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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FINANCIAL PERFORMANCE CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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NEW YORK 7372 13-3236325
(STATE OR JURISDICTION OF PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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335 MADISON AVENUE, 8TH FL.
NEW YORK, NEW YORK 10017
(212) 557-0401
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS
SENT TO AGENT FOR SERVICE, SHOULD BE SENT TO:
WILLIAM F. FINLEY
PRESIDENT
FINANCIAL PERFORMANCE CORPORATION
335 MADISON AVENUE, 8TH FL.
NEW YORK, NEW YORK 10017
(212) 557-0401
WITH A COPY TO:
JONATHAN J. RUSSO, ESQ.
BAER MARKS & UPHAM LLP
805 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 702-5700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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Common Stock, $.01 par value......... 3,006,000(1) $0.641(2) $1,926,846 $535.66
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(1) This Registration Statement covers the registration of 3,006,000 shares of
the Company's common stock on behalf of certain selling shareholders, which
includes 1,456,000 outstanding shares of common stock and 1,550,000 shares
of common stock underlying outstanding warrants.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based
upon the average of the closing bid and ask price of the Company's common
stock on the OTC Bulletin Board on June 24, 1999.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED JUNE 28, 1999
SELLING STOCKHOLDERS'
PROSPECTUS
FINANCIAL PERFORMANCE CORPORATION
3,006,000 SHARES OF COMMON STOCK
OTC BULLETIN BOARD
FPCX
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- --------------------------------------- - This is an offering of common stock by
stockholders of our company.
THIS INVESTMENT INVOLVES A
HIGH DEGREE OF RISK. YOU - The selling stockholders will receive all
SHOULD PURCHASE SHARES ONLY of the proceeds from the sale of the stock,
IF YOU CAN AFFORD A less any commissions or discounts paid to
COMPLETE LOSS OF YOUR brokers or other agents. We will not
INVESTMENT. SEE RISK FACTORS receive any of the proceeds from the sale
BEGINNING ON PAGE 4. of the stock.
- ------------------ - The selling stockholders may offer and sell
the shares at any time in one or more
Neither the Securities and Exchange transactions at prevailing market prices,
Commission nor or in privately negotiated transactions at
any state securities prices other than the market price. On
commission has approved or June 21, 1999, the average of the high and
disapproved the sale of the low sale price for our common stock as
shares, or determined if this quoted on the OTC Bulletin Board was
prospectus is truthful or $0.59375.
complete. Any representation
to the contrary is a criminal
offense.
- ---------------------------------------
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell their shares until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell shares and it is not soliciting an offer to buy shares
in any state where the offer or sale is not permitted.
, 1999
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Use of Proceeds............................................. 11
Market for Common Equity and Related Stockholder Matters.... 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Business.................................................... 21
Management.................................................. 32
Security Ownership of Certain Beneficial Owners and
Management................................................ 39
Certain Relationships and Related Transactions.............. 40
Selling Stockholders........................................ 43
Description of Securities................................... 45
Plan of Distribution........................................ 48
Legal Matters............................................... 48
Experts..................................................... 49
Where You Can Find More Information......................... 49
Index to Financial Statements............................... F-1
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Our principal executive offices are located at 335 Madison Avenue, New
York, New York 10017, and our telephone number is (212) 557-0401.
------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. You should not assume that the information contained in this prospectus is
accurate as of any date other than the date on the front cover.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that you
should consider before purchasing our common stock.
OUR COMPANY
OUR SERVICES AND PROPOSED PRODUCT
Our principal business is marketing specialized merger communications
consulting services to the financial services industry. We have also developed
specialized software that we plan to market to this industry. Our services and
software are designed to identify and analyze the financial impact and
competitive position of our customer's products and services and assist them in
developing and analyzing their own marketing and communications strategies.
We have developed expertise in consulting with banks on communications
concerning mergers and other business combinations and sales promotions. Our
customers have included First Union National Bank, Chemical Bank (now The Chase
Manhattan Bank), The Bank of New York, Citibank, First National Bank of
Maryland, The Dime Savings Bank of New York, Fleet Bank, CIT Group and PNC
National Bank.
Our software program that we intend to market is called MARS(TM), which
stands for Managing Account Relationships. MARS is an integrated planning and
sales management system designed to gather and sort information on the user's
marketing activity and analyze the results of the user's sales efforts and
profitability of its products. We created MARS for the banking industry as a
tool to enable a bank's management to analyze in greater detail the products it
offers and the profitability and contributions of each of the various
departments within the bank. We believe that MARS will enable users to monitor
the income and new business contributions of each department faster and more
efficiently than other currently available software applications. Among our
other planned marketing efforts, we intend to market MARS to those banks to whom
we have provided merger communications consulting services as a way for them to
gather and analyze performance and profitability post-merger. We have completed
the development stage of the current version of MARS and we are currently
testing this version. We cannot predict when MARS will be available for sale.
(see "Our History" below).
OUR HISTORY
We were incorporated in New York in August 1984 under the name Performance
Services Group, Inc. and changed our name to Financial Performance Corporation
in June 1986. In February 1990, we became insolvent and, as a result, ceased our
day-to-day operations. We were inactive from February 1990 to November 1992.
We resumed operations in January 1993. At that time, we raised working
capital through private debt and equity issuances. In 1994, we began
implementing a business strategy of establishing subsidiary companies to engage
in related or complementary areas of the financial services industry. As a
result, together with certain of our affiliates, we formed three subsidiaries:
Michaelson Kelbick Partners Inc. ("MKP"), FPC Information Corp. ("FPC
Information") and Aspen Capital Management, LLC ("Aspen"). MKP is the subsidiary
through which we provide merger communications and marketing services to the
financial services industry and FPC Information holds the rights to our MARS
<PAGE> 5
software. Aspen is inactive. See "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
We incurred losses in five of the last six fiscal years. For the year ended
September 30, 1996, we generated approximately $8,780,000 in revenues, $278,000
in operating income, losses of approximately $15,000 from continuing operations,
and a net loss of approximately $235,000. For the year ended December 31, 1997,
we generated approximately $8,383,000 in revenues, had an operating loss of
approximately $569,000, losses from continuing operations of approximately
$516,000 and a net loss of approximately $551,000. For the year ended December
31, 1998, we generated approximately $21,492,000 in revenues, had operating
income of approximately $2,946,000 and net income of approximately $2,107,000.
Our revenues have historically been generated from a limited number of
customers. For the year ended December 31, 1997, three customers of MKP
accounted for an aggregate of approximately 77% of our total revenues, with one
customer of MKP accounting for 48% of total revenues. For the year ended
December 31, 1998, three customers of MKP accounted for an aggregate of
approximately 83% of our total revenues, with one customer of MKP accounting for
approximately 55% of our total revenues. For the three months ended March 31,
1999, two customers of MKP accounted for an aggregate of approximately 84% of
our total revenues, with one customer of MKP accounting for approximately 74% of
our total revenues.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"FPCX."
THE OFFERING
Stockholders may offer and sell up to 3,006,000 shares of our common stock
under this prospectus. We will not receive any of the proceeds from the sale of
these shares. However, we will receive proceeds from the exercise, in cash, of
warrants to purchase shares of common stock, which shares are being offered in
this prospectus. See "Use of Proceeds" and "Selling Stockholders."
RISK FACTORS
Investing in our common stock involves significant risks. You should
consider the information under the caption "Risk Factors" beginning on page 4 of
this prospectus in deciding whether to purchase the common stock offered under
this prospectus.
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SUMMARY CONSOLIDATED FINANCIAL DATA
This table summarizes our operating data and balance sheet data for and as
of the periods indicated. You should read this summary consolidated financial
data in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and notes thereto included elsewhere in this prospectus.
In February 1998, we changed our fiscal year end from September 30 to
December 31. The financial data presented below for 1996, 1995 and 1994 relate
to the fiscal years ended September 30, 1996, 1995 and 1994, respectively. The
financial data presented for 1998 as well as 1997 relate to the fiscal years
ended December 31, 1998 and 1997, respectively.
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FOR THE THREE FOR THE YEARS ENDED
MONTHS ENDED ------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30,
--------------- ---------------- -----------------------
1999 1998 1998 1997 1996 1995 1994
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(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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OPERATING DATA:
Total revenues........... $3,390 $4,489 $21,492 $8,383 $8,784 $1,315 $ 49
Net income (loss)........ 273 383 2,108 (551) (235) (801) (146)
Net basic earning (loss)
per share.............. .029 .048 .24 (.06) (.05) (.25) (.01)
Net diluted earnings
(loss) per share....... .026 .048 .23 (.06) (.05) (.25) (.01)
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AS OF MARCH 31,
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1999 1998
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(UNAUDITED)
(IN THOUSANDS)
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BALANCE SHEET DATA:
Assets...................................................... $7,684 $4,682
Liabilities................................................. 2,334 2,018
Minority interest in consolidated subsidiaries.............. 915 517
Shareholders' equity........................................ 4,434 2,147
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RISK FACTORS
Purchasing the common stock offered by this prospectus involves a high
degree of risk. Before purchasing our common stock, you should carefully
consider the following risk factors and the other information contained in this
prospectus.
WE HAVE A HISTORY OF LOSSES AND OUR COMPANY WAS INACTIVE FOR THREE YEARS.
We have a history of net losses since our inception in 1984. In July 1989,
our common stock was delisted from the Nasdaq over-the-counter market for
failure to maintain the minimum capital requirements imposed by Nasdaq. In
February 1990, our company became insolvent and we ceased day-to-day operations.
We remained inactive in each of the fiscal years ended September 30, 1991 and
1992, respectively.
In January 1993, we recommenced operations and incurred net losses of
$146,000, $801,000, $235,000 and $551,000, respectively, for the fiscal years
ended September 30, 1994, 1995 and 1996 and the fiscal year ended December 31,
1997. For the fiscal year ended December 31, 1998, we generated $21,492,00 in
revenues and had net income of $2,108,000.
Our future depends on our ability to continue to generate significant
revenues from the sale of our financial consulting services and includes plans
to commence generating revenues from sales of our information software, MARS. We
cannot make any assurances that we will continue to generate revenues from our
consulting services at the level achieved in 1998 or that we will generate
revenues from sales of MARS. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
OUR REVENUES ARE CONCENTRATED FROM A LIMITED NUMBER OF LARGE CUSTOMERS IN ONE
INDUSTRY.
We market our services and plan to market MARS primarily to the financial
services industry. Any material decline in business related to the financial
services industry or any event which negatively impacts the industry will likely
have a material adverse effect on our business, financial condition or results
of operations. For the year ended December 31, 1998, three customers of MKP
accounted for an aggregate of approximately 83% of our total revenues, with one
customer of MKP accounting for approximately 55% of our total revenues. For the
three months ended March 31, 1999, two customers of MKP accounted for an
aggregate of approximately 84% of our total revenues, with one customer of MKP
accounting for approximately 74% of our total revenues. We anticipate that a
substantial amount of sales will continue to be concentrated from a limited
number of customers. The loss of, or reduction in services to, one or more of
our customers will materially harm our business, financial condition and results
of operations.
WE HAVE NOT GENERATED ANY REVENUES FROM MARS.
We have completed the development stage of the current version of MARS and
are currently testing this version. We have not derived any revenues from the
sale of the current version of our MARS software. Our success in generating
revenues from MARS will depend in part on our ability to market this proposed
product, respond promptly to market feedback and provide adequate technical
support and service to customers, as well as the level of market acceptance of
MARS. We cannot predict whether we can successfully market MARS, or whether we
will generate or sustain income as a result of
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<PAGE> 8
such sales. Our inability to generate revenues from MARS could have a material
adverse effect on our ability to expand operations beyond our consulting
services. See "-- We face risks related to the commercialization and development
of MARS and we cannot guarantee the acceptance of MARS."
WE FACE RISKS RELATED TO THE COMMERCIALIZATION AND DEVELOPMENT OF MARS AND WE
CANNOT GUARANTEE THE ACCEPTANCE OF MARS.
Our business plan relies on the commercialization of MARS. We have been
engaged in the development of MARS since 1988 and the MARS software has
undergone several substantial revisions. We have completed the development stage
of the current version of MARS. We do not know whether the financial industry
will accept MARS. Market and customer acceptance of MARS will depend on, among
other things, its operational performance. Customer feedback on performance is
not available because MARS is not installed at any outside testing sites. We are
currently testing our current version of MARS. As we complete testing of MARS,
or if we sell any of our proposed MARS products, we may face difficulties with
installation, or undetected errors in MARS, which could result in unanticipated
costs, production delays or costly product recalls.
WE ARE HIGHLY DEPENDENT ON OUR MANAGEMENT.
We depend for the continued development of our business on our President
and Chief Executive Officer, William F. Finley, and the two Managing Directors
of MKP, Susan Michaelson and Hillary Kelbick. We have entered into employment
agreements with Mr. Finley as well as with Ms. Michaelson and Ms. Kelbick, each
of which expire in October 2000. The loss of the services of any of Mr. Finley,
Ms. Michaelson or Ms. Kelbick would materially harm our company. We have not
obtained any life insurance or disability insurance coverage for Mr. Finley, Ms.
Michaelson or Ms. Kelbick. See "Management -- Directors, Executive Officers and
Key Employees."
OUR SOFTWARE IS SUBJECT TO TECHNOLOGICAL CHANGE AND OBSOLESCENCE.
The computer software industry is continually undergoing rapid change as a
result of technological advances. We plan to market MARS in the future. The
ability of MARS to compete in this environment will depend on our ability to
develop enhancements incorporating the latest technological advances and ensure
that this software is compatible with accepted technological standards. Further,
technological developments by competitors may make MARS obsolete. If we fail to
anticipate or respond adequately to changes in technology or customer
preferences, or if we experience significant delays in product development or
introduction, our business may be materially harmed. See "Business -- Our
Financial Information Software: MARS."
THE INDUSTRIES FOR OUR SERVICES AND PROPOSED SOFTWARE PRODUCT ARE VERY
COMPETITIVE.
Competition among providers of merger communications services and software
products to financial institutions and other business organizations is intense.
We face competition from other companies that offer services or products similar
to our services and proposed product. Many of these companies have greater
financial resources, more technical personnel and more extensive service
capabilities than us. We cannot guarantee that we can continue to attract
clients and generate revenues within this competitive environment.
5
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Assuming we are able to commercialize MARS, we believe that the software
products that MARS will most directly compete with are Lotus Notes, Siebel
Systems Sales Enterprises, Aurum Software Sales Trak and Borealis Arsenal. In
particular, Lotus Development Corp. markets the Notes product as a universal
information sharing tool for collaborative work groups. We believe that while
the flexibility and workflow components of Notes make that product attractive,
it is sold at a significantly higher price than the price we intend to sell
MARS.
We also expect that MARS will compete with custom-designed programs
developed by in-house development teams or systems consultants for companies
that we will target for marketing. These teams and consultants often have well
established positions within their organizations. Accordingly, these teams and
consultants may resist the introduction of MARS because they prefer their
traditional approaches to solving systems integration issues, which may also be
more familiar to the decision makers at these organizations than our MARS
solutions. We expect the number of products that will compete with MARS will
continue to increase. No assurance can be given that we will be able to compete
successfully against current or future competition to MARS. See "Business --
Competition."
OUR OPERATING RESULTS TEND TO VARY SIGNIFICANTLY AND OUR FUTURE REVENUES ARE
UNPREDICTABLE.
Our operating results have fluctuated significantly in the past and may
vary significantly in the future. Our revenues will vary with the demand for our
services. In addition, because of the nature of our services and the software we
intend to market, we anticipate that future projects may take from up to several
months for a single customer The period of installation for MARS may also be
dependent upon the level of commitment made by the customer to installation as
well as the learning speed of the customer's personnel. The installation periods
may delay the recognition of revenue. Accordingly, the timing of receipt of
payments and the recognition of revenues in a given period could result in
significant fluctuations in liquidity and financial results. As a result of
these factors, our operating results for any particular quarter may not
necessarily be indicative of results for a full fiscal year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
WE FACE RISKS ASSOCIATED WITH THE YEAR 2000.
Significant uncertainty exists regarding the impact of Year 2000 issues.
These issues arise when computer systems do not properly recognize date
sensitive information beyond December 31, 1999, thereby generating erroneous
data or failing altogether. In January 1999, we completed a comprehensive review
of our information technology system, on which we are dependent for the conduct
of our business operations, as well as the computer hardware and software
products, components and other equipment supplied to us by third parties, in
order to determine the adequacy of those systems in light of our future business
requirements. We believe that our computer equipment and software will function
properly in all material respects with respect to Year 2000 issues. However, we
have not developed a "worst case" scenario with respect to Year 2000 issues.
Third parties such as suppliers and vendors that have relationships with us may
experience significant Year 2000 issues. If we, or third parties with which we
have relationships, were to cease or be unsuccessful in Year 2000 remediation
efforts, we could encounter disruptions to our business. We believe that such
disruptions would not have a material adverse effect on our business, financial
position and results of operations. However, we could be materially and
6
<PAGE> 10
adversely impacted by widespread economic or financial market disruption, or by
Year 2000 computer system failures of third parties, that may generally occur as
a result of the Year 2000 problem. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
WE MAY NEED ADDITIONAL FINANCING AND WE DO NOT KNOW WHETHER FINANCING WILL BE
AVAILABLE WHEN WE NEED IT.
We have funded our operations to date mostly through public and private
sales of our shares and debt securities, including significant sales to one of
our principal shareholders, and in 1998, through revenues generated by MKP. At
December 31, 1998, we had working capital of approximately $3,820,018. Based on
our current plan of operations, we believe that our working capital plus
expected operating revenues will provide sufficient working capital for
operations for the foreseeable future. We may, however, need additional
financing for reasons not part of our current plans. Our working capital
requirements depend on many factors, including:
- whether we are successful in continuing to generate revenues and income
from MKP;
- whether we can successfully market MARS;
- whether any demand for MARS will require expansion at a faster rate than
anticipated;
- whether marketing or other expenditures or the extent of service and
customer support that we will be required to provide will be greater than
expected;
- whether other opportunities arise which may require significant
investment;
- competing technological and market developments;
- whether we incur any costs involved in protecting and enforcing our
proprietary rights and any litigation related thereto; and
- the cost and availability of third-party financing.
We cannot assure you that, if we need additional financing, it will be
available on acceptable terms, or at all. If we raise money by issuing stock, or
securities convertible into stock, the percentage ownership of our then
stockholders will be reduced and our stockholders will experience dilution. In
addition, if we do issue stock, it may have rights, preferences or privileges
senior to those of our common stock, such as additional voting rights or rights
to receive dividends. If we do not have adequate funds to satisfy our capital
requirements, we may be required to limit operations significantly and we may be
unable to carry out our business plan. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
ONE STOCKHOLDER OWNS A LARGE PERCENTAGE OF OUR STOCK.
As of the date of this prospectus, Mr. Robert S. Trump may be deemed to
beneficially own approximately 58.7% of our common stock. Accordingly, Mr. Trump
has the ability to control our management and affairs, including matters
requiring stockholder approval, such as the election of directors. Mr. Trump's
interests may conflict with the interests of other stockholders. See "Security
Ownership of Certain Beneficial Owners and Management."
7
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WE ARE SUBJECT TO RISKS BECAUSE OF THE LOW-PRICE OF OUR STOCK.
Our common stock is subject to the risks associated with low priced or
"penny stock," which could severely affect its market liquidity. The Securities
Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure
relating to the market for penny stocks in connection with trades in any stock
defined as a penny stock. SEC regulations generally define a penny stock to be
an equity security that has a market price of less than $5.00 per share, subject
to certain exceptions. Such exceptions include any equity security listed on
Nasdaq or a national securities exchange and any equity security issued by an
issuer that has (i) net tangible assets of at least $2,000,000, if such issuer
has been in continuous operation for three years, (ii) net tangible assets of at
least $5,000,000, if such issuer has been in continuous operation for less than
three years, or (iii) average annual revenue of at least $6,000,000, if such
issuer has been in continuous operation for less than three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith. We believe that we
currently fall within an exception to the penny stock rules but there can be no
assurance that these rules do not or will not adversely affect our stock in the
future.
In addition, trading in our common stock is currently subject to Rule 15g-9
under the Securities Exchange Act for non-Nasdaq and non-exchange listed
securities. Pursuant to Rule 15g-9, broker/dealers who recommend our securities
to persons other than established customers and accredited investors (generally
those with assets in excess of $1,000,000 or annual incomes exceeding $200,000
or $300,000 together with their spouse) must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale. Securities are exempt from this rule if their
market price is at least $5.00 per share. Additionally, for any transaction
(other than exempt transactions) involving a penny stock, the rules require the
delivery, prior to the transaction, of a risk disclosure document mandated by
the SEC relating to the penny stock market. The broker-dealer also must disclose
the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
The impact on our common stock of these regulations is to reduce the market
liquidity of the common stock by limiting the ability of broker/dealers to trade
the common stock and the ability of purchasers of the common stock to sell in
the secondary market. The low price of our common stock also has a negative
effect on the amount and percentage of transaction costs paid by individual
shareholders and the potential ability of our company to raise additional
capital by issuing additional shares. The primary reasons for these effects
include the internal policies of certain institutional investors that prohibit
the purchase of low-priced stocks, the fact that many brokerage houses do not
permit low-priced stocks to be used as collateral for margin accounts or to be
purchased on margin and certain brokerage house policies and practices that tend
to discourage individual brokers from dealing in low-priced stocks. In addition,
since broker's commissions on low-priced stocks represent a higher percentage of
the stock price than commissions on higher priced stocks, the current share
price of the common stock results in individual shareholders paying transaction
costs that are a higher percentage of their total share value than would be the
case if our share price were substantially higher.
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THE PRICE OF OUR COMMON STOCK CAN BE VOLATILE.
The market price of our common stock has fluctuated significantly and may
be affected by our operating results, changes in our business, changes in the
industries in which we conduct business, and general market and economic
conditions. In addition, the stock markets in general have recently experienced
extreme price and volume fluctuations. These fluctuations have affected stock
prices of many companies without regard to their specific operating performance.
The price of our common stock may fluctuate significantly in the future.
OUR INTELLECTUAL PROPERTY RIGHTS ARE NOT REGISTERED AND WE FACE RISKS IN
PROTECTING AND ENFORCING OUR INTELLECTUAL PROPERTY RIGHTS.
We do not have any registered copyrights relating to MARS. We rely on
copyright and trademark laws, trade secrets, and nondisclosure and other
contractual arrangements to establish and protect our proprietary rights. We
cannot assure you that the steps we take will be adequate to deter
misappropriation of our proprietary information, to detect any unauthorized use
of our proprietary information or to prevent others from infringing upon our
proprietary rights. Further, it is possible that others with whom we enter into
nondisclosure and other contractual arrangements designed to protect our
proprietary rights may breach these agreements. In such cases, we may not have
adequate remedies and our trade secrets may become known to our competitors. Our
failure or inability to protect our proprietary information could materially
harm our business, financial condition and results of operations.
Third parties may assert claims against our company in the future relating
to intellectual property infringement. These assertions may result in costly
litigation and we may not prevail in such litigation. If we were required to
attempt to obtain licenses from third parties claiming infringement, there could
be no assurances that licenses would be available or, if available, that they
would be on commercially reasonable terms. Litigation, in and of itself and
regardless of its outcome, could result in substantial cost and the diversion of
our resources from operations. Any infringement claim or other litigation
against or by our company could materially harm our business, financial
condition and results of operations.
THE FUTURE SALES OF SHARES INTO THE MARKET MAY DEPRESS THE MARKET PRICE FOR OUR
COMMON STOCK.
We have 9,471,534 shares of common stock outstanding as of June 24, 1999.
As of the date of this prospectus, all of our outstanding shares of common stock
will be immediately eligible for sale in the public market, in some cases,
including sales of shares held by affiliates, subject to volume limitations and
other restrictions. Future sales of shares of common stock, or the perception
that such sales are going to occur, could cause the market price of our stock to
drop significantly.
In addition, as of June 24, 1999, we had outstanding warrants and options
to purchase an aggregate of 1,745,000 shares of common stock, of which 1,550,000
are being offered hereby. The remaining 195,000 shares will be eligible for sale
from time to time commencing one year after the date of exercise, subject to
limitations on the volume of shares that may be sold. See "Description of
Securities -- Shares Eligible For Future Sale."
9
<PAGE> 13
IN ORDER TO MAKE OFFERS AND SALES USING THIS PROSPECTUS, IT MUST BE CURRENT AND
THE TRANSACTION MUST BE COVERED BY ANY APPLICABLE "BLUE SKY" REGISTRATION
REQUIREMENTS.
We believe that this prospectus, which is part of our registration
statement, may be used by the selling shareholders for the sale of the shares
offered hereby for a period of nine months after the date on the cover page
hereof, provided that the information contained herein (including our financial
statements) is not more than 16 months old from the date of such prospectus and
we otherwise comply with applicable securities laws. There can be no assurance,
however, that sales under this prospectus will be made in accordance with all
applicable securities laws or that our registration statement will remain
effective as we intend. The value of the common stock being offered by this
prospectus could deteriorate if a current prospectus covering the common stock
is not part of an effective registration statement, or if the common stock is
not registered for sale or exempt from registration in the states governing the
sales made under this prospectus.
WE HAVE NOT PAID DIVIDENDS ON OUR COMMON STOCK.
To date, we have not paid any dividends on our common stock. Whether we pay
dividends in the future will be at the discretion of our Board of Directors and
will depend on our operating results, financial condition, capital requirements
and such other factors as our Board of Directors may deem relevant.
WE ARE A HOLDING COMPANY AND WE DEPEND ON PAYMENTS FROM OUR OPERATING
SUBSIDIARIES.
We conduct our operations through our subsidiaries. We rely on cash
payments from MKP to, among other things, pay creditors, maintain capital and
meet other operating requirements. Under MKP's shareholders' agreement, MKP is
required to pay to FPC on a quarterly basis a consulting fee equal to 30% of
MKP's pre-tax earnings. In fiscal 1998 and 1997, MKP paid FPC $1,714,000 and
$337,000, respectively. Regulations, legal restrictions and contractual
agreements could prohibit, restrict or make unfavorable any needed payments from
MKP, or in the future, other subsidiaries. If we are unable to receive cash
funds from MKP, our operations and financial condition will be materially and
adversely affected.
THE ISSUANCE OF OUR PREFERRED STOCK COULD ADVERSELY AFFECT HOLDERS OF OUR COMMON
STOCK.
Under our governing documents, our Board of Directors may issue up to
10,000,000 shares of "blank check" preferred stock without obtaining shareholder
approval. Our preferred stock may be issued in one or more series with rights,
preferences, privileges and restrictions, that could materially harm the holders
of our common stock. For example, we could issue preferred stock with more
voting rights than the common stock, or with rights to dividends to which our
common stock would not be entitled. Our ability to issue "blank check" preferred
stock gives us flexibility in connection with possible acquisitions and other
corporate purposes. However, the issuance of preferred stock could limit the
rights of the holders of our common stock to consummate some corporate
transactions. We do not have any present plans to issue shares of preferred
stock, but we may issue preferred stock from time to time in the future. See
"Description of Securities -- Preferred Stock."
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<PAGE> 14
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale of
the common stock offered by this prospectus. We will not receive any proceeds
from the sale of the common stock offered hereby. We may however receive
proceeds from the exercise of warrants by the selling stockholders. The selling
stockholders are offering in this prospectus up to 1,550,000 shares currently
underlying warrants. These warrants may be exercised at prices of $1.00 per
share or $0.50 per share, depending on the warrants, or without cash payment
under the cashless exercise provisions contained in the warrants. We will
receive gross proceeds of up to $1,025,000 upon the exercise of these warrants
by the selling stockholders, assuming the exercise of all of the outstanding
warrants held by the selling stockholders and no cashless exercises. See
"Selling Stockholders" and "Plan of Distribution."
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
From January 1987 until July 6, 1989, our common stock traded on the Nasdaq
over-the-counter market under the symbol "FPCC." Our common stock was delisted
by Nasdaq in July 1989 due to our failure to maintain Nasdaq's continued listing
requirements. As of November 27, 1996, our common stock resumed trading on the
OTC Bulletin Board under the symbol "FPCX." The following table sets forth the
range of high and low bid prices as reported by the OTC Bulletin Board during
the calendar quarters set forth therein. We believe that these quotations
represent interdealer quotations, without adjustment for retail mark-up,
mark-down or commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
1997 HIGH LOW
---- ------- -------
<S> <C> <C>
1st Quarter................................ $1.7500 $0.9375
2nd Quarter................................ 0.9375 0.2500
3rd Quarter................................ 0.3750 0.2500
4th Quarter................................ 0.3125 0.125
</TABLE>
<TABLE>
<CAPTION>
1998 HIGH LOW
---- ------- -------
<S> <C> <C>
1st Quarter................................ 0.2813 0.1875
2nd Quarter................................ 0.8125 0.1563
3rd Quarter................................ 0.9688 0.2500
4th Quarter................................ 1.3750 0.4375
</TABLE>
<TABLE>
<CAPTION>
1999 HIGH LOW
---- ------- -------
<S> <C> <C>
1st Quarter................................ 1.8125 0.8750
2nd Quarter (through June 24, 1999)........ 1.2500 0.5938
</TABLE>
The average weekly trading volume of the common stock since the resumption
of trading on the OTC Bulletin Board in November 1996 through December 31, 1997
was approximately 35,000 shares. From January 1, 1998 through December 31, 1998,
the average weekly trading volume of the common stock was approximately 67,000
shares.
11
<PAGE> 15
As of June 18, 1999, we had approximately 176 shareholders of record, which
number excludes the number of beneficial owners whose share are held in
"streetname." We believe that a substantial number of shares of our common stock
are held in "streetname."
DIVIDEND POLICY
To date, we have not paid any dividends on our common stock. Whether we pay
dividends in the future will be at the discretion of our Board of Directors and
will depend on our operating results, financial condition, capital requirements
and such other factors as our Board of Directors may deem relevant.
12
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
History. Our company was incorporated in New York in 1984 under the name
Performance Services Group, Inc. and at that time was primarily engaged in
offering banking institutions a range of proprietary sales and marketing
products, strategic planning and product consulting services and financial
software products. From our inception in 1984 through February 1990, we incurred
continuous losses and working capital deficiencies which limited our marketing
efforts and operations. In July 1989, our common stock was delisted from the
Nasdaq market and from February 1990 to November 1992 our company was inactive.
In January 1993, we recommenced operations and raised working capital
through private debt and equity issuances, including issuances to one of our
principal shareholders. Although we generated revenues for each of the four
fiscal years ended September 30, 1994, 1995 and 1996 and December 31, 1997, we
incurred losses of $146,036, $801,296, $235,049 and $550,738, respectively.
In February 1998, we changed our fiscal year end from September 30 to
December 31. For the fiscal year ended December 31, 1998, we generated revenues
of $21,492,151 and had a net profit of $2,107,707.
Revenues. Our revenues historically have been derived from a limited
number of customers in the banking industry. For the year ended December 31,
1997, three customers of MKP accounted for an aggregate of approximately 77% of
our total revenues, with one customer of MKP accounting for 48% of total
revenues. For our fiscal year ended December 31, 1998, three customers accounted
for approximately 83% of our revenues, with one customer accounting for
approximately 55% of revenues. For the three months ended March 31, 1999, two
customers of MKP accounted for an aggregate of approximately 84% of our total
revenues, with one customer of MKP accounting for approximately 74% of our total
revenues. We anticipate that a substantial amount of our revenues will continue
to be concentrated from a limited number of customers. As a result, our sales
and operating results are subject to substantial variations in any given year
and from quarter to quarter. Our sales and net income (if any) in a particular
quarter may be lower than the sales and net income (if any) for the comparable
quarter in the prior year. In addition, sales and net income (if any) in any
particular quarter may not necessarily reflect our results of operations for the
full year.
Subsidiaries. Our consolidated financial statements include the accounts
of FPC, the holding company, and our subsidiaries. All significant intercompany
accounts and transactions have been eliminated. During the four most recent
fiscal years ended September 30, 1995 and 1996 and December 31, 1997 and 1998,
MKP accounted for all of our consolidated revenues.
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<PAGE> 17
Summary financial information concerning MKP, excluding intercompany
eliminations, as of December 31, 1998 and 1997, and for the years then ended,
and as of March 31, 1999 and 1998, and for the three months then ended is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ------------------------
1998 1997 1999 1998
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash....................... $ 5,910,000 $2,109,000 $3,837,000 $1,610,000
Accounts receivable........ 343,000 721,000 1,847,000 1,808,000
Other assets............... 281,000 209,000 -- 15,000
Accounts payable........... 2,478,000 1,576,000 1,979,000 1,657,000
Revenues................... 21,492,000 8,383,000 3,390,000 4,489,000
Operating costs............ 19,312,000 8,002,000 3,038,000 4,116,000
Net Income................. 1,999,000 401,000 336,000 345,000
</TABLE>
Summary financial information concerning our other two subsidiaries, FPC
Information and Aspen, as of December 31, 1998 and 1997 and for the years then
ended, and as of March 31, 1999 and 1998, and for the three months then ended,
is not separately set forth as these entities had no revenues for such periods
and their assets and liabilities during such periods were immaterial.
Other. Income taxes are computed in accordance with the provisions of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At December 31, 1998, we had net operating loss carryforwards of
approximately $3,567,000, which will expire in various years through and
including 2012. Certain provisions of the tax law may limit the net operating
loss carryforwards available for our use in the event of a significant change in
the ownership interest of our company. At December 31, 1998, we had a deferred
tax asset of approximately $1,700,000. The deferred tax asset consists primarily
of net operating loss carryforwards and was fully offset by a valuation
allowance of the same amount.
The income tax expenses for the year ended December 31, 1998 of $262,106,
and for the three months ended March 31, 1999 of $41,784, represent state and
local income taxes on the income of MKP.
Costs associated with software development subsequent to the establishment
of technological feasibility, including enhancements to software products, are
capitalized and amortized as required by Statement of Financial Accounting
Standards No. 86. Costs incurred prior to achieving technological feasibility
are expensed as incurred and classified as research and development costs. We
did not incur any research and development costs for the three months ended
March 31, 1999, or the fiscal years ended December 31, 1998 and 1997.
14
<PAGE> 18
Change In Fiscal Year. In February 1998, we changed our fiscal year end
from September 30 to December 31. Accordingly, the periods for which results of
operations are compared for purposes of this section are the fiscal year ended
December 31, 1998 and the year ended December 31, 1997 (which is comprised of
the nine month period of January 1, 1997 through September 30, 1997 and the
transition period commencing October 1, 1997 through December 31, 1997).
Restatement. Certain items in our financial statements for the quarter
ended March 31, 1998 have been restated to reflect the quarterly accrual of
bonus payments for the fiscal year ended December 31, 1998 and conform the
presentation of such financial statements with our financial statements for the
quarter ended March 31, 1999.
The following analysis of the financial condition and results of operations
of the company should be read in conjunction with our consolidated financial
statements appearing elsewhere in this prospectus.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
Revenues. Total revenues decreased by $1,098,161, or approximately 24.5%,
to $3,390,389 for the three months ended March 31, 1999 from $4,488,550 for the
three months ended March 31, 1998. This decrease was attributable to a decrease
in billings by MKP during this period. We believe the decrease in MKP's billings
was primarily attributable to quarterly variations arising from the nature of
MKP's business, based upon the different stages of merger communications
projects in which MKP was engaged during the three months ended March 31, 1999.
MKP generated 100% of our consolidated revenues for the three months ended March
31, 1999 and for the three months ended March 31, 1998.
Cost of Revenues. Cost of revenues decreased by $1,105,442, or
approximately 32.9%, to $2,257,354 for the three months ended March 31, 1999
from $3,362,796 for the three months ended March 31, 1998. This decrease was
primarily attributable to the decreased level of business of MKP during this
period.
Salaries and Related Expenses. Payroll expenses increased by $3,458, or
approximately 1.0%, to $350,588 for the three months ended March 31, 1999 from
$347,130 for the three months ended March 31, 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $137,299, or approximately 62.9%, to
$355,545 for the three months ended March 31, 1999 from $218,246 for the three
months ended March 31, 1998. This increase was primarily attributable to
quarterly variations arising from the nature of MKP's business, based upon the
different stages of merger communications projects in which MKP was engaged
during the three months ended March 31, 1999.
Other Income (Expenses). Other expenses decreased by $21,916, or
approximately 16.3%, to other expense of $112,486 for the three months ended
March 31, 1999 from other expenses of $134,402 for the three months ended March
31, 1998. This decrease was attributable to a decrease in the deduction
attributable to our minority interest in income of consolidated subsidiaries and
an increase in the amount of the interest income we earned.
15
<PAGE> 19
Operating Profit. Our operating profit decreased by $133,476, or
approximately 23.8%, to $426,902 for the three months ended March 31, 1999
compared to an operating profit of $560,378 for the three months ended March 31,
1998.
Net Income. Our net income decreased by $110,510, or approximately 28.8%,
to $272,632 for the three months ended March 31, 1999 compared to net income of
$383,142 for the three months ended March 31, 1998.
FISCAL YEAR ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Revenues. Revenues for the fiscal year ended December 31, 1998 increased
by $13,108,984, or approximately 156.4%, to $21,492,151 from $8,383,167 for the
fiscal year ended December 31, 1997. This increase was attributable to the
increased size of the merger projects for which MKP was engaged during this
period. The amount of revenues generated from each of the merger projects for
which MKP is retained, as well as the cost of generating such revenues, vary
depending upon various factors, including the size of the merger and the number
of products and services offered by the merged entity. MKP accounted for 100% of
our consolidated revenues for the fiscal year ended December 31, 1998 and the
year ended December 31, 1997.
Cost of Revenues. Cost of revenues increased by $7,917,291, or
approximately 114.6%, to $14,823,626 for the fiscal year ended December 31, 1998
from $6,906,335 for the year ended December 31, 1997. This increase was
attributable primarily to the increased size of the merger projects for which
MKP was engaged during this period.
Salaries And Related Expenses. Payroll expenses increased by $1,559,698,
or approximately 230.8%, to $2,235,358 for the fiscal year ended December 31,
1998 from $675,660 for the year ended December 31, 1997. This increase was due
primarily to increased levels of base salary and bonus compensation paid to the
managing directors of MKP as well as increased compensation paid to other
employees during this period.
Selling, General And Administrative Expenses. Selling, general and
administrative expenses increased by $169,293, or approximately 12.8%, to
$1,486,869 for the fiscal year ended December 31, 1998 from $1,317,576 for the
year ended December 31, 1997. This increase reflects increased rental payments
required under the lease for our office space for this period.
Operating Income (Loss). We had operating income of $2,946,298 for the
fiscal year ended December 31, 1998 as compared to an operating loss of $516,404
for the year ended December 31, 1997. The increase in operating income was due
primarily to our increased revenues.
Net Income (Loss). We had net income of $2,107,707 for the fiscal year
ended December 31, 1998 as compared to a net loss of $550,738 for the year ended
December 31, 1997. The increase in net income was due primarily to our increased
revenues.
LIQUIDITY AND CAPITAL RESOURCES
In the past, we required continuous capital to fund our operating losses
which were primarily attributable to expenses in connection with marketing
activities, research and development costs and other expenses, including
salaries and related expenses and selling, general and administrative expenses.
We have financed our operations to date primarily through public and private
sales of debt and equity securities, including significant sales to
16
<PAGE> 20
one of our principal stockholders, and in 1998, through revenues generated by
MKP. See "Business -- Our Corporate Structure: FPC and Our Subsidiaries."
As of March 31, 1999, we had working capital of $4,139,278, stockholders'
equity of $4,434,458 and a working capital ratio (current assets to current
liabilities) of approximately 2.8:1. As of March 31, 1999, and March 31, 1998,
we had cash and cash equivalents of $4,560,760 and $1,627,979, respectively.
For the three months ended March 31, 1999, net cash used in our operating
activities was $1,605,031 compared to net cash used in operating activities of
$444,999 for the three months ended March 31, 1998. This increase was primarily
attributable to quarterly variations arising from the nature of MKP's business,
based upon the different stages of merger communications projects in which MKP
was engaged during the three months ended March 31, 1999, as well as larger
year-end bonuses earned in 1998 compared to 1997, which are paid in the first
quarter of the next fiscal year. For the three months ended March 31, 1999, and
March 31, 1998, we used $121,357 and $183,240 for investing activities,
respectively.
As of December 31, 1998, we had working capital of $3,820,018,
stockholders' equity of $4,161,826 and a working capital ratio (current assets
to current liabilities) of approximately 2.34:1. As of December 31, 1998 and
1997, we had cash and cash equivalents of $6,287,148 and $2,256,218,
respectively. The increase in cash and cash equivalents of $4,030,930 or
approximately 178.7% for the fiscal year ended December 31, 1998 was
attributable primarily to MKP's increased revenues and operating income as well
as improved revenue collection in 1998 compared to the year ended December 31,
1997.
As of December 31, 1998 and 1997, we had accounts receivable of $342,783
and $720,616, respectively. The decrease in accounts receivable of $377,833 or
approximately 52.4% was attributable primarily to differences in the timing of
MKP's billing and resultant receipt of revenues. As of December 31, 1998 and
1997, we had accounts payable and accrued expenses of $2,841,188 and $1,908,153,
respectively. The increase in accounts payable of $933,035 or approximately
48.9% was attributable primarily to differences in the timing of MKP's receipt
of invoices covering expenses incurred during such periods as well as the
increased level of MKP's business during the fiscal year ended December 31,
1998.
For the years ended December 31, 1998 and 1997, we generated positive cash
flow from operations of $4,329,565 and $673,503, respectively, primarily as a
result of an increase in revenues and utilized $588,635 and $372,768 for
investing activities during the years ended December 31, 1998 and 1997,
respectively. Net cash provided by our financing activities for the years ended
December 31, 1998 and 1997 were $290,000 and $310,743, respectively.
As of March 31, 1999, we had no long-term debt.
As of March 31, 1999, we have made no material capital commitments other
than those related to non-cancelable operating leases for office space and
equipment. For the years ended December 31, 1999, 2000, 2001 and 2002, our
minimum payments in connection with these leases are approximately $281,000,
$281,000, $374,000 and $415,000 per year, respectively. We expect to continue to
fund the operations of FPC Information, our 50% owned subsidiary in connection
with testing and marketing MARS. We expect to spend approximately $250,000 in
1999 and up to approximately $1,000,000 in 2000 on MARS, depending on working
capital requirements.
17
<PAGE> 21
Based on our current plan of operations, we anticipate that our existing
working capital and expected operating revenues will provide sufficient working
capital for our planned operations for the foreseeable future. However, there
can be no assurance that we will not require additional financing. Our capital
requirements depend on, among other things, whether we are successful in
continuing to generate revenues and income from MKP, our marketing efforts,
including those related to MARS, our ability to successfully market our services
and software, competing technological and market developments, costs involved in
protecting and enforcing our proprietary rights and any litigation related
thereto and the cost and availability of third-party financing. See "Risk
Factors -- We may need additional financing and we do not know whether financing
will be available when we need it."
We may also seek additional financing in connection with the acquisition of
one or more entities or products (or rights related thereto) or the consummation
of other business combinations. Although we engage in discussions with third
parties from time to time concerning potential acquisitions and other business
combinations and anticipate continuing such activities in the future, we have no
current commitments regarding such acquisitions or other business combinations.
We may raise financing through additional equity offerings, joint ventures
or other collaborative relationships, borrowings and other transactions. We may
seek additional funding through any such transaction or a combination thereof.
There can be no assurance that additional financing will be available to us or,
if available, that such financing will be available on acceptable terms. See
"Risk Factors -- We may need additional financing and we do not know whether
financing will be available when we need it."
YEAR 2000
We recognize the potential business impact relating to the Year 2000
computer issue and we have implemented a plan to assess and improve our state of
readiness with respect to such issue. The Year 2000 issue is one where computer
systems recognize the designation "00" as 1900 instead of 2000, potentially
resulting in system failure or miscalculations.
In recognition of the Year 2000 issue, commencing in 1998, we initiated a
comprehensive review of our information technology systems, on which we are
dependent for the conduct of our business operations, as well as the computer
hardware and software products, components and other equipment supplied to us by
third parties in order to determine the adequacy of those systems in light of
our future business requirements. Year 2000 readiness was one of the factors
considered in our review of these systems. Such review included testing and
analysis of our systems and inquiries of third parties supplying us with
information technology systems, computer hardware and software products and
components, and other equipment in order to receive assurances from such third
parties that these systems, products and components are Year 2000 compliant. We
completed our review in January 1999.
As a result of our review, we have determined that our internal financial
software systems are adequate for our future business needs, including Year 2000
compliance, and do not need to be replaced. Also, we have completed all
necessary Year 2000 modifications with regard to our proposed MARS computer
software product. We believe that our proposed MARS computer software product is
Year 2000 compliant. The cost of our Year 2000 efforts was immaterial.
18
<PAGE> 22
We have not assessed the Year 2000 readiness of any third parties with whom
we have relationships, such as our banking clients or vendors. Due to our
uncertainty of the Year 2000 readiness of these third parties, we cannot
determine whether the failure by one or more of these parties to be Year 2000
compliant will materially impact our business, financial condition or results of
operations.
We have not developed a "worst case" scenario with respect to Year 2000
issues. Instead we have focused our resources on identifying any material,
remediable problems and reducing uncertainties generally, through the review
procedures described above.
We have not developed Year 2000 contingency plans, other than the review
described above, and do not believe such plans are merited by the results of our
Year 2000 review. We maintain and deploy contingency plans designed to address
various other potential business interruptions. These plans may be applicable to
address the possible interruption of support provided by third parties resulting
from their failure to be Year 2000 compliant.
If we or the third parties with which we have relationships were to not
successfully meet Year 2000 compliance requirements, we would likely encounter
disruptions to our business that could have a material adverse effect on our
business, financial position and results of operations. We could be materially
and adversely impacted by widespread economic or financial market disruption or
by Year 2000 computer system failures of third parties with which we have
relationships.
FORWARD-LOOKING STATEMENTS
Certain statements we make in this prospectus are "forward-looking
statements." You can identify these forward-looking statements when you see us
using words such as "believes," "anticipates," "may," "intends," "expects,"
"plans" and words of similar import. These forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements or industry results to be materially
different from results, performance or achievements that we expressed or implied
by our forward-looking statements. These factors include:
- the continued services of Ms. Kelbick and Ms. Michaelson;
- changes in our business strategy or development plans;
- competition;
- our anticipated growth within the banking industry;
- our ability to obtain sufficient financing to continue operations.
- the development and testing of our MARS software;
- market acceptance of our MARS software;
- technological, engineering, manufacturing, quality control or other
problems which could delay the sale of our software;
- our ability to obtain necessary licenses from third parties, as well as
protect our trade secrets, operate without infringing on other companies'
proprietary rights and prevent others from infringing on our proprietary
rights; and
- general economic and business conditions, both nationally and in the
regions in which we operate.
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<PAGE> 23
Some of these factors are discussed in more detail elsewhere in this
prospectus, including under the captions "Risk Factors" and "Business." Given
these uncertainties, you should not place undue reliance on our forward-looking
statements. We disclaim any obligation to update these factors or to publicly
announce the result of any revisions to any of our forward-looking statements
contained in this prospectus to reflect future events or developments.
INFLATION
In general, we believe that we will be able to offset any inflationary
pressures by increasing operating efficiency, monitoring and controlling
expenses and increasing prices to the extent permitted by competitive factors.
20
<PAGE> 24
BUSINESS
INTRODUCTION
Through our principal subsidiary, we provide specialized merger
communications consulting services to the financial services industry. We have
also developed our proprietary MARS software to assist this industry in the
detailed analysis of its product offerings and the profitability and
contributions of the various departments and sectors within a particular bank's
organization. We intend to market MARS to those banks to whom we have provided
merger communications consulting services as a way for them to gather and
analyze performance and profitability post-merger. We have completed the
development stage of the current version of MARS and we are currently testing
this version. We cannot predict when MARS will be available for sale.
BACKGROUND ON CONSULTING IN THE FINANCIAL SERVICES INDUSTRY
Consulting services currently provided to the financial services industry
are rendered by a diverse group of companies or firms, substantially all of
which are privately-held. These companies or firms range in size from large
firms which are divisions or subsidiaries of major accounting firms or Fortune
100 companies to organizations which are smaller than us.
We believe that the recent increase of mergers and acquisitions in the
financial services industry has generated an increase in demand for related
consulting services. We believe this increased demand includes a trend towards
outsourcing certain services and a greater focus on product and sales analyses
and marketing and communications strategies used in connection with mergers and
business combinations. Further, we believe that the industry will continue to
consider alternative methods of analyzing the financial impact and competitive
position of its products and reduce in-house corporate functions which may be
more efficiently effectuated by outside resources. We intend to capitalize on
this trend.
OUR CORPORATE STRUCTURE: FPC AND OUR SUBSIDIARIES
In 1994, we began implementing a business strategy of establishing
subsidiary companies to engage in related or complementary areas of the
financial services industry. Since such time, we have functioned as a holding
company seeking investment and acquisition opportunities in the financial
services industry. Together with certain of our affiliates, we formed three
subsidiaries, two of which are currently active.
- Michaelson Kelbick Partners Inc. In October 1994, together with Susan
Michaelson and Hillary Kelbick, we formed Michaelson Kelbick Partners Inc.
(which we refer to as "MKP"). We own 80% of the outstanding equity of MKP and
each of Ms. Michaelson and Ms. Kelbick own 10% of the outstanding equity of MKP.
During the four most recent fiscal years ended September 30, 1995, 1996, and
1997 and December 31, 1998, MKP accounted for all of our consolidated revenues.
MKP is the subsidiary through which we provide specialized business and
marketing consulting services to the financial services industry, particularly
with respect to communications concerning mergers and other business
combinations and sales promotions. Bank merger communications accounts for
approximately 85% of MKP's revenues. MKP also specializes in marketing planning
and communications strategies, sales promotion and direct mail.
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Ms. Michaelson and Ms. Kelbick have over 34 years of combined experience in
financial services marketing. They have managed over 50 merger communications
and other projects for banks. They were both formerly employed as Senior Vice
Presidents by Wilcox Associates in New York City where they were primarily
responsible for the planning, development and execution of marketing
communications projects for numerous financial institutions. While there, Ms.
Michaelson and Ms. Kelbick were the principal employees involved in working on
and completing the NationsBank merger which created the then third largest
banking organization in the United States. See "Management."
MKP's first two major merger assignments were the First Union/First
Fidelity merger and the Bank of Boston/Bay Bank merger. MKP was the sole merger
communications firm involved in these mergers. Since its formation, MKP has also
performed services for various other banking institutions, including Chemical
Bank (now The Chase Manhattan Bank), The Bank of New York, Citibank, First
National Bank of Maryland, The Dime Savings Bank of New York, Fleet Bank, CIT
Group and PNC National Bank. MKP was awarded the First Union/Signet Bank merger
and has received a "Future Bank Initiative" assignment from First Union National
Bank. This assignment was awarded to MKP by First Union National Bank based upon
MKP's expertise in the banking industry and involved designing and implementing
communications with the bank's customers which describe the bank's products and
services. In 1997, MKP received the Vendor of the Year Award from First Union
National Bank. The Vendor of the Year award is presented to the vendor that has
had a major positive impact on First Union National Bank for the year in
question. Only one such award was presented by First Union National Bank in
1997.
- FPC Information Corp. In November 1994, together with Robert S. Trump,
we formed FPC Information Corp. which we refer to as "FPC Information." We
transferred the MARS software and any rights associated therewith, and related
liabilities, to FPC Information. Mr. Trump provided $150,000 in connection with
the establishment and initial operations of FPC Information in exchange for a
20% equity interest in FPC Information. In October 1997, Mr. Trump acquired an
additional 30% equity interest in FPC Information in exchange for an additional
investment of $225,000. As of the date of this prospectus, Mr. Trump owns 50% of
the outstanding equity of FPC Information. However, we have the option to
repurchase from Mr. Trump a 30% equity interest in FPC Information exercisable
at any time prior to September 30, 1999 at the fair market value of such
interest, but in no event less than $225,000. See "Certain Relationships and
Related Transactions."
As of the date of this prospectus, Mr. Trump beneficially owns
approximately 58.7% of our outstanding shares of common stock. See "Risk
Factors -- One stockholder owns a large percentage of our stock" and "Security
Ownership of Certain Beneficial Owners and Management."
Aspen Capital Management, LLC. In January 1995, together with Messrs.
Richard Loos and Sean Brennan, we formed Aspen Capital Management, LLC, which we
refer to as "Aspen." Aspen was established to operate as an international
sponsor of cash management funds. Aspen is currently inactive. We own 80% of the
outstanding equity of Aspen.
During the period from January through April 1995, Mr. Trump, one of our
principal shareholders, loaned us an aggregate of $500,000, which we used in
connection with the funding and the initial operations of Aspen. Mr. Trump's
loans were subsequently converted into shares of our common stock at a
conversion price of $1.00 per share. In
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August 1995, Aspen officially commenced operations with the formation of the
Aspen Worldwide Dollar Fund. The fund was administered by ABN -- Ambro Trust
Company (Cayman) Limited. The fund received approximately $5,000,000 through
initial subscriptions provided by persons associated with Mr. Trump. The fund
did not receive any additional subscriptions. We believe that strong equity
markets and the performance of equity-based mutual funds during the period that
the fund was soliciting investments were a significant factor in the fund's
inability to attract additional subscriptions. During the fiscal year ended
September 30, 1996, the initial investors redeemed all of their interests in the
fund. The fund became and is currently inactive. In July and September 1996, at
our request, Messrs. Brennan and Loos resigned as employees and officers of
Aspen. Such individuals have no continuing affiliation with the fund. In view of
the resignations of Messrs. Loos and Brennan, operations of Aspen ceased. There
can be no assurance that we will retain an investment advisor for the fund or
that the fund or Aspen will recommence operations.
MERGER COMMUNICATIONS SERVICES
The merger communications projects which MKP undertakes involve planning,
strategizing, managing and executing customer communications in support of the
merger related events, including:
- Systems conversions;
- Product consolidations;
- Price changes; and
- Branch closings.
Merger Communications Services. MKP's merger communications services
include:
- Business strategies and marketing planning;
- Advisory services: impact assessments by product, service and customer
group;
- Data processing: data sources and customer account file integration;
- Proprietary methodologies for Matrix programming instructions for
customized copy block messaging;
- Communications development and execution: comprehensive layouts,
pre-press production, mail file development, print and mail production;
- Project management including milestones and budgets;
- Communications recommendations: vehicles, audiences and timing;
- File collapse methodology (definition of the customer); and
- Regulatory requirements for disclosure.
Data Management. MKP's data management services include:
- Planning. Includes defining the communications requirements, including
product/account types, file integration and merge/purge requirements and
level of personalization required.
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- Data Source(s) and External Suppliers. MKP advises on the most
advantageous data source(s) for each project (i.e., operating systems,
CIF or a combination thereof). In addition, MKP can assist in assessing
internal and external data processing requirements.
- Tape Specifications. Includes definition of tape formats, record
information, and all file coding required for data integration and the
customization of messages.
- Customer Mail File Development. Includes development of specifications
and procedures for record selection, file clean-up programming,
merge/purge and file verification.
- Verification/Quality Control. Includes development of detailed
procedures to ensure that counts are correct (all records are accounted
for), established procedures are followed, all programming steps are
verified and exceptions are identified and properly handled. A key step
includes the creation of a test file including all copy blocks and block
assignment criteria existing in the main file.
MKP Quality Control. As MKP works to develop concepts and strategies for
our clients, MKP confirms that the concepts and strategies which are developed
can be properly executed. MKP adheres to strict quality control procedures and
uses numerous quality control/verification checks in this process, including the
following:
- Developing tape specifications and mail house instructions (before tape
is cut);
- Initial tape verification (immediately upon receipt of tape);
- File clean-up verification;
- Merge/purge verification;
- Verification of programmed data, including copy block assignment and line
count;
- Account number verifications;
- Verification of live laser proofs;
- Laser printing quality control;
- Lettershop quality control; and
- Postal receipts.
Data Management/Quality Control. MKP has significant experience in
developing systems for customizing data processing and programming verification
in order to ensure quality control integrity of each merger project. MKP must
often operate under tight time frames and deadlines that generally accompany
merger projects. MKP assembles and manages both internal and external resources
in support of large-scale, complex projects.
OUR FINANCIAL INFORMATION SOFTWARE: MARS
General. We have developed a software program referred to as MARS
(Managing Account Relationships). MARS functions as an integrated planning and
sales management system designed to coordinate the user's sales and marketing
activity and analyze the results of its sales efforts and the profitability of
its products. It was designed to enable management at banks to analyze in
greater detail the products it offers in light of an
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increasingly competitive industry environment. We believe that banks can use
MARS to monitor income and new business contributions of each department,
branch, sector or group within the bank faster and more efficiently than current
applications. We also believe that future projections by a bank using MARS would
be easier since the software regularly maintains information regarding pending
sales.
We believe that the sales management component of MARS will provide
management with extensive "on line" information to enable managers to make fast
and informed decisions based upon total customer sales and other financial
information. MARS is designed to retrieve data directly from the customer's
mainframe computers, access overall sales information and match the retrieved
data to targets previously set by the customer. Reporting can be done by
customer, product, account officer, department or division.
In addition to MARS' ability to coordinate sales and marketing activities,
MARS is designed for individual department managers to measure the productivity
of each employee on a daily, weekly, monthly or annual basis. The overall
performance of a business enterprise can be evaluated and compared against the
contributions of each employee. Planning and performance results can be accessed
instantly through standard reports or by means of customized reporting formats.
We have completed the development stage of the current version of MARS and
we are currently testing this version. We intend to market MARS to those banks
to whom we have provided merger communications consulting services as a way for
them to gather and analyze performance and profitability post-merger. We cannot
predict when MARS will be available for sale. See "Risk Factors -- We have not
generated any revenues from MARS."
We have completed all necessary programming with regard to our proposed
MARS software product in order to address all Year 2000 issues and we believe
that our proposed MARS software product is Year 2000 compliant. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Description. The MARS program contains modules for key areas, including
customer information, product information, customization, management reports,
report writer, SQL (Structured Query Language) Support and MARS Remote.
- CUSTOMER AND PRODUCT INFORMATION. The customer and product information
modules of MARS are designed to allow a user to retrieve in real time its
client's record and select marketing and technical information on its
products, programs and services. The customer and product information
modules are designed to enable the user's sales team to offer the most
suitable products to its clients. The product files contain pricing and
competitive information and textual descriptions of features, benefits
and various terms and conditions of the products offered.
- MARS CUSTOMIZATION. MARS customization is designed to allow a user to
set system capabilities for office automation, passwords and access paths
to customer information and product databases. Additionally, it provides
the user with the ability to pre-load the system with text and
terminology for windows and menus so that the particular culture and
methodology of the user is replicated throughout the system.
- MANAGEMENT REPORT. MARS is designed to allow the user to generate
management reports on officer performance, sales in process and other
sales information by
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month and quarter. These reports can be accessed by the user at any time
and viewed on-line or in a printed report. Management can access a
complete picture of the activities of each employee by task, account or
as a calendar of activities. Many of the major reports of the system are
also presented graphically as pie or bar charts, allowing for alternative
presentations of complex relationships.
- REPORT WRITER. In addition to the standard reports provided by MARS, the
system supports the popular report writer called "Crystal Reports," which
we consider an industry standard. Through the use of this third party
product, we believe the user will be able to easily add new reports to
its MARS installation, thereby potentially increasing the value of the
data provided.
- SQL SUPPORT. We have completed a module for MARS which will include SQL
support, to enable MARS to be used as a single desk top sales support
system or a system that is implemented throughout an organization.
- E-MAIL SUPPORT. We are currently designing a module to the MARS system
to include its own e-mail capability, thereby connecting all users and
enabling effective data sharing for management communication or team
selling efforts. Alternatively, the system could be supported by
connections to popular e-mail products such as Microsoft Mail and Lotus
Notes.
- ADVANCED SOFTWARE TECHNOLOGY. MARS is designed to be fully compliant
with the Microsoft Windows user interface. MARS system navigation is
mouse driven requiring minimum keying by the user. A simple export of
MARS files to Microsoft Word or spread sheets tools, such as EXCEL,
allows the user to quickly gather, sort, and combine information from
multiple sources into one format.
- MARS REMOTE. MARS is designed to permit mobile computing by the exchange
and synchronization of information between the computer of the remote
user and the server data base. The system will support both direct or
Internet connections.
Technical Information. The MARS system is designed to produce over 30
on-line reports to assist the user and management in recommending appropriate
products to customers in a short period of time. Each transaction can be
monitored in real time.
We intend to provide a wide range of delivery options for MARS, including
installation of a fully-configured workstation. MARS is a client/server
application implemented with state-of-the-art technologies. MARS requires an IBM
compatible PC with a 386 or higher processor, 8MB RAM and a 20 MB hard drive.
The front-end windows-based application provides a user-friendly, easy-to-access
graphic user interface and is consistent to all users with different desktop or
laptop operating systems, such as Windows, OS/2, Windows 95 or Windows NT. The
back-end server can be implemented with a wide range of relational database
systems such as MS Access, MS Fox-Pro, NS SQL Server for Windows NT, Sybase
Infomix, or Oracle, which also may reside on a variety of platforms.
MARS is designed for use in a wide range of working environments, ranging
from a single PC or a workstation, or a small LAN, to a large corporate setting
with multiple sites connected by a Wide Area Network. MARS supports a variety of
networking communication environments including Novell NetWare, Microsoft
Windows for Workgroups, Microsoft Windows NT, IBM LAN Manager, the TCP/IP
Networks (UNIX bases networks) and remote dial-up.
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Marketing Strategies Relating to MARS. We intend to market MARS through a
variety of channels, including the following:
- CROSS-SELLING POTENTIAL. We believe that the banking institutions for
which MKP provides consulting services are potential customers for MARS
software. We believe that a banking client of MKP that has completed a
merger will be in a position to benefit from MARS. We intend for FPC
Information to launch MARS software and related services by cross-selling
to these institutions. We also believe that the type of analysis which
MKP generally performs for its bank clients can be instrumental in
planning for an efficient MIS gathering system post-merger, such as MARS.
Armed with this type of information about potential clients, it is our
view that FPC Information may have advantages over competitors when
making proposals to implement system-wide computer software improvements
for MKP banking clients. To date, none of MKP's clients have purchased
our proposed MARS software products. See "Risk Factors -- We have not
generated any revenues from MARS."
- SFA SOLUTION. There exists in the financial services industry an
emerging trend toward sales force automation, or SFA. SFA involves a
firm's use of computers, equipped with a sophisticated software program,
to manage the sales function more efficiently and effectively than
through human personnel with the objective of enhancing profitability. We
believe that SFA techniques are particularly important to the banking
industry due to the acute competitive pressures in such industry and the
necessity to more effectively cross-sell an institution's products to its
customers. Our management recognized the need for SFA early in the
development stage of the proposed MARS product and developed MARS
software to address SFA solutions for the banking and financial services
community. Generally, banks rely heavily for profits on cross-selling
products to a relatively small proportion of its customers. The wide
range of products offered by the typical large bank makes cross-selling
strategies extremely complex. In addition, because banks are usually
organized on a structured departmental basis, with each department
operating with autonomous systems and sales forces, information that
could be useful in cross-selling an institution's products is often
dispersed. We designed MARS to integrate critical client relationship
information on a bank-wide basis, while at the same time providing the
tools for enhanced productivity. We believe that MARS is well-suited to
meet the SFA needs of both larger and smaller banking institutions. We
intend to enter into arrangements with accounting firms that provide
information technology services to banks to market MARS as part of their
IT packages. See "Risk Factors -- We have not generated any revenues from
MARS."
- STRATEGIC ALLIANCES. We believe that the opportunity exists for possible
alliances with over a dozen regional systems integrators whose businesses
are primarily concerned with the installation and modification of banking
and financial services applications. We also intend to target software
companies with banking-specific applications that could complement MARS.
We also intend to explore relationships with hardware providers who have
relationships with the banking market. See "Risk Factors -- We have not
generated any revenues from MARS."
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SOFTWARE LICENSING
We intend to license MARS to customers under license agreements pursuant to
which the customer will pay a fixed license fee for the nontransferable and
nonexclusive right to use MARS at one or more designated sites. We anticipate
that additional license fees will be negotiated between the parties depending
upon the number of sites at which the customer intends to use our software. As
part of the fixed license fee for MARS, we intend for customers to receive, for
a period of one year after installation, all announced software enhancements to
the licensed software at the latest standard release level we are then offering
for license, including all software and documentation updates. We are currently
testing the latest version of MARS and we cannot predict when MARS will be
available for sale. There can be no assurance we will enter into any licenses or
generate any revenues from our MARS software in the future.
We expect to recognize revenue from license fees after delivery of the
documentation and the software components to the customer and upon final
customer acceptance, provided that no significant obligations remain and
collection of the resulting receivable is deemed probable. Because of the nature
of the software we intend to market and our overall commitment to a software
based, integrated sales and marketing approach, we anticipate that the
installation of MARS may take from up to several months for a single customer
and up to 12 months for an entire integrated system. The period of installation
may also be dependent upon the level of commitment made by the customer to
installation as well as the learning speed of the customer's personnel. Lengthy
installation periods may delay the recognition of revenue from software
licensing fees. See "Risk Factors -- We have not generated any revenues from
MARS."
CUSTOMER SUPPORT; SOFTWARE MAINTENANCE AND SERVICE
In connection with MARS, we expect to provide support services such as
project planning, system installation, software implementation, user training
and ongoing technical support and documentation. In addition, we expect to offer
a full range of consulting services, including planning, research and custom
design for modifications to meet the specific needs of a customer. Support
services will be provided either by our personnel or independent subcontractors.
We anticipate that we will offer software maintenance services to our
customers for a period of time following the installation of MARS. We expect to
enter into software maintenance agreements that will generally provide for the
maintenance of our licensed software at a specific site for a specified period
of time.
There have been no revenues from customer support, software maintenance and
service fees. While we intend to generate revenues from such activities, there
can be no assurance that we will do so. See "Risk Factors -- We have not
generated any revenues from MARS."
COMPETITION
Competition among enterprises which render merger communications services
and software products to financial institutions and other business organizations
is intense. Such services are generally rendered by a relatively small number of
specialized firms and require sophisticated and time critical support services,
such as data processing and printing which are sometimes (as in the case of MKP)
provided by outside firms. We face
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competition from other companies that offer services or products similar to our
services and proposed product and that have greater financial resources, more
technical personnel and more extensive service capabilities than us. For
example, MKP competes against larger and more established companies such as
Harte-Hanks Communication, Dimac Corporation and Arthur Anderson LLP. See "Risk
Factors -- The industries for our services and proposed software products are
very competitive."
We are aware of several competitors that offer computer software products
similar to MARS, as well as other competitors. We believe that the software
products that will most directly compete with MARS are Lotus Notes, Siebel
Systems Sales Enterprises, Aurum Software Sales Trak and Borealis Arsenal. In
particular, Lotus Development Corp. markets the Notes product as a universal
information sharing tool for collaborative work groups. We believe that while
the flexibility and workflow components of Notes make that product attractive,
it is sold at a significantly higher price than the price we intend to offer
MARS.
We seek to distinguish our services and software from those of our
competitors based upon the following factors:
- our services and software are specifically designed for application in
financial institution environments, unlike most competitive products
which are designed for more general applications and require modification
for effective utilization by financial institutions; and
- the experience of our management in the financial services industry. See
"-- Our Corporate Structure: FPC and Our Subsidiaries."
There can be no assurances that we will be successful in our efforts to
distinguish our services and proposed software in the marketplace.
MARKETING
William F. Finley, our company's founder, chairman of the board, president,
chief executive officer and chief financial officer, together with Ms.
Michaelson and Ms. Kelbick, the managing directors of MKP, are primarily
responsible for marketing our services and software. In the past, we conducted
our marketing activities primarily through advertising in selected financial
institution trade media and at professional financial institution conventions.
We currently market our services primarily through direct sales calls, referral
business and personal contacts.
We market primarily to domestic and foreign banks. We believe that there
are approximately 500 banks in the United States engaged in activities which may
require our consulting services and/or our proposed MARS software product. We
also believe that significant opportunities exist for us to sell our services in
Europe and the Far East, where market conditions have made financial
institutions acutely aware of the necessity to develop sales, marketing and
business development priorities.
For a discussion of our planned marketing strategies relating to MARS, see
"-- Our Financial Information Software: MARS -- Marketing Strategies Relating to
MARS."
We anticipate that bank merger activity will continue at a rapid pace for
at least the next four years. We also plan to explore expansion into merger
communications for other
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industries, such as the insurance and brokerage industries, as a means to
increase MKP's revenues and reduce its dependence on bank merger communications.
We believe that our success is dependent upon our ability to attract a
steady flow of new customers, as well as new assignments from past customers.
The solicitation of new assignments from past customers has been and is expected
to be an integral part of our marketing strategy.
INTELLECTUAL PROPERTY RIGHTS AND PROTECTION
We do not hold any registered copyrights and rely upon a combination of
copyright and trade secret laws and contractual restrictions to protect our
rights in our software, technology and trade secrets. There can be no assurance
that our proprietary technology will remain a secret or that others will not
develop similar technology and use such technology to compete with us. See "Risk
Factors -- Our intellectual property rights are not registered and we face risks
in protecting and enforcing our intellectual property rights."
We do not have any license agreements for MARS. We anticipate that we will
include in any license agreements into which we may enter, indemnification
provisions under which we will agree to indemnify our customers from losses
resulting from any third-party claims that our software infringes upon
proprietary rights of such third parties. The amount of this indemnification
will generally be limited to the amount of the license fee paid by the
particular customer.
We also own exclusive rights to videotapes, manuals and workbooks utilized
in our sales, marketing and business programs and we will seek to protect our
proprietary rights therein through restrictions in our license agreements. The
licenses for videotapes, manuals and workbooks will generally have a term of one
year. There can be no assurance that we would have the ability or the resources
necessary to enforce our rights under such licenses.
OUR EMPLOYEES
As of June 24, 1999, we had 16 full-time employees. We also engage
independent contractors and consultants from time to time in connection with
certain projects. As of June 24, 1999, we had two full-time and five part-time
consultants. We expect to employ additional personnel as needed in connection
with our operations. We believe that we have good relations with our employees
and independent contractors.
OUR PROPERTY
Our principal executive offices are located in New York City at 335 Madison
Avenue, 8th Floor, New York, New York 10017. In October 1996, we entered into a
lease with Builtland Partners, covering approximately 11,142 square feet on the
8th floor at 335 Madison Avenue. This lease has a ten-year term commencing as of
October 1996. The lease provides for a fixed minimum rent of approximately
$31,000 per month payable during the first five years of the term and fixed
minimum rent of approximately $35,000 per month payable during the final five
years of the term. Under the terms of the lease, our fixed minimum rent
obligations were abated from October 1996 through March 20, 1997 and for the
months of October, November and December in each of the first four years of the
lease term. Additionally, in September 1997, the landlord agreed to a further
one month abatement of fixed minimum rent. We will be required to pay operating
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expense and real estate tax escalation payments as additional rent. The landlord
has paid or reimbursed us for approximately $500,000 of construction and other
related costs. We assumed occupancy of the 8th floor premises in May 1997.
We believe that our facilities are well maintained, in good condition and
suitable for us to continue our operations in the foreseeable future.
LEGAL PROCEEDINGS
From time to time, we are a party to certain lawsuits that arise in the
conduct of our business. We are not a party to any legal proceedings which we
consider to be material.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information, as of June 24, 1999,
concerning our directors, executive officers and key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William F. Finley.................... 56 President; Chief Executive Officer; Chief
Financial Officer; Chairman of the Board
of Directors
Duncan G. Burke...................... 55 Vice President and Director
Richard Levy......................... 63 Secretary and Director
Ottavio Serena....................... 46 Director
Susan Michaelson..................... 41 Managing Director of MKP
Hillary Kelbick...................... 42 Managing Director of MKP
</TABLE>
The business experience of each of the directors, executive officers and
key employees of our company for at least the most recent five years includes
the following:
William F. Finley is the founder of our company and has served as its
President, Chief Executive Officer and Chairman of the Board since its inception
in 1984, and has served as its Chief Financial Officer since December 1987. From
1978 through 1984, Mr. Finley served as Vice President-Corporate Banking and
Manager of a consulting services group known as the Performance Services
Department of Marine Midland Bank, N.A. Prior thereto, from 1971 to 1978, Mr.
Finley held the position of Personnel-Training Director at Irving Trust Company.
From 1969 to 1971, Mr. Finley was employed in the Corporate and Management
Development Department at Chase Manhattan Bank. Mr. Finley has a Masters Degree
in Business Administration from New York University and a Bachelors of Arts
Degree in Psychology and Sociology from Miami University (Ohio). Mr. Finley is
the husband of Susan Michaelson, one of the two Managing Directors of MKP.
Duncan G. Burke has served as a Director of our company since April 1994.
He has also been the sole principal of Burke Capital Group, Greenwich,
Connecticut, since 1994. From 1992 to 1994, Mr. Burke was a Senior Vice
President of Laidlaw Holdings Asset Management, Inc. and from August 1991 to
November 1992 he served as a Vice President of Laidlaw Equities, Inc. From 1989
to 1991, Mr. Burke was a Vice President with Tucker Anthony Incorporated. He was
in the investment banking group with Dean Witter Reynolds, Inc. from 1970 to
1989. Mr. Burke holds a B.A. in Economics from Dartmouth College and an M.B.A.
in Finance from Columbia University Graduate School of Business.
Richard Levy has served as a Director of our company since April 1994.
Since March 1998, Mr. Levy has been a Senior Vice President with Tishman Real
Estate Services, a real estate consulting and brokerage firm. Until March 1998,
Mr. Levy was a Senior Director at Cushman & Wakefield, Inc., a real estate
consulting and brokerage firm, and was employed by such firm for more than 38
years. Mr. Levy is also a director of Mascott Corporation, a restaurant and
catering company. Mr. Levy attended Muhlenberg College and Columbia University.
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Ottavio Serena has served as a director of our company since October 1998.
Mr. Serena has been a consultant with Citicorp Venture Capital, a leveraged
buy-out firm, since 1993. From 1993 to 1997, he was also President and Director
of Galaxy Energy USA, a privately held oil trading company based in Houston,
Texas. From 1991 to 1993, Mr. Serena served as interim Chairman and Director of
RES Associates, a Citicorp Venture Capital portfolio company. From 1987 to 1993
he was a Managing Director and co-founder of The Lynx Partners, an investment
banking firm based in New York specializing in mergers and acquisitions,
buy-outs and corporate finance for both U.S. and European companies. From 1982
to 1987, Mr. Serena was a Vice President for Bankers Trust Company responsible
for corporate financing activities for large multinational companies. From 1977
to 1982, Mr. Serena was a management trainee and then an Assistant Treasurer for
J.P. Morgan. Mr. Serena has a graduate degree in business and economics from the
University of Rome. Mr. Serena is on the Advisory Board of the American Museum
of Natural History.
Susan Michaelson is one of the co-founders of MKP, together with Hillary
Kelbick and our company. She has been a Managing Director of MKP since its
inception in October 1994. From 1990 to 1994, Ms. Michaelson served as Senior
Vice President at Wilcox Associates. From 1986 to 1990, Ms. Michaelson was also
a Senior Vice President of the Company. Ms. Michaelson is the wife of William F.
Finley, President, Chairman of the Board and Chief Executive Officer of the
Company. Ms. Michaelson holds a Bachelor of Arts Degree from Syracuse
University.
Hillary Kelbick is one of the co-founders of MKP, together with Susan
Michaelson and our company. She has been a Managing Director of MKP since its
inception in October 1994. From 1982 to 1994, Ms. Kelbick served as Senior Vice
President at Wilcox Associates. Ms. Kelbick holds a Bachelor of Arts Degree from
SUNY Albany.
There are currently four members on the Board of Directors. Our certificate
of incorporation and by-laws authorize the Board of Directors to fix the number
of authorized directors. Our by-laws provide that directors are to be elected
annually by the shareholders and hold office until the next annual meeting and
until their respective successors are elected and qualified. Our most recent
annual meeting of shareholders was held in August 1996.
Executive officers are elected by the Board of Directors and hold office
until their respective successors are elected and qualified. We have employment
agreements with each of Mr. William F. Finley, Ms. Susan Michaelson and Ms.
Hillary Kelbick. Other than Mr. Finley and Ms. Michaelson, who are married,
there are no family relationships among directors, executive officers and key
employees. See "-- Employment Agreements."
EXECUTIVE COMPENSATION
The following table summarizes, for the fiscal years ended December 31,
1998 and September 30, 1997 and 1996, the compensation paid by our company to
the Chief Executive Officer and to each other executive officer whose total
annual salary and bonus exceeded $100,000 for services rendered in all
capacities to our company (the "named executive officers"). See "-- Employment
Agreements."
33
<PAGE> 37
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
--------------------------------------------- AWARDS
NAME AND FISCAL OTHER ANNUAL OPTIONS/
PRINCIPAL POSITION YEAR(2) SALARY($) BONUS($) COMPENSATION WARRANTS(#)
- ------------------ ------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
William F. Finley(1)(3).... 1998 $187,000 $100,000(6) $18,480(8) --
Chief Executive Officer 1997 $150,000 -- $14,534(9) --
1996 $150,000 $25,000 $30,000(10) 200,000
Susan Michaelson(3)(4)..... 1998 $169,000 $627,000(7) $18,480(8) --
Managing Director of MKP 1997 $160,000 $141,500 $15,500(11) --
1996 $127,000 $215,000 $30,000(10) 200,000(4)
Hillary Kelbick(5)......... 1998 $169,000 $627,000(7) $18,480(8) --
Managing Director of MKP 1997 $160,000 $141,500 $15,500(11) --
1996 $127,000 $215,000 $30,000(10) 200,000(5)
</TABLE>
- -------------------------
(1) On September 16, 1996, we issued to Mr. Finley warrants to purchase 200,000
shares of common stock with an exercise price of $1.00 per share,
exercisable until September 15, 2006. Effective as of January 1, 1995, we
entered into an employment agreement with Mr. Finley for a period of five
years providing for an annual salary of $125,000.00. Effective as of July
1, 1996, we agreed to amend the employment agreement to increase Mr.
Finley's annual salary to $150,000.00 and to grant Mr. Finley a bonus in
the amount of $25,000. Effective as of October 1, 1997, we entered into a
new employment agreement with Mr. Finley for a period of three years
providing for an annual salary of $150,000. In November 1997, the Board of
Directors voted to grant Mr. Finley a bonus of $100,000. Effective as of
October 1, 1998, we entered into a revised employment agreement with Mr.
Finley providing for an increase in Mr. Finley's annual salary to $250,000
and containing revised provisions concerning change of control, termination
of employment and other matters. Effective April 21, 1999, we entered into
a revised employment agreement with Mr. Finley. See "-- Employment
Agreements."
(2) In February 1998, we changed our fiscal year end from September 30 to
December 31.
(3) Susan Michaelson is the wife of William F. Finley, our Chairman of the
Board, President, Chief Executive Officer and Chief Financial Officer.
(4) On September 16, 1996, we issued to Ms. Michaelson warrants to purchase
200,000 shares of common stock with an exercise price of $1.00 per share,
exercisable until September 15, 2006. Effective as of September 11, 1997,
MKP entered into a new employment agreement with Ms. Michaelson for a
period of three years providing for an annual salary of $150,000. Effective
as of October 1, 1998, MKP entered into a revised employment agreement with
Ms. Michaelson providing for an increase in Ms. Michaelson's annual salary
to $250,000 and containing revised provisions concerning change of control,
termination of employment and other matters. See "-- Employment
Agreements."
(5) On September 16, 1996, we issued to Ms. Kelbick warrants to purchase
200,000 shares of common stock with an exercise price of $1.00 per share,
exercisable until September 15, 2006. Effective as of September 11, 1997,
MKP entered into a new
34
<PAGE> 38
employment agreement with Ms. Kelbick for a period of three years providing
for an annual salary of $150,000. Effective as of October 1, 1998, MKP
entered into a revised employment agreement with Ms. Kelbick providing for
an increase in Ms. Kelbick's annual salary to $250,000 and containing
revised provisions concerning change of control, termination of employment
and other matters. See "-- Employment Agreements."
(6) This bonus was authorized by the Board of Directors during our fiscal year
ended September 30, 1997, but was not paid until our fiscal year ended
December 31, 1998.
(7) This amount represents the bonus earned during the first three quarters of
1998 and the fourth quarter of 1997 and paid during our fiscal year ended
December 31, 1998. It excludes the amount of bonus earned during the fourth
quarter of 1998 and paid in the first quarter of 1999. The total amount of
bonus earned in the fiscal year ended December 31, 1998 was $857,000.
(8) For the year ended December 31, 1998, we contributed an aggregate of
$18,480 for such executive under our 401(k) and profit sharing plan. See
"-- Pension Plan".
(9) For the year ended September 30, 1997, we contributed an aggregate of
$14,534 for such executive under our 401(k) and profit sharing plan. See
"-- Pension Plan".
(10) For the year ended September 30, 1996, we contributed an aggregate of
$30,000 for such executive under our non-contributory pension and profit
sharing plan. See "-- Pension Plan."
(11) For the year ended September 30, 1997, we contributed an aggregate of
approximately $15,500 for such person under our 401(k) and profit sharing
plan. See "-- Pension Plan."
STOCK OPTION AND WARRANT GRANTS IN 1998
We did not issue any options or warrants to any of our named executive
officers during the fiscal year ended December 31, 1998.
35
<PAGE> 39
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
No options or warrants were exercised by any named executive officer during
the fiscal year ended December 31, 1998. The following table sets forth
information, as of December 31, 1998, concerning the number of shares issuable
as to exercisable and nonexercisable options or warrants and the value of "in
the money" options and warrants held by our named executive officers.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS OPTIONS/WARRANTS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William F. Finley.......... 400,000 -- $376,000 --
Susan Michaelson........... 200,000 -- $138,000 --
Hillary Kelbick............ 200,000 -- $138,000 --
</TABLE>
- -------------------------
(1) The value of exercisable options and warrants is based on the closing sale
price of the common stock as reported on the OTC Bulletin Board on December
31, 1998, which was $1.69, minus the exercise price of the option or
warrant, as the case may be.
COMPENSATION OF DIRECTORS
We do not have a standard arrangement relating to the compensation of our
directors. Historically, directors have been compensated for their services and
attendance at meetings through the grant of options and warrants to purchase
shares of common stock. Directors who are also officers of the company are not
paid any monetary compensation for attendance at directors' meetings or for
attending or participating in any committee meetings.
The table below sets forth information about the warrants we issued as
compensation for services as a director during the fiscal year ended December
31, 1998. All of the warrants are immediately exercisable, may be exercised on a
"cashless" basis and are entitled to "piggyback" registration rights as to the
shares of common stock underlying the warrants. All of the shares underlying
these warrants are being offered in this prospectus.
<TABLE>
<CAPTION>
NO. OF EXERCISE EXPIRATION
DIRECTOR WARRANTS DATE ISSUED PRICE DATE
- -------- -------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Duncan Burke....................... 100,000 10/98 $0.50 10/01
Richard Levy....................... 100,000 10/98 $0.50 10/01
Ottavio Serena..................... 100,000 10/98 $0.50 10/01
</TABLE>
INCENTIVE STOCK OPTION PLAN
In March 1988, we adopted an Incentive Stock Option Plan (the "Option
Plan") pursuant to which 140,000 shares of common stock were reserved for
issuance to our officers, directors and key employees. Under the Option Plan,
options may be granted at 100% of fair market value on the date of grant (or
110% of fair market value, if the grantee was the owner of 10% or more of the
company's common stock as of the date of grant). We granted options to five
individuals to purchase a total of 70,000 shares,
36
<PAGE> 40
exercisable at an average exercise price of approximately $4.60 per share until
October 1998. Our Option Plan expired by its terms in October 1998. None of the
options issued under that plan were exercised and these options expired as of
December 31, 1998.
EMPLOYMENT AGREEMENTS
William F. Finley. On September 1, 1995, we entered into a five-year
employment agreement with Mr. Finley. Under the agreement, Mr. Finley's initial
annual salary was $125,000, subject to increases as determined by our Board of
Directors. Mr. Finley's salary was subsequently increased through a series of
revised employment agreements to its current level of $250,000 per year.
Effective as of April 21, 1999, we entered into a new employment agreement
with Mr. Finley expiring on September 30, 2000, subject to renewal. In the event
we terminate Mr. Finley's employment other than for "cause," or if he terminates
for "good reason," as defined in the agreement, we are obligated to pay to Mr.
Finley, as severance pay, an amount equal to 200% of Mr. Finley's annual base
salary rate. If we elect not to renew Mr. Finley's employment at the expiration
of the term, he is entitled to a severance payment of $350,000 and common stock
with "piggy-back" registration rights equal in value to the difference, if any,
between the fair market value of all stock and warrants of our company that Mr.
Finley then owns and $1,000,000.00. If Mr. Finley elects not to renew the
employment agreement upon the expiration of the term, Mr. Finley will be
entitled to a severance payment of $250,000. If we terminate the employment
agreement with Mr. Finley in breach of the agreement, then in addition to the
cash severance payments, Mr. Finley will be entitled to receive common stock,
with "piggy-back" registration rights, equal in value to the difference, if any,
between the fair market value of all stock and warrants of our company that Mr.
Finley then owns and $1,000,000.00.
In the event of the termination of Mr. Finley's employment by reason of a
"change in control" (as such term is defined in the employment agreement) of the
company or MKP, then in addition to paying Mr. Finley's salary and accrued
benefits through the date of termination of employment, the company shall be
obligated to pay to Mr. Finley, as severance pay, an amount equal to 200% of Mr.
Finley's annual base salary rate as of the effective date of termination and to
maintain through the remaining balance of the term of the employment (but not
less than two years from the date of termination of Mr. Finley's employment
agreement) all employee benefit plans and programs in which Mr. Finley was
entitled to participate.
Susan Michaelson and Hillary Kelbick. In October 1994, MKP entered into
executive employment agreements with each of Ms. Michaelson and Ms. Kelbick for
a term of three years ending on October 17, 1997. Under the terms of the
agreements, the initial annual salary of each of Ms. Michaelson and Ms. Kelbick
was $80,000. The annual base salary payable to each of Ms. Michaelson and Ms.
Kelbick was subsequently increased through a series of revised employment
agreements to the current level of $250,000 per year.
The employment agreements with each of Ms. Michaelson and Ms. Kelbick
expire on September 10, 2000, subject to renewal. The annual base salary payable
to each of Ms. Michaelson and Ms. Kelbick is subject to periodic increases to be
determined by MKP's Board of Directors. The employment agreements also provide
for an annual incentive compensation payment for each of Ms. Michaelson and Ms.
Kelbick equal to a percentage, determined annually by MKP's Board of Directors
(not to exceed 30% in the aggregate) of the net income before taxes of MKP. For
the year ended December 31,
37
<PAGE> 41
1998, Ms. Michaelson and Ms. Kelbick each received approximately $627,000 under
the incentive program. Ms. Michaelson and Ms. Kelbick have the option to receive
bonus payments in cash, in stock of FPC or a combination of stock and cash.
If, at the expiration of the term, MKP elects not to renew the respective
employment agreements of Ms. Michaelson and Ms. Kelbick, each employee will be
entitled to receive a severance payment in the amount of $350,000. If either Ms.
Michaelson or Ms. Kelbick elects not to renew her respective employment
agreement with MKP at the expiration of the term, the respective employee will
be entitled to receive a severance payment of $250,000. In the event we
terminate the employment of either Ms. Michaelson or Ms. Kelbick, other than
"for cause," MKP shall be obligated to pay to the employee, as severance pay, an
amount equal to 200% of the employee's annual base salary in effect as of the
date of termination and to maintain through the remaining balance of the term of
the employment agreement (but not less than two years from the date of
termination of the employee's employment agreement) all employee benefit plans
and programs in which the employee was entitled to participate. If the
employment of either Ms. Michaelson or Ms. Kelbick shall be terminated for any
reason other than "for cause," then the respective employee shall also be
entitled to continued payment of the annual incentive compensation payment
described above for a period of six (6) months after termination based upon
MKP's net income before taxes for projects which were active on the date of
termination.
In the event of the termination of employment of either Ms. Michaelson or
Ms. Kelbick by reason of a "change in control" (as such term is defined in the
employment agreement) of MKP or FPC, then in addition to paying all salary and
accrued benefits through the date of termination of employment, MKP shall be
obligated to pay to the employee, as severance pay, an amount equal to 200% of
the employee's annual base salary rate in effect as of the date of termination
and to maintain through the remaining balance of the term of the employment
agreement (but not less than two years from the date of termination of the
employee's employment agreement) all employee benefit plans and programs in
which the employee was entitled to participate.
MKP Shareholders Agreement. Effective as of October 1, 1998, the
Shareholders Agreement among FPC, MKP, Susan Michaelson and Hillary Kelbick was
amended to provide, among other things, that in the event of the termination of
the employment of either Ms. Michaelson or Ms. Kelbick for any reason, the
respective employee has the right to require MKP to purchase all of the shares
of stock of MKP owned by such employee for an amount equal to the "cash value"
of such stock (i.e., the amount of cash and cash equivalents less accounts
payable and other short term liabilities, all as reflected on MKP's then current
balance sheet, multiplied by the percentage equity ownership in MKP represented
by the stock of MKP owned by such employee). If this right is not exercised by
the employee, then MKP will have the option to purchase such employee's stock in
MKP at the "fair market value" thereof as provided in the original Shareholders
Agreement.
LIMITATION ON PERSONAL LIABILITY; INDEMNIFICATION
Our Certificate of Incorporation and By-Laws contain provisions exculpating
our directors from personal liability for actions taken or omitted to be taken
by them in connection with their positions, with limited exceptions. Our By-Laws
also contain provisions which require us to indemnify current and former
officers and directors for any judgments, fines, amounts paid in settlement or
reasonable attorneys' fees incurred in the
38
<PAGE> 42
defense of certain actions and proceedings to the fullest extent permitted under
New York law. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons pursuant to the foregoing provisions or otherwise, we have been advised
that in the opinion of the SEC, this indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable.
PENSION PLAN
In September 1996, we established a non-contributory pension and profit
sharing plan for the benefit of our eligible full-time employees. The plan
provided for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes. For
the year ended September 30, 1996, we contributed an aggregate of $90,000 in
connection with the plan for the benefit of Mr. Finley, Ms. Michaelson and Ms.
Kelbick. This plan was terminated in March 1997.
In January 1997, we established a 401(k) salary deferred benefit plan
covering substantially all employees who meet certain requirements. The plan
requires us to make contributions equal to one-half of each participant's
elected contribution, up to a maximum of 3% of each participant's elected
contribution percentage. In September 1997, we amended the 401(k) plan to
provide a provision for discretionary profit sharing plan contributions. Total
contributions under the plan (401(k) and profit sharing) were approximately
$127,000 for the year ended December 31, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 24, 1999, certain information
regarding the beneficial ownership of common stock by (i) each person who is
known to us to be the beneficial owner of more than 5% of the common stock, (ii)
each of our directors and executive officers, (iii) each of our "named executive
officers" as determined in accordance with the rules and regulations of the SEC,
and (iv) all directors and executive officers of our company as a group. The
following information is based in part upon data furnished by the persons
indicated below:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF CLASS(1)
- ------------------- --------------------- -------------------
<S> <C> <C>
Robert S. Trump(2)....................... 5,555,422 58.7%
William F. Finley(3)..................... 618,000 6.1%
Duncan G. Burke(4)....................... 220,000 2.3%
Richard S. Levy(5)....................... 220,000 2.3%
Ottavio Serena(6)........................ 266,000 2.8%
Susan Michaelson(7)...................... 218,000 2.3%
Hillary Kelbick(8)....................... 225,000 2.3%
All directors and executive officers as a
group (4 persons)...................... 1,273,000 12.9%
</TABLE>
- -------------------------
(1) Based upon an aggregate of 9,471,534 shares of common stock outstanding as
of June 24, 1999, plus, for each listed beneficial owner, the number of
shares which such person has the right to acquire within 60 days of June 24,
1999.
39
<PAGE> 43
(2) The address of Mr. Trump is c/o Trump Management, Inc., 2611 West Second
Street, Brooklyn, New York 11223. For further information concerning Mr.
Trump's relationships to the Company, see "Certain Relationships and Related
Transactions -- Transactions with Principal Stockholders."
(3) Includes: (i) 200,000 shares issuable upon the exercise of warrants granted
on September 15, 1995; and (ii) 200,000 shares issuable upon the exercise of
warrants granted on September 16, 1996. Also includes: (i) 18,000 shares of
common stock held by Susan Michaelson; and (ii) 200,000 shares issuable upon
the exercise of warrants granted to Ms. Michaelson, which securities Mr.
Finley may be deemed to beneficially own. Ms. Michaelson is the wife of Mr.
Finley and a Managing Director and 10% stockholder of MKP. Mr. Finley
disclaims beneficial ownership of the shares owned by his wife. The business
address of Mr. Finley is 335 Madison Avenue, New York, New York 10017.
(4) Includes: (i) 20,000 shares of common stock; (ii) 50,000 shares issuable
upon the exercise of warrants granted to Mr. Burke on September 16, 1996;
(iii) 50,000 shares issuable upon the exercise of warrants granted to Mr.
Burke on December 29, 1997 and (iv) 100,000 shares issuable upon the
exercise of warrants granted to Mr. Burke on October 21, 1998. The business
address of Mr. Burke is c/o Burke Capital, Two Greenwich Plaza, P.O. Box
628, Greenwich, Connecticut 06836.
(5) Includes: (i) 20,000 shares of common stock; (ii) 50,000 shares issuable
upon the exercise of warrants granted to Mr. Levy on September 16, 1996,
(iii) 50,000 shares issuable upon the exercise of warrants granted to Mr.
Levy on December 29, 1997 and (iv) 100,000 shares issuable upon the exercise
of warrants granted to Mr. Levy on October 21, 1998. The business address of
Mr. Levy is c/o Tishman Real Estate Services, 40 Wall Street, New York, New
York 10005.
(6) Includes: (i) 15,000 shares of common stock; and (ii) 200,000 shares
issuable upon the exercise of warrants granted to Mr. Serena on October 21,
1998. Also includes: (i) 1,000 shares of common stock; and (ii) 50,000
shares of common stock issuable upon the exercise of warrants granted to Mr.
Serena's wife, Charlotte Tuck, which securities Mr. Serena may be deemed to
beneficially own. Mr. Serena disclaims beneficial ownership of the shares
owned by his wife. The business address of Mr. Serena is 399 Park Avenue,
14th Floor, New York, New York 10043.
(7) Includes: (i) 18,000 shares of common stock; and (ii) 200,000 shares
issuable upon the exercise of warrants granted on September 16, 1996. Does
not include any securities of the company owned by Ms. Michaelson's husband,
William F. Finley, our Chairman of the Board, President, Chief Executive
Officer and Chief Financial Officer. Ms. Michaelson disclaims beneficial
ownership of the shares beneficially owned by her husband. The business
address of Ms. Michaelson is 335 Madison Avenue, New York, New York 10017.
(8) Includes: (i) 25,000 shares of common stock; and (ii) 200,000 shares
issuable upon the exercise of warrants granted to Ms. Kelbick on September
16, 1996. The business address of Ms. Kelbick is 335 Madison Avenue, New
York, New York 10017.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a discussion of material transactions that we entered into
with our principal stockholders, executive officers and directors within the
past two years. We
40
<PAGE> 44
believe that the terms of these transactions were just as favorable to us as
similar transactions with non-affiliated third parties would have been at the
time of such transactions. Our policy is that all transactions between us and
our principal stockholders, officers and directors should be on terms no less
favorable to us than could be obtained from unaffiliated parties.
TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS
In October 1997, Mr. Trump purchased from us an additional 30% equity
interest in FPC Information for a purchase price of $225,000. As a result, Mr.
Trump owns a 50% equity interest in FPC Information and we own a 50% equity
interest in FPC Information.
In March 1998, Mr. Trump purchased from us 1,000,000 shares of common stock
for a purchase price of $0.20 per share. This sale was part of our private
placement of an aggregate of 1,400,000 shares of common stock.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
General. In February 1999, we agreed that in the event of any corporate
financial transaction involving the company, such as our acquisition of another
company or business, a sale or merger of the company, or a private offering or
other sale or placement of equity or debt by the company, for which any of our
outside directors (i.e., Messrs. Burke, Levy and Serena) act as the procuring
party or otherwise is entitled to payment of a fee or commission if such outside
director were an independent third party, then, in any such event, such outside
director will be entitled to payment of a fee or commission from us in an amount
which shall be fair, reasonable and customary in the financial or banking
industry with regard to such transaction as if such fee or commission were
negotiated on an arms-length basis with an unaffiliated third party, such as an
independent investment banking firm. As of the date of this prospectus, no fees
have been paid.
Duncan Burke. Mr. Burke is a Director of our company. As consideration for
Mr. Burke's services as a director of our company:
- in December 1997, we granted Mr. Burke warrants to purchase 50,000 shares
of common stock, which are exercisable at $0.50 per share through
November 1999; and
- In October 1998, we granted Mr. Burke warrants to purchase 100,000 shares
of common stock, which are exercisable at $0.50 per share through October
2001.
The shares of common stock underlying all of the warrants we have issued to
Mr. Burke are entitled to "piggyback" registration rights and contain "cashless
exercise" provisions. These shares are being offered in this prospectus. All of
the warrants owned by Mr. Burke are exercisable immediately.
Richard Levy. Mr. Levy is our Secretary and a Director. As consideration
for Mr. Levy's services as a director of our company:
- in December 1997, we granted Mr. Levy warrants to purchase 50,000 shares
of common stock, which are exercisable at $0.50 per share through
November 1999; and
- in October 1998, we granted Mr. Levy warrants to purchase 100,000 shares
of common stock, which are exercisable at $0.50 per share through October
2001.
41
<PAGE> 45
The shares of common stock underlying all of the warrants we have issued to
Mr. Levy are entitled to "piggyback" registration rights and contain "cashless
exercise" provisions. These shares are being offered in this prospectus. All of
the warrants owned by Mr. Levy are exercisable immediately.
Ottavio Serena. Mr. Serena is currently a Director. In October 1998, as
consideration for Mr. Serena's services as a director, we granted Mr. Serena
warrants to purchase 100,000 shares of common stock, which are exercisable at
$0.50 per share through October 31, 2001. In October 1998, we also issued to Mr.
Serena warrants to purchase an additional 100,000 shares of common stock on the
same terms as compensation for certain investment banking and consulting
services Mr. Serena furnished to us. The shares of common stock underlying all
of the warrants issued to Mr. Serena are entitled to "piggyback" registration
rights and contain "cashless exercise" provisions. These shares are being
offered in this prospectus. All of the warrants owned by Mr. Serena are
immediately exercisable.
For further information concerning employment agreements and certain other
arrangements between our Company or MKP and its directors, executive officers
and key employees, see "Management -- Employment Agreements."
42
<PAGE> 46
SELLING STOCKHOLDERS
The following selling stockholders are offering 3,006,000 shares of our
common stock, 1,456,000 of which are issued and outstanding and 1,550,000 of
which are issuable upon exercise of warrants. Such shares may be offered from
time to time by such selling shareholders, their nominees or permitted
transferees. They are under no obligation to sell all or any portion of the
shares pursuant to this prospectus. The information in the table below
concerning the selling shareholders is based on our records as of June 24, 1999.
Information concerning the selling shareholders may change from time to time
after the date of this prospectus. See "Risk Factors," "Plan of Distribution"
and "Description of Securities."
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK OWNED COMMON STOCK OFFERED
NAME OF SELLING SHAREHOLDER PRIOR TO OFFERING PURSUANT TO OFFERING
- --------------------------- ------------------ --------------------
<S> <C> <C>
Duncan G. Burke(1).................... 220,000 220,000(1)
William F. Finley(2).................. 400,000 400,000(2)
Gary S. Friedman(3)................... 100,000 100,000(3)
Hillary Kelbick(4).................... 225,000 200,000(4)
Richard S. Levy(5).................... 220,000 220,000(5)
Susan Michaelson(6)................... 218,000 200,000(6)
Ottavio Serena(7)..................... 215,000 215,000(7)
Charlotte Tuck(8)..................... 51,000 51,000(8)
Robert S. Trump(9).................... 5,555,422 1,000,000(9)
Samaritan Holdings Limited............ 300,000 300,000
Jan Van Eck(10)....................... 205,000 100,000
</TABLE>
- -------------------------
(1) Includes: (i) 20,000 shares of common stock; (ii) 50,000 shares of common
stock issuable upon the exercise of warrants at $1.00 per share until
September 2006; (iii) 50,000 shares of common stock issuable upon the
exercise of warrants at $0.50 per share until November 1999; and (iv)
100,000 shares of common stock issuable upon the exercise of warrants at
$0.50 per share until October 2001. Mr. Burke is our Vice President and a
Director. See "Management" and "Security Ownership of Certain Beneficial
Owners and Management."
(2) Includes: (i) 200,000 shares of common stock issuable upon the exercise of
warrants at $0.50 per share until September 2010; and (ii) 200,000 shares
of common stock issuable upon the exercise of warrants at $1.00 per share
until September 2006. Does not include 18,000 shares and warrants to
purchase 200,000 shares of common stock owned by Susan Michaelson, Mr.
Finley's wife, of which Mr. Finley disclaims beneficial ownership. Mr.
Finley is our President, Chief Executive Officer, Chief Financial Officer
and Chairman of the Board. See "Management" and "Security Ownership of
Certain Beneficial Owners and Management."
(3) Includes 100,000 shares of common stock issuable upon the exercise of
warrants at $0.50 per share until October 2001. Mr. Friedman is a partner
in the law firm of Kaufman Friedman Plotnicki & Grun, LLP, which is our
general counsel.
(4) Includes 200,000 shares of common stock issuable upon the exercise of
warrants at $1.00 per share until September 2006. After the offering, Ms.
Kelbick will own
43
<PAGE> 47
25,000 shares of common stock, assuming she sells all of her shares being
offered in this prospectus. Ms. Kelbick is a Managing Director of MKP. See
"Management."
(5) Includes: (i) 20,000 shares of common stock; (ii) 50,000 shares of common
stock issuable upon the exercise of warrants at $1.00 per share until
September 2006; (iii) 50,000 shares of common stock issuable upon the
exercise of warrants at $0.50 per share until November 1999; and (iv)
100,000 shares of common stock issuable upon the exercise of warrants at
$0.50 per share until October 2001. Mr. Levy is our Secretary and a
Director. See "Management" and "Certain Relationships and Related
Transactions."
(6) Includes 200,000 shares of common stock issuable upon the exercise of
warrants at $1.00 per share until September 2006. Does not include warrants
to purchase 400,000 shares of common stock owned by William Finley, Ms.
Michaelson's husband, of which Ms. Michaelson disclaims beneficial
ownership. After the offering, Mr. Michaelson will own 18,000 shares of
common stock, assuming she sells all of her shares being offered in this
prospectus. Ms. Michaelson is a Managing Director of MKP. See "Management"
and "Security Ownership of Certain Beneficial Owners and Management."
(7) Includes: (i) 15,000 shares of common stock; and (ii) 200,000 shares of
common stock issuable upon the exercise of warrants at $0.50 per share
until October 2001. Does not include 1,000 shares and warrants to purchase
50,000 shares of common stock owned by Charlotte Tuck, Mr. Serena's wife,
of which Mr. Serena disclaims beneficial ownership. Mr. Serena is a
Director. See "Management," "Certain Relationships and Related
Transactions" and "Security Ownership of Certain Beneficial Owners and
Management."
(8) Includes: (i) 1,000 shares of common stock; and (ii) 50,000 shares of
common stock issuable upon the exercise of warrants at $0.50 per share
until October 2001. Does not include 15,000 shares and warrants to purchase
200,000 shares of common stock owned by Ottavio Serena, Ms. Tuck's husband,
of which Ms. Tuck disclaims beneficial ownership. Ms. Tuck is an employee.
See "Security Ownership of Certain Beneficial Owners and Management."
(9) Mr. Trump is a principal shareholder of our company. After the offering,
Mr. Trump will own 4,555,422 shares, or 48.1% of our outstanding common
stock, assuming he sells all of his shares being offered in this
prospectus. See "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and "Related Transactions."
(10) After the offering, Mr. Van Eck will own 105,000 shares, or 1.1% of our
outstanding common stock, assuming he sells all of his shares being offered
in this prospectus.
We will incur expenses in respect of this offering in an amount estimated
to be $80,000 in the aggregate. Except as otherwise provided in this prospectus,
no selling stockholder has held any position or office or had any other material
relationship with our company within the past three years. The selling
stockholders will receive all of the proceeds from the sale of the shares
offered hereby. We will not receive any proceeds from the sale of such shares,
however, we will receive proceeds from the exercise by the selling stockholders
of warrants to purchase shares offered in this prospectus, assuming warrants
held by the selling stockholders are exercised for cash. See "Use of Proceeds"
and "Plan of Distribution."
44
<PAGE> 48
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock, par value
$.01 per share, of which, as of June 24, 1999, 9,471,534 shares were
outstanding. Holders of shares of common stock are entitled to one vote for each
share held of record on all matters to be voted on by stockholders. There are no
preemptive, subscription, conversion or redemption rights pertaining to the
shares of common stock. Holders of shares of common stock are entitled to
receive dividends when, as and if declared by the Board of Directors from funds
legally available therefor and to share ratably in our assets that are available
upon liquidation, dissolution or winding up. We have never declared or paid any
dividends on our common stock. The holders of shares of common stock do not have
cumulative voting rights for the election of directors and, accordingly, the
holders of more than 50% of the shares of common stock are able to elect all
directors.
PREFERRED STOCK
The Board of Directors has the authority to issue, without any further
action by the stockholders, up to 10,000,000 shares of preferred stock from time
to time. The Board of Directors may issue preferred stock in one or more series
and establish the rights, preferences, privileges and restrictions relating to
the preferred, including dividend rights, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), preemptive
rights and liquidation preferences. The ability to issue preferred stock could
materially harm the ability of holders of common stock to consummate some
corporate transactions, including proposals to acquire all or substantially all
of the outstanding shares of our company. In addition, the issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to holders of our common stock, or adversely affect the rights and
powers, including voting rights, of the holders of common stock. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of our company. We have no present plans to issue any shares
of preferred stock. See "Risk Factors -- The issuance of our preferred stock
could adversely affect holders of our common stock."
OUTSTANDING WARRANTS AND OPTIONS
As of the date of this prospectus, there are 1,745,000 shares of common
stock which are issuable upon the exercise in full of outstanding options and
warrants issued by us, which expire at various times up until September 2010 and
have exercise prices ranging from $0.50 to $1.00 per share. Of these, 1,550,000
shares of common stock underlying options and warrants are being registered
hereunder.
REVERSE SPLIT OF COMMON STOCK
In August 1996, shareholders representing a majority of our outstanding
shares approved, among other things, an amendment to our Certificate of
Incorporation to effectuate a one-for-five reverse stock split which was
effected in September 1996. Each share of common stock after the split has a par
value of $0.01 per share. All of the information in this prospectus relating to
our common stock reflects the one-for-five reverse stock split.
45
<PAGE> 49
DIVIDENDS
To date, our company has not paid any dividends. Any future determination
as to the payment of dividends will be at the discretion of the Board of
Directors and will depend on, among other things, our operating results,
financial condition, capital requirements and such other factors as the Board of
Directors may deem relevant. In addition, our Board of Directors has the
authority, without obtaining stockholder approval, to issue shares of preferred
stock, the terms of which could provide for preferential dividend rights or
otherwise restrict our ability to pay dividends to the holders of the common
stock. See "Dividend Policy" and "-- Preferred Stock."
NEW YORK LAW; CHANGE OF CONTROL
Certain provisions of New York law could delay, defer or prevent a change
in control of our company and thereby make it more difficult to accomplish, or
could deter, transactions which shareholders may otherwise consider to be in the
best interests of the company and thereafter may limit the price that certain
investors might be willing to pay in the future for shares of our common stock.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for the common stock is
Continental Stock Transfer & Trust Company, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
As of June 24, 1999, we had 9,471,534 shares of common stock outstanding,
including the 1,456,000 outstanding shares of common stock offered in this
prospectus. This prospectus also covers 1,550,000 shares issuable upon the
exercise of immediately exercisable warrants. Assuming the exercise of these
warrants in full for cash, we will have approximately 11,021,534 shares of
common stock outstanding. The 3,006,000 shares offered hereby, including the
1,550,000 shares underlying issued and outstanding warrants, will be freely
tradable upon the date of this prospectus without restriction or further
registration under the Securities Act, unless such shares are purchased by
"affiliates" of our Company, as that term is defined in the Securities Act. All
of our outstanding shares of common stock owned by the existing stockholders of
our company are also freely tradable, either:
- without restriction or further registration under the Securities Act,
except if held by affiliates, because they were issued in our initial
public offering in 1989; or
- because they are "restricted securities" within the meaning of Rule 144
under the Securities Act and are eligible for sale in the public market
pursuant to Rule 144 under the Securities Act.
In addition, of our outstanding options and warrants to purchase an
aggregate of 1,745,000 shares, 1,550,000 shares are being offered by this
prospectus and, upon exercise, will be freely tradeable if we keep the
prospectus current, and 195,000 shares will, upon the exercise of such warrants
and options, be eligible for sale from time to time under Rule 144.
In general, under Rule 144, as in effect on the date of this Prospectus, a
person (or persons whose shares are aggregated with those of others), including
an affiliate, whose restricted securities have been fully paid and held for at
least one year from the later of the date such restricted securities were
acquired from our company or if applicable the
46
<PAGE> 50
date they were acquired from an affiliate, is generally entitled to sell within
any three-month period a number of shares of common stock that does not exceed
the greater of 1% of the number of the then outstanding shares of common stock
(approximately 94,715 shares of common stock based on the number of shares
outstanding on June 15, 1999) or the average weekly trading volume of the common
stock in the public market during the four calendar weeks preceding such sale or
the date on which notice of the sale is filed with the Commission. Sales under
Rule 144 are also subject to certain requirements as to the manner and notice of
sale and the availability of public information concerning our company. In
addition, under Rule 144, if at least two years have elapsed since the shares of
common stock relating to the sale were issued by our company or acquired from an
affiliate of our company, the holder of those shares can sell them without the
restrictions of Rule 144 so long as the holder is not an affiliate of our
company at the time of sale and has not been an affiliate for at least 90 days
from the date of sale.
No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on future prices of the
common stock prevailing from time to time. Nevertheless, sales of substantial
amounts of common stock in the public market could aversely affect the
prevailing market prices and impair our ability to raise capital through sales
of equity securities.
47
<PAGE> 51
PLAN OF DISTRIBUTION
The selling stockholders may sell their shares of common stock directly to
purchasers as principals, or through one or more underwriters, brokers, dealers
or agents from time to time in one or more transactions (which may involve block
transactions). Any sales of the shares may be effected through the OTC Bulletin
Board, in private transactions or otherwise, and the shares may be sold at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. If the selling shareholders
effect sales through underwriters, brokers, dealers or agents, such firms may
receive compensation in the form of discounts, concessions or commissions from
the selling shareholders or the purchasers of the shares for whom they may act
as agent, principal or both. Those persons who act as broker-dealers or
underwriters in connection with the sale of the shares may be selected by the
selling shareholders and may have other business relationships with, and perform
services for, us. Any selling shareholder, underwriter or broker-dealer who
participates in the sale of the shares may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act. Any commissions
received by any underwriter or broker-dealer and any profit on any sale of the
shares as principal may be deemed to be underwriting discounts and commissions
under the Securities Act.
The anti-manipulation provisions of Rules 101 through 104 under the
Exchange Act may apply to purchases and sales of shares of common stock by the
selling shareholders. In addition, there are restrictions on market-making
activities by persons engaged in the distribution of the common stock.
Under the securities laws of certain states, the shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the shares may not be able to be sold unless the common stock has
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
We are required to pay expenses incident to the registration, offering and
sale of the shares pursuant to this offering. We estimate that our expenses will
be approximately $80,000 in the aggregate. We and some of the selling
shareholders have agreed to indemnify each other and certain other persons
against certain liabilities, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers and controlling
persons, we have been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
We have advised the selling shareholders that if a particular offer of
shares is to be made on terms constituting a material change from the
information set forth above, then to the extent required, a prospectus
supplement should be distributed setting forth such terms and related
information and should be used.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Baer Marks & Upham LLP, New York, New York.
48
<PAGE> 52
EXPERTS
The consolidated financial statements of FPC and our subsidiaries as of
December 31, 1998 and 1997 and for each of the years then ended, have been
included herein in reliance upon the report of Goldstein and Morris, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC under the Securities Act a Registration
Statement on Form SB-2 (the "Registration Statement"), of which this prospectus
is a part, with respect to the shares offered hereby. This prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits and schedules as permitted by the rules and regulations of
the Securities and Exchange Commission. Statements made in this prospectus as to
the contents of any contract, agreement or other document referred to herein are
not necessarily complete. With respect to each contract, agreement or other
document filed as an exhibit to the Registration Statement or in a filing
incorporated by reference herein or otherwise, reference is made to the exhibit
for a more complete description of the matters involved, and each statement
shall be deemed qualified in its entirety by this reference.
We are subject to the informational requirements of the Exchange Act and
file periodic reports, proxy statements and other information with the SEC.
Reports and other information filed by us may be inspected and copied at the
public reference facilities maintained by the SEC at:
Judiciary Plaza
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Seven World Trade Center
13th Floor
New York, New York 10048
500 West Madison Street
Suite 1400
Chicago, Illinois 60601
Copies of such material may be obtained by mail from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the SEC maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC,
including us. The SEC's telephone number is 1-800-SEC-0330.
49
<PAGE> 53
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER
31, 1998 AND 1997
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet as of December 31, 1998.......... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997................................ F-4
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1998 and 1997.................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997................................ F-6
Notes to Consolidated Financial Statements.................. F-7
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998
Consolidated Balance Sheets as of March 31, 1999 and 1998
(unaudited)............................................... F-16
Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998 (unaudited)................. F-17
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 (unaudited)................. F-18
Consolidated Statements of Shareholders' Equity for the
three months ended March 31, 1999 and 1998 (unaudited).... F-19
Notes to Consolidated Financial Statements.................. F-20
</TABLE>
F-1
<PAGE> 54
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Financial Performance Corporation and Subsidiaries
New York, New York
We have audited the accompanying consolidated balance sheets of Financial
Performance Corporation and Subsidiaries as of December 31, 1998 and 1997 and
the related consolidated statements of changes in stockholders' equity,
operations and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Financial
Performance Corporation and Subsidiaries as of December 31, 1998 and 1997 and
the results of its consolidated operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
GOLDSTEIN AND MORRIS
New York, New York
February 23, 1999
F-2
<PAGE> 55
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................... $ 6,287,148 $ 2,256,218
Accounts receivable............................... 342,783 720,616
Prepaid expenses and other current assets......... 31,275 79,110
----------- -----------
Total current assets........................... 6,661,206 3,055,944
Property and equipment, net of accumulated
depreciation...................................... 213,729 198,963
Software development costs.......................... -- 135,605
Investment in subsidiary............................ 666,039 426,000
Other assets........................................ 310,086 303,806
----------- -----------
$ 7,851,060 $ 4,120,318
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses............. $ 2,841,188 $ 1,908,153
----------- -----------
Total current liabilities...................... 2,841,188 1,908,153
----------- -----------
Minority interest in consolidated subsidiaries...... 848,046 448,046
----------- -----------
Stockholders' equity
Common stock -- authorized 50,000,000 shares of
$.01 par value per share: issued and
outstanding 9,471,534 as of December 31, 1998;
8,021,534 as of December 31, 1997.............. 94,715 80,215
Additional paid in capital........................ 7,756,261 7,480,761
Accumulated (deficit)............................. (3,689,150) (5,796,857)
----------- -----------
Total stockholders' equity..................... 4,161,826 1,764,119
----------- -----------
$ 7,851,060 $ 4,120,318
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 56
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Revenues............................................. $21,492,151 $8,383,167
----------- ----------
Costs and expenses
Cost of revenues................................... 14,823,626 6,906,335
Salaries and related expenses...................... 2,235,358 675,660
Selling, general and administrative................ 1,486,869 1,317,576
----------- ----------
18,545,853 8,899,571
----------- ----------
Operating income (loss).............................. 2,946,298 (516,404)
----------- ----------
Other income (expense):
Interest income.................................... 80,515 48,444
Minority interest in earnings of subsidiaries...... (657,000) (53,600)
----------- ----------
(576,485) (5,156)
Income (loss) before income taxes.................... 2,369,813 (521,560)
Income taxes......................................... 262,106 29,178
----------- ----------
Net income (loss).................................... $ 2,107,707 $ (550,738)
=========== ==========
Earnings (loss) per common share:
Basic.............................................. $.24 $(.06)
Diluted............................................ .23 (.06)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 57
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL ACCUMULATED
SHARES PAR VALUE PAID IN CAPITAL DEFICIT TOTAL
--------- --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998....... 8,021,534 $80,215 $7,480,761 $(5,796,857) $1,764,119
Issuance of shares in private
placement, net of costs...... 1,450,000 14,500 275,500 -- 290,000
Net income..................... -- -- -- 2,107,707 2,107,707
--------- ------- ---------- ----------- ----------
Balance, December 31, 1998..... 9,471,534 $94,715 $7,756,261 $(3,689,150) $4,161,826
========= ======= ========== =========== ==========
Balance, January 1, 1997....... 7,850,782 $78,508 $7,341,725 $(5,246,119) $2,174,114
Issuance of shares in private
placement, net of costs...... 170,752 1,707 139,036 -- 140,743
Net income (loss).............. -- -- -- (550,738) (550,738)
--------- ------- ---------- ----------- ----------
Balance, December 31, 1997..... 8,021,534 $80,215 $7,480,761 $(5,796,857) $1,764,119
========= ======= ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 58
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss)..................................... $2,107,707 $ (550,738)
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization....................... 212,435 152,392
Minority interest in earnings of consolidated
subsidiaries..................................... 657,000 53,600
Increase (decrease) in cash flows from operating
activities resulting from changes in:
Accounts receivable................................. 377,833 376,942
Prepaid expenses and other current assets........... 47,835 82,587
Other assets........................................ (6,280) (143,550)
Accounts payable and accrued expenses............... 933,035 702,270
---------- ----------
Net cash provided by operating activities........ 4,329,565 673,503
---------- ----------
Cash flows from investing activities:
Acquisition of equipment............................ (89,635) (154,591)
Software development costs.......................... -- (210,177)
Investment in subsidiary............................ (499,000) (8,000)
Net cash used in investing activities............ (588,635) (372,768)
---------- ----------
Cash flows from financing activities:
Proceeds from sale of common shares................. 290,000 140,743
Subsidiary company stock issued to minority
shareholder...................................... -- 170,000
---------- ----------
Net cash provided by financing activities........ 290,000 310,743
---------- ----------
Net increase in cash.................................. 4,030,930 611,478
Cash and cash equivalents, beginning of year.......... 2,256,218 1,644,740
---------- ----------
Cash and cash equivalents, end of year................ $6,287,148 $2,256,218
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for income taxes:......................... $ 201,535 $ 23,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 59
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") through its subsidiaries
currently markets merger communications services and computer software to the
financial services industry. The Company was incorporated in New York on August
14, 1984. The Company ceased operations from February 1990 through November
1992.
During the fiscal year ended September 30, 1995, the Company established
three eighty percent owned subsidiaries, Michaelson Kelbick Partners Inc.
("MKP"), FPC Information Corp. ("FPC Information") and Aspen Capital Management,
LLC ("Aspen").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized merger communications and marketing services to the
financial services industry (see Note B (1)).
FPC Information was formed in November 1994 for the purpose of marketing
the Company's software products.
In October 1997, the Company's investment in FPC Information Corp. was
reduced from eighty percent to fifty percent, as a result of a $225,000
additional investment by the minority shareholder. The Company has the option to
repurchase a thirty percent equity interest in FPC Information Corp. exercisable
at any time prior to September 30, 1999 at the fair market value of such
interest, but in no event less than $225,000.
Aspen was formed in January 1995 as an international sponsor of cash
management funds and planned to engage in the development, investment management
and administration of such funds. Aspen, which was in the development stage,
ceased operations in September 1996.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Financial
Performance Corporation and Subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Investments in FPC Information Corp. in
which the Company does not have control is accounted for by the equity method.
Condensed financial information of its eighty percent owned subsidiary,
MKP, excluding intercompany eliminations, as of December 31, 1998 and 1997 and
for the years then ended, is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash.......................................... $5,910,000 $2,109,000
Accounts receivable........................... 343,000 721,000
Other assets.................................. 281,000 209,000
Accounts payable.............................. 2,478,000 1,576,000
Revenues...................................... 21,492,000 8,383,000
Operating costs............................... 19,312,000 8,002,000
Net income.................................... 1,999,000 401,000
</TABLE>
F-7
<PAGE> 60
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intercompany management fees of $1,714,000 and $336,526 were included in
operating costs for the years ended December 31, 1998 and 1997, respectively.
These amounts were eliminated upon consolidation.
Condensed financial information for the Company's other subsidiary, FPC
Information Corp. for the years ended December 31, 1998 and 1997 has not been
separately disclosed. This entity had no revenues and its assets and liabilities
are immaterial.
(2) REVENUE RECOGNITION
Revenue from software products is recognized upon delivery to the customer,
provided that no significant vendor obligations remain, and collection of the
resulting receivable is deemed probable.
(3) SOFTWARE DEVELOPMENT COSTS AND AMORTIZATION
Costs associated with software development subsequent to the establishment
of technological feasibility, including enhancements to software products, are
capitalized and amortized as required by Statement of Financial Accounting
Standards No. 86. Costs incurred prior to achieving technological feasibility
are expensed as incurred and classified as research and development costs. There
were no research and development costs incurred for the years ended December 31,
1998 and 1997.
Amortization of capitalized software development costs is generally
provided on a product-by-product basis at the greater of the amount computed by
using the ratio that current gross revenue bears to the total current and
anticipated gross revenue of the product or on the straight-line method over the
sixty-month estimated useful life of the product commencing when the product is
available for general release to customers.
Software Development Costs are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Balance, beginning of year...................... $ 135,605 $135,605
Additions....................................... -- --
Amortization.................................... (135,605) --
--------- --------
Balance, end of year............................ $ -- $135,605
========= ========
</TABLE>
(4) EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share was calculated by dividing net
income by the weighted average number of common shares outstanding during the
year. Diluted earnings per share was calculated by dividing net income by the
sum of the weighted average number of common shares outstanding plus all
additional common shares that would have been outstanding if potentially
dilutive common shares had been issued.
(5) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-8
<PAGE> 61
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(7) DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets, 5 to 7
years. When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations for the period. The cost of maintenance and
repairs is charged to operations as incurred. Significant renewals and
betterments are capitalized.
Amortization of an intangible asset, a customer list of $164,000, included
on the balance sheet under the caption, other assets, is being amortized on the
straight line basis, over ten years.
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Computer equipment............................... $192,513 $107,275
Furniture and fixtures........................... 159,978 155,580
Leasehold improvements........................... 33,977 33,977
-------- --------
386,468 296,832
Less: accumulated depreciation and
amortization................................... 172,739 97,869
-------- --------
$213,729 $198,963
======== ========
</TABLE>
(8) INCOME TAXES
Income taxes are computed in accordance with the provisions of Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At December 31, 1998, the Company has net operating loss carryforwards of
approximately $3,567,000, which expire in various years through 2012, available
to offset future taxable income. Certain provisions of the tax law may limit the
net operating loss carryforwards available for use in any given year in the
event of a significant change in ownership interest. At December 31, 1998, the
Company had a deferred tax asset
F-9
<PAGE> 62
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amounting to approximately $1,700,000. The deferred tax asset consists primarily
of net operating loss carryforwards and has been fully offset by a valuation
allowance of the same amount.
The income tax expense for the for the years ended December 31, 1998 and
1997 represents state and local income taxes on the income of MKP.
Income tax expense for the years ended December 31, 1998 and 1997 is
reconciled to Federal statutory rates as follows:
<TABLE>
<CAPTION>
1998 1997
--------- -------
<S> <C> <C>
Income taxes at statutory rates.................. $ 782,000 $ --
Utilization of loss carryforwards................ (782,000) --
State and local income taxes..................... 262,106 29,178
--------- -------
Income taxes................................... $ 262,106 $29,178
========= =======
</TABLE>
NOTE C -- SIGNIFICANT CUSTOMERS
For the year ended December 31, 1998, three customers of the Company's
subsidiary, MKP, accounted for 82% of the Company's consolidated revenues in the
following respective percentages:
<TABLE>
<S> <C>
Customer A................................ 55%
Customer B................................ 18%
Customer C................................ 10%
---
83%
===
</TABLE>
The total accounts receivable from these customers at December 31, 1998
amounted to 70% of the total accounts receivable balance.
NOTE D -- WARRANTS TO PURCHASE COMMON STOCK
At December 31, 1998, the Company had outstanding warrants as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
- ---------------- -------------- ------------------
<S> <C> <C>
250,000.............................. $ .50 November 30, 1999
550,000.............................. .50 October 31, 2001
725,000.............................. 1.00 September 15, 2006
20,000.............................. 1.00 September 16, 2006
200,000.............................. .50 September 15, 2010
</TABLE>
NOTE E -- INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted a stock option plan. The plan provides
for the granting of options to purchase up to 140,000 shares of common stock to
key employees, officers and directors at an exercise price equal to fair market
value at the date of grant.
F-10
<PAGE> 63
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The right to exercise options granted under the plan commences one year from the
date of the grant and such options are exercisable in increments of 25% each
year provided employment with the Company is continuous. The plan expired by its
terms in October 1998.
Presented below is a summary of the status of the Company's stock options:
<TABLE>
<CAPTION>
SHARES SHARES
UNDER WEIGHTED EXERCISE UNDER
OPTIONS AVERAGE PRICE OPTIONS
------- -------- -------- -------
<S> <C> <C> <C> <C>
Balance, beginning of year............. 70,000 $2.31 70,000 $2.31
Granted................................ -- -- -- --
Exercised.............................. -- -- -- --
Expired................................ (70,000) 2.31 -- --
------- ----- ------ -----
Balance, end of year................... -- $ -- 70,000 $2.31
------- ----- ------ -----
</TABLE>
NOTE F -- EMPLOYEE BENEFIT PLANS
In September 1996, the Company established a non-contributory pension and
profit sharing plan for the benefit of eligible full-time employees. The plan
provides for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes.
The plan was terminated in March, 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit
plan covering substantially all employees who have met certain requirements. The
plan requires Company contributions equal to 50% to a maximum of 3% of each
participant's contribution percentage.
In September, 1997, the Company amended its 401(k) plan to provide a
provision for discretionary profit sharing plan contributions. Total
contributions to the plan, (401(k) and profit sharing), were $127,000 and
$82,000 for the years ended December 31, 1998 and 1997, respectively.
NOTE G -- COMMITMENTS
The Company has commitments under non-cancelable operating leases for
office space and equipment, which expire on October 31, 2006 and September 30,
2000, respectively. The office lease includes provisions requiring the Company
to pay a proportionate share of increases in real estate taxes and operating
expenses over base period amounts.
F-11
<PAGE> 64
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- -------------------------
<S> <C>
1999............................................... $ 281,000
2000............................................... 281,000
2001............................................... 374,000
2002............................................... 415,000
2003............................................... 419,000
Thereafter......................................... 1,292,000
----------
$3,062,000
==========
</TABLE>
Rent and equipment leasing expense for the years ended December 31, 1998
and 1997 was $370,734 and $330,669, respectively.
NOTE H -- EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five year employment
agreement with Mr. Finley which expires on August 31, 2000. Under the agreement,
Mr. Finley's initial annual salary was $125,000, subject to increases as
determined by the Company's Board of Directors, Mr. Finley's salary was
subsequently increased to $150,000.
Effective as of October 1, 1997, the Company entered into a new three year
employment agreement with Mr. Finley which expires on September 30, 2000. Under
this employment agreement, Mr. Finley's initial salary was $150,000 per annum,
subject to periodic increases as determined by the Company's Board of Directors.
In the event of the termination of Mr. Finley's employment by reason of a
"change in control" (as such term is defined in the employment agreement) of the
Company or certain other events, then in addition to paying Mr. Finley's salary
and accrued benefits through the date of termination of employment, the company
shall be obligated to pay to Mr. Finley, as severance pay, an amount equal to
200% of Mr. Finley's annual base salary rate as of the effective date of
termination and to maintain through the remaining balance of the term of the
employment (but not less than two years from the date of termination of Mr.
Finley's employment agreement) all employee benefit plans and programs in which
Mr. Finley was entitled to participate. The Company agreed to pay reasonable
travel and entertainment expenses incurred by Mr. Finley on behalf of the
Company and to provide Mr. Finley with a leased automobile. If Mr. Finley does
not elect not to renew his employment agreement at the expiration of the term
and the Company does not elect to renew Mr. Finley's employment upon the
expiration of the term thereof, then Mr. Finley was entitled to receive a
severance payment of $100,000.
Effective as of October 1, 1998, the Company amended its employment
agreement with Mr. Finley to increase Mr. Finley's annual salary from $150,000
to $250,000 and to increase Mr. Finley's severance payment in the event Mr.
Finley does not elect not to renew his employment agreement at the expiration of
the term thereof and the Company does not elect to renew Mr. Finley's employment
upon the expiration of the term thereof from $100,000 to $350,000. The $350,000
severance payment to Mr. Finley would also become due if Mr. Finley's employment
agreement is terminated by reason of the
F-12
<PAGE> 65
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's breach thereof. If Mr. Finley elects not be renew the employment
agreement upon the expiration of the term thereof, Mr. Finley will be entitled
to a severance payment of $250,000. The amended employment agreement with Mr.
Finley also provides that (i) if the Company elects not to renew the employment
agreement with Mr. Finley upon the expiration of the term thereof, (ii) Mr.
Finley terminates the employment agreement due to a "change in control" of the
Company or MKP or (iii) the Company terminates the employment agreement in
breach of the terms thereof, then in addition to the cash severance payments
provided for, Mr. Finley will be entitled to receive common stock of the
Company, with "piggy-back" registration rights, equal in value to the
difference, if any, between the fair market value of all stock and warrants of
the Company then owned by Mr. Finley and $1,000,000.
In October, 1994, MKP entered into executive employment agreements with
each of Ms. Michaelson and Ms. Kelbick for a term of three years ending October
17, 1997. Under the terms of the agreements, the initial annual salary of Ms.
Michaelson and Ms. Kelbick was $80,000. The annual base salary payable to each
of Ms. Michaelson and Ms. Kelbick was subsequently increased to $115,000.
Effective as of September 11, 1997, MKP entered into a new three year employment
agreement with each of Ms. Michaelson and Ms. Kelbick which expires on September
10, 2000. Under these agreements, the initial annual base salary payable to each
of Ms. Michaelson and Ms. Kelbick is $150,000, subject to periodic increases as
shall be determined by MKP's Board of Directors. The employment agreements
further provide for an annual incentive compensation payment to Ms. Michaelson
and Ms. Kelbick not to exceed 30% in the aggregate, determined annually by the
Board of Directors, (such percentage initially established at 30%) of the net
income before taxes of MKP as if MKP was not a member of the Company's
consolidated group. Ms. Michaelson and Ms. Kelbick have the option to take all
or a portion of the bonus in the Company's securities.
Pursuant to the September 1997 executive employment agreements if either
Ms. Michaelson or Ms. Kelbick does not elect not to renew her respective
employment agreement with MKP at the expiration of the term and MKP elects not
to renew the employment agreement, the respective executive will be entitled to
receive a severance payment in the amount of $250,000. The employment agreements
provide each of Ms. Michaelson and Ms. Kelbick with a clothing expense allowance
of $10,000 for each year of the term of the agreement and a leased automobile
throughout the term.
In the event of the termination of employment of either Ms. Michaelson or
Ms. Kelbick by reason of a "change in control" (as such term is defined in the
employment agreement) of MKP or the Company, or certain other events, then in
addition to paying all salary and accrued benefits through the date of
termination of employment, MKP shall be obligated to pay to the employee, as
severance pay, an amount equal to 200% of the employee's annual base salary rate
in effect as of the date of termination and to maintain through the remaining
balance of the term of the employment agreement (but not less than two years
from the date of termination of the employee's employment agreement) all
employee benefit plans and programs in which the employee was entitled to
participate. The Company has issued 20 shares of MKP and 200,000 shares of the
Company, in the aggregate, to Ms. Michaelson and Ms. Kelbick.
F-13
<PAGE> 66
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective as of October 1, 1998, MKP entered into amendments of the
employment agreements with each of Ms. Michaelson and Ms. Kelbick. Pursuant to
the amendments, the annual base salary payable to each of Ms. Michaelson and Ms.
Kelbick was increased to $250,000 and the annual clothing allowance for each of
Ms. Michaelson and Ms. Kelbick was increased from $10,000 to $15,000.
Additionally, the severance payment required if either Ms. Michaelson or Ms.
Kelbick does not elect not to renew her respective employment agreement with MKP
at the expiration of the term and MKP elects not to renew the employment
agreement was increased from $250,000 to $350,000.
The $350,000 severance payment would also become due to each of Ms.
Michaelson and Ms. Kelbick if the employment of such employee is terminated by
reason of MKP's breach of the employment agreement with such employee.
Additionally, if either Ms. Michaelson or Ms. Kelbick elects not to renew her
respective employment agreement with MKP at the expiration of the term, the
respective employee will be entitled to receive a severance payment of $250,000.
If the employment of either Ms. Michaelson or Ms. Kelbick shall be terminated
for any reason other than "for cause" by MKP, then the respective employee shall
be entitled to continued payment of the annual incentive compensation payment
for a period of six (6) months after termination based upon MKP's net income
before taxes for projects which were active on the date of termination.
NOTE I -- RESTRICTED CASH AND CONTINGENCIES
At December 31, 1998, $180,000 was invested in a Certificate of Deposit and
is pledged as security for a letter of credit issued in connection with the
lease for office space (see Note G). The $180,000 Certificate of Deposit is
included on the balance sheet under the caption, other assets. This exceeds the
federally insured limit.
NOTE J -- CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents with a major financial
institution. The balance at times may exceed federally insured limits. The
company performs periodic evaluations of the relative credit standing of this
financial institution and limits the amount of credit exposure.
NOTE K -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value amounts of cash and cash equivalents, prepaid expenses
and accrued expenses approximate fair value because of the short maturity of
these items.
F-14
<PAGE> 67
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- EARNINGS (LOSS) PER SHARE INFORMATION
The calculation of basic and diluted earnings (loss) per share is as
follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Net income (loss) available to Common share
owners...................................... $2,107,707 $ (550,738)
---------- ----------
Average shares outstanding(a)................. 8,967,367 7,987,741
Dilutive securities
Stock options and warrants.................. 184,821 --
---------- ----------
Average shares outstanding assuming
dilution(b)................................. 9,152,188 7,987,741
========== ==========
</TABLE>
- -------------------------
(a) Used to compute basic earnings (loss) per share.
(b) Used to compute diluted earnings per share.
Excluded from 1997 computation was 70,000 of stock options and 1,952,649 of
warrants which would be antidilutive.
NOTE M -- CHANGE IN FISCAL YEAR
In February 1998, the Company's Board of Directors unanimously approved a
resolution to change the Company's fiscal year end from September 30 to December
31.
F-15
<PAGE> 68
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(UNAUDITED)
(UNAUDITED) (RESTATED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................... $ 4,560,760 $ 1,627,979
Accounts receivable............................... 1,847,395 1,808,324
Prepaid expenses and other current assets......... 65,071 99,807
----------- -----------
Total current assets........................... 6,473,226 3,536,110
Property and equipment, net of accumulated
depreciation...................................... 209,070 197,391
Software development costs.......................... -- 135,605
Investment in subsidiary............................ 695,070 513,186
Other assets........................................ 306,086 299,694
----------- -----------
$ 7,683,452 $ 4,681,986
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses............. $ 2,333,948 $ 2,018,079
----------- -----------
Total current liabilities...................... 2,333,948 2,018,079
----------- -----------
Minority interest in consolidated subsidiaries...... 915,046 516,646
----------- -----------
Stockholders' equity
Common stock -- authorized 50,000,000 shares of
$.01 par value per share: issued and
outstanding 9,471,534 as of March 31, 1999;
8,021,534 as of March 31, 1998................. 94,715 80,215
Additional paid in capital........................ 7,756,261 7,480,761
Accumulated (deficit)............................. (3,416,518) (5,413,715)
----------- -----------
Total stockholders' equity..................... 4,434,458 2,147,261
----------- -----------
$ 7,683,452 $ 4,681,986
=========== ===========
</TABLE>
See the accompanying notes to the financial statements.
F-16
<PAGE> 69
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(UNAUDITED)
(UNAUDITED) (RESTATED)
<S> <C> <C>
Revenues.............................................. $3,390,389 $4,488,550
---------- ----------
Costs and expenses
Cost of revenues.................................... 2,257,354 3,362,796
Salaries and related expenses....................... 350,588 347,130
Selling, general and administrative................. 355,545 218,246
---------- ----------
2,963,487 3,928,172
---------- ----------
Operating income.................................... 426,902 560,378
---------- ----------
Other income (expense):
Interest income..................................... 25,514 14,198
Minority interest in earnings of subsidiaries....... (138,000) (148,600)
---------- ----------
(112,486) (134,402)
---------- ----------
Income before income taxes............................ 314,416 425,976
Income taxes.......................................... 41,784 42,834
---------- ----------
Net income............................................ $ 272,632 $ 383,142
========== ==========
Earnings per common share:
Basic............................................... $.029 $.048
Diluted............................................. $.026 $.048
</TABLE>
See the accompanying notes to the financial statements.
F-17
<PAGE> 70
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(UNAUDITED)
(UNAUDITED) (RESTATED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 272,632 $ 383,142
Adjustments to reconcile net cash provided by (used
in) operating activities:
Depreciation and amortization..................... 27,986 21,738
Minority interest in earnings of consolidated
subsidiaries................................... 138,000 148,600
Increase (decrease) in cash flows from operating
activities resulting from changes in:
Accounts receivable............................... (1,504,612) (1,087,708)
Prepaid expenses and other current assets......... (33,796) (20,697)
Other assets...................................... 1,999 --
Accounts payable and accrued expenses............. (507,240) 109,926
----------- -----------
Net cash provided by (used in) operating
activities........................................ (1,605,031) (444,999)
----------- -----------
Cash flows from investing activities:
Acquisition of equipment.......................... (23,326) (16,054)
Investment in subsidiary.......................... (98,031) (167,186)
----------- -----------
Net cash used in investing activities............... (121,357) (183,240)
----------- -----------
Net increase (decrease) in cash..................... (1,726,388) (628,239)
Cash and cash equivalents, beginning of period...... 6,287,148 2,256,218
----------- -----------
Cash and cash equivalents, end of period............ $ 4,560,760 $ 1,627,979
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes........................ $ 26,000 $ 23,000
=========== ===========
</TABLE>
See the accompanying notes to the financial statements.
F-18
<PAGE> 71
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID IN ACCUMULATED
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
--------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1,
1999................... 9,471,534 $94,715 $7,756,261 $(3,689,150) $4,161,826
Net income............... -- -- -- 272,632 272,632
--------- ------- ---------- ----------- ----------
Balance, March 31,
1999................... 9,471,534 $94,715 $7,756,261 $(3,416,518) $4,434,458
========= ======= ========== =========== ==========
Balance, January 1,
1998................... 8,021,534 $80,215 $7,480,761 $(5,796,857) $1,764,119
Net income (Restated).... -- -- -- 383,142 383,142
--------- ------- ---------- ----------- ----------
Balance, March 31,
1998................... 8,021,534 $80,215 $7,480,761 $(5,413,715) $2,147,261
========= ======= ========== =========== ==========
</TABLE>
See the accompanying notes to the financial statements.
F-19
<PAGE> 72
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE A -- ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") through its subsidiaries
currently markets merger communications services and computer software to the
financial services industry. The Company was incorporated in New York on August
14, 1984. The Company ceased operations from February 1990 through November
1992.
During the fiscal year ended September 30, 1995, the Company established
three eighty percent owned subsidiaries, Michaelson Kelbick Partners Inc.
("MKP"), FPC Information Corp. ("FPC Information") and Aspen Capital Management,
LLC ("Aspen").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized merger communications and marketing services to the
financial services industry (see Note B (1)).
FPC Information was formed in November 1994 for the purpose of marketing
the Company's software products.
In October 1997, the Company's investment in FPC Information was reduced
from eighty percent to fifty percent, as a result of a $225,000 additional
investment by the minority shareholder. The Company has the option to repurchase
a thirty percent equity interest in FPC Information Corp. exercisable at any
time prior to September 30, 1999 at the fair market value of such interest, but
in no event less than $225,000.
Aspen was formed in January 1995 as an international sponsor of cash
management funds and planned to engage in the development, investment management
and administration of such funds. Aspen, which was in the development stage,
ceased operations in September 1996.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Financial
Performance Corporation and Subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Investments in FPC Information Corp. is
accounted for by the equity method.
F-20
<PAGE> 73
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Condensed financial information of its eighty percent owned subsidiary,
MKP, excluding intercompany eliminations, as of March 31, 1999 and 1998 and for
the three months then ended, is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash.......................................... $3,837,000 $1,610,000
Accounts receivable........................... 1,847,000 1,808,000
Other assets.................................. -- 15,000
Accounts payable.............................. 1,979,000 1,657,000
Revenues...................................... 3,390,000 4,489,000
Operating costs............................... 3,038,000 4,116,000
Net income.................................... 336,000 345,000
</TABLE>
Intercompany management fees of $286,000 and $293,000 were included in
operating costs for the three months ended March 31, 1999 and 1998,
respectively. These amounts were eliminated upon consolidation.
Condensed financial information for the Company's other subsidiary, FPC
Information Corp. for the three months ended March 31, 1999 and 1998 has not
been separately disclosed. This entity had no revenues and its assets and
liabilities are immaterial.
(2) RECLASSIFICATION OF CERTAIN ITEMS
Certain items in the Company's financial statements for the three months
ended March 31, 1998 have been restated to conform the presentation of such
financial statements with the Company's financial statements for the three
months ended March 31, 1999.
(3) REVENUE RECOGNITION
Revenue from software products is recognized upon delivery to the customer,
provided that no significant vendor obligations remain, and collection of the
resulting receivable is deemed probable.
(4) SOFTWARE DEVELOPMENT COSTS AND AMORTIZATION
Costs associated with software development subsequent to the establishment
of technological feasibility, including enhancements to software products, are
capitalized and amortized as required by Statement of Financial Accounting
Standards No. 86. Costs incurred prior to achieving technological feasibility
are expensed as incurred and classified as research and development costs. There
were no research and development costs incurred for the years ended March 31,
1999 and 1998.
Amortization of capitalized software development costs is generally
provided on a product-by-product basis at the greater of the amount computed by
using the ratio that current gross revenue bears to the total current and
anticipated gross revenue of the product or on the straight-line method over the
sixty-month estimated useful life of the product commencing when the product is
available for general release to customers.
F-21
<PAGE> 74
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Software Development Costs are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Balance, beginning of period..................... $ -- $135,605
Additions...................................... -- --
Amortization................................... -- --
-------- --------
Balance, end of period........................... $ -- $135,605
======== ========
</TABLE>
(5) EARNINGS PER COMMON SHARE
Basic earnings per common share was calculated by dividing net income by
the weighted average number of common shares outstanding during the year.
Diluted earnings per share was calculated by dividing net income by the sum of
the weighted average number of common shares outstanding plus all additional
common shares that would have been outstanding if potentially dilutive common
shares had been issued.
(6) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
(7) 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(8) DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets, 5 to 7
years. When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations for the period. The cost of maintenance and
repairs is charged to operations as incurred. Significant renewals and
betterments are capitalized.
F-22
<PAGE> 75
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Amortization of an intangible asset, a customer list of $164,000, included
on the balance sheet under the caption, other assets, is being amortized on the
straight line basis, over ten years.
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Computer equipment............................... $192,513 $123,329
Furniture and fixtures........................... 183,305 155,581
Leasehold improvements........................... 33,977 33,977
-------- --------
409,795 312,887
Less: accumulated depreciation and
amortization................................... 200,725 115,496
-------- --------
$209,070 $197,391
======== ========
</TABLE>
(9) INCOME TAXES
Income taxes are computed in accordance with the provisions of Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At December 31, 1998, the Company has net operating loss carryforwards of
approximately $3,567,000, which expire in various years through 2012, available
to offset future taxable income. Certain provisions of the tax law may limit the
net operating loss carryforwards available for use in any given year in the
event of a significant change in ownership interest. At December 31, 1998, the
Company had a deferred tax asset amounting to approximately $1,700,000. The
deferred tax asset consists primarily of net operating loss carryforwards and
has been fully offset by a valuation allowance of the same amount.
The income tax expense for the for the three months ended March 31, 1999
and 1998 represents state and local income taxes on the income of MKP.
F-23
<PAGE> 76
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE C -- SIGNIFICANT CUSTOMERS
For the three months ended March 31, 1999, two customers of the Company's
subsidiary, MKP, accounted for 84% of the Company's consolidated revenues in the
following respective percentages:
<TABLE>
<S> <C>
Customer A....................................... 10%
Customer B....................................... 74%
---
84%
===
</TABLE>
The total accounts receivable from these customers at March 31, 1999
amounted to 86% of the total accounts receivable balance.
NOTE D -- WARRANTS TO PURCHASE COMMON STOCK
At March 31, 1999, the Company had outstanding warrants as follows:
<TABLE>
<CAPTION>
EXERCISE
NUMBER OF SHARES PRICE EXPIRATION DATE
- ---------------- -------- ------------------
<S> <C> <C>
250,000................................. $ .50 November 30, 1999
550,000................................. .50 October 31, 2001
725,000................................. 1.00 September 15, 2006
20,000.................................. 1.00 September 16, 2006
200,000................................. .50 September 15, 2010
</TABLE>
NOTE E -- INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted a stock option plan. The plan provides
for the granting of options to purchase up to 140,000 shares of common stock to
key employees, officers and directors at an exercise price equal to fair market
value at the date of grant. The right to exercise options granted under the plan
commences one year from the date of the grant and such options are exercisable
in increments of 25% each year provided employment with the Company is
continuous. The plan expired by its terms in October 1998.
F-24
<PAGE> 77
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Presented below is a summary of the status of the Company's stock options
for the three months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE
OPTIONS PRICE OPTIONS PRICE
------- -------- ------- --------
<S> <C> <C> <C> <C>
Balance, beginning of period......... -- $-- 70,000 $2.31
Granted.............................. -- -- -- --
Exercised............................ -- -- -- --
Expired.............................. -- -- -- --
------- -- ------- -----
Balance, end of period............... -- $-- 70,000 $2.31
======= == ======= =====
</TABLE>
NOTE F -- EMPLOYEE BENEFIT PLANS
In September 1996, the Company established a non-contributory pension and
profit sharing plan for the benefit of eligible full-time employees. The plan
provides for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes.
The plan was terminated in March, 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit
plan covering substantially all employees who have met certain requirements. The
plan requires Company contributions equal to 50% to a maximum of 3% of each
participant's contribution percentage.
In September, 1997, the Company amended its 401(k) plan to provide a
provision for discretionary profit sharing plan contributions. Total
contributions to the plan, (401(k) and profit sharing), were $127,000 and
$82,000 for the years ended December 31, 1998 and 1997, respectively.
NOTE G -- COMMITMENTS
The Company has commitments under non-cancelable operating leases for
office space and equipment, which expire on October 31, 2006 and September 30,
2000, respectively. The office lease includes provisions requiring the Company
to pay a proportionate share of increases in real estate taxes and operating
expenses over base period amounts.
F-25
<PAGE> 78
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1999....................................................... $ 281,000
2000....................................................... 281,000
2001....................................................... 374,000
2002....................................................... 415,000
2003....................................................... 419,000
Thereafter................................................. 1,292,000
----------
$3,062,000
==========
</TABLE>
Rent and equipment leasing expense was $88,000 for the three months ended
March 31, 1999 and 1998.
NOTE H -- RESTRICTED CASH AND CONTINGENCIES
At March 31, 1999, $180,000 was invested in a Certificate of Deposit and is
pledged as security for a letter of credit issued in connection with the lease
for office space (see Note G). The $180,000 Certificate of Deposit is included
on the balance sheet under the caption, other assets. This exceeds the federally
insured limit.
NOTE I -- CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents with a major financial
institution. The balance at times may exceed federally insured limits. The
company performs periodic evaluations of the relative credit standing of this
financial institution and limits the amount of credit exposure.
NOTE J -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value amounts of cash and cash equivalents, prepaid expenses
and accrued expenses approximate fair value because of the short maturity of
these items.
F-26
<PAGE> 79
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE K -- EARNINGS PER SHARE INFORMATION
The calculation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net income available to Common share owners.......... $ 272,632 $ 383,142
----------- ----------
Average shares outstanding(a)........................ 9,471,534 8,021,532
Dilutive securities
Stock options and warrants(c)...................... 903,000 --
----------- ----------
Average shares outstanding assuming dilution(b)...... 10,374,534 8,021,532
=========== ==========
</TABLE>
- -------------------------
(a) Used to compute basic earnings per share.
(b) Used to compute diluted earnings per share.
(c) Excluded for 1998 because exercise price exceeded market value.
NOTE L -- CHANGE IN FISCAL YEAR
In February 1998, the Company changed the Company's fiscal year end from
September 30 to December 31.
F-27
<PAGE> 80
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL PERFORMANCE CORPORATION
3,006,000 SHARES OF COMMON STOCK
--------------------------------------------------------------
SELLING STOCKHOLDERS' PROSPECTUS
--------------------------------------------------------------
, 1999
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS
OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR ANY
BROKER, DEALER, AGENT OR UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. EXCEPT WHERE OTHERWISE INDICATED, THIS PROSPECTUS SPEAKS AS OF THE
EFFECTIVE DATE OF THE REGISTRATION STATEMENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAVE BEEN NO CHANGES IN OUR AFFAIRS SINCE THE DATE OF
THIS PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 81
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The New York Business Corporation Law ("NYBCL"), in general, allows
corporations to indemnify their officers and directors against any judgment,
fine, settlement or reasonable expenses incurred in any non-derivative civil or
criminal action, or against any settlement or reasonable expenses in any
derivative civil action, if the officer or director acted in good faith and for
a purpose that such person reasonably believed to be in, or not opposed to, the
best interests of the corporation. In the case of a criminal action, the officer
or director must have had no reasonable cause to believe that that person's
conduct was unlawful. Partial indemnification is allowed in cases where the
officer or director was partially successful in defeating the claim. The NYBCL
establishes procedures for determining whether the standard of conduct has been
met in the particular case, for timely notification of shareholders, for
prepayment of expenses and for payment pursuant to a court order or as
authorized by disinterested directors or the shareholders. The NYBCL also
provides that it is not exclusive of any other rights to which an officer or
director may be entitled under the certificate of incorporation or by-laws or
pursuant to an agreement, resolution of shareholders or resolution or directors
which are authorized by the certificate of incorporation or by-laws; provided
that no indemnification may be made if a judgment or other final adjudication
adverse to the officer or director establishes that person's acts were committed
in bad faith or were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or that that person personally
gained in fact a financial profit or other advantage to which that person was
not legally entitled.
The Company's Certificate of Incorporation and By-Laws contain provisions
exculpating the Company's directors from liability to the Company's shareholders
for certain actions taken or omitted by them and indemnifying the Company's
officers and directors against judgments, fines, amounts paid in settlement and
reasonable attorneys' fees incurred in the defense of certain actions and
proceedings related to the sale of the Common Stock offered hereby.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors or officers pursuant to the foregoing, or
otherwise, the Company has been informed that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
II-1
<PAGE> 82
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred and borne by FPC
in connection with the sale of the shares offered hereby. All amounts shown are
estimates, except for the Securities and Exchange Commission filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee.............. $ 530.00
Legal fees and expenses.................................... $40,000.00
Accounting fees and expenses............................... $10,000.00
Blue Sky fees and expenses................................. $ 5,000.00
Printing and engraving expenses............................ $15,000.00
Miscellaneous.............................................. $ 9,470.00
----------
Total................................................. $80,000.00
==========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following paragraphs set forth certain information with respect to
securities sold by FPC within the past three years preceding the filing of this
Registration Statement, in transactions that were not registered under the
Securities Act.
Unless otherwise indicated, there were no underwriters or placement agents
with respect to these transactions and the securities were issued in
transactions not involving public offerings in reliance on exemptions from
registration provided by Section 4(2) of the Securities Act.
1. On September 16, 1996, we issued to Ms. Michaelson warrants to purchase
200,000 shares of common stock with an exercise price of $1.00 per
share, exercisable until September 15, 2006. Ms. Michaelson is a
managing director of MKP. The warrants were issued for past services
she performed for us.
2. On September 16, 1996, we issued to Ms. Kelbick warrants to purchase
200,000 shares of common stock with an exercise price of $1.00 per
share, exercisable until September 15, 2006. Ms. Kelbick is a managing
director of MKP. The warrants were issued for past services she
performed for us.
3. In July 1996, Duncan Burke and Richard Levy, respectively, each
received 20,000 shares of common stock for past services rendered to
the company.
4. In September 1996, Messrs. Burke and Levy each received warrants to
purchase 50,000 shares of common stock at $1.00 per share exercisable
until September 15, 2006, for past services rendered to the company.
5. In September 1996, Philip L. Hage, a former director of the company,
received warrants to purchase 25,000 shares of common stock at $1.00
per share, exercisable until September 15, 2006. Mr. Hage received the
warrants in consideration for past services performed for the company.
6. In November 1997, we issued to each of Richard Levy and Duncan Burke
warrants to purchase 50,000 shares of common stock at $0.50 per share,
exercisable until November 1999, together with "piggyback" registration
rights as to the shares of common stock underlying the warrants. They
each received the warrants in consideration for past services rendered
to the company.
II-2
<PAGE> 83
7. In October 1998, we issued to each of Richard Levy, Duncan Burke,
Ottavio Serena and Gary S. Friedman, warrants to purchase 100,000
shares of common stock at $0.50 per share, exercisable until October
31, 2001. Such warrants may be exercised on a "cashless" basis and are
entitled to "piggyback" registration rights as to the shares of common
stock underlying the warrants. The warrants were issued in
consideration for past services rendered to us.
8. In October 1998, we issued to Ottavio Serena warrants to purchase an
additional 100,000 shares of common stock, exercisable on the same
terms as the other warrants issued to him in October 1998, as
compensation for investment banking and consulting services Mr. Serena
furnished to us.
9. In October 1998, we issued to Charlotte Tuck warrants to purchase
50,000 shares of common stock at $0.50 per share, exercisable until
October 31, 2001. Such warrants may be exercised on a "cashless" basis
and are entitled to "piggyback" registration rights as to the shares of
common stock underlying the warrants. The warrants were issued in
consideration for past services rendered to us. Ms. Tuck is our
employee and is the wife of Ottavio Serena, one of our directors.
10. On September 16, 1996, we issued to Mr. Finley warrants to purchase
200,000 shares of common stock with an exercise price of $1.00 per
share, exercisable until September 15, 2006. We registered all of the
shares of common stock underlying the warrants issued to Mr. Finley
under a registration statement which was declared effective in February
1997. That registration statement is no longer current. The warrants
were issued in consideration for past services rendered to us.
11. In November 1996, we issued Van Kasper & Company ("Van Kasper") a three-
year warrant to purchase 150,000 shares of common stock with an exercise
price of $0.50 per share. This warrant expires in November 1999. We
registered the shares of common stock underlying the warrant under a
registration statement filed which was declared effective in February
1997. The registration statement is no longer current. The warrants were
issued pursuant to an advisory agreement between Van Kasper and FPC.
12. In November 1996, we entered into a non-exclusive advisory agreement
with Laidlaw Equities, Inc. ("Laidlaw") which provided that Laidlaw
would render general corporate advice to us and proposed to act as a
placement agent in connection with potential acquisition financing.
Pursuant to the terms of the agreement, we issued Laidlaw a three-year
warrant to purchase 150,000 shares of common stock with an exercise
price of $0.50 per share. We registered the shares of common stock
underlying the warrant under a registration statement which was declared
effective in February 1997. The registration statement is no longer
current. During the Company's fiscal year ended September 30, 1997, we
advised Laidlaw that Laidlaw had abrogated the provisions of this
agreement and that the three-year warrant issued to Laidlaw had been
cancelled.
13(a). In March 1996, we issued Robert S. Trump (i) 1,000,000 shares of common
stock upon exercise of warrants in consideration of an aggregate
purchase price of $500,000; and (ii) 1,000,000 shares of common stock
upon conversion of approximately $1,000,000 of indebtedness under an
outstanding promissory note. Mr. Trump is the beneficial owner of
approximately 58.7% of our outstanding common stock.
II-3
<PAGE> 84
(b) In June 1996, Mr. Trump converted an additional $517,474 of our
indebtedness into 517,474 shares of common stock at a conversion
price of $1.00 per share.
(c) In November 1996, we issued Mr. Trump 400,000 shares of common
stock upon the exchange of a promissory note in consideration of
approximately $0.3125 per share. We also issued to Mr. Trump an
additional 164,614 shares of common stock upon the conversion of
outstanding debt in the aggregate amount of $164,614.
(d) In March 1998, Mr. Trump purchased from us 1,000,000 shares of
common stock for a purchase price of $0.20 per share. This sale was
part of our private placement of 1,400,000 shares of common stock
referred to in item 14 below.
14. In March 1998, in addition to the 1,00,000 shares of common stock
purchased by Robert Trump as indicated in item 13(d) above,
Samaritan Holdings, Ltd. and Jan Van Eck purchased from us 300,000
and 100,000 shares of common stock, respectively, for a purchase
price of $0.20 per share.
ITEM 27. EXHIBITS.
The following is a list of Exhibits filed as a part of this Registration
Statement:
<TABLE>
<C> <S>
3.1 Certificate of Incorporation dated August 9, 1984
(incorporated by reference to Exhibit 3.1 to Registration
Statement on Form S-8, No. 33-7778).
3.2 Amendment to Certificate of Incorporation dated August 29,
1984 (incorporated by reference to Exhibit (i) to
Registrant's Quarterly Report on Form 10-QSB for the period
ended March 31, 1988).
3.3 Amendment to Certificate of Incorporation dated July 1, 1986
(incorporated by reference to Exhibit 3.3 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1996).
3.4 Amendment to Certificate of Incorporation dated March 14,
1988 (incorporated by reference to Exhibit 3.4 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1996).
3.5 Amendment to Certificate of Incorporation dated September
13, 1996 (incorporated by reference to Exhibit 3.5 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1996).
3.6 By-laws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-8, No. 33-7778).
3.7 Amendment to By-Laws dated July 1995 (incorporated by
reference to Exhibit 3.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.1 Specimen Certificate of Common Stock (incorporated by
reference to Exhibit 4.1 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.2 Incentive Stock Option Plan (incorporated by reference to
Exhibit 4.7 to Registration Statement on Form S-1, No.
33-20886).
*5.1 Opinion of Baer Marks & Upham LLP re: validity of shares.
</TABLE>
II-4
<PAGE> 85
<TABLE>
<C> <S>
10.1 Agreement between Marine Midland Bank, N.A. and William F.
Finley (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-18, No. 33-7778).
10.2 Form of Indemnification Agreement between Registrant and its
Officers and Directors (incorporated by reference to Exhibit
10.35 to Registration Statement on Form S-1, No. 33-20886).
10.3 Promissory Note due on May 1, 1989 in the principal amount
of $50,000 executed by the Registrant in favor of Marvin M.
Reiss (incorporated by reference to Exhibit 10.41 to
Amendment No. 2 to Registration Statement on Form S-1, No.
33-20886).
10.4 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
William F. Finley (incorporated by reference to Exhibit 10.4
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.5 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.5
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.6 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Julius London (incorporated by
reference to Exhibit 10.6 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.7 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Marie Monell (incorporated by
reference to Exhibit 10.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.8 Promissory Note due on November 1, 1989 in the principal
amount of $12,500 executed by the Registrant in favor of
Paul M. Diamond (incorporated by reference to Exhibit 10.8
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.9 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of
Paul M. Diamond (incorporated by reference to Exhibit 10.9
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.10 Promissory Note due on November 1, 1989 in the principal
amount of $2,500 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.10 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.11 Promissory Note due on November 1, 1989 in the principal
amount of $30,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.11
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.12 Promissory Note due on November 1, 1989 in the principal
amount of $20,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.12
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
</TABLE>
II-5
<PAGE> 86
<TABLE>
<C> <S>
10.13 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.13
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.14 Promissory Note due on November 1, 1989 in the principal
amount of $15,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.14
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.15 Demand Promissory Note in the principal amount of $5,000
executed by the Registrant in favor of Marvin M. Reiss
(incorporated by reference to Exhibit 10.15 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.16 Form of Exchangeable Note due on December 31, 1995 in the
principal amount of $125,000 executed by the Registrant in
favor of Robert S. Trump (incorporated by reference to
Exhibit 10.16 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.17 Security Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.17 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.18 Letter Agreement dated January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.18 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.19 Warrant Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.19 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.20 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Henry T. Doherty (incorporated by reference
to Exhibit 10.20 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.21 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Nick Varsames (incorporated by reference to
Exhibit 10.21 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.22 Letter Agreement dated September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.22 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.23 Warrant Agreement dated as of September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.23 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.24 Form of Subscription Agreement dated September 22, 1993
between the Registrant and Henry T. Doherty (incorporated by
reference to Exhibit 10.24 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
</TABLE>
II-6
<PAGE> 87
<TABLE>
<C> <S>
10.25 Term Note in the principal amount of $112,397.27 executed by
the Registrant in favor of The Rebot Corporation
(incorporated by reference to Exhibit 10.25 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.26 Form of Warrant dated as of September 30, 1993 between the
Registrant and Rebot Corporation (incorporated by reference
to Exhibit 10.26 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.27 Term Note in the principal amount of $38,418.40 executed by
the Registrant in favor of William F. Finley (incorporated
by reference to Exhibit 10.27 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September
30, 1993).
10.28 Form of Warrant dated as of September 30, 1993 between the
Registrant and William F. Finley (incorporated by reference
to Exhibit 10.28 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.29 Letter Agreement dated September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.29 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.30 Form of Warrant dated as of September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.30 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.31 Form of Warrant dated as of November 11, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.31 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.32 Form of Warrant dated as of November 11, 1993 between the
Registrant and William F. Finley (incorporated by reference
to Exhibit 10.32 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.33 Form of Warrant dated as of November 11, 1993 between the
Registrant and Marvin M. Reiss (incorporated by reference to
Exhibit 10.33 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.34 Form of Warrant dated as of November 11, 1993 between the
Registrant and Alan M. Swiedler (incorporated by reference
to Exhibit 10.34 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.35 Form of Warrant dated as of November 11, 1993 between the
Registrant and Susan M. Michaelson (incorporated by
reference to Exhibit 10.35 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.36 Form of Warrant dated as of November 11, 1993 between the
Registrant and Leonard Gartner (incorporated by reference to
Exhibit 10.36 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
</TABLE>
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<TABLE>
<C> <S>
10.37 Form of Warrant dated as of November 11, 1993 between the
Registrant and Ted Prince (incorporated by reference to
Exhibit 10.37 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.38 Form of Subscription Agreement dated November 17, 1993
between the Registrant and Henry T. Doherty (incorporated by
reference to Exhibit 10.38 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.39 Form of Subscription Agreement dated February 28, 1994
between the Registrant and Robert S. Trump (incorporated by
reference to Exhibit 10.39 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 36,
1993).
10.40 Letter Agreement dated November 24, 1992 between the
Registrant and Management Technologies, Incorporated
(incorporated by reference to Exhibit 10.40 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.41 Agreement dated April 29, 1994 between the Registrant and
New Paradigm Software Corporation (incorporated by reference
to the Registrant's Report on Form 10-QSB for the Quarter
Ended March 31, 1994).
10.42 Occupancy Agreement dated October 10, 1994 between the
Registrant and New Paradigm Software Corp. (incorporated by
reference to Exhibit 10.42 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.43 Letter agreement dated October 10, 1994 between the
Registrant and New Paradigm Software Corp. (incorporated by
reference to Exhibit 10.43 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.44 Letter agreement dated August 10, 1994 between the
Registrant and Management Technologies, Inc. concerning the
conversion of the MARS(TM)-product to Windows IBM
(incorporated by reference to Exhibit 10.44 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.45 $150,000 Secured Promissory Note dated July 21, 1994 issued
by the Registrant in favor of Robert S. Trump (incorporated
by reference to Exhibit 10.45 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September
30, 1994).
10.46 Letter agreement dated July 21, 1994 between the Registrant
and Robert S. Trump concerning $125,000 Exchangeable Note
dated January 7, 1993 (incorporated by reference to Exhibit
10.46 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.47 $280,000 Secured Promissory Note dated October 17, 1994
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.47 to the Company's
Report, on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.48 $150,000 Secured Promissory Note dated December 13, 1994
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.48 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
</TABLE>
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<TABLE>
<C> <S>
10.49 $149,791.67 Amended and Restated Exchangeable Note dated
January 1, 1995 issued by the Registrant in favor of Robert
S. Trump (incorporated by reference to Exhibit 10.49 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1994).
10.50 $156,708.37 Amended and Restated Secured Promissory Note
dated January 1, 1995 issued by the Registrant in favor of
Robert S. Trump (incorporated by reference to Exhibit 10.50
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.51 $250,000 Secured Promissory Note dated January 11, 1995
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.51 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.52 Letter agreement dated December 29, 1994 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.52 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.53 Letter agreement dated January 13, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.53 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.54 Letter agreement dated January 13, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.54 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.55 Letter of Intent dated October 17, 1994 by and among the
Registrant, Hillary Kelbick and Susan Michaelson concerning
Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.) (incorporated by reference to Exhibit
10.55 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.56 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Susan Michaelson and the Registrant
(incorporated by reference to Exhibit 10.56 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.57 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Hillary Kelbick and the Registrant
(incorporated by reference to Exhibit 10.57 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.58 Shareholders Agreement dated as of January 5, 1995 by and
among the Registrant, Aspen Capital Management Corp. (then
known as FPC Funds Corp.), Richard J. Loos and Sean P.
Brennan (incorporated by reference to Exhibit 10.58 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1994).
10.59 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Richard J. Loos (incorporated by
reference to Exhibit 10.59 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
</TABLE>
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<TABLE>
<C> <S>
10.60 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Sean P. Brennan (incorporated by
reference to Exhibit 10.60 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.61 $250,000 Secured Promissory Note dated April 6, 1995 issued
by the Registrant in favor of Robert S. Trump (incorporated
by reference to Exhibit 10.14 to Report of Form 10-QSB for
fiscal quarter ended March 31, 1995).
10.62 Letter agreement dated May 3, 1995 between the Registrant
and New Paradigm Software Corp. (incorporated by reference
to Exhibit 10.15 to Report on Form 10-QSB for fiscal quarter
ended March 31, 1995).
10.63 Agreement dated July 28, 1995 by and among the Company,
Scott Rhodes, Scott Rhodes d/b/a "Metamorphic Computing",
Scott Rhodes d/b/a "Metamorphic Systems", Scott Rhodes d/b/a
"MCC", Scott Rhodes d/b/a "Metamorphic Computing Corp." and
Metamorphic Computing Corp. (incorporated by reference to
Exhibit to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.64 Form of Warrant dated as of September 15, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.64 to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.65 Form of Warrant dated as of September 15, 1995 between the
Registrant and William F. Finley (incorporated by reference
to Exhibit 10.65 to Report on Form 10-KSB for fiscal year
ended September 30, 1995).
10.66 Letter dated March 29, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.66 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.67 Letter dated June 20, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.67 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.68 General Form of Subscription Agreement used in private
placements in 1996 (incorporated by reference to Exhibit
10.68 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.69 Form of Warrant Agreement for Warrants issued in September
1996 (incorporated by reference to Exhibit 10.69 to Report
on Form 10-KSB for fiscal year ended September 30, 1996).
10.70 Letter agreement dated November 12, 1996 with Robert S.
Trump regarding exercise of Restated Exchangeable Note dated
January 1, 1995 and conversion of debt into equity
(incorporated by reference to Exhibit 10.70 to Report on
Form 10-KSB for fiscal year ended September 30, 1996).
10.71 Executive Employment Agreement dated as of September 11,
1997 between the Registrant and William F. Finley
(incorporated by reference to Exhibit 10.71 to Report on
Form 10-KSB for fiscal year ended September 30, 1997).
10.72 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Susan
Michaelson (incorporated by reference to Exhibit 10.72 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
</TABLE>
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<TABLE>
<C> <S>
10.73 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Hillary
Kelbick (incorporated by reference to Exhibit 10.73 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
10.74 Form of Warrant dated as of December 29, 1997 issued to
Duncan Burke (incorporated by reference to Exhibit 10.74 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
10.75 Form of Warrant dated as of December 29, 1997 issued to
Richard Levy (incorporated by reference to Exhibit 10.75 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
10.76 Stock Purchase Agreement dated as of October 1, 1997 by and
between the Company and Robert S. Trump (incorporated by
reference to Exhibit 10.76 to Report on Form 10-KSB for
fiscal year ended September 30, 1997).
10.77 First Amendment to Executive Employment Agreement by and
among the Company, FPC Information Corp. and William F.
Finley dated as of October 1, 1998 (incorporated by
reference to Exhibit 10.77 to Report on Form 10-QSB for the
fiscal quarter ended September 30, 1998).
10.78 First Amendment to Managing Director's Agreement between MKP
and Susan Michaelson dated as of October 1, 1998
(incorporated by reference to Exhibit 10.78 to Report on
Form 10-QSB for the fiscal quarter ended September 30,
1998).
10.79 First Amendment to Managing Director's Agreement between MKP
and Hillary Kelbick dated as of October 1, 1998
(incorporated by reference to Exhibit 10.79 to Report on
Form 10-QSB for the fiscal quarter ended September 30,
1998).
10.80 Restated and Amended Shareholders Agreement dated as of
October 18, 1994 by and among MKP, Susan Michaelson, Hillary
Kelbick and the Company, effective as of October 1, 1998
(incorporated by reference to Exhibit 10.80 to Report on
Form 10-QSB for the fiscal quarter ended September 30,
1998).
10.81 Form of Warrant dated as of October 21, 1998 between the
Registrant and Richard Levy (incorporated by reference to
Exhibit 10.81 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.82 Form of Warrant dated as of October 21, 1998 between the
Registrant and Duncan G. Burke (incorporated by reference to
Exhibit 10.82 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.83 Form of Warrant dated as of October 21, 1998 between the
Registrant and Ottavio Serena (incorporated by reference to
Exhibit 10.83 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.84 Form of Warrant dated as of October 21, 1998 between the
Registrant and Gary S. Friedman (incorporated by reference
to Exhibit 10.84 to Report on Form 10-KSB for the fiscal
year ended December 31, 1998).
10.85 Form of Warrant dated as of October 21, 1998 between the
Registrant and Charlotte Tuck (incorporated by reference to
Exhibit 10.85 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.86 Form of Warrant Agreement dated as of October 21, 1998
covering warrants issued to Richard Levy, Duncan G. Burke,
Ottavio Serena, Gary S. Friedman and Charlotte Tuck
(incorporated by reference to Exhibit 10.86 to Report on
Form 10-KSB for the fiscal year ended December 31, 1998).
</TABLE>
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10.87 Restated and Amended Executive Employment Agreement between the Registrant and William F.
Finley (incorporated by reference to Exhibit 10.87 to Report on Form 10-QSB for the fiscal
quarter ended March 31, 1999).
*21.1 Subsidiaries of the Company.
*23.1 Consent of Goldstein and Morris, Independent Accountants.
*23.2 Consent of Baer Marks & Upham LLP (included in Exhibit 5.1).
*24.1 Power of Attorney (Included on the signature page of this Registration Statement).
</TABLE>
- -------------------------
* Filed herewith.
ITEM 28. UNDERTAKINGS.
(a) Financial Performance Corporation hereby undertakes the following:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any prospectus required by Section 10(a)(3) of the Securities Act, any
material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to such information in this Registration Statement.
(2) That, for the purpose of determining liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the termination of the Offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of FPC
pursuant to the foregoing provisions, or otherwise, FPC has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by FPC of expenses incurred or paid by a
director, officer or controlling person of FPC in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, FPC will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against the public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) That it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
prospectus filed by Financial Performance Corporation under Rule 424(b)(1),
or (4), or 497(h) under the Securities Act as part of this Registration
Statement as of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of the Common Stock at that time as the initial
bona fide offering of those securities.
II-12
<PAGE> 93
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of New
York, State of New York, on June 22, 1999.
FINANCIAL PERFORMANCE CORPORATION
By: /s/ WILLIAM F. FINLEY
------------------------------------
William F. Finley
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints William F. Finley, as his true
and lawful attorney-in-fact and agent, with full powers of substitution and
resubstitution, for him and in his name, place and stead, to sign in any and all
capacities any and all amendments (including posteffective amendments) to this
Registration Statement on Form SB-2 and to file the same, with all exhibits
thereto and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that such attorney-in-fact and
agent, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM F. FINLEY Chief Executive Officer and June 22, 1999
- --------------------------------------------------- President (Principal Executive
William F. Finley Officer and Principal Financial
Accounting Officer)
/s/ RICHARD LEVY Secretary and Director June 22, 1999
- ---------------------------------------------------
Richard Levy
/s/ DUNCAN G. BURKE Vice President and Director June 22, 1999
- ---------------------------------------------------
Duncan G. Burke
/s/ OTTAVIO SERENA Director June 22, 1999
- ---------------------------------------------------
Ottavio Serena
</TABLE>
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<PAGE> 94
INDEX TO EXHIBITS FILED WITH
FORM SB-2 REGISTRATION STATEMENT
<TABLE>
<C> <S>
3.1 Certificate of Incorporation dated August 9, 1984
(incorporated by reference to Exhibit 3.1 to Registration
Statement on Form S-8, No. 33-7778).
3.2 Amendment to Certificate of Incorporation dated August 29,
1984 (incorporated by reference to Exhibit (i) to
Registrant's Quarterly Report on Form 10-QSB for the period
ended March 31, 1988).
3.3 Amendment to Certificate of Incorporation dated July 1, 1986
(incorporated by reference to Exhibit 3.3 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1996).
3.4 Amendment to Certificate of Incorporation dated March 14,
1988 (incorporated by reference to Exhibit 3.4 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1996).
3.5 Amendment to Certificate of Incorporation dated September
13, 1996 (incorporated by reference to Exhibit 3.5 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1996).
3.6 By-laws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-8, No. 33-7778).
3.7 Amendment to By-Laws dated July 1995 (incorporated by
reference to Exhibit 3.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.1 Specimen Certificate of Common Stock (incorporated by
reference to Exhibit 4.1 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.2 Incentive Stock Option Plan (incorporated by reference to
Exhibit 4.7 to Registration Statement on Form S-1, No.
33-20886).
*5.1 Opinion of Baer Marks & Upham LLP re: validity of shares.
10.1 Agreement between Marine Midland Bank, N.A. and William F.
Finley (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-18, No. 33-7778).
10.2 Form of Indemnification Agreement between Registrant and its
Officers and Directors (incorporated by reference to Exhibit
10.35 to Registration Statement on Form S-1, No. 33-20886).
10.3 Promissory Note due on May 1, 1989 in the principal amount
of $50,000 executed by the Registrant in favor of Marvin M.
Reiss (incorporated by reference to Exhibit 10.41 to
Amendment No. 2 to Registration Statement on Form S-1, No.
33-20886).
10.4 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
William F. Finley (incorporated by reference to Exhibit 10.4
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.5 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.5
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
</TABLE>
<PAGE> 95
<TABLE>
<C> <S>
10.6 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Julius London (incorporated by
reference to Exhibit 10.6 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.7 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Marie Monell (incorporated by
reference to Exhibit 10.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.8 Promissory Note due on November 1, 1989 in the principal
amount of $12,500 executed by the Registrant in favor of
Paul M. Diamond (incorporated by reference to Exhibit 10.8
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.9 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of
Paul M. Diamond (incorporated by reference to Exhibit 10.9
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.10 Promissory Note due on November 1, 1989 in the principal
amount of $2,500 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.10 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.11 Promissory Note due on November 1, 1989 in the principal
amount of $30,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.11
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993),
10.12 Promissory Note due on November 1, 1989 in the principal
amount of $20,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.12
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.13 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.13
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.14 Promissory Note due on November 1, 1989 in the principal
amount of $15,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.14
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.15 Demand Promissory Note in the principal amount of $5,000
executed by the Registrant in favor of Marvin M. Reiss
(incorporated by reference to Exhibit 10.15 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.16 Form of Exchangeable Note due on December 31, 1995 in the
principal amount of $125,000 executed by the Registrant in
favor of Robert S. Trump (incorporated by reference to
Exhibit 10.16 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.17 Security Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.17 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
</TABLE>
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<TABLE>
<C> <S>
10.18 Letter Agreement dated January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.18 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.19 Warrant Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.19 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.20 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Henry T. Doherty (incorporated by reference
to Exhibit 10.20 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.21 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Nick Varsames (incorporated by reference to
Exhibit 10.21 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.22 Letter Agreement dated September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.22 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.23 Warrant Agreement dated as of September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.23 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.24 Form of Subscription Agreement dated September 22, 1993
between the Registrant and Henry T. Doherty (incorporated by
reference to Exhibit 10.24 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.25 Term Note in the principal amount of $112,397.27 executed by
the Registrant in favor of The Rebot Corporation
(incorporated by reference to Exhibit 10.25 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.26 Form of Warrant dated as of September 30, 1993 between the
Registrant and Rebot Corporation (incorporated by reference
to Exhibit 10.26 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.27 Term Note in the principal amount of $38,418.40 executed by
the Registrant in favor of William F. Finley (incorporated
by reference to Exhibit 10.27 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September
30, 1993).
10.28 Form of Warrant dated as of September 30, 1993 between the
Registrant and William F. Finley (incorporated by reference
to Exhibit 10.28 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.29 Letter Agreement dated September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.29 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
</TABLE>
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10.30 Form of Warrant dated as of September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.30 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.31 Form of Warrant dated as of November 11, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.31 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.32 Form of Warrant dated as of November 11, 1993 between the
Registrant and William F. Finley (incorporated by reference
to Exhibit 10.32 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.33 Form of Warrant dated as of November 11, 1993 between the
Registrant and Marvin M. Reiss (incorporated by reference to
Exhibit 10.33 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.34 Form of Warrant dated as of November 11, 1993 between the
Registrant and Alan M. Swiedler (incorporated by reference
to Exhibit 10.34 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.35 Form of Warrant dated as of November 11, 1993 between the
Registrant and Susan M. Michaelson (incorporated by
reference to Exhibit 10.35 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.36 Form of Warrant dated as of November 11, 1993 between the
Registrant and Leonard Gartner (incorporated by reference to
Exhibit 10.36 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.37 Form of Warrant dated as of November 11, 1993 between the
Registrant and Ted Prince (incorporated by reference to
Exhibit 10.37 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.38 Form of Subscription Agreement dated November 17, 1993
between the Registrant and Henry T. Doherty (incorporated by
reference to Exhibit 10.38 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.39 Form of Subscription Agreement dated February 28, 1994
between the Registrant and Robert S. Trump (incorporated by
reference to Exhibit 10.39 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 36,
1993).
10.40 Letter Agreement dated November 24, 1992 between the
Registrant and Management Technologies, Incorporated
(incorporated by reference to Exhibit 10.40 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.41 Agreement dated April 29, 1994 between the Registrant and
New Paradigm Software Corporation (incorporated by reference
to the Registrant's Report on Form 10-QSB for the Quarter
Ended March 31, 1994).
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10.42 Occupancy Agreement dated October 10, 1994 between the
Registrant and New Paradigm Software Corp. (incorporated by
reference to Exhibit 10.42 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.43 Letter agreement dated October 10, 1994 between the
Registrant and New Paradigm Software Corp. (incorporated by
reference to Exhibit 10.43 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.44 Letter agreement dated August 10, 1994 between the
Registrant and Management Technologies, Inc. concerning the
conversion of the MARS(TM)-product to Windows IBM
(incorporated by reference to Exhibit 10.44 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.45 $150,000 Secured Promissory Note dated July 21, 1994 issued
by the Registrant in favor of Robert S. Trump (incorporated
by reference to Exhibit 10.45 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September
30, 1994).
10.46 Letter agreement dated July 21, 1994 between the Registrant
and Robert S. Trump concerning $125,000 Exchangeable Note
dated January 7, 1993 (incorporated by reference to Exhibit
10.46 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.47 $280,000 Secured Promissory Note dated October 17, 1994
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.47 to the Company's
Report, on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.48 $150,000 Secured Promissory Note dated December 13, 1994
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.48 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.49 $149,791.67 Amended and Restated Exchangeable Note dated
January 1, 1995 issued by the Registrant in favor of Robert
S. Trump (incorporated by reference to Exhibit 10.49 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1994).
10.50 $156,708.37 Amended and Restated Secured Promissory Note
dated January 1, 1995 issued by the Registrant in favor of
Robert S. Trump (incorporated by reference to Exhibit 10.50
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.51 $250,000 Secured Promissory Note dated January 11, 1995
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.51 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.52 Letter agreement dated December 29, 1994 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.52 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.53 Letter agreement dated January 13, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.53 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
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10.54 Letter agreement dated January 13, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.54 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.55 Letter of Intent dated October 17, 1994 by and among the
Registrant, Hillary Kelbick and Susan Michaelson concerning
Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.) (incorporated by reference to Exhibit
10.55 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.56 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Susan Michaelson and the Registrant
(incorporated by reference to Exhibit 10.56 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.57 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Hillary Kelbick and the Registrant
(incorporated by reference to Exhibit 10.57 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.58 Shareholders Agreement dated as of January 5, 1995 by and
among the Registrant, Aspen Capital Management Corp. (then
known as FPC Funds Corp.), Richard J. Loos and Sean P.
Brennan (incorporated by reference to Exhibit 10.58 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1994).
10.59 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Richard J. Loos (incorporated by
reference to Exhibit 10.59 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.60 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Sean P. Brennan (incorporated by
reference to Exhibit 10.60 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.61 $250,000 Secured Promissory Note dated April 6, 1995 issued
by the Registrant in favor of Robert S. Trump (incorporated
by reference to Exhibit 10.14 to Report of Form 10-QSB for
fiscal quarter ended March 31, 1995).
10.62 Letter agreement dated May 3, 1995 between the Registrant
and New Paradigm Software Corp. (incorporated by reference
to Exhibit 10.15 to Report on Form 10-QSB for fiscal quarter
ended March 31, 1995).
10.63 Agreement dated July 28, 1995 by and among the Company,
Scott Rhodes, Scott Rhodes d/b/a "Metamorphic Computing",
Scott Rhodes d/b/a "Metamorphic Systems", Scott Rhodes d/b/a
"MCC", Scott Rhodes d/b/a "Metamorphic Computing Corp." and
Metamorphic Computing Corp. (incorporated by reference to
Exhibit to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.64 Form of Warrant dated as of September 15, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.64 to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
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10.65 Form of Warrant dated as of September 15, 1995 between the
Registrant and William F. Finley (incorporated by reference
to Exhibit 10.65 to Report on Form 10-KSB for fiscal year
ended September 30, 1995).
10.66 Letter dated March 29, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.66 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.67 Letter dated June 20, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.67 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.68 General Form of Subscription Agreement used in private
placements in 1996 (incorporated by reference to Exhibit
10.68 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.69 Form of Warrant Agreement for Warrants issued in September
1996 (incorporated by reference to Exhibit 10.69 to Report
on Form 10-KSB for fiscal year ended September 30, 1996).
10.70 Letter agreement dated November 12, 1996 with Robert S.
Trump regarding exercise of Restated Exchangeable Note dated
January 1, 1995 and conversion of debt into equity
(incorporated by reference to Exhibit 10.70 to Report on
Form 10-KSB for fiscal year ended September 30, 1996).
10.71 Executive Employment Agreement dated as of September 11,
1997 between the Registrant and William F. Finley
(incorporated by reference to Exhibit 10.71 to Report on
Form 10-KSB for fiscal year ended September 30, 1997).
10.72 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Susan
Michaelson (incorporated by reference to Exhibit 10.72 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
10.73 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Hillary
Kelbick (incorporated by reference to Exhibit 10.73 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
10.74 Form of Warrant dated as of December 29, 1997 issued to
Duncan Burke (incorporated by reference to Exhibit 10.74 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
10.75 Form of Warrant dated as of December 29, 1997 issued to
Richard Levy (incorporated by reference to Exhibit 10.75 to
Report on Form 10-KSB for fiscal year ended September 30,
1997).
10.76 Stock Purchase Agreement dated as of October 1, 1997 by and
between the Company and Robert S. Trump (incorporated by
reference to Exhibit 10.76 to Report on Form 10-KSB for
fiscal year ended September 30, 1997).
10.77 First Amendment to Executive Employment Agreement by and
among the Company, FPC Information Corp. and William F.
Finley dated as of October 1, 1998 (incorporated by
reference to Exhibit 10.77 to Report on Form 10-QSB for the
fiscal quarter ended September 30, 1998).
10.78 First Amendment to Managing Director's Agreement between MKP
and Susan Michaelson dated as of October 1, 1998
(incorporated by reference to Exhibit 10.78 to Report on
Form 10-QSB for the fiscal quarter ended September 30,
1998).
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10.79 First Amendment to Managing Director's Agreement between MKP and Hillary Kelbick dated as of
October 1, 1998 (incorporated by reference to Exhibit 10.79 to Report on Form 10-QSB for the
fiscal quarter ended September 30, 1998).
10.80 Restated and Amended Shareholders Agreement dated as of October 18, 1994 by and among MKP,
Susan Michaelson, Hillary Kelbick and the Company, effective as of October 1, 1998
(incorporated by reference to Exhibit 10.80 to Report on Form 10-QSB for the fiscal quarter
ended September 30, 1998).
10.81 Form of Warrant dated as of October 21, 1998 between the Registrant and Richard Levy
(incorporated by reference to Exhibit 10.81 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.82 Form of Warrant dated as of October 21, 1998 between the Registrant and Duncan G. Burke
(incorporated by reference to Exhibit 10.82 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.83 Form of Warrant dated as of October 21, 1998 between the Registrant and Ottavio Serena
(incorporated by reference to Exhibit 10.83 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.84 Form of Warrant dated as of October 21, 1998 between the Registrant and Gary S. Friedman
(incorporated by reference to Exhibit 10.84 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.85 Form of Warrant dated as of October 21, 1998 between the Registrant and Charlotte Tuck
(incorporated by reference to Exhibit 10.85 to Report on Form 10-KSB for the fiscal year
ended December 31, 1998).
10.86 Form of Warrant Agreement dated as of October 21, 1998 covering warrants issued to Richard
Levy, Duncan G. Burke, Ottavio Serena, Gary S. Friedman and Charlotte Tuck (incorporated by
reference to Exhibit 10.86 to Report on Form 10-KSB for the fiscal year ended December 31,
1998).
10.87 Restated and Amended Executive Employment Agreement between the Registrant and William F.
Finley (incorporated by reference to Exhibit 10.87 to Report on Form 10-QSB for the fiscal
quarter ended March 31, 1999).
*21.1 Subsidiaries of the Company.
*23.1 Consent of Goldstein and Morris, Independent Accountants.
*23.2 Consent of Baer Marks & Upham LLP (included in Exhibit 5.1).
*24.1 Power of Attorney (Included on the signature page of this Registration Statement).
</TABLE>
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* Filed herewith.
<PAGE> 1
EXHIBIT 5.1
[BAER MARKS & UPHAM LLP LETTERHEAD]
June 28, 1999
Financial Performance Corporation
335 Madison Avenue
New York, New York 10017
Re: Registration Statement on Form SB-2
Gentlemen:
We have acted as your special counsel in connection with the offering by
certain selling shareholders of 3,006,000 shares of common stock, par value $.01
per share (the "Shares"), of Financial Performance Corporation (the "Company"),
1,550,000 of which are issuable upon the exercise of outstanding warrants (the
"Warrants"). The Shares are being offered pursuant to the Company's registration
statement on Form SB-2 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") on June 28, 1999.
In connection with the foregoing, we have examined originals or copies,
satisfactory to us, of all such corporate records and of all such agreements,
certificates and other documents as we have deemed relevant and necessary as a
basis for the opinion hereafter expressed. In such examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals and the conformity with the original documents of all
documents submitted to us as copies. As to any facts material to such opinion,
we have relied solely on certificates of public officials and representations of
officers or other representatives of the Company.
Based upon the foregoing, and subject to the qualifications and limitations
contained herein, we are of the opinion that the Shares are, or upon issuance,
subject to the payment of the exercise price in accordance with the terms of the
respective Warrants, will be, duly authorized, validly issued and outstanding,
and fully paid and non-assessable.
We are members of the Bar of the State of New York and are not licensed or
admitted to practice law in any other jurisdiction. Accordingly, we express no
opinion with respect to the laws of any jurisdiction other than those of the
United States of America and the State of New York.
Our opinion and the matters expressed herein are as of the date hereof and
we assume no obligation to advise you of any change in any matter set forth
herein after the date hereof. This opinion may not be relied upon by any other
person for any purpose without our prior written consent.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming part of the Registration Statement. In giving
such consent, we do not thereby concede that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended (the "Act"), or the rules and regulations thereunder, or that we are
"experts" within the meaning of the Act or such rules and regulations.
Very truly yours,
/s/ BAER MARKS & UPHAM LLP
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF FPC
<TABLE>
<CAPTION>
JURISDICTION OF INCORPORATION
NAME OR FORMATION
- ---- -----------------------------
<S> <C>
Michaelson Kelbick Partners Inc........................ New York
FPC Information Corp................................... New York
Aspen Capital Management, LLC.......................... New York
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Financial Performance Corporation:
We consent to the use of our report dated February 23, 1999, included
herein and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ GOLDSTEIN AND MORRIS
New York, New York
June 28, 1999
