) (898,081)
Preferred stock dividends (477,550) (294,604)
------------ ------------
Net loss applicable to common stockholders $ (2,358,396) $ (1,192,685)
============ ============
Net loss per basic and diluted common share
$ (.34) $ (.32)
============ ============
Weighted average common shares outstanding
6,944,692 3,691,956
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE> 23
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Total
------------------- ------------------- Treasury Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Stock Capital Deficit Equity
--------- ------- --------- ------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 2,958,817 $29,586 2,667,382 $26,674 $ -- $ 6,947,803 $(2,799,445) $ 4,204,618
Net loss -- -- -- -- -- -- (898,081) (898,081)
Preferred stock dividends -- -- -- -- -- -- (294,604) (294,604)
Common stock issued -- -- 30,000 300 -- -- -- 300
Common stock issued for
acquisitions -- -- 975,855 9,758 -- 3,167,588 -- 3,177,346
Common stock issued for
services -- -- 412,600 4,126 -- 574,854 -- 578,980
Preferred stock Series B
issued 500,000 5,000 -- -- -- 495,000 -- 500,000
Private placement, net of
issuance costs -- -- -- -- -- 400,578 -- 400,578
Repurchase of common stock -- -- -- -- (34,644) -- -- (34,644)
Repurchase and retirement
of common stock -- -- (10,000) (100) -- (54,900) -- (55,000)
Common stock rescission -- -- -- -- -- (100,000) -- (100,000)
Sale of common stock, net
of issuance costs -- -- 36,290 363 -- 19,226 -- 19,589
--------- ------- --------- ------- -------- ----------- ----------- -----------
Balance at December 31, 1998 3,458,817 34,586 4,112,127 41,121 (34,644) 11,450,149 (3,992,130) 7,499,082
Net loss (1,880,846) (1,880,846)
Preferred stock dividends -- -- -- -- -- -- (477,550) (477,550)
Exercise of warrants for
common stock -- -- 140,000 1,400 -- 198,170 -- 199,570
Common stock issued for
acquisitions -- -- 2,417,500 24,175 -- 5,858,105 -- 5,882,280
Common stock issued for
services -- -- 279,600 2,796 -- 520,098 -- 522,894
Common stock issued for
debt conversion 155,000 1,550 308,450 310,000
Preferred stock Series C
issued 3,780 38 -- -- -- 3,779,962 -- 3,780,000
Preferred stock Series A
converted to common stock (230,813) (2,307) 49,637 496 24,892 23,081
Private placement, net of
issuance costs 2,039,872 20,399 2,773,780 2,794,179
Sale of common stock, net
of issuance costs -- -- 135,425 1,354 -- 369,430 -- 370,784
Purchase of treasury stock (31,150) (31,150)
Issuance of treasury stock 65,794 65,794
Issuance of warrants 105,000 105,000
---------- ------- --------- ------- ---------- ----------- ----------- -----------
Balance at December 31, 1999 3,231,784 32,317 9,329,161 93,291 -- 25,388,036 (6,350,526) $19,163,118
========== ======= ========= ======= ========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 24
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,880,846) $ (898,081)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 830,015 228,253
Provision for credit losses 482,727 1,107,269
Common stock issued for services 522,894 578,880
Changes in assets and liabilities:
Purchases of loans available for sale and
net originations of reeivables (97,706,142) (5,073,003)
Proceeds from sales of loans available
for sale 91,621,213 --
Increase (decrease) in accounts payable
and accrued expenses (19,477) 925,431
Increase in client reserves and client payouts 28,708
Increase in other assets (3,140,182) (78,898)
------------ ------------
Net cash used by operating activities (9,261,090) (3,210,149)
------------ ------------
Cash flows from investing activities:
Purchase of subsidiary (14,080,359) 46,044
Change in capital lease obligation -- (76,511)
Notes acquired for cash -- (1,012,000)
Increase in related party receivables (888,097) (792,964)
Decrease in certificate of deposit - restricted 25,000 225,000
Purchase of fixed assets (924,422) --
------------ ------------
Net cash used by investing activities (15,867,878) (1,610,431)
------------ ------------
Cash flows from financing activities:
Net increase in lines of credit 12,249,458 2,643,571
Proceeds from issuance of notes payable and
other ineterest bearing obligations 3,624,085 100,000
Repayment of preferred stock -- (322,361)
Proceeds from issuance of Series C
preferred stock 3,780,000
Repayments of notes payable and
other interest bearing obligations (83,334) (166,297)
Preferred stock dividends (204,375) 420,268
Issuance of common stock 6,107,269 (89,644)
Exercise of warrants for common stock 199,570 300,000
Prepayments of notes payable-related party (270,000) 500,000
Purchase of treasury stock (31,150) --
------------ ------------
Net cash provided by financing activities 25,371,523 3,385,537
------------ ------------
Net increase (decrease) in cash and cash equivalents 242,555 (1,435,043)
Cash and cash equivalents - beginning of period 971,760 2,406,803
------------ ------------
Cash and cash equivalents - end of period $ 1,214,315 $ 971,760
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE> 25
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Supplemental disclosures of cash flow
information:
Interest paid $ 1,003,933 $ 74,961
============ ============
Stock issued for acquisitions $ 3,177,346
============
Acquisition of businesses:
Fair value of assets acquired (44,728,039)
Liabilities assumed 21,128,039
Note payable issued 5,000,000
Stock issued 2,728,530
------------
Cash paid (15,871,470)
Less cash acquired 1,791,111
------------
Net cash paid $(14,080,359)
============
Supplemental disclosure of non-cash investing and
financing activities:
Exchange of notes payable for common stock $ 310,000
Assets acquired for stock 150,000
Exchange of preferred stock for common stock 23,081
Issuance of treasury stock for notes receivable 34,644
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-8
<PAGE> 26
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Finantra Capital, Inc., and subsidiaries (the "Company") is a Delaware
corporation headquartered in Plantation, Florida. The Company is a specialty
finance company, principally engaged in lending activities related to accounts
receivable factoring, equipment leasing, mortgage banking, consumer finance and
other types of specialty financing. The Company also provides accounting and
collections services to other companies.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
RECLASSIFICATION
Certain amounts included in the 1998 consolidated financial statements have been
reclassified to conform with the 1999 presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
In the normal course of business, the Company encounters significant economic
risk: credit risk, market risk and concentration of credit risk. Credit risk is
the risk of default on the Company's receivables portfolios that results from a
borrowers' inability or unwillingness to make contractually required payments.
Market risk includes interest rate risk. The Company is exposed to interest
rate risk to the degree that its interest-bearing liabilities mature or reprice
at different speeds, or different bases, than its interest-earning
assets. Market risk also reflects the risk of declines in the valuation of
loans held for sale, and in the value of the collateral underlying loans.
Concentration of credit risk refers to the risk that, if the Company extends a
significant portion of its total outstanding credit to borrowers in a specific
geographical area or industry or on the security of a specific form of
collateral, the Company may experience disproportionately high levels of
default and losses if those borrowers, or the value of such type of collateral,
is adversely affected by economic or other factors that are particularly
applicable to such borrowers or collateral.
CASH AND CASH EQUIVALENTS
The Company considers unrestricted highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
F-9
<PAGE> 27
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LOANS AVAILABLE FOR SALE
Residential mortgage loans originated by the Company which the Company does not
presently intend to hold to maturity are designated as loans available for sale
and are stated at the lower of cost, after consideration of deferred loan fees
and costs, or aggregate market value. Loan origination fees and certain direct
loan origination costs are deferred and included in the carrying value. Upon the
sale of a loan, the deferred loan fees and costs are included in the gain or
loss on sale. Gains and losses on disposal of such loans are computed on a
specific identification basis.
FINANCE RECEIVABLES
The Company both originates and acquires finance receivables. Finance
receivables include interest-bearing and precompute discount receivables. The
face amount of an interest bearing receivable equals the amount of cash loaned
or paid to acquire the receivable; unearned interest is not recorded. In a
precompute discount receivable, the amount of the cash loaned or paid to acquire
the receivable is less than the face amount of the receivable; the difference
represents unearned income to be earned over the life of the receivable.
Receivables that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding unpaid principal balances, reduced by an allowance for credit
losses, unearned income and net of any deferred fees or costs on
originated receivables, or unamortized premiums or discounts on purchased
receivables.
Finance income includes origination, commitment, delinquency and rollover fees
and prepayment penalties. Origination and commitment fees and certain direct
origination costs are capitalized and recognized as an adjustment of the yield
of the related receivable. Delinquency fees are recognized when charged, and
prepayment penalties are recognized when the receivable is prepaid.
Finance income also includes interest income and the accretion of the discount
recorded on discount loans. The discount is accreted into interest income as a
yield adjustment using the interest method over the contractual maturity of the
finance receivable. In general, when finance receivables become 90 days past
due, accretion of the discount and interest income recognition is discontinued.
Factoring fee income represents fees on purchased factoring receivables that are
earned over the period services are rendered based on rates stipulated in the
factoring agreement.
CONSULTING AND ADVISORY FEES
Consulting and advisory fees are generated by the Company for services rendered
in the area of structuring and obtaining financing for other companies.
LEASE RECEIVABLES
Lease receivables are reported as the sum of the minimum lease payments
receivable plus the estimated residual value of the leased property, less
unearned income and the allowance for credit losses.
Leasing income represents the unearned income which is amortized to income over
the life of the underlying lease term using the effective interest method to
produce a constant periodic rate of return on the net investment in the lease.
OTHER RECEIVABLES
Other receivables are reported at the contractual amount of the receivable.
Interest income is recognized on the accrual method.
F-10
<PAGE> 28
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level that management, based
upon an evaluation of known and inherent risks in the finance, lease and other
receivables portfolios, considers adequate to provide for credit losses.
Management's periodic evaluation of the allowance for credit losses is based on
an analysis of the portfolios, taking into consideration historical loss
experience, economic conditions and trends, collateral values and other relevant
factors. Future adjustments to the allowance for credit losses may be necessary
if actual experience differs from the assumptions used by management. Credit
exposures deemed to be uncollectible are charged against the allowance for
credit losses and recoveries of previously charged off amounts are credited to
the allowance for credit losses.
Specific valuation allowances are established for non-homogenous impaired loans
in the amount by which the carrying value, before any allowance for credit
losses, exceeds the fair value of collateral less costs to dispose on an
individual receivable basis. Impairment is evaluated on a pool basis for certain
pools of homogenous receivables. The Company considers a receivable to be
impaired when, based on current information and events, it believes that it is
probable that the Company will be unable to collect all amounts due according to
the contractual terms of the receivable agreement. Impairment losses are
recognized through an increase in the allowance for credit losses and a
corresponding charge to the provision for credit losses.
REPOSSESSED ASSETS
Assets are classified as repossessed assets and included in other assets when
physical possession of the collateral is taken. Subsequent to repossession,
repossessed assets are carried at fair value less costs to sell.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided by the
straight-line method over the estimated useful lives of the assets, ranging from
3 to 7 years.
GOODWILL AND OTHER INTANGIBLES
Net assets of companies acquired in purchase business combinations are recorded
at fair value at the date of acquisition. Identified intangibles are amortized
over the period benefited. Goodwill is amortized on a straight-line basis over a
period not to exceed 15 years. The recoverability of goodwill and other
intangibles is evaluated if events or circumstances indicated a possible
impairment. Such evaluation is based on various analyses, including undiscounted
future cash flow projections. Additionally, the Company periodically evaluates
the amortization periods to determine whether events or circumstances warrant
revised amortization periods.
The results of operations of purchased companies are included in the Company's
results of operations from the date of acquisition.
INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company's investments in unconsolidated entities are accounted for under the
cost or equity method, generally based on the percentage of legal ownership in
the entity. Under the cost method, the Company owns less than 20% of the
outstanding shares of the entity and the Company does not have the ability to
exercise significant influence over the entity. Investments accounted for under
the cost method are carried at the amount of the Company's initial investment,
and are periodically reviewed for impairment.
F-11
<PAGE> 29
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Under the equity method, the Company owns 20% or greater but less than 50% of
the outstanding shares of the entity and the Company has the ability to exercise
significant influence over the entity. Under the equity method, the investment
in the shares of the entity is initially recorded at the cost of the shares
acquired and thereafter is periodically increased or decreased by the Company's
proportionate share of the earnings or losses of the entity, and decreased by
the dividends or distributions received from the entity. Equity method
investments are also periodically reviewed for impairment.
CLIENT RESERVES
Client reserves represent amounts withheld on consumer installment contracts
purchased by the Company. Chargeoffs resulting from borrower defaults may be
charged against the client reserves based on the underlying contract with the
client. If these charges result in a reduction of the client reserves to zero,
incremental charges are recorded through the allowance for credit losses. If the
charges do not exceed the client reserves, the client reserves are refunded to
the client based on an analysis of client delinquency and minimum reserve
requirements.
CLIENT PAYOUTS
Client payouts represent amounts collected on receivables serviced for third
parties and amounts payable by the Company for finance receivables purchased
which have not yet been funded.
The Company receives servicing fees from third parties for servicing finance
receivables. The servicing fees are generally collected from the underlying
borrowers' payments on a monthly basis.
TREASURY STOCK
Treasury stock acquired is recorded at cost.
INCOME TAXES
There are two components of income tax provision: current and deferred. Current
income tax expense approximates taxes to be paid or refunded for the applicable
period. Balance sheet amounts of deferred taxes are recognized on the temporary
differences between the bases of assets and liabilities as measured by tax laws
and their bases as reported in the financial statements. Deferred tax expense or
benefit is then recognized for the change in deferred tax liabilities or assets
between periods.
Recognition of deferred tax assets is based on management's belief that it is
more likely than not that the tax benefit associated with certain temporary
differences, tax operating loss carryforwards and tax credits will be realized.
A valuation allowance is recorded for those deferred tax items for which it is
more likely than not that realization will not occur.
LOSS PER COMMON SHARE
Loss per common share is computed by dividing net loss, plus dividends on
preferred stock, by the weighted average number of common shares issued and
outstanding. Diluted earnings per common share is computed by dividing net loss
available to common stockholders, adjusted for the effect of assumed
conversions, by the weighted average number of common shares issued and
outstanding and dilutive potential common shares, which include convertible
preferred stock and stock options. Dilutive potential common shares are
calculated using the treasury stock method. Potential dilutive common shares
are excluded from the diluted calculation when a net loss was incurred for the
period as they would be antidilutive.
F-12
<PAGE> 30
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STOCK COMPENSATION
As allowed under SFAS No. 123, the Company accounts for stock based compensation
under APB No. 25, rather than under SFAS No. 123. Accordingly, the Company has
elected to provide the SFAS No. 123 disclosures as if the Company had adopted
the fair-value based method of measuring outstanding employee stock options.
LIQUIDITY
The Company's business requires substantial cash to support the growth of loan
production and operations. In general, the Company finances the purchase of
loans through various credit and wharehouse facilities. The Company funds
through these facilities approximately 72% of factored receivables,
approximately 98% of mortgage loans and between approximately 70% and 90% of
other finance receivables, and funds the remainder of the purchase price through
its capital. The Company generates negative cash flow from operations and
expects to continue to do so as long as it continues to experience significant
growth in its receivables portfolio. As the Company continues to increase the
volume of receivables purchased, it must secure additional capital to support
its growth. Failure to secure additional capital or to consummate
securitizations and other sales transactions may result in a significant adverse
effect on the Company's financial position and results of operations.
NOTE 2 - ACQUISITION AND DISPOSITION TRANSACTIONS
1999 ACQUISITIONS
Effective September 30, 1999, the Company acquired 100% of the outstanding
capital stock of Travelers Investment Corporation ("Travelers"). The total
purchase price was $23,600,000, including direct costs of the acquisition. The
acquisition was accounted for as a purchase and the purchase price was allocated
to Travelers assets and liabilities based on their fair values as follows:
Purchase price $ 23,600,000
Fair value of net assets acquired 14,614,000
--------------
Goodwill $ 8,986,000
==============
The following unaudited pro forma results of operations of the Company are
presented as if the acquisition of Travelers had occurred on January 1, 1998:
Years Ended December 31,
-----------------------------
1999 1998
----------- -----------
Revenues $19,650,881 $19,217,832
Expenses 20,987,386 19,192,953
Net (loss) income (1,365,574) 24,879
Loss per share (.20) -
The pro forma consolidated results of operations include adjustments to give
effect to the purchase accounting adjustments as if the acquisition occurred on
January 1, 1998. The unaudited pro forma information is not necessarily
indicative of the results of operations that would have occurred had the
acquisition occurred on January 1, 1998, or the future results of the combined
operations.
On May 11, 1999, through an 80% owned subsidiary of the Company, the Company
acquired the assets of Suntrust Financial Corporation ("Suntrust") for $50,000
in cash. Suntrust had no significant assets or results of operations at the
date of acquisition.
On January 1, 1999, through an 80% owned subsidiary of the Company, the Company
acquired 80% of the outstanding common shares of Suncoast Title Company
("Suncoast") from an affiliate of the Company for 50,000 shares of the Company's
common stock. The Company is obligated to issue a total of 50,000 additional
shares of common stock to acquire the remaining 20% of Suncoast common stock
over a 5 year period ending December 31, 2003. The acquisition was accounted for
as a purchase. Suncoast had no significant assets or results of operations at
the date of acquisition.
1999 DISPOSITIONS
On December 31, 1999, the Company sold Medical Billings Services Systems, Inc.
("Medical Billings"), a 100% owned subsidiary of the Company and a company
engaged primarily in providing accounting and other financial administrative
services principally to the medical industry, to the original owner of the
company. Medical Billings was acquired by the Company on March 30, 1998.
F-13
<PAGE> 31
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On July 14, 1999, the Company sold American Investment Management ("AIM"), an
80% owned subsidiary, and a marketer and manager of a variety of financial and
insurance-related services, to the minority stockholder. The ownership interest
in AIM had been acquired by the Company on March 13, 1998. According to the
terms of the original acquisition agreement, the seller had the right to
reacquire the shares of AIM in 1999.
On May 17, 1999, the Company sold MFC Financial Corp ("MFC"), an 80% owned
subsidiary of the Company engaged in leasing activity, to an unrelated third
party. The ownership interest in MFC was acquired by the Company on June 30,
1998.
None of these companies had material assets or results of operations at
the date of disposition.
1998 ACQUISITIONS
On August 31, 1998, the Company, through a wholly owned subsidiary, acquired
approximately 91% of the outstanding capital stock of Ameritrust Holdings, Inc..
In consideration, the Company issued an aggregate of 381,000 shares of its
common stock to Ameritrust's stockholders. The remaining capital stock of
Ameritrust will be exchanged for shares of the Company's common stock at annual
intervals ending on June 30, 2002, if certain earning hurdles are met. The
maximum number of shares that could be issued under this agreement over the next
five years is 624,750 shares. No exchanges occurred during 1999 or 1998.
On March 30, 1998, the Company acquired 100% of Premier Provider Services and
PPS Staffing Systems, engaged primarily in providing accounting and other
financial administrative services. These companies did not have significant
assets or results of operations at the date of acquisition. The acquisitions
resulted in goodwill of $2,272,455.
NOTE 3 - LOANS AVAILABLE FOR SALE
At December 31, 1999, loans available for sale were comprised of residential
mortgage loans originated under flow agreements principally for sale to
government sponsored entities. The loans were sold in January 2000.
F-14
<PAGE> 32
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - FINANCE RECEIVABLES
Finance receivables are comprised of the following at December 31, 1999:
Consumer installment contracts:
Education tuition and seminary fees $12,238,094
Used automobiles 6,432,343
Leisure activity memberships 4,254,831
Fitness 1,579,000
Dating club memberships 3,987,608
Medical 2,103,911
Other 9,591,863
-----------
40,187,650
Unearned income (4,431,036)
-----------
35,756,614
-----------
Commercial finance receivables:
Loan receivable which is secured by
common stock of the borrower and the
pledge of certain assigned receivables of
the borrower. The note plus interest at
10% is due June 30, 2000. 1,120,461
Loan receivable which is secured by a
pledge of 125,000 shares of Finantra
common stock. The note plus
interest at 10% is due April 1, 2006. 208,969
Other 20,070
-----------
1,349,500
Factored receivables, partially insured 3,708,798
-----------
40,814,912
Allowance for credit losses (2,642,259)
-----------
$38,172,653
===========
At December 31, 1999, the Company had impaired loans of approximately $209,000,
with the related valuation allowance included in the allowance for credit
losses.
NOTE 5 - LEASE RECEIVABLES
Lease receivables are comprised of the following at December 31, 1999:
Minimum lease payments receivable $1,345,688
Estimated unguaranteed residual value of leased equipment 101,686
----------
1,447,374
Unearned income (214,520)
----------
$1,232,854
==========
F-15
<PAGE> 33
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Future minimum lease payments receivable at December 31, 1999 are as follows:
2000 $ 801,128
2001 412,735
2002 131,825
----------
$1,345,688
==========
NOTE 6 - OTHER RECEIVABLES
Other receivables are comprised of the following at December 31, 1999:
Notes receivable bearing interest at 8% per annum
and maturing on May 17, 2001 $ 47,295
Various other demand receivables, unsecured and
non-interest bearing 621,366
--------
$668,661
========
NOTE 7 - PROPERTY AND EQUIPMENT
Property and equipment was comprised of the following at December 31, 1999:
Office equipment $1,013,351
Furniture and fixtures 326,964
Equipment under capital lease 88,611
----------
1,428,926
Accumulated depreciation (855,116)
----------
$ 573,810
==========
Depreciation expense on property and equipment for the years ended December 31,
1999 and 1998 was $95,280 and $60,824, respectively.
NOTE 8 - INVESTMENTS IN UNCONSOLIDATED ENTITIES
At December 31, 1999, the Company has a 19% ownership interest in Titan
Mortgage, Inc., a residential mortgage originator and telemarketer, in the
amount of $660,000, accounted for under the cost method.
At December 31, 1999, the Company has a 49.5% interest in FunU.com Corp., an
internet web-application catering to college students, in the amount of $316,000
accounted for under the equity method.
NOTE 9 - RECEIVABLES SERVICING
The Company services finance receivables for third parties. The face amount of
finance receivables serviced for others at December 31, 1999 was approximately
$102 million. Since the Company does not own these receivables, they are
excluded from the consolidated balance sheet.
Included in cash and cash equivalents at December 31, 1999 is approximately
$568,000 of cash collected on behalf of third parties.
F-16
<PAGE> 34
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10 - LINES OF CREDIT
Lines of credit were comprised of the following at December 31, 1999:
<TABLE>
<CAPTION>
Committed Outstanding Expiration Interest
Description Amount Amount Date Rate
----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
On May 11, 1998, the Company through $4,000,000 $ 1,993,396 5/11/00, Prime + 1.5%
an 85% owned subsidiary entered into a with
Loan and Security Agreement. annual
The proceeds of the loan automatic
are utilized to purchase renewals
accounts receivable. The loan contains thereafter
various debt covenants.
On March 26, 1999, the Company through 10,000,000 2,548,934 4/30/2000 LIBOR+2.25%
an 80% owned subsidiary entered into a
Mortgage Loan Warehousing and
Security Agreement. The loan
agreement contains various debt
covenants including, but not limited to,
an adjusted tangible net worth covenant,
the violation of which at December 31,
1999 was waived by the lender.
On September 23, 1999, the Company 32,500,000 21,841,416 8/31/2004 Prime + 2%
through a 100% owned subsidiary
entered into a Loan and Security
Agreement. The proceeds of the loan
are utilized to purchase consumer
finance contracts. The loan contains
various debt covenants.
On June 30, 1999, the Company through 5,000,000 3,459,283 6/30/2000 Prime - .25%
an 80% owned subsidiary entered into a
Credit and Security Agreement.
The proceeds of the loan
are utilized by the subsidiary to purchase
mortgage loan collateralized by
residential real estate, which loans are
then sold to various investors. The loan
contains various debt covenants.
----------- -----------
$51,500,000 $29,843,029
=========== ===========
</TABLE>
F-17
<PAGE> 35
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 31, 1999, the prime rate was 8.5% and LIBOR was 6.0%.
NOTE 11 - NOTES PAYABLE AND OTHER INTEREST BEARING OBLIGATIONS
Notes payable and other interest bearing obligations were comprised of the
following at December 31 1999:
Notes payable to financial institutions:
Note payable at 13.5% interest rate maturing November
2000. $3,580,000
Various notes at interest rates varying from 9% to
10.5%, due in monthly installments through 2001
collateralized by certain lease receivables. 34,246
Notes payable to individuals:
Notes payable at 10% interest. Notes were for
various amounts maturing November 2002. 4,916,666
8% note payable in sixty monthly
installments of $4,460 plus interest at 8%, secured
by certain furniture, fixtures and equipment,
maturity date July 15, 2001. 79,397
----------
$8,610,309
==========
NOTE 12 - INCOME TAXES
For the years ended December 31, 1999 and 1998, the Company had a tax benefit of
$355 and $65,960, respectively.
F-18
<PAGE> 36
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A reconciliation of the Federal statutory income tax rate of 35% to the
Company's effective income tax rate is as follows:
1999 1998
-------- ---------
Computed at the Statutory rates $(658,296) $(345,207)
(Increase) decrease resulting from:
Non-deductible expenses 161,000 258,220
State income taxes, net loss -- 9,620
Change in deferred tax asset
valuation allowance 496,941 11,407
-------- ---------
Actual benefit $ (355) $ (65,960)
======== =========
The components of the deferred tax asset were as follows at December 31, 1999:
Net operating loss carryforward $ 850,000
Allowance for credit losses 1,057,000
Basis difference in leases 150,000
Other 60,801
----------
2,117,801
----------
Deferred tax liabilities:
Depreciation expense (47,000)
----------
(47,000)
----------
2,070,801
Valuation allowance (2,033,000)
----------
Net deferred tax asset $ 37,801
==========
Management conducts periodic evaluations to determine whether it is more likely
than not that the deferred tax asset can be realized in future periods. Among
the factors considered in this evaluation are estimates of future earnings, the
future reversal of temporary differences and the impact of tax planning
strategies that can be implemented if warranted. As a result of this evaluation,
the Company included in its tax provision a valuation allowance for
substantially all of the deferred tax assets at December 31, 1999.
At December 31, 1999, the Company has unused net operating loss carryforwards of
approximately $2,125,000, expiring between in 2012 and 2019, which is available
for use on its future corporate Federal and State tax returns.
NOTE 13 - CONSULTING AND EMPLOYMENT AGREEMENTS
At December 31, 1999, the Company had outstanding various non-exclusive
consulting agreements with investment bankers and investment advisors which are
conditioned for payment upon the consultant introducing acceptable acquisition
transactions to the Company. The consultants will be compensated upon the
closing of an introduced transaction based upon the equity raised or the value
of the transaction, either in cash or stock depending upon the specific
agreement with the consultant.
At December 31, 1999, the Company had existing employment agreements with
certain key executives that expire between three and seven years. The employment
agreements generally include fixed base compensation, performance bonuses,
perquisites, stock options and stock grants.
F-19
<PAGE> 37
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14 - STOCKHOLDERS' EQUITY
INITIAL PUBLIC OFFERING
The Company commenced its initial public offering ("IPO") at December 24, 1997,
selling 1,285,135 shares of common stock and 1,566,500 warrants. The common
stock sold for $5.50 per share. The warrants sold for $0.15 each and consist of
one redeemable warrant to purchase one share of common stock for $5.75. The
common shares and warrants were purchased separately and are transferable
separately.
The Company received cash and subscriptions of approximately $6,893,000 for
securities and warrants sold from the IPO. Of this amount, there was a non-cash
portion approximating $1,234,000 in subscriptions, representing 223,933 shares,
that were issued to satisfy existing obligations by the Company to the
subscribers of the IPO. Included in this amount was approximately $290,000 due
to the President and Chairman of the Board of the Company and $361,000 due to a
former principal stockholder. Offering costs of approximately $958,000 were
charged to additional paid-in capital upon completion of the offering.
RESCISSION
Following the consummation of the IPO, management of the Company concluded that
various procedural and administrative matters relating to the IPO should have
been disclosed during the period that the IPO was being marketed, rather than
following the consummation of the IPO, as the Company did. As a consequence,
the Company provided purchasers of the Company's securities in the IPO
with the opportunity to rescind their IPO purchase in consideration for their
IPO investment price. The rescission offer expired January 22, 1998.
PREFERRED STOCK
Series A: In June 1996, the Company authorized and issued an aggregate of
2,958,817 shares designated as Series A 10% convertible preferred stock. At the
time the preferred stock was issued, the Company offered to certain note holders
the option to exchange their notes, approximating $972,000, to convertible
preferred stock of the Company at a ratio of approximately 1.03 shares to $1.00.
Note holders elected to convert $788,844 of notes and accrued interest to
convertible preferred stock. Dividends on the preferred stock are payable
quarterly and are cumulative. The preferred stock is convertible to common stock
of the Company at $4.68. Under the terms of the convertible preferred stock
issue the Company, at its sole discretion, may redeem the stock commencing on or
after the fifth anniversary of its issuance if the average trading price of the
common stock in the 20 trading days immediately preceding such anniversary,
exceeds the conversion price by 20%. At anytime after the fifth anniversary, the
Company has the right to redeem the convertible preferred stock, in whole or in
part, upon 30 days notice to the holders.
Series B: In November 1998, the Company authorized 500,000 shares of Series B
preferred stock. The preferred stock is convertible to common stock of the
Company at a rate of 2 1/8 shares of Series B preferred stock for each share of
common stock exchanged. The Series B preferred stock is neither redeemable nor
subject to dividends. Holders of the Series B Preferred Stock are subordinate to
Series A Preferred Stock and to senior all other equity securities of the
Company. In the event of a liquidation or dissolution, the holders of the Series
A and Series B Preferred Stock will be entitled on a pari passu basis to receive
all of the assets of the Company available for distribution to its stockholders
prior to the Company's common shareholders. The Series B Preferred Stock has a
liquidation value of $1 per share.
F-20
<PAGE> 38
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Series C: In November 1999, the Company authorized 3,800 shares and issued 3,780
shares of Series C Preferred stock. The Series C Preferred stock is convertible
into shares of the Company's common stock at any time at the option of the
holder within 180 days from the original issue date at a price of $3.28 per
share and thereafter the conversion price will be the lesser of (a) the initial
conversion price or (b) the product of (1) 80% multiplied by (2) the closing
price of the Company's common stock on the bulletin board (or the exchange upon
which the shares of the Company's common stock are traded) on the day
immediately preceding the date that conversion is requested. Notwithstanding the
foregoing, in the event a holder of Series C Preferred stock requests conversion
at a date when the per market share value (as defined) is less than $3.00 per
share, the Company will have the right, but not the obligation, to redeem all of
the shareholder's shares of Series C Preferred stock by paying to such holder,
in cash, a redemption price equal to 120% of the aggregate liquidation
preference attributable to the shares of the Series C Preferred stock ($1,000
per share) for which conversion had been requested. The Series C Preferred stock
pays a dividend at an annual rate of $60 per share. Holders of the Series C
Preferred stock rank pari passu with the outstanding shares of Series A and
Series B Preferred stock of the Company in the event of liquidation, dissolution
or winding up.
WARRANTS ISSUED
At December 31, 1999, warrants to purchase 2,176,131 common shares are
exercisable at a strike price of $3.25 through November 2001; 500,000 warrants
are exercisable until December 2002 at a strike price of $2.50 per share;
138,625 warrants are exercisable until December 2002 at a strike price of $1.50
per share; and 1,566,500 warrants are exercisable until July 2002 at a strike
price of $5.75. In addition at December 31, 1999, the Company had other
warrants outstanding arising from various acquisitions and other financing
activities to acquire an aggregate of 2,644,080 shares of common stock at
exercise prices ranging from approximately $1.20 to approximately $3.50. These
other warrants are exercisable at various times through December 2004.
NOTE 15 - STOCK OPTION PLAN
On January 9, 1997, the Company established an incentive compensation stock
option plan (the "Plan"). The Plan has 1,500,000 shares of Common Stock reserved
for issuance upon the exercise of options designated as either (i) incentive
stock options ("ISOs") under the Internal Revenue Code of 1986, or (ii)
non-qualified options. ISOs may be granted under the Plan to employees and
officers of the Company. Non-qualified options may be granted to consultants,
directors (whether or not they are employees), employees or officers of the
Company.
Options issued for the years ended December 31, 1999 and 1998 carry exercise
prices equal to the fair market value on the date of the grant. The options vest
over a period of up to five years following the date of grant and the
unexercised portion of the options expires and ceases to be exercisable on the
earlier of the stated exercise period of the grant or specified date following
termination of employment. In certain circumstances, the exercise of stock
options may have an adverse effect on the market price of the Company's common
stock and/or warrants. There was no compensation expense for the years ended
December 31, 1999 and 1998 related to options granted.
F-21
<PAGE> 39
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Had compensation expense for the stock option plan been determined based on the
fair value of the options at the grant date consistent with the methodology
prescribed under Statement of Financial Standards No. 123, "Accounting for Stock
Based Compensation," the Company's loss would have been increased by $729,960
and $251,287 in 1999 and 1998, respectively. The fair value of each option is
estimated on the date of grant using the fair market option pricing model with
the assumptions at December 31:
1999 1998
---- ----
Risk-free interest rate 6.50% 5.50%
Expected option life (years) 2-5 2-5
Expected stock price volatility 0.591 N/A
Expected dividend yield None None
Information related to options is summarized below:
<TABLE>
<CAPTION>
Weighted-
Average Range of Options
Options Exercise Exercise Options Forfeited/ Options Options
Granted Price Prices Exercised Terminated Outstanding Vested
------- --------- -------------- --------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 418,000 $ 1.96 $1.20 to $3.30 25,000 12,000 381,000 381,000
1999 543,500 3.32 2.63 to 5.12 -- 15,000 528,500 264,500
------- ------ ------ ------- -------
961,500 25,000 27,000 909,500 645,500
======= ====== ====== ======= =======
</TABLE>
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS
A majority of the Company's assets and liabilities are financial instruments.
For the majority of the Company's financial instruments, fair values are not
readily available since there are not available trading markets as characterized
by current exchanges between willing parties. Accordingly, fair values can only
be derived or estimated using various valuation techniques, such as computing
the present value of estimated future cash flows using discount rates
commensurate with the risks involved. However, the determination of estimated
future cash flows is inherently subjective and imprecise. The estimates are not
necessarily indicative of the amounts the Company could realize in a current
market exchange, and the use of different market assumptions or methodologies
could have a material effect of the estimated fair value amounts.
The fair values indicated below are indicative of the interest rate environment
at December 31, 1999, and do not take into consideration the effects of interest
rate fluctuations. The methodologies and key assumptions used by the Company in
estimating fair values of financial instruments are as follows:
CASH AND CASH EQUIVALENTS: The carrying amounts of cash and cash equivalents,
and the certificate of deposit approximate the fair values.
FINANCE RECEIVABLES: Fair values were estimated for groups of similar loans
based on the type of loan, credit quality and maturity. The fair values for
factoring receivables approximate the carrying values given the contractual
interest rates and the relatively short-term duration of the receivables. Fair
values for consumer installment contracts and commercial finance receivables
were estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of similar
credit quality.
F-22
<PAGE> 40
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LEASE RECEIVABLES, OTHER RECEIVABLES, DUE FROM RELATED PARTIES: The fair values
for interest bearing receivables were estimated using discounted cash flow
analysis, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. The fair values of demand notes
approximate the carrying value.
LINES OF CREDIT: The fair values of the lines of credit approximate the carrying
values given the short term maturities and the variable interest rates.
NOTES PAYABLE AND OTHER INTEREST BEARING OBLIGATIONS AND NOTES PAYABLE - RELATED
PARTIES: The fair values for interest bearing obligations were estimated using
discounted cash flow analysis, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. The fair values
of demand notes approximate the carrying value.
The carrying amounts and fair values of the Company's financial instruments at
December 31, 1999 are as follows:
Carrying Estimated
Value Fair Value
---------- -----------
Assets:
Cash and cash equivalents $ 1,214,315 $ 1,214,315
Certificate of deposit 1,450,000 1,450,000
Loans available for sale 6,065,166 6,065,166
Finance receivables 38,172,653 39,523,139
Lease receivables 1,232,854 1,232,854
Other receivables 668,661 634,495
Due from related parties 1,756,474 1,644,220
Liabilities:
Lines of credit 29,843,029 29,843,029
Notes payable and other interest bearing
obligations 8,610,309 8,680,309
Notes payable - related parties 30,000 30,000
F-23
<PAGE> 41
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 17 - RELATED PARTY TRANSACTIONS
Due from related parties is comprised of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Note receivable from Medley Group, Inc. The note has a stated interest
rate of 8% with principal and interest payable in full on December 30,
2000. $ 392,893
Note receivable from Medley Group, Inc. The note is payable in sixty
monthly installments of $3,754 plus accrued interest at 5%
beginning July 1, 1999. The remaining balance of $100,000 plus
any accrued interest is due July 1, 2004. 333,089
Note receivable from an affiliated company, 8% interest rate, payable
on or before May 1, 2000. 250,000
Note receivable from Tract IV, Inc. The note is payable in monthly
installments of $3,500 plus accrued interest of 12% with the balance
due on May 31, 2001. 206,784
Note receivable due jointly from two employees, unsecured and non-interest bearing,
repayable out of future commissions earned from a subsidiary of the Company. 160,000
Note receivable, bears interest at 3% and matures December 2003. 100,449
Note receivable from employee, unsecured and bears interest at 6% and
matures on July 16, 2000. 99,791
Demand note. 80,000
Short term notes receivable from employees and affiliates. 28,192
6% interest-bearing note receivable from an employee, unsecured and
matures on October 27, 2002. 26,000
Note receivable, due May 2000 at 6%. 24,876
Note receivable from the Chief Executive Officer of the Company with an
original amount of $68,000. Interest accrues on the note at a rate of 10% with
maturity on May 5, 2001. The note was modified along with the employment
agreement whereby $68,000 in principal will be forgiven at a rate of
20% per year beginning in 1999. 54,400
----------
$1,756,474
==========
</TABLE>
At December 31, 1999, the Company has receivables totaling $725,982 from Medley
Group, Inc. whose management is substantially the same as that of the Company.
Medley Group has pledged 175,000 shares of common stock of the Company as
collateral.
F-24
<PAGE> 42
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 31, 1999, the Company has a $1,450,000 certificate of deposit with a
six month maturity, that is pledged as security for a letter of credit for
Medley Group, Inc. The Company's letter of credit was provided as a financial
accommodation to Medley Group, Inc. for a fee equal to $150,000 per annum. This
fee is payable each year the Company continues to extend such financial
accommodation. This letter of credit was posted for the purpose of securing the
performance of certain equipment leases sold by Medley Group to the Company in
1997 for 750,000 shares of the Company's Common Stock owned by Medley Group,
Inc., which common stock, for purposes of the pledge, has an agreed upon value
of $2.50 per share.
At December 31, 1999, the Company has a loan payable to a shareholder and
director of the Company for $30,000 which bears an interest rate of 12% per
annum and matured January 1, 1999.
Subsequent to December 31, 1999, the Chief Executive Officer of the Company
acquired, in a private transaction 1,532,127 shares of Series A Preferred stock.
During January 1999, the Company, through its Ameri-Cap Mortgage subsidiary,
acquired from a director of the Company, 80% of the outstanding capital stock of
Suncoast for 50,000 shares of the Company's Common Stock. The Company has
agreed, through 2003, to acquire the remaining 20% of the outstanding capital
stock of Suncoast for an aggregate of 50,000 additional shares of the Company's
common stock.
During February 1999, the Company, through its Ameri-Cap Factors subsidiary,
acquired from the same director, .6% of the outstanding capital stock of
Ameri-Med Financial Services, Inc., a Florida medical receivables financing
business ("Ameri-Med Financial"), for 140,000 shares of the Company's common
stock. Ameri-Cap Factors previously owned 80% of the outstanding capital stock
of Ameri-Med Financial. The Company has agreed beginning in February 2000 and in
February of each year thereafter, through 2004, to acquire .06% of the capital
stock of Ameri-Med Financial owned by the director in exchange for 35,000 shares
of the Company's common stock. The expense associated with the exchanges will be
accounted for at the dates the exchanges occur.
Also during February 1999, the Company acquired from the same director the right
to exchange the director's 7% of the outstanding common stock of Ameri-Cap
Mortgage for 400,000 shares of the Company's common stock. The Company has
agreed to exchange 1.4% of the director's common stock of Ameri-Cap Mortgage
annually beginning in February 2000 for 80,000 shares of the Company's Common
Stock. The Company currently owns 80% of the outstanding common stock of
Ameri-Cap Mortgage. The expense associated with the exchanges will be accounted
for at the dates the exchanges occur.
NOTE 18 - BUSINESS SEGMENTS
Management of the Company reports the results of operations of the Company
through two primary business segments: BUSINESS FINANCE, which specializes
principally in accounts receivable factoring and equipment leasing; and CONSUMER
FINANCE, which specializes principally in mortgage banking, consumer finance,
and other types of specialty finance.
F-25
<PAGE> 43
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes certain financial data for the Company's business
segments:
<TABLE>
<CAPTION>
Revenues Expenses Net Loss Total Assets
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
December 31, 1999:
Business Finance $ 4,109,291 $ 5,806,236 $ (679,490) $ 56,224,979
Consumer Finance 7,531,186 8,344,573 (807,082) 10,310,541
Corporate items and eliminations (36,463) 655,818 (394,274) --
------------ ------------ ------------ ------------
$ 11,604,014 $ 13,494,991 $ (1,880,846) $ 66,535,520
============ ============ ============ ============
December 31, 1998
Business Finance $ 9,391,071 $ 10,206,594 $ (815,323) $ 16,998,001
Consumer Finance 565,032 646,700 (81,668) 1,239,685
Corporate items and other (221,163) (166,062) (1,090) (4,619,499)
------------ ------------ ------------ ------------
$ 9,734,940 $ 10,687,232 $ (898,081) $ 13,618,187
============ ============ ============ ============
</TABLE>
NOTE 19 - CONCENTRATION OF CREDIT RISK
At December 31, 1999, the Company had outstanding several individually
significant finance and related party receivables, which represent significant
credit risk. The Company has obtained various forms of collateral to secure
certain of these receivables.
NOTE 20 - COMMITMENTS AND CONTINGENCIES
LEASES
The Company acquired computers and equipment under the provisions of two leases
which, for financial reporting purposes, have been capitalized.
Future minimum lease payments for the Company's operating leases are as follows:
Year ending Operating
December 31, Leases
------------ ----------
2000 $ 419,158
2001 250,337
2002 256,702
2003 234,663
2004 37,004
----------
Total minimum lease payments $1,197,864
==========
Total rent expense for all operating leases for the years ended December 31,
1999 and 1998, was $428,135 and $141,530, respectively.
LITIGATION
The Company is involved in litigation in the normal course of business. This
litigation is not expected to have a material effect on the Company's results of
operations or financial condition.
F-26
<PAGE> 44
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 21 - SUBSEQUENT EVENTS (UNAUDITED)
On February 29, 2000, the Company entered into a letter of intent to acquire all
of the issued and outstanding common stock of Prime Capital Corporation
("Prime"), a publicly held commercial leasing company. The acquisition is
subject to a variety of conditions, including approval by Prime shareholders.
There are no assurances that the acquisition will be consummated, nor
consummated on the previously agreed to terms. Prime is principally engaged in
the structuring and funding of custom finance programs on behalf of developers,
manufacturers and distributors of commercial software, communication equipment
and medical devices. In 1999, Prime originated approximately $160 million of
such leases.
F-27
<PAGE> 45
EXHIBIT INDEX
NO. DESCRIPTION
--- -----------
10.3 Second Amendment to Employment Agreement, dated December 15,
1999, between Robert D. Press and the Company.
10.5 Amendment No. 1 to Employment Agreement, dated December 16,
1999, between Maynard J. Hellman and the Company.
10.6 Employment Agreement, dated as of January 4, 1999, between Alyce
Schreiber and the Company.
10.7 Employment Agreement, dated as of May 16, 1999, between Charles
Litt and the Company.
10.8 Employment Agreement, dated April 1, 2000, between Vern Landeck
and the Company.
21 Operating Subsidiaries of the Company
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.3
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement is made and entered into
this 15th day of December, 1999, by and between FINANTRA CAPITAL, INC., a
Delaware corporation (the "Company"), and ROBERT D. PRESS ("Employee")
(throughout this Agreement, the Company and Employee may be referred to
collectively as "Parties" for convenience).
W I T N E S S E T H :
WHEREAS, the Parties entered into an Employment Agreement on March 1,
1998 (the "Agreement") and an Amendment to Employment Agreement on December 31,
1998 (the "Amendment"); and
WHEREAS, subsequent to the effective date of the Agreement and
Amendment, events and matters have taken place which necessitate entering into
an additional amendment to the Agreement; and
WHEREAS, the Parties desire to document their Amendment to the
Agreement in a written instrument.
NOW, THEREFORE, in consideration of the promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. RECITALS: The above and foregoing recitals are true and correct and are
incorporated herein.
2. AMENDMENTS: The amendments to the Agreement and/or Amendment, whichever
may be applicable, as of the date hereof, are as follows:
2.1 TERM: The term of the Agreement, as amended, shall be extended
for a period of seven (7) years commencing as of January 1,
2000.
2.2 STOCK GRANTS: In addition to the grants of common stock of the
Company set forth in section 6.E of the Agreement and Section
2.3 of the Amendment, the Company hereby agrees to grant to
Employee, as of January 1, 2000, 1.4 million shares of common
stock of the Company, said grant being effective as of January
1, 2000 but subject to return and forfeiture at the rate of
200,000 shares per year for each year or any portion thereof
that Employee would fail to remain in the employ of the
Company for the seven (7) year term beginning January 1, 2000
as a result of Employee's voluntary termination or termination
for cause.
- 1 -
<PAGE> 2
It is the intent of the Company and the Employee that the
taxable effect to both Parties arising out of this grant shall
be based upon the vesting of 200,000 shares per year.
2.3 MERGER AND ACQUISITION BONUSES: In order to compensate
Employee for the additional time and effort expended by
Employee in searching for, defining and negotiating mergers
and acquisitions for the Company, the Company, following the
date hereof, on all future mergers and acquisitions completed
by the Company during the term of the Employee's employment
shall distribute to the Employee an amount equal to five (5%)
percent of the gross value of the transaction, said sum shall
be paid in common stock of the Company based upon the average
bid price of the Company's common stock during the ten (10)
consecutive trading days prior to the closing date of the
acquisition or merger.
3. RATIFICATION: That except for the modifications and amendments set
forth herein, all of the terms and covenants contained in the Agreement
and Amendment between the Employee and the Company are hereby ratified
and confirmed and are incorporated herein and remain in full force and
effect.
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals
this 15th day of December, 1999.
FINANTRA CAPITAL, INC., a Delaware
Corporation
By: /s/ ROBERT D. PRESS
---------------------------
Robert D. Press, Chairman
/s/ ROBERT D. PRESS
---------------------------
Robert D. Press, Employee
- 2 -
<PAGE> 1
EXHIBIT 10.5
AMENDMENT NUMBER ONE TO EMPLOYMENT AGREEMENT
This Amendment Number One to Employment Agreement between FINANTRA
CAPITAL, INC., a Delaware corporation (the "Company"), and MAYNARD J. HELLMAN
("Employee"), is made and entered into this 16th day of December, 1999.
(Throughout this Agreement, the Company and Employee may be referred to as
"Parties" for convenience.)
W I T N E S S E T H :
WHEREAS, the Parties entered into an Employment Agreement on December
23, 1998 (the "Agreement"); and
WHEREAS, events have taken place subsequent to the execution of the
Agreement necessitating amendments thereto; and
WHEREAS, the Parties desire to document their Amendments in a written
instrument.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
1. RECITALS: The above and foregoing recitals are true and
correct and are incorporated herein.
2. AMENDMENTS: The following amendments to the Employment
Agreement between the Parties, effective as of the date hereof are as follows:
2.1 MERGER AND ACQUISITION BONUSES: In order to
compensate Employee for the additional time and
effort expended by Employee in searching for,
defining and negotiating mergers and acquisitions for
the Company, the Company, following the date hereof,
on all future mergers and acquisitions completed by
the Company during the term of the Employee's
employment shall distribute to the Employee an amount
equal to 2.5 percent of the gross value of the
transaction, said sum shall be paid in common stock
of the Company based upon the average bid price of
the Company's common stock during the ten (10)
consecutive trading days prior to the closing date of
the acquisition or merger.
3. RATIFICATION: That except for the modifications and amendments
set forth herein, all of the terms and covenants contained in the Agreement and
Amendment between the Employee
- 1 -
<PAGE> 2
and the Company are hereby ratified and confirmed and are incorporated herein
and remain in full force and affect.
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals
this 16th day of December, 1999.
FINANTRA CAPITAL, INC., a Delaware
Corporation
By: /s/ ROBERT D. PRESS
-----------------------------
ROBERT D. PRESS, Chairman
/s/ MAYNARD J. HELLMAN
-------------------------------------
MAYNARD J. HELLMAN, Employee
- 2 -
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as of
this 4th day of January, 1999 by and between Finantra Capital, Inc., a Delaware
corporation (the "Company") and Alyce Schreiber ("Employee").
W IT N E S S E T H :
WHEREAS, the Company desires to retain, engage and employ Employee and
Employee desires to be so retained, engaged and employed by the Company in the
capacity of Executive Vice President upon the terms and conditions set forth in
this Agreement, and
WHEREAS, Employee by reason of the nature of Employee's duties and
responsibilities will be provided access to the Company's confidential and
proprietary information which the Company desires to maintain confidential.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
fol1ows:
1. The above and foregoing recitals are true and correct and are
incorporated herein.
2. RELATIONSHIP OF THE PARTIES: The Company hereby employs, hires and
engages Employee as its Executive Vice President and the Employee hereby accepts
and agrees to such hiring, engagement and employment subject to the supervision
and pursuant to the orders, advice and discretion of the Company's President and
Board of Directors. The Employee shall also perform such other duties as are
customarily performed by one holding such position in
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other, same or similar businesses as that engaged in by the Employer.
3. DUTIES: During the term of the Employee's employment, the Employee
shall be responsible for assisting and carrying out the directives of the
Company's President.
4. TERM: The term of the Employee's employment shall be for a term of
four (4) years commencing on January l, 1999 and subject to the termination
provisions set forth in this Agreement.
5. COMPENSATION: The Company in consideration of the services performed
and to be performed hereunder, will pay to Employee, during the term of
Employee's employment under this Agreement, at the Company's regular and
customary intervals for payment of compensation to employees, but not less than
twice per month, an annual salary as follows:
5.1 During the calendar year 1999 the sum of $85,000.00
5.2 During the calendar year 2000 the sum of $90,000.00
5.3 During the calendar year 2001 the sum of $95,000.00
5.4 During the calendar year 2002 the sum of $100,000.00
6. BENEFITS: The Employee shall be entitled to the following benefits
during the period of his employment hereunder:
6.1 Employee shall he entitled in accordance with the
Company's general policies to participate in health, medical and life insurance
programs and any other insurance benefits as are made available from time to
time by the Company to other employees or executives.
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6.2 During the term of his employment the Employee shall be
entitled reimbursement of all reasonable expenses actually paid or incurred by
Employee in the course of and pursuant to the performance of her duties
hereunder.
6.3 Employee shall be entitled to three weeks vacation time
annually. Paid vacation shall be prorated in any calendar year during which the
Employee is employed under this Agreement for less than an entire year. The
Employee shall also be entitled to all paid holidays given by the Company to its
executives or employees.
7. INCENTIVE STOCK OPTION PROGRAM: Employee shall be granted annually
50,000 Incentive Stock Options as described in the Incentive Stock Option
Program of the Company with the first grant of 12,500 on March 30, 1999 and on
the 30th day of each quarter thereafter during the term hereof. The Incentive
Stock Options shall be funded with common shares of the Company.
7.1 PIGGY BACK REGISTRATION RIGHTS: If at any time following
the date of this Agreement Finantra proposes to register any of its securities
under the Security Act of 1933, as amended, and further provided consultant is
tile owner of any of the common shares of Finantra will give written notice by
registered mail, at least thirty (30) days prior to the filing of any such
registration statement of its intention to file a registration statement.
Employee shall have twenty (20) days after receipt of such notice to notify
Finantra to register the common shares owned by Employee under such registration
statement. Finantra shall pay all costs and expenses in connection with the
registration of shares be in furtherance of a secondary offering of common
shares to the public and the underwriter engaged by Finantra
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have reasonable grounds to request that all shares of Employee not be registered
but only a portion thereof, Employee agrees to only register so many of its
shares as the underwriter may allow.
8. DISABILITY: In the event that Employee shall become incapacitated by
reason of mental or physical disability during the term of his employment such
that he is prevented from performing his principal duties and services hereunder
for a period of sixty (60) consecutive days or for shorter periods aggregating
ninety (90) days during any twelve (12) month period, the Company thereafter
shall have the right to terminate Employee's employment under this Agreement by
sending written notice of such termination to Employee or his legal
representative and thereupon his employment shall hereunder immediately
terminate. Upon such termination Employee shall be entitled to receive and shall
be paid by the Company his salary in effect on the date of termination paid at
the Company's regular and customary intervals for the payment of salaries for
the lesser of three (3) months or the remaining teens of this Agreement. In
addition, during such period, Employee shall continue to receive his benefits
described in this Agreement as in effect at the date of termination. Immediately
following the expiration of such applicable period the Employee shall no longer
be entitled to further Company benefits. The Employee agrees to accept the
payments described herein in full discharge and release of the Company of and
from any further obligations under this Agreement. Such discharge and release
shall not affect any rights or remedies which may be available to Employee or
the Company otherwise than under this Agreement.
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9. TERMINATION:
9.1 CAUSE: The Company shall have the right to terminate the
employment of Employee hereunder at any time for cause (as used herein, "cause")
if:
9.1.1. Employee shall be convicted by a court of
competent and final jurisdiction of any crime (whether or not involving the
Company) which constitutes a felony in tile jurisdiction involved or otherwise
commit acts of moral turpitude in such a manner as to adversely reflect upon the
reputation of the Company; or
9.1.2. Employee shall commit any act of embezzlement
or similar material dishonest and injurious conduct against the Company; or
9.1.3. Employee shall demonstrate reckless disregard
or grossly negligent and injurious conduct in connection with the performance
of, or a gross disregard for, his duties and responsibilities under, or assigned
pursuant to this Agreement; or
9.1.4. Employee is in default in the performance of
his obligations, services or duties under this agreement and such default
continues for a period of fifteen (15) days after written notice to Employee.
Notwithstanding the foregoing, the Company agrees that it wil1 not be
arbitrary or capricious in terminating Employee's employment hereunder for other
than good and valid cause which results in material damage to the Company. In
the event there is any dispute between the Company and the Employee concerning
the validity of such termination, such matter shall be resolved by binding
arbitration in Miami, Florida in accordance with the rules of the American
Arbitration Association. The Employee shall continue to receive his regular
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salary and benefits until such termination has been determined. If the
termination was determined to be valid the employee shall reimburse the Company
all compensation and benefits received from the date of the termination.
9.2 MUTUAL AGREEMENT: Company and Employee may mutually agree
to terminate this agreement.
9.3 In the event that the employment of Employee shall be
terminated by the Company, Employee shall be entitler1 to receive his salary
then in effect through the date of such termination. Employee shall accept the
payments pursuant to this paragraph in full discharge and release of the Company
of and from any further obligations under this Agreement. Nothing contained in
this paragraph shall constitute a waiver or release by the Company of any rights
or claims it may have against the Employee, including, but not limited to, any
claims or rights pursuant to the provisions set forth in this Agreement.
10. BEST EFFORTS OF EMPLOYEE: The Employee agrees that Employee will,
at all times, faithfully, industriously and to the best of her ability,
experience and talents, perform all of the express and implicit terms hereof, to
the reasonable satisfaction of the Company and its Board of Directors. It is
understood that the Employee shall devote her full time and effort to the
business of tile Company and may not render the same or similar services or
dukes during the term hereof to a business which is the same or similar to that
of the Company.
11. EMPLOYEE'S LIMITATIONS ON ABILITY TO MAKE COMPANY COMMITMENTS: The
Employee shall have the legal authority to enter into contracts and commitments
for and on behalf of the Company. However, the Employee shall not enter into any
contract or
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commitment on behalf of the Company which has not been approved by the Company's
Board of Directors.
12. TRUST FUND: All money belonging to the Company which comes into the
possession of Employee shall be received by Employee in trust for the Company
and Employee shall immediately deliver said funds to tile Company for deposit.
All of such funds shall be considered "Trust Funds".
13. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF EMPLOYEE: The
Employee represents and warrants to the Company as follows:
13.1 Employee has the power and authority to enter into this
Agreement and perform its duties hereunder.
13.2 Employee shall use his best efforts to comply with all
laws, regulations, rules and ordinances pertaining to the Company's business.
13.3 Employee shall weekly, or at such other interval
designated by the Company, deliver to the Chairman of the Board of the Company
and its Parent, activity reports of the Company in such form as prescribed by
the Company.
14. RESTRICTIVE COVENANTS:
14.1 Employee recognizes and acknowledges that as a
consequence of his duties hereunder, Employee will be provided access to or will
come in contact with confidential information of or regarding, the Company and
its Subsidiaries from time to time. Accordingly, Employee agrees that she will
not, during or for a period of 18 months after the term of her employment except
with prior written consent of the Company, disclose any
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confidential information relating to the Company or its Subsidiaries. The
provisions of this section shall not apply to information which Employee is
required to disclose by law or by order a court of competent jurisdiction but
only to the extent required by law or by order and when reasonably possible,
only if Employee shall give the Company prior notice of such intended disclosure
so that the Company has the opportunity to seek a protective order if it deems
such appropriate.
14.2 As used in this Agreement, "confidential information"
shall mean and include studies, plans, reports, records, promotional materials,
agreements, memoranda, documents, information related to Company activities,
systems, finances, client lists, research data, personnel data, financing
sources, and such other related information not of a public knowledge.
14.3 For so long as the Employee is employed hereunder, and
for a period of 18 months following termination, Employee shall not engage
either as principal, agent or consultant, or through any corporation, firm or
organization in which she is or may be an officer, director, employee,
shareholder, partner, member or with which he is otherwise affiliated in any
business for profit which is engaged in any activity or business similar to that
of the Employer within 75 miles of any office where the Company is conducting
business on the date of the Employee's termination of Employment.
14.4 It is agreed by the Employee that should she violate the
provisions of this section, the Company shall have the right to obtain an Order
from a court of competent jurisdiction enjoining her from violating any and all
of the provisions of this section or of this
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Agreement and the Company's application for such a writ of injunction shall be
deemed without prejudice to any all other rights, remedies or actions which may
accrue in favor of the Company as a result of the Employee's breach of this
provision or of the terms of this Agreement. In the event the Company is
required to institute any litigation concerning the terms and conditions of this
section or of this Agreement, the prevailing party shall be entitled to
reimbursement of all reasonable attorney's fees and costs at both the trial and
the appellate court level. The Employee further agrees that in the event of
litigation venue shall only be proper in Broward County, Florida.
15. NOTICE: All notices, requests, demands, waivers, consents,
approvals or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been given when received if delivered
personally or by recognized overnight carrier, or three (3) days after being
sent if sent by certified or registered mail, postage prepaid, return receipt
requested, to the following addresses:
If to the Company: Finantra Capital, Inc.
Attention: Robert Press
Westside Corporate Center
150 S. Pine Island Road, Suite 500
Plantation, Florida 33324
With a copy to: Maynard J. Hellman, Esq.
1100 Ponce de Leon Blvd.
Coral Gables, FL 33134
If to the Employee: Alyce Schreiber
-------------------------------
-------------------------------
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Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed.
16. MISCELLANEOUS PROVISIONS:
16.1 CAPTIONS AND PARAGRAPH HEADINGS: Captions and paragraph
headings contained in this Contract are for convenience and reference only and
in no way define, describe, extend or limit the copy or intent of this Contract
nor the intent of any provision hereof.
16.2 COUNTERPARTS: This Contract may be executed in one or
more counterparts, each of which shall be deemed an original, but all Of which
shall constitute one and the same Contract
16.3 BINDING EFFECT: This Contract shall enure to the benefit
of and shall be binding upon the parties hereto and their respective heirs,
personal representatives, successors and assigns. However, under no
circumstances shall this Contract be assignable by Employee.
16.4 ENTIRE AGREEMENT: This Contract constitutes the entire
understanding agreement between the parties and may not be changed, altered or
modified, except by an instrument in writing signed by all parties against whom
and enforcement of such Contract would be sought. In the event any provision of
this Contract shall be determined by appropriate judicial authority to be
illegal or otherwise invalid, such provision, shall be given its nearest legal
meaning or be construed or deleted as such authority determines. The remainder
of this Contract shall be construed to be in full force and effect. This
Contract shall not be modified unless said modification is in writing and signed
by the party to be charged.
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16.5 GOVERNING LAW AND VENUE: This Contract shall be construed
and interpreted according to the laws of the State of Florida. Venue for any
litigation hereunder shall be in Dade County, Florida.
16.6 JOINT PREPARATION: The preparation of this Contract has
been a joint effort of the parties and the resulting documents shall not, solely
as a matter of judicial construction, be construed more severely against one of
the parties than the other.
16.7 Attorney's FEES: In the event of any litigation arising
out of or relating to this Contract, the unsuccessful party in such litigation
shall pay to the successful party all costs and expenses incurred therein by the
successful party, including, without limitation, reasonable attorney's fees and
costs at the trial and appellate court level.
IN WITNESS WHEREOF, the parties have hereunto set theirs hands and
seals this 4th day of January, 1999.
FINANTRA CAPITAL, INC.
By: /s/ ROBERT PRESS
----------------------------
ROBERT PRESS, President
/s/ ALYCE SCHREIBER
--------------------------------
ALYCE SCHREIBER, Employee
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of this 16th day of May, 1999 by and between Finantra Capital, Inc., a Delaware
corporation (the "Company") and Charles Litt ("Employees").
W I T N E S S E T H :
WHEREAS, Employee is experienced in the development and operation of a
business engaged in specialty financing including but not limited to factoring,
leasing and mortgage lending, and
WHEREAS, the Company desires to retain, engage and employ Employee and
Employee desires to be so retained, engaged and employed by the Company in the
capacity of President upon the terms and conditions set forth in this Agreement,
and
WHEREAS, Employee by reason of the nature of Employee's duties and
responsibilities will be provided access to the Company's confidential and
proprietary information which the Company and its parent, Finantra Capital, Inc.
desire to maintain confidential.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. The above and foregoing recitals are true and correct and are
incorporated herein.
2. RELATIONSHIP OF THE PARTIES: The Company hereby employs,
hires and engages Employee as its President and the Employee hereby accepts and
agrees to such hiring, engagement and employment subject to the supervision and
pursuant to the orders, advice and discretion of the
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Company's Board of Directors. The Employee shall also perform such other duties
as are customarily performed by one holding such position in other, same or
similar businesses as that engaged in by the Employer.
3. DUTIES: During the term of the Employee's employment, the
Employee shall be responsible for the overall management of the Company.
4. TERM: The term of the Employee's employment shall be for a
term of five (5) years commencing on May 17, 1999 and subject to the termination
provisions set forth in this Agreement.
5. COMPENSATION: The Company in consideration of the services
performed and to be performed hereunder, will pay to Employee, during the term
of Employee's employment under this Agreement, at the Company's regular and
customary intervals for payment of compensation to employees, but not less than
twice per month, an annual base salary in the sum of $250,000.00.
6. BENEFITS: The Employee shall be entitled to the following
benefits during the period of his employment hereunder.
6.1 Employee shall be entitled in accordance with the
Company's general policies to participate in health, medical and life insurance
programs as well as Director's and Officer's Liability Insurance and any other
insurance benefits as are made available from time to time by the Company to
other employees or executives. The Company shall pay the Employee's portion of
any insurance premium.
6.2 During the term of his employment the Employee shall
be entitled to reimbursement of all reasonable expenses actually paid or
incurred by Employee in the course of and pursuant to the performance of his
duties hereunder.
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6.3 Employee shall be entitled to four weeks vacation
time annually. Paid vacation shall be prorated in any calendar year during which
the Employee is employed under this Agreement for less than an entire year. The
Employee shall also be entitled to all paid holidays given by the Company to its
executives or employees.
7. INCENTIVE STOCK OPTION PROGRAM: Employee shall be entitled to
participate in the Incentive Stock Option Program of the Company on an annual
basis during the term of this agreement as follows:
7.1 INITIAL GRANT OF OPTIONS: Upon the execution of this
agreement the Employee shall receive 100,000 stock options to purchase the
common shares of the Company at an exercise price equal to the Fair Market Value
of the share price on the day the option is granted less the maximum allowable
discount allowed by law which will not create income to the Employee or expense
to the Company.
7.2 ANNUAL GRANT OF OPTION: Commencing on December 31,
1999 and the same day of each year thereafter during the term of this agreement,
the Employee shall be granted 100,000 stock options at an exercise price equal
to those described in Section 7.1 above.
7.3 The ISO's shall have a vesting period of six months
and an exercise period of 36 months from the date of issuance.
8. LIVING ACCOMMODATIONS: The Company shall as soon as practical
following the commencement of this agreement obtain possession of a furnished
apartment acceptable to Employee which can be utilized by the Employee during
the term of this agreement of if Employee rents same reimburse Employee. The
Company shall be responsible for providing all utilities for the
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accommodations, and shall also provide a vehicle for Employee's transportation.
Prior to securing the apartment the Company shall provide hotel accommodations
for the Employee.
9. DISABILITY: In the event that Employee shall become
incapacitated by reason of mental or physical disability during the term of his
employment such that he is prevented from performing his principal duties and
services hereunder for a period of sixty (60) consecutive days or for shorter
periods aggregating ninety (90) days during any twelve (12) month period, the
Company thereafter shall have the right to terminate Employee's employment under
this Agreement by sending written notice of such termination to Employee or his
legal representative and thereupon his employment shall hereunder immediately
terminate. Upon such termination Employee shall be entitled to receive and shall
be paid by the Company his salary in effect on the date of termination paid at
the Company's regular and customary intervals for the payment of salaries for
the lesser of six (6) months or the remaining terms of this Agreement and offset
by any disability benefits received by the Employee from any source. In
addition, during such period, Employee shall continue to receive his benefits
described in this Agreement as in effect at the date of termination. Immediately
following the expiration of such applicable period the Employee shall no longer
be entitled to further Company benefits. The Employee agrees to accept the
payments described herein in full discharge and release of the Company of and
from any further obligations under this Agreement. Such discharge and release
shall not affect any rights or remedies which may be available to Employee or
the Company otherwise than under this Agreement.
10. TERMINATION:
10.1 CAUSE: The Company shall have the right to terminate
the employment of Employee hereunder at any time for cause (as used herein,
"cause") if:
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10.1.1 Employee shall be convicted by a court of
competent and final jurisdiction of any crime (whether or not involving the
Company) which constitutes a felony in the jurisdiction involved or otherwise
commit acts of morel turpitude in such a manner as to adversely reflect upon the
reputation of the Company; or
10.1.2 Employee shall commit any act of
embezzlement or similar material dishonest and injurious conduct against the
Company; or
10.1.3 Employee shall demonstrate reckless
disregard or grossly negligent and injurious conduct in connection with the
performance of, or a gross disregard for, his duties and responsibilities under,
or assigned pursuant to this Agreement; or
10.1.4 Employee is in default in the performance of
his obligations, services or duties under this agreement as may reasonably be
requested by the Company's Board of Directors and such default continues for a
period of thirty (30) days after written notice to Employee.
Notwithstanding the foregoing, the Company agrees that it will not be
arbitrary or capricious in terminating Employee's employment hereunder for other
than good and valid cause which results in material damage to the Company. In
the vent there is any dispute between the Company and the Employee concerning
the validity of such termination, such matter shall be resolved by binding
arbitration in Miami, Florida in accordance with the rules of the American
Arbitration Association. The Employee shall continue to receive his regular
salary and benefits until such termination has been determined. If the
termination was determined to be valid the employee shall reimburse the Company
all compensation and benefits received from the date of the termination.
10.2 MUTUAL AGREEMENT: Company and Employee may mutually
agree to terminate this agreement.
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10.2.1 In the event that the employment of Employee
shall be terminated by the Company, Employee shall be entitled to receive his
salary then in effect through the date of such termination. Employee shall
accept the payments pursuant to this paragraph in full discharge and release of
the Company of and from any further obligations under this Agreement. Nothing
contained in this paragraph shall constitute a waiver or release by the Company
of any rights or claims it may have against the Employee, including, but not
limited to, any claims or rights pursuant to the provisions set forth in this
Agreement.
10.2.2 BY EMPLOYEE: The Employee may terminate this
agreement upon thirty (30) days written notice should the Company be convicted
of a crime which constitutes a felony within which the Employee had no knowledge
or complicity or should an officer, or Director or Employee be convicted by a
crime which constitutes a felony and the Company at the President's request
refuses to discharge said Officer, Director or Employee. In the event of the
Employee's resignation for the reasons set forth herein, the Company shall
continue the Employee's benefits and compensation for a period of twenty four
(24) months or the remaining term of the agreement whichever is less.
10.2.3 Employee may terminate his employment with
the Company upon ninety (90) days written notice if the Company would require
the Employee to relocate his residence from Atlanta, Georgia to South Florida.
In the event of the Employee's resignation for the reasons set forth herein, the
Company shall continue the Employee's benefits and compensation for a period of
twenty four (24) months or the remaining term of the agreement, whichever is
less.
11. BEST EFFORTS OF EMPLOYEE: The Employee agrees that Employee
will, at all times, faithfully, industriously and to the best of his ability,
experience and talents, perform all of the
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express and implicit terms hereof, to the reasonable satisfaction of the Company
and its Board of Directors. It is understood that the Employee shall devote his
full time and effort to the business of the Company and may not render the same
or similar services or duties during the term hereof to a business which is the
same or similar to that of the Company.
12. EMPLOYEE'S LIMITATIONS ON ABILITY TO MAKE COMPANY COMMITMENTS:
The Employee shall have the legal authority to enter into contracts and
commitments for and on behalf of the Company. However, the Employee shall not
enter into any contract or commitment on behalf of the Company outside of the
Company's ordinary course of business which has not been approved by the
Company's Board of Directors or is of such material nature that requires Board
of Director approval.
13. TRUST FUNDS: All money belonging to the Company which comes
into the possession of Employee shall be received by Employee in trust for the
Company and Employee shall immediately deliver said funds to the Company for
deposit. All of such funds shall be considered "Trust Funds".
14. COVENANTS, REPRESENTATIONS AND WARRANTIES OF EMPLOYEE: The
Employee represents and warrants to the Company as follows:
14.1 Employee has the power and authority to enter into
this Agreement and perform its duties hereunder.
14.2 Employee shall use his best efforts to comply with
all laws, regulations, rules and ordinances pertaining to the Company's
business.
14.3 Employee shall weekly, or at such other interval
designated by the Company, deliver to the Chairman of the Board of the Company
and its Parent, activity reports of the Company in such form as prescribed by
the Company.
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15. RESTRICTIVE COVENANTS:
15.1 Employee recognizes and acknowledges that as a
consequence of his duties hereunder, Employee will be provided access to or will
come in contact with confidential information of or regarding the Company and
its parent, Finantra Capital, Inc., from time to time. Accordingly, Employee
agrees that he will not, during or for a period of 18 months after the term of
his employment except with prior written consent of the Company, disclose any
confidential information relating to the Company or its Parent. The provisions
of this section shall not apply to information which Employee is required to
disclose by law or by order a court of competent jurisdiction but only to the
extent required by law or by order and when reasonably possible, only if
Employee shall give the Company prior notice of such intended disclosure so that
the Company has the opportunity to seek a protective order if it deems such
appropriate.
15.2 As used in this Agreement, "confidential information"
shall mean and include studies, plans, reports, records, promotional materials,
agreements, memoranda, documents, information related to Company activities,
systems, finances, client lists, research data, personnel data, financing
sources, and such other related information not of a public knowledge.
15.3 It is agreed by the Employee that should be violate
the provisions of this section, the Company shall have the right to obtain an
Order from a court of competent jurisdiction enjoining him from violating any
and all of the provisions of this section or of this Agreement and the Company's
application for such a writ of injunction shall be deemed without prejudice to
any all other rights, remedies or actions which may accrue in favor of the
Company as a result of the Employee's breach of this provision or of the terms
of this Agreement. In the event the Company is required to institute any
litigation concerning the terms and conditions of this section or of this
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<PAGE> 9
Agreement, the prevailing party shall be entitled to reimbursement of all
reasonable attorney's fees and costs at both the trial and the appellate court
level. The Employee further agrees that in the event of litigation venue shall
only be proper in Broward County, Florida.
16. NOTICES: All notices, requests, demands, waivers, consents,
approvals or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been given when received if delivered
personally or by recognized overnight carrier, or three (3) days after being
sent if sent by certified or registered mail, postage prepaid, return receipt
requested, to the following addresses:
If to the Company: Finantra Capital, Inc.
Attention: Robert D. Press
150 S. Pine Island Road, Suite 500
Plantation, Florida 33324
With a copy to: Maynard J. Hellman, Esq.
150 S. Pine Island Road, Suite 500
Plantation, Florida 33324
If to the Employee: Charles Litt
---------------------------------
---------------------------------
Any party may by notice change the address to which notice or
other communications to it are to be delivered or mailed.
17. MISCELLANEOUS PROVISIONS:
17.1 CAPTIONS AND PARAGRAPH HEADINGS: Captions and
paragraph headings contained in this Contract are for convenience and reference
only and in no way define, describe, extend or limit the copy or intent of this
Contract nor the intent of any provision hereof.
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<PAGE> 10
17.2 COUNTERPARTS: This Contract may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same Contract.
17.3 BINDING EFFECT: This Contract shall enure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns. However, under no
circumstances shall this Contract be assignable by Employee.
17.4 ENTIRE AGREEMENT This Contract constitutes the entire
understanding agreement between the parties and may not be changed, altered or
modified, except by an instrument in writing signed by all parties against whom
and enforcement of such Contract would be sought. In the event any provision of
this Contract shall be determined by appropriate judicial authority to be
illegal or otherwise invalid, such provisions, shall be given its nearest legal
meaning or be construed or deleted as such authority determines. The remainder
of this Contract shall be construed to be in full force and effect. This
Contract shall not be modified unless said modification is in writing and signed
by the party to be charged.
17.5 GOVERNING LAW AND VENUE: This Contract shall be
construed and interpreted according to the laws of the State of Florida. Venue
for any litigation hereunder shall be in Dade County, Florida.
17.6 JOINT PREPARATION: The preparation of this Contract
has been a joint effort of the parties and the resulting documents shall not,
solely as a matter of judicial constructions, be construed more severely against
one of the parties than the other.
17.7 ATTORNEY'S FEES: In the event of any litigation
arising out of or relating to this Contract, the unsuccessful party in such
litigation shall pay to the successful party all costs and
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<PAGE> 11
expenses incurred therein by the successful party, including, without
limitation, reasonable attorney's fees and costs at the trial and appellate
court level.
IN WITNESS WHEREOF, the parties have hereunto set theirs hands and
seals this 16th day of May, 1999.
FINANTRA CAPITAL, INC.
By: /s/ ROBERT D. PRESS
---------------------------------
ROBERT D. PRESS, President
/s/ CHARLES LITT
--- ---------------------------------
CHARLES LITT, Employee
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
this day 1st of April, 2000, by and between FINANTRA CAPITAL, INC., a Delaware
corporation (the "Company"), and VERN LANDECK ("Landeck" or "Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ Landeck as its Chief Financial
Officer, and
WHEREAS, the Company and Landeck desire to memorialize their employment
agreement into a written instrument.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for such other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. RECITALS: The above and foregoing recitals are true and
correct and are incorporated herein.
2. EMPLOYMENT: The Company hereby employs, hires and engages
Landeck as its Chief Financial Officer for the purpose of giving and rendering
such services to the Company as may be necessary, including, but not limited to,
the overseeing of outside accountants employed by the Company on specific
matters.
3. TERM OF AGREEMENT: The term of this agreement shall commence
on April 1, 2000 and shall continue thereafter for a term of three (3) years,
subject to the termination provisions set forth in this Agreement.
- 1 -
<PAGE> 2
4. COMPENSATION: The Company, in consideration of the services to
be performed and provided by Landeck, shall pay to Landeck during the term of
this agreement the sum of One Hundred Seventy-Five Thousand Dollars
($175,000.00) per annum payable at the Company's usual and customary payment
dates for employee compensation. The Company shall deduct from Landeck's
compensation all applicable deductions, including, but not limited to,
withholding taxes and FICA taxes.
5. BONUS POOL: Landeck shall participate in the Executive Bonus
Pool (to be established in the calendar year 2000).
6. BENEFITs: In addition to the compensation set forth in
paragraphs 4 and 5 above, Landeck shall be entitled to receive the following
benefits during the term of this agreement:
6.1 MEDICAL INSURANCE: Landeck shall be entitled to
medical, health and life insurance benefits as are made available by the Company
to the Company's executives and employees during the term of this agreement.
6.2 REIMBURSEMENT OF EXPENSES: Landeck shall be entitled
to reimbursement of all reasonable expenses actually paid or incurred by Landeck
in the course of and pursuant to the performance of his duties under this
agreement.
6.3 VACATION: Employee shall be entitled to three weeks
vacation time annually. Any vacation time not utilized or taken in a given year
shall not accrue to the following year during the term hereof. Paid vacation
shall be prorated in any calendar year during which the Employee is employed
under this Agreement for less than an entire year. The Employee shall also be
entitled to all paid holidays given by the Company to its executives or
employees.
- 2 -
<PAGE> 3
6.4 MOVING EXPENSES: The Company shall reimburse Landeck for
his actual moving expenses incurred to relocate to South Florida, up to a
maximum amount of $15,000.00.
6.5 LIVING EXPENSES: The Company agrees to reimburse Landeck
for reasonable travel, lodging and transportation expenses incurred by him prior
to his move to South Florida. Temporary living expenses shall not exceed the sum
of $1,500.00 per month. This benefit will cease on July 1, 2000 irrespective of
whether Landeck has relocated.
6.6 INCENTIVE STOCK OPTION PROGRAM (ISO): Employee shall be
entitled to participate in Incentive Stock Option Program of the Company on an
annual basis during the term of this agreement as follows:
6.6.1 ANNUAL GRANT OF OPTIONS: Commencing in the calendar
year 2000 and each calendar year during the term of this agreement, the Employee
shall be granted 75,000 stock options at an exercise price equal to the market
value share price on the day the option is granted. The options shall be granted
quarterly in each year (January 1st, April 1st, October 1st).
6.6.2 The ISO's shall have an exercise period of 36 months
from the date of issuance and cannot be exercise during the first six months
following their issuance.
7. INDEMNIFICATION AND WAIVER OF PROFESSIONAL LIABILITY COVERAGE:
The Company agrees that it will indemnify Landeck against any and claims, suits,
actions, debts, damages, costs, charges and expenses including court costs and
attorney's fees arising from any and all liability, losses and damages of any
nature whatsoever as a result of the services being rendered to the Company by
Landeck unless said claims are as a result of Landeck's gross negligence or
total disregard of his duties.
- 3 -
<PAGE> 4
8. DISABILITY: In the event Landeck shall become incapacitated by
reason of mental or physical disability during the term of this agreement such
that he is substantially prevented from performing his duties and services
hereunder for a period of 90 days or for such shorter periods aggregating 90
days during any twelve month period, the Company thereafter shall have the right
to terminate this agreement by sending written notice of termination to Landeck
or his legal representative and thereupon his employment shall hereunder
immediately terminate. Upon such termination Landeck shall be entitled to
receive and shall be paid by the Company all compensation due him to the date of
termination.
9. TERMINATION:
9.1 CAUSE: The Company shall have the right to terminate
the employment of Employee hereunder at any time for cause (as used herein,
"cause") if:
9.1.1 Employee shall be convicted by a court of
competent and final jurisdiction of any crime (whether or not involving the
Company) which constitutes a felony in the jurisdiction involved or otherwise
commit acts of moral turpitude in such a manner as to adversely reflect upon the
reputation of the Company; or
9.1.2 Employee shall commit any act of
embezzlement or similar material dishonest and injurious conduct against the
Company; or
9.1.3 Employee shall demonstrate reckless
disregard or grossly negligent and injurious conduct in connection with the
performance of, or a gross disregard for, his duties and responsibilities under,
or assigned pursuant to this Agreement; or
9.1.4 Employee is in default in the performance of
his obligations, services or duties under this agreement and such default
continues for a period of fifteen (15) days after
- 4 -
<PAGE> 5
written notice to Employee and a majority of the Company's outside Directors
after having heard the Employee's explanation have voted in favor of
termination.
Notwithstanding the foregoing, the Company agrees that it will not be
arbitrary or capricious in terminating Employee's employment hereunder for other
than good and valid cause which results in material damage to the Company.
9.2 MUTUAL AGREEMENT: Company and Employee may mutually
agree to terminate this Agreement.
9.3 In the event that the employment of Employee shall be
terminated by the Company, Employee shall be entitled to receive his salary then
in effect through the date of such termination. Employee shall accept the
payments pursuant to this paragraph in full discharge and release of the Company
of and from any further obligations under this Agreement. Nothing contained in
this paragraph shall constitute a waiver or release by the Company of any rights
or claims it may have against the Employee, including, but not limited to, any
claims or rights pursuant to the provisions set forth in this Agreement.
10. BEST EFFORTS OF EMPLOYEE: The Employee agrees that Employee
will, at all times, faithfully, industriously and to the best of his ability,
experience and talents, perform all of the express and implicit terms hereof, to
the reasonable satisfaction of the Company. It is understood that the Employee
shall devote full time and effort to the business of the Company.
11. COVENANTS, REPRESENTATIONS AND WARRANTIES OF LANDECK: Landeck
represents and warrants to the Company as follows:
11.1 He has the power and authority to enter into this
Agreement and perform its duties hereunder.
- 5 -
<PAGE> 6
11.2 He shall use his best efforts to comply with all
laws, regulations, rules and ordinances pertaining to the Company's business.
12. RESTRICTIVE COVENANTS:
12.1 Employee recognizes and acknowledges that as a
consequences of his duties hereunder, Employee will be provided access to or
will come in contact with confidential information of or regarding the Company.
Accordingly, Employee agrees that he will not, during or for a period of 24
months after the term of his employment except with prior written consent of the
Company, disclose any confidential information relating to the Company. The
provisions of this section shall not apply to information which Employee is
required to disclose by law or by order a court of competent jurisdiction but
only to the extent required by law or by order and when reasonably possible,
only if Employee shall give the Company prior notice of such intended disclosure
so that the Company has the opportunity to seek a protective order if it deems
such appropriate.
12.2 As used in this Agreement, "confidential information"
shall mean and include studies, plans, reports, records, promotional materials,
agreements, memoranda, documents, information related to Company activities,
systems, finances, client lists, research data, personnel data, financing
sources, and such other related information not of a public knowledge.
12.3 It is agreed by the Employee that should be violate
the provisions of this section, the Company shall have the right to obtain an
Order from a court of competent jurisdiction enjoining him from violating any
and all of the provisions of this section or of this Agreement and the Company's
application for such a writ of injunction shall be deemed without
- 6 -
<PAGE> 7
prejudice to any all other rights, remedies or actions which may accrue in favor
of the Company as a result of the Employee's breach of this provision or of the
terms of this Agreement. In the event the Company is required to institute any
litigation concerning the terms and conditions of this section or of this
Agreement, the prevailing party shall be entitled to reimbursement of all
reasonable attorney's fees and costs at both the trial and the appellate court
level. The Employee further agrees that in the event of litigation venue shall
only be proper in Broward County, Florida.
13. Notices: All notices, requests, demands, waivers, consents,
approvals or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been given when received if delivered
personally or by recognized overnight carrier, or three (3) days after being
sent if sent by certified or registered mail, postage prepaid, return receipt
requested, to the following addresses:
If to the Company: Finantra Capital, Inc.
Attention: Robert D. Press
Westside Corporate Center
150 S. Pine Island Road, Suite 500
Plantation, Florida 33324
If to the Employee: Vern E. Landeck
8300 Chaucer Drive
Willow Springs, IL 60480
14. MISCELLANEOUS PROVISIONS:
14.1 CAPTIONS AND PARAGRAPH HEADINGS: Captions and
paragraph headings contained in this Contract are for convenience and reference
only and in no way define, describe, extend or limit the copy of intent of this
Contract nor the intent of any provision hereof.
- 7 -
<PAGE> 8
14.2 COUNTERPARTS: This Contract may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same Contract.
14.3 BINDING EFFECT: This Contract shall enure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns. However, under no
circumstances shall this Contract be assignable by Employee.
14.4 ENTIRE AGREEMENT: This Contract constitutes the
entire understanding agreement between the parties and may not be changed,
altered or modified, except by an instrument in writing signed by all parties
against whom and enforcement of such Contract would be sought. In the event any
provision of this Contract shall be determined by appropriate judicial authority
to be illegal or otherwise invalid, such provision, shall be given its nearest
legal meaning or be construed or deleted as such authority determines. The
remainder of this Contract shall be construed to be in full force and effect.
This Contract shall not be modified unless said modification is in writing and
signed by the party to be charged.
14.5 GOVERNING LAW AND VENUE: This Contract shall be
construed and interpreted according to the laws of the State of Florida. Venue
for any litigation hereunder shall be in Broward County, Florida.
14.6 ATTORNEY'S FEES: In the event of any litigation
arising out of or relating to this Contract, the unsuccessfully party in such
litigation shall pay to the successful party all costs and expenses incurred
therein by the successful party, including, without limitation, reasonable
attorney's fees and costs at the trial and appellate court level.
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties have hereunto set theirs hands and
seals this 1st day of April, 2000.
FINANTRA CAPITAL, INC.
By: /s/ CHARLES V. LITT
-----------------------------
CHARLES V. LITT, President
/s/ VERN LANDECK
--- -----------------------------
VERN LANDECK
- 9 -
<PAGE> 1
EXHIBIT 21
OPERATING SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
OWNERSHIP
JURISDICTION OF INTEREST BY
ENTITY INCORPORATION COMPANY
------ ------------- -------
<S> <C> <C>
Ameri-Cap Business Finance Group, Inc. Florida 100%
Ameri-Cap Medical Finance, Inc. Florida 100%
Ameri-Cap Commercial Asset Finance Group, Inc. Florida 100%
Pronet Resources, Inc. Florida 100%
Ameri-Med Asset Finance Corp. Delaware 100%
Ameri-Cap Commercial Lending Corp. Delaware 100%
Ameri-Cap Consumer Finance Group, Inc. Florida 100%
Finantra Internet Services.com, Inc. Florida 100%
American Factors Group, Inc. Florida 85%
Suncoast Title Company, Inc. Florida 85%
Ameri-Cap Mortgage Group, Inc. Florida 84%
Ameri-Cap Mortgage Lending Corp. Florida 84%
Ameri-Cap Mortgage Services, Inc. Florida 84%
Ameri-Med Financial Services, Inc. Florida 84%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,214,315
<SECURITIES> 0
<RECEIVABLES> 44,472,901
<ALLOWANCES> (2,642,259)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 573,810
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,535,520
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 24,992,545
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 66,535,520
<SALES> 0
<TOTAL-REVENUES> 11,604,014
<CGS> 0
<TOTAL-COSTS> 13,494,991
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 482,727
<INTEREST-EXPENSE> 1,389,295
<INCOME-PRETAX> (1,890,977)
<INCOME-TAX> 355
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,880,846)
<EPS-BASIC> (.34)
<EPS-DILUTED> 0
</TABLE>
