Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF EARLIEST REPORTED EVENT - APRIL 5, 1999
FAB GLOBAL, INC.
(Exact name of Registrant as specified in its charter)
Georgia 0-15900 #59-3461241
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification Number)
50 Broadway, 14th floor
New York, New York 10004
(Address of Registrant's principal executive offices)
(212) 785-5000
(Registrant's telephone number, including area code)
(212) 785-3232
(Registrant's facsimile number, including area code)
1612 OSCEOLA
CLEARWATER, FLORIDA
(Former name or former address, if changed since last report)
<PAGE>
INTRODUCTORY NOTE
Unless otherwise indicated, all information in this Current Report on Form
8-K (the "Report") has been adjusted to reflect a 1-for-18 reverse stock split
effected April 2, 1999 and a business combination that closed on April 5, 1999.
References to "Marci" refer to the company before the business combination and
references to "FAB Global," the "Company," "we," "us" and "our" refer to FAB
Global, Inc. and its subsidiaries after the combination.
Our quarterly and annual operating results will be affected by a wide
variety of factors that could materially and adversely affect our actual
results. These factors include, but are not limited to:
(1) Changes in general economic and market conditions; (2) Fluctuations in the
U.S. and foreign securities markets; (3) Changes in interest rates and the
demand for investment services; (4) Changes in the nature of our business
resulting from the introduction of
new products and services;
(5) Competition from other firms who offer competitive services or lower
commission rates;
(6) General declines in the market for venture capital and emerging company
investments;
(7) Changes in regulatory requirements; and (8) Risks related to the year 2000.
As a result of these factors and others, our future operating results may
fluctuate on a quarterly or annual basis. Such fluctuations could materially and
adversely affect our business, financial condition, operating results, and stock
price.
This report and other documents that we file with the Securities and
Exchange Commission (the "SEC") contain forward-looking statements about our
business. These forward-looking statements are subject to many risks and
uncertainties. Therefore, actual results may differ significantly from the
forward-looking statements. Except as specified in SEC regulations, we have no
duty to release information that updates the forward-looking statements
contained in this Report. An investment in our stock involves various risks,
including those mentioned above and described elsewhere in this Report.
Additional risks will be disclosed from time to time in our future SEC filings.
ITEM 1.CHANGE IN CONTROL OF REGISTRANT
General. FAB Global Inc. is a Georgia corporation formerly known as Marci
International Imports, Inc. Marci conducted an initial public offering in
February 1987 pursuant to a Form S-18 Registration Statement under the
Securities Act of 1933 (the "Securities Act"). In connection with an application
to list its Common Stock on the NASDAQ system, Marci also registered its Common
Stock pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act"). As a result of a 1989 bankruptcy proceeding, Marci became an
inactive shell that had with no material assets, liabilities or business
activities. Marci remained inactive until June 1998 when its stockholders
approved a plan of reorganization proposed by Capston Network Company of
Clearwater, Florida ("Capston"). This plan of reorganization authorized Capston
to seek a suitable business combination opportunity for Marci, authorized a
series of changes in Marci's corporate structure, and provided for stock-based
compensation to Capston and others for services rendered and to be rendered in
connection with the implementation of the plan of reorganization. Capston and
its president Sally A. Fonner, who also serves as our sole director, began
actively seeking a business combination opportunity for Marci in the summer of
1998. After investigating a number of potential opportunities for Marci, Capston
negotiated a business combination transaction (the "Transaction") with FAB
Capital Corporation, an Idaho corporation ("FAB Capital") and Western Union
Leasing Ltd., a trust organized under the laws of the United Kingdom
("Western"). Pursuant to the terms of a written reorganization agreement dated
April 5, 1999, FAB Capital agreed to transfer all of its interest in FAB
Securities of America, Inc. ("FAB Securities"), FAB Finanz- und Anlagen-
Beratung und Vermittlung GmbH ("FAB Germany"), FAB Corporate Funding, Inc. ("FAB
Corporate Funding"), FAB Capital Markets, Inc. ("FAB Capital Markets"), FAB
Futures, Inc. ("FAB Futures"), and Momentum Capital Funding Corp. ("Momentum"),
together with 775,180 shares of King's Road Entertainment, Inc. (Nasdaq: KREN),
to Marci in exchange for 10,000,000 shares of common stock. Concurrently,
Western agreed to transfer 266,418 shares of King's Road Entertainment and
500,000 shares of Metropolitan Worldwide, Inc. (OTC BB: MWWM) to Marci in
exchange for 1,400,000 shares of Common Stock. In this Report, the properties
transferred to Marci by FAB Capital and Western are sometimes referred to
collectively as the "Transaction Properties."
The Transaction. Marci acquired the Transaction Properties in a business
combination that was structured as a reverse takeover, or "RTO." In connection
with the Transaction, FAB Capital and Western Union agreed to exchange the
Transaction Properties for newly issued stock of Marci. Before the Transaction,
Marci had no material assets, liabilities or business operations. No
relationship existed between Marci and FAB Capital or Western before the
Transaction. No funds of Marci were spent to acquire the Transaction Properties.
As consideration for the Transaction Properties, Marci issued shares of Common
Stock to FAB Capital and Western. The number of shares issued by Marci in the
Transaction was determined by arms-length negotiation between the parties.
Until April 2, 1999, Marci had 5,181,085 shares of common stock ("Old
Common") issued and outstanding. In preparation for the Transaction, Marci
changed its name to FAB Global, Inc. It also effected a "reverse split" where
the Old Common was consolidated in the ratio of one post-consolidation share
("Common Stock") for every eighteen (18) shares of Old Common, provided, that no
stockholder's ownership was reduced to fewer than 100 shares of Common Stock if
that stockholder owned at least 100 shares of Old Common on April 2, 1999. In
connection with the Transaction, Marci agreed to acquire all of FAB Capital's
interest in the Transaction Properties in exchange for 10,000,000 shares of
Common Stock and all of Western's interest in the Transaction Properties in
exchange for 1,400,000 shares of Common Stock. In addition, Marci agreed to
issue 1,020,000 shares of Common Stock to certain consultants and advisors
(including 300,000 shares of Common Stock issued to persons designated by
Capston, 150,000 shares of Common Stock issued to legal counsel for the parties
and 570,000 shares of Common Stock issued to certain financial consultants). The
Transaction closed on April 5, 1999. Taking all of the stock issuances into
account, there are approximately 12,720,000 shares of Common Stock issued and
outstanding on the date of this Report. The shares of Common Stock issued to FAB
Capital and Western constitute approximately 90% of our outstanding Common
Stock.
Principal Stockholders. The following table sets forth the number of shares
of Common Stock owned, as of the date of this Report, by (i) each executive
officer and director, (ii) all executive officers and directors as a group, and
(iii) each other person who owns of record or own beneficially, more than five
percent (5%) of our outstanding Common Stock.
Name and Address of Beneficial Owner Shares Percent
Owned of Class
FAB Capital Corp. 10,000,000 78.6%
50 Broadway, 14th floor
New York, New York 10004
Western Union Leasing Corp. (1) 1,400,000 11.0%
10 Greycoat Place
1 Premier House
London SW1 England.
Christophe Martin, (1) 1,400,000 11.0%
Rothhaus Street 1
67348 Bad Hamburg Germany
Phillip G. Cook (1)(2)(3)(4) 12,000,000 90.1%
David W. Dube (2)(3) 10,000,000 89.6%
Randy M. Strausberg (2)(3) 10,000,000 89.6%
Executive Officers and Directors as a Group (4 persons)12,000,000 90.1%
(1) Western is a trust organized under the laws of the United Kingdom.
Western's sole trustee is Christophe Martin, who disclaims any beneficial
interest in the Common Stock held by Western. Phillip G. Cook is a
reversionary beneficiary of the trust and may be deemed to be the
beneficial owner of the shares of Common Stock held by Western.
(2) c/o FAB Global, Inc., 50 Broadway, 14th floor, New York, New York 10004. (3)
Messrs. Cook, Dube and Strausberg are all directors and executive
officers of FAB Capital and may be deemed to be beneficial owners of the
shares of Common Stock held by FAB Capital.
(4) Includes presently exercisable options to purchase 600,000 shares of Common
Stock at a price of $1 per share that were granted in consideration of Mr.
Cook's agreement to reduce his cash salary to $100,000 per year until
January 1, 2000.
New Management Team. In connection with the closing of the Transaction,
Sally A. Fonner appointed six persons designated by FAB Capital and Western to
serve as executive officers of FAB Global. Our new executive officers, and the
positions held by each such executive officer are set forth below. It is
anticipated that our current executive officers will continue to serve in such
capacities for the foreseeable future.
Name Age Position
Phillip G. Cook........ 45 Chief Executive Officer
Randy M. Strausberg.... 50 Chief Operating Officer
David W. Dube.......... 43 Chief Financial Officer,
Treasurer
Steven Strauss......... 47 Controller
David Parsons.......... 46 General Counsel
Judith L. Kaufman...... 58 Secretary
Under the terms of the Transaction, FAB Capital and Western have the right
to replace the current board of directors with their own nominees. FAB Capital
and Western have nominated Phillip G. Cook, David W. Dube and Randy M.
Strausberg to serve as directors of FAB Global (the "New Directors"). The
proposed changes in our board of directors will not become effective and the New
Directors will not assume office until 10 days after we file an Information
Statement and Notice of Change in the Majority of the Board of Directors with
the SEC and send copies of the Notice to our stockholders. At that time, Sally
A. Fonner will appoint the New Directors and then resign as a director.
Thereafter, the New Directors will manage our business.
Phillip G. Cook was appointed Chief Executive Officer of our Company on
April 5, 1999. He has also been nominated to serve as a New Director. Mr.
Cook is an Australian national who has served as the president and chief
executive officer of FAB Capital since March 1998 and as a self-employed
investment banking consultant since 1986. Mr. Cook serves as chairman of the
board of directors of Essential Resources, Inc. (OTC BB: ESRS) since December
1995 and as chairman of the board of directors of King's Road Entertainment,
Inc. (Nasdaq: KREN) since November of 1998. Mr. Cook is also the licensed
principal of FAB Germany.
Randy M. Strausberg was appointed Chief Operating Officer of our Company on
April 5, 1999. He has also been nominated to serve as a New Director. Mr.
Strausberg has served as the chief operating officer of FAB Capital since
September 1998. Before joining FAB Capital, Mr. Strausberg served for one year
as the director of fixed income trading in the New York Office of Credit
Lyonnais, one year as a senior vice president, proprietary trading in the New
York office of HSBC Securities, one year as a senior vie president, manager of
fixed income in the New York office of Commerzbank Capital Markets and one year
as a vice president, treasury department in the New York office of Bank Austria.
Previously, Mr. Strausberg accumulated 14 years of experience as an employee
and/or principal of several securities firms. Mr. Strausberg is a 1970 graduate
of Brooklyn College, City University of New York (BS in Economics) and a 1974
graduate of New York University Graduate School of Business (MBA). Mr.
Strausberg holds various securities and commodities licenses including Series
3,4,7,24, 27, 53, 55 and 63.
David W. Dube was appointed Chief Financial Officer of our Company on
April 5, 1999. He has also been nominated to serve as a New Director. Mr.
Dube has served as the chief financial officer of FAB Securities and its
affiliates since September 1997. Before joining FAB Securities, Mr. Dube
served for one year as the president and chief executive officer of Optimax
Industries, Inc., a publicly-held company with interests in the
horticultural, decorative giftware and truck parts accessories industries.
Previously, Mr. Dube worked for six years as the principal of Dube & Company,
a financial consulting firm. Mr. Dube currently serves as a director of
King's Road Entertainment (Nasdaq: KREN), New World Wine Group, Ltd. (OTC BB:
CORK), Safe Science, Inc. (Nasdaq: SAFS) and Helmstar Group, Inc. (AMEX:
HLM). He also serves as a director of Meyers Capital Management LLC, a
privately-held registered investment advisory firm that manages the Meyers
Pride Value Fund ("MYPVX"). Mr. Dube is a 1977 graduate of Suffolk University
(BS in Business Administration), a 1980 graduate of Bentley College (MS in
Accountancy) and a 1995 graduate of Suffolk University (MS in Taxation). Mr.
Bentley is licensed to practice as a Certified Public Accountant and holds
various general and principal securities licenses including Series 7, 24 and
63.
Steven Strauss was appointed Controller of our Company on April 5, 1999.
Before joining the Company, Mr. Strauss served for two years as an accounting
and internal control consultant for Majek Fire Protection, Inc. and for one year
as chief financial officer of Citizen's Mortgage Service Co., a subsidiary of
the publicly-held Helmstar Group, Inc. Previously, Mr. Strauss served for four
years as the treasurer and chief financial officer for Hart Mortgage Corp. Mr.
Strauss is a 1973 graduate of Pennsylvania State University (BA in Political
Science) and a 1975 graduate of Temple University (MBA in Accounting). Mr.
Strauss has been licensed to practice as a Certified Public Accountant since
1977 and is a member of the American and Pennsylvania Institutes of Certified of
Certified Public Accountants.
David W. Parsons was appointed General Counsel of our Company on April 5,
1999. Mr. Parsons has served as the general counsel of FAB Securities since July
of 1997. Before joining FAB Securities, Mr. Parsons served for three years as
general counsel for Marsh Block & Co. and he previously served as special
counsel for financial affairs at Antioch College. Mr. Parsons has twenty years
experience in the field of securities law including four years with the Division
of Enforcement of the Securities and Exchange Commission and three years with
the Antifraud Department of the National Association of Securities Dealers. Mr.
Parsons is a 1975 graduate of New College, Sarasota, Florida (BA in Political
Science) and a 1979 graduate of the Georgetown University Law Center (JD Cum
Laude).
Judith L. Kaufman was appointed Secretary of our Company on April 5,
1999. Ms. Kaufman has served as the secretary/treasurer of FAB Capital since
May 1998. Before joining FAB Capital, Ms. Kaufman served for one year as the
secretary/treasurer and human resources administrator for Manhattan Merchant
Funding Corp. Previously, Ms. Kaufman worked for 13 years as a licensed real
estate broker.
In connection with the plan of reorganization approved by Marci's
stockholders, certain persons designated by Capston received 300,000 shares of
Common Stock for administrative and management services. Ms. Fonner received
96,400 of shares of Common Stock for her personal account. In addition, 150,000
shares of Common Stock were issued to legal counsel for Capston for services
rendered since 1996. A total of 570,000 shares of Common Stock were issued to a
single finder who assisted in the identification of FAB Capital and Western as
potential business combination candidates, the introduction of FAB Capital and
Western to Marci, the collection and analysis of due diligence information on
FAB Capital and Western, and other financial consulting and advisory services.
All shares of Common Stock issued to designees of Capston, legal counsel for
Capston and the finder were registered prior to issuance on a Form S-8
Registration Statement under the Securities Act of 1933. We believe that each of
these transactions were on terms that were no less favorable than we could have
obtained in transactions with unrelated third parties.
ITEM 2....ACQUISITION OR DISPOSITION OF ASSETS
Summary Description of Transaction Properties
Marci acquired the Transaction Properties in exchange for 11,400,000 shares
of Common Stock. The following provide a summary description of the Transaction
Properties:
Transaction Properties Contributed by FAB Capital Corp.
in exchange for 10,000,000 shares of Common Stock
FAB Securities of America, Inc. 100% Equity Ownership
FAB Finanz- und Anlagen- Beratung und Vermittlung GmbH100% Equity Ownership
Momentum Capital Funding Corp. 100% Equity Ownership
FAB Capital Markets, Inc. 100% Equity Ownership
FAB Corporate Funding, Inc. 100% Equity Ownership
FAB Futures, Inc. 100% Equity Ownership
King's Road Entertainment (Nasdaq: KREN) 775,180 common shares
Transaction Properties Contributed by Western Union Leasing Ltd.
in exchange for 1,400,000 shares of Common Stock
King's Road Entertainment (Nasdaq: KREN) 266,418 common shares
Metropolitan Worldwide (OTC BB: MWWM) 500,000 common shares
FAB Securities is a full service NASD member broker-dealer with offices in
New York. FAB Securities has approximately 50 employees including 20
administrative and compliance staff members and approximately 30 registered
representatives.
FAB Germany is a German Broker/Dealer firm with offices in Frankfurt,
Dresden, Dusseldorf, Ausberg and Schoenberg. FAB Germany has approximately 270
employees including 20 administrative and compliance staff members and
approximately 250 retail brokers.
Momentum develops and implements training and support for all trading
platforms and provides Internet access to the clients of FAB Securities and FAB
Germany. In addition it is charged with developing our proposed on-line
day-trading system. Momentum has a full time staff of three and contracts with
third parties for additional staff when required.
FAB Capital Markets is a newly organized equity and fixed income research
organization that develops and distributes our market and corporate research
publications. In addition, this division functions as a conduit of information
and ideas to the institutional marketplace.
FAB Corporate Funding is a newly organized merchant banking concern that
will undertake the development of financial products (i.e. IPO's; Private
Placements; Secondary Offerings; etc.) that may be sold through FAB Securities
and FAB Germany. FAB Corporate Funding has offices in New York and San Diego and
currently employs a staff of eight persons.
FAB Futures is a newly organized derivative broker that is presently
inactive while awaiting the requisite licenses and establishing necessary
clearing arrangements.
Kings Road Entertainment develops, finances and produces motion pictures
for subsequent distribution in theaters, on pay-per view, network and
syndicated television, on home video, and in other ancillary media. The
shares of King's Road will be held for investment.
Metropolitan Worldwide is engaged in the business of providing management
services to fashion models, recording artists and commercial actors throughout
Germany and the rest of the world. The shares of Metropolitan Worldwide will be
held for investment.
Introduction to Our Business
FAB Global is a holding company that conducts its business activities
through six wholly-owned subsidiaries. FAB Securities and FAB Germany have been
actively involved in the securities brokerage business for several years. In the
fall of 1998, we developed a new business plan to meet the demanding
requirements of sophisticated individual and institutional investors worldwide.
Our principal goal is to establish FAB Global as a leader in the use of
information and Internet technology to facilitate capital formation and
investment transactions. Under the new business plan, our current and planned
activities have been organized into six principal operating units:
o Electronic Trading--Momentum has been organized to develop, operate and
manage a variety of proposed electronic stock trading platforms. The
first of the proposed electronic trading platforms, FABTRADE.com, will
compete in the rapidly evolving on-line discount brokerage market and
focus primarily on the needs of individual retail investors. Our second
proposed electronic trading platform, "FABSTOCKPRO.com", will provide
more robust information and order execution capabilities, and focus
primarily on the needs of professional "day traders." Initially,
FABSTOCKPRO will only be available to persons who choose to operate from
one of our 5 proposed day trading centers. Once FABSTOCKPRO is
thoroughly tested and refined, we intend to provide information and
order execution services to professional day-traders worldwide over the
Internet. We are also working to develop an information and order
execution system that will give institutional investors the power to
manage their own trading activities.
All of our electronic trading platforms are being developed in English,
German, French and Spanish and we intend to add Asian language capabilities
in the near future. Our ultimate goal is to create a series of user
specific on-line trading platforms that will give individual and
institutional investors real time access to the principal global financial
markets 24 hours a day. If we are successful in these efforts, we believe
we will be the only on-line brokerage firm with the ability to give our
customers immediate real time access to a global investment portfolio.
Given the competitive nature of online trading and the rapid advances in
Internet related technology, Momentum has acquired ownership of a number of
Internet domain names related to various classes of investments that will
be activated in the near future and used primarily as "harvesting tools"
that will direct potential clients to our principal trading sites. These
domain names include.
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Mutual Funds:
Mutualfundinvestments.net
Noloadmutualfunds.net
Loadmutualfunds.com
Fixed Income Securities:
USTreasuryzerocoupons.com
USTreasurybond.com
Mortgagebackedbonds.com
InterestIncome.com
InterestIncome.net
USTreasurystrips.com
Municipalbondmarket.com
Eurocurrencybonds.com
Equities and Options:
OTCmarketmaker.com
OTCequitytrading.com
Retirement Planning:
401kpensionplan.com
Lifeinsuranceannuity.com
Derivatives:
Oilderivatives.com
Crudeoilproducts.com
Eurocurrencytrading.com
<PAGE>
o Securities Brokerage--FAB Securities and FAB Germany provide traditional
brokerage and related services to retail and institutional investors in
the U.S. and Germany. These subsidiaries are members of NASD and both
the American and Frankfort Stock Exchanges and offer a wide range of
investment services at commission rates that are competitive with
similarly situated brokerage firms. We believe that the financial
unification of Europe will create significant opportunities for U.S.
style retail securities brokerage firms. Since April of 1998, FAB
Germany has grown from a staff of 2 to over 250 retail brokers and we
intend to establish additional European affiliates in the United
Kingdom, France and Spain within the next 12 months.
o Equity, Fixed Income and Market Research--FAB Capital Markets will
provide equity research and analysis that focuses on emerging companies
and growth industries in the U.S., Germany and other world markets. As a
boutique equity research and analysis organization, FAB Capital Markets
will strive to become an industry leader in the identification and
analysis of companies and industries that can be expected to achieve
above average rates of growth and equity appreciation. Additionally, FAB
Capital Markets will provide general research on macroeconomic factors
affecting interest rates and trade ideas to institutional investors.
o Investment Banking--FAB Corporate Funding will manage our worldwide
investment banking and merchant banking activities. FAB Corporate
Funding will be active in the development of a full range of investment
products focusing on emerging companies and growth industries including
Internet and computer technology, biotechnology and life sciences, media
and entertainment, and energy. These investment products, which will
include venture capital investments, private placements, initial public
offerings, secondary public offerings and managed investment funds, will
be offered for sale through FAB Securities, FAB Germany and our proposed
European subsidiaries, and may be offered through other foreign and
domestic brokerage firms.
o Derivative Brokerage--FAB Futures has been organized to provide full
service and on-line discount commodities brokerage services to
sophisticated individual and institutional investors world-wide.
o Principal Trading and Investments--The Registrant is actively involved in
merchant banking and principal trading for its own account. These
activities include venture capital investments in early stage companies,
merchant banking transactions, private placements, mergers and acquisitions
consulting, day trading on the principal world securities markets and
medium term investments in emerging companies and growth industries.
Through our six operating units, FAB Global intends to provide a full range
of office-based and on-line investment services to sophisticated individual and
institutional investors who require direct access to the world equity markets.
By focusing on emerging companies, growth industries and the global market, FAB
Global will endeavor to differentiate itself from its competitors and establish
a boutique clientele of high net worth individual and institutional investors
who require a wide variety of analytical and brokerage services, and demand
hands-on trading and order execution capabilities that are not generally
available through similar sized competitive firms in the securities brokerage,
commodities brokerage, merchant banking and investment banking industries
Certain Important Risk Factors.
We have a limited operating history and we may incur losses as our business
expands. We have a limited operating history upon which to evaluate the merits
of investing in our common stock. Our prospects are subject to the risks,
expenses and uncertainties encountered by companies in the new and rapidly
evolving markets for Internet-based investment products and services. These
risks include the failure to continue to develop and extend our on-line service
capabilities, the rejection of our services by Internet users or vendors, our
inability to maintain and increase traffic on our proprietary web-sites,
increased competition and the ability to attract, retain and motivate qualified
personnel. We may not be successful in addressing such risks, and our business
and financial condition could suffer. Our prospects are also subject to the
risks encountered by companies in the investment banking business.
Our limited operating history and the uncertain nature of the markets we
address make it difficult or impossible to predict future results of operations.
Therefore, our recent revenue growth should not be an indicator of the rate of
revenue growth, if any, we can expect in the future.
Our business may be adversely affected if our electronic trading platforms
do not become operational. The FABTRADE.com and FABSTOCKPRO.com electronic
trading platforms are not yet operational. The principal reason for this has
been that Momentum is still engaged in developing the technical capacity and
interfaces necessary to enable them to effectively operate and manage the
proposed trading platforms. There can be no assurance that Momentum will
successfully complete development of the FABTRADE.com and FABSTOCKPRO.com
electronic trading platforms, and the interfaces necessary to operate and manage
the proposed trading platforms.
We may incur losses and liabilities in the course of business that could
prove costly to defend or resolve. The brokerage and investment banking business
involves significant economic risks. Brokerage and investment banking firms face
significant legal risks in the U.S., and the volume and amount of damages
claimed in lawsuits against financial intermediaries are increasing. These risks
include potential liability under federal and state securities and other laws
for allegedly false or misleading statements made in connection with securities
offerings and other transactions. We also face the possibility that customers or
others will claim that we improperly failed to apprise them of applicable risks
or that they were not authorized or permitted under applicable corporate or
regulatory requirements to enter into transactions with us and that their
obligations to us are not enforceable. These risks often may be difficult to
assess or quantify and their existence and magnitude often remain unknown for
substantial periods of time. We may incur significant legal expenses in
defending against litigation. We expect to be active in the underwriting of
initial public offerings and follow-on offerings of the securities of emerging
and mid-size growth companies, which often involve a high degree of risk and
volatility. Substantial legal liability or a regulatory action against us could
have a material adverse financial effect on us.
Our planned electronic trading platforms are subject to risks associated
with development, enhancement and proper functioning, and may never meet their
performance expectations. We intend to invest substantial amounts of time and
capital in the development and introduction of our FABTRADE.com and FABPRO.com
electronic trading platforms. This investment is subject to the following risks:
o Our software is still in the development phase, and any delays in
development or problems discovered in the testing of the software could
result in significant delays. We cannot assure you that we will complete
development of a product that provides secure and dependable technology
and meets performance expectations. In addition, our technology will
require continual enhancements if we are to maintain a competitive edge.
Accordingly, we will need to make substantial ongoing investments in
software design and development.
o We cannot assure you our proposed electronic trading platforms will attract
a critical mass of trading activity to ensure a commercially viable
electronic trading operation.
o Our retail brokerage and investment banking groups currently focus on
raising capital from traditional institutional and venture capital
sources and strategic investors. In the future, we plan to offer a
variety of investment products to high net worth individuals and
institutional investors. This may not be feasible. In particular, our
proposed affiliates in the United Kingdom, France and Spain have not yet
been established and we cannot assure you as to how much money we can
raise or how quickly we can raise those funds. Once our proposed
affiliates are established, they may not be successful. Failure of our
proposed European affiliates may impair our ability to establish
additional offices in the future.
o We may not be able to expand our business internationally, and if we do, we
face risks relating to international operations and regulations.
o A component of our strategy is our planned increase in efforts to
attract more international customers and business partners. We are
currently exploring business opportunities in United Kingdom, France and
Spain, and intend to explore additional opportunities in Asia and
Europe. We cannot assure you that we will be able to successfully market
our services and products in international markets. In addition, in
doing business in international markets, we face risks, such as
unexpected changes in regulatory requirements, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations,
political instability, fluctuations in currency exchange rates, reduced
protection for intellectual property rights in some countries, seasonal
reductions in business activity during the summer months in Europe and
certain other parts of the world and potentially adverse tax
consequences, any of which could adversely impact our international
operations.
We may not be able to keep up in a cost-effective way with rapid
technological change. The financial services industry is characterized by rapid
technological change, changes in customer requirements, frequent new service and
product introductions and enhancements and evolving industry standards. Our
future success will depend, in part, on our ability to develop technologies and
enhance our existing services and products. We must also develop new services
and products that address the increasingly sophisticated and varied needs of our
customers and prospective customers. We must respond to technological advances
and evolving industry standards and practices on a timely and cost-effective
basis. The development and enhancement of services and products entails
significant technical and financial risks. We may not (1) effectively use new
technologies, (2) adapt services and products to evolving industry standards or
(3) develop, introduce and market service and product enhancements or new
services and products. In addition, we may experience difficulties that could
delay or prevent the successful development, introduction or marketing of these
services and products, and our new service and product enhancements may not
achieve market acceptance. If we encounter these problems, our business,
financial condition and operating results will be materially adversely affected.
Periods of declining prices, inactivity or uncertainty in the public or
private equity markets may adversely affect our revenues. Our revenues are
likely to be lower during periods of declining prices or securities market
inactivity in the sectors on which we focus. Our business is particularly
dependent on the public and private equity markets for companies in the
Internet, biotechnology, entertainment and energy industries. The public markets
have historically experienced significant volatility not only in the number and
size of share offerings, but also in the secondary market trading volume and
prices of newly issued securities. For example, the market for offerings by
companies in the Internet industry has recently experienced significant activity
while the market for offerings by energy companies has been almost non-existent.
This recent activity may not sustain its current levels. Activity in the private
equity markets frequently reflects the trends in the public markets. As a
result, our revenues from private capital raising activity may also be adversely
affected during periods of declining prices or inactivity in the public markets.
The growth in our revenues will depend largely on a significant increase in
the number and size of transactions by companies in our targeted industries and
by the related increase in secondary market trading for these companies.
Financing activity in these industries can decline for a number of reasons. Such
activity may also decrease during periods of market uncertainty occasioned by
concerns over inflation, rising interest rates and related issues.
Disappointments in quarterly performance relative to analysts' expectations or
changes in long-term prospects for an industry can also adversely affect capital
raising activities to a significant degree.
We may not be able to service and maintain marketing relationships with
portal entities and Web content companies, which may adversely affect our
business growth. Our strategy for expanding brand recognition and exposure
depends to some extent on the portal market and Web content companies. We plan
to enter into marketing agreements with portal entities and Web content
companies that will permit us to advertise our products and services on their
Web pages. We plan to access a larger and broader potential customer base by
disseminating proprietary information, such as our stock offerings, investment
research and the quote and execution streams for FABTRADE.com and FABPRO.com
over the Internet. If we cannot secure or maintain these marketing agreements on
favorable terms, our prospects could be harmed. Additionally, other online
brokers, which advertise on portals, may object to and attempt to undermine our
marketing agreements or relationships. If successful, the efforts of competing
brokers could materially and adversely affect our growth.
We may not be able to protect our intellectual property rights, which may
cause us to incur significant costs. Our business is dependent on proprietary
technology and other intellectual property rights. We rely primarily on
copyright, trade secret and trademark law to protect our technology. We
currently have no patents. These concepts and technologies may never be
patentable. In addition, effective trademark protection may not be available for
our concepts and technologies. Notwithstanding the precautions we have taken, a
third party may copy or otherwise obtain and use our software or other
proprietary information without authorization or may develop similar software
independently. Policing unauthorized use of our technology is difficult,
particularly because the global nature of the Internet makes it difficult to
control the ultimate destination or security of software or other data
transmitted. The laws of other countries may afford us little or no effective
protection of our intellectual property. The steps we have taken may not prevent
misappropriation of our technology or the agreements entered into for that
purpose may not be enforceable. In addition, litigation may be necessary in the
future to enforce our intellectual property rights, to protect our trade
secrets, to determine the validity and scope of the proprietary rights of others
or to defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversions of resources, either of which could
have a material adverse effect on our business, financial condition and
operating results.
Our success is dependent on our key personnel whom we may not be able to
retain, and we may not be able to hire enough additional qualified personnel to
meet our growing needs. Our business requires the employment of highly skilled
personnel. The recruitment and retention of experienced investment professionals
and proficient technologists are particularly important to our performance and
success. We have "key person" life insurance policies on Phillip G. Cook and
Randy M. Strausberg. The loss of the services of any of our key personnel or the
inability to recruit and retain experienced investment professionals and
proficient technologists in the future could have a material adverse effect on
our business, financial condition and operating results. We expect further
growth in the number of our personnel, particularly if markets remain favorable
to on-line investment transactions. Competition for such personnel is intense.
Our ability to compete effectively in our business depends on our ability to
attract and retain the quality personnel our operations and development require.
We may have difficulty effectively managing our growth. We expect our
business to develop rapidly both in the U.S. and international markets. Our
current senior management has limited experience managing a rapidly growing
enterprise and may not be able to manage our growth. The intensifying
competition we face from both established and recently formed entities may
adversely affect our revenues and profitability. We expect to encounter intense
competition in all aspects of our business, and we expect this competition to
increase. Our principal competitors include traditional investment banking and
brokerage firms, and a number of newly organized electronic brokerage firms,
many of which offer investment products through the Internet. In the context of
online distributions of public offerings, we expect to face significant
competition from brokerage firms such as Charles Schwab, Fidelity Brokerage
Services, E*Trade ("EGRD") and Wit Capital, among others, which offer equity
securities through the Internet. In our online brokerage business, we expect to
encounter direct competition from discount brokerage firms and online brokerage
firms, including Charles Schwab ("SCH"), Fidelity Brokerage Services ("FLCSX"),
Waterhouse Investor Services ("WTMXX"), Muriel Siebert ("SIEB") and Dateq Online
("DATQ"), and from full-service brokerage firms such as Morgan Stanley Dean
Witter ("AMVAX"), Paine Webber ("PFICX"), Donaldson, Lufkin & Jenrette ("DLJ")
and Merrill Lynch ("MRL"). Most of these investment banking and brokerage firms
have been established far longer and are far better capitalized and staffed than
we are, and have much larger, established customer bases than we do.
Operational risks may disrupt our business or limit our growth. Our
business is highly dependent on information processing and telecommunications
systems. We face operational risks arising from mistakes made in the
confirmation or settlement of transactions or from transactions not being
properly booked, evaluated or accounted for. Our business is highly dependent on
our ability, and the ability of our clearing firm, to process, on a daily basis,
a large and growing number of transactions across numerous and diverse markets.
Consequently, our clearing firm and we rely heavily on our respective financial,
accounting, telecommunications and other data processing systems. If any of
these systems do not operate properly or are unavailable due to problems with
our physical infrastructure, we could suffer financial loss, a disruption of our
business, liability to clients, regulatory intervention or damage to our
reputation. In addition, we face operational risks due to difficulties with our
telecommunications system's inability to handle the high level of customer
inquiries. The inability of our systems to accommodate an increasing volume of
transactions could also constrain our ability to expand our businesses. We have
experienced disruptions in our Web site service due to failures in our
telecommunications system and our Web servers, which have resulted in customer
frustration. We are currently upgrading and expanding the capabilities of our
data and telecommunications systems and other operating technology. We expect
that in the future we will need to continue to upgrade and expand our systems
infrastructure. We intend to expand our telecommunications system capacity in
order to better ensure customer satisfaction.
If we fail to comply with applicable laws and regulations, we may face
penalties or other sanctions that may be detrimental to our business. When
enacted, the Securities Act of 1933, which governs the offer and sale of
securities, and the Securities Exchange Act of 1934, which governs, among other
things, the operation of the securities markets and broker-dealers, did not
contemplate the conduct of a securities business through the Internet.
Uncertainty regarding the application of these laws and other regulations to our
business may adversely affect the viability and profitability of our business.
If we fail to comply with an applicable law or regulation, government regulators
and self regulatory organizations may institute administrative or judicial
proceedings against us that could result in censure, fine, civil penalties
(including treble damages in the case of insider trading violations), the
issuance of cease-and-desist orders, the loss of our status as a broker-dealer,
the suspension or disqualification of our officers or employees or other adverse
consequences. The imposition of any material penalties or orders on us could
have a material adverse effect on our business, operating results and financial
condition.
If we engage in market-making or proprietary trading activities in the
future, we will face increased risks, which could be harmful to our business. We
currently engage in market-making and proprietary trading for our own account.
These activities involve significant risks of changes in the market prices of
such securities and of decreases in the liquidity of the securities markets.
These risks, in turn, could limit our ability to resell securities purchased or
to repurchase securities sold short. In addition, our market making and trading
activities subject our capital to significant risks that other parties to the
transactions will fail to perform their obligations. From time to time, we may
establish short positions during the course of our trading activities. It is a
characteristic of short positions that any loss sustained on closing out the
position may exceed the liability related thereto as reflected on our financial
statements.
We may not be able to secure financing if we need it in the future. We may
require additional financing to support our planned expansion, develop new or
enhanced services and products, respond to competitive pressures, acquire
complementary businesses or technologies or respond to unanticipated
requirements. We can give stockholders no assurance that additional financing
will be available when needed on favorable terms, if at all.
Employee misconduct could harm us and is difficult to detect and deter.
There have been a number of highly publicized cases involving fraud or other
misconduct by employees in the financial services industry in recent years, and
we run the risk that employee misconduct could occur. Misconduct by employees
could include binding us to transactions that exceed authorized limits or
present unacceptable risks, or hiding from us unauthorized or unsuccessful
activities. In either case, this type of conduct could result in unknown and
unmanaged risks or losses. Employee misconduct could also involve the improper
use of confidential information, which could result in regulatory sanctions and
serious harm to our reputation. It is not always possible to deter employee
misconduct, and the precautions we take to prevent and detect this activity may
not be effective in all cases.
Despite our efforts, our systems as well as those of others may prove not
to be Year 2000 compliant, which could significantly disrupt our business. We
may realize exposure and risk if the systems on which we are dependent to
conduct our operations are not Year 2000 compliant. Because we are largely
dependent on our ability to conduct our operations through the Internet, any
significant disruption of this computer infrastructure caused by the Year 2000
problem could significantly interfere with our business operations. Our
potential areas of exposure include products purchased from third parties,
computers, software, telephone systems and other equipment used internally. If
our present efforts to address Year 2000 compliance issues are not successful,
or if trading counterparties, financial intermediaries and vendors with whom we
conduct business do not successfully address such issues, our business,
operating results and financial position could be materially and adversely
affected.
Our long-term success depends on the development of the Internet as a
commercial marketplace, which is uncertain. The markets for investment banking
and brokerage services through the Internet are at an early stage of development
and are rapidly evolving. Because the markets for our online services are new
and evolving, it is difficult to predict the future growth (if any) and the
future size of these markets. We cannot assure you that the markets for our
online services will continue to develop or become sustainable. A substantial
number of our clients have been Internet related companies. Sales of many of our
services and products will depend upon the acceptance of the Internet as a
widely used medium for commerce and communication. A number of factors could
prevent such acceptance, including the following:
o Electronic commerce is at an early stage and buyers may be unwilling to
shift their purchasing from traditional vendors to online vendors;
o The necessary network infrastructure for substantial growth in usage of the
Internet may not be adequately developed;
o Increased government regulation or taxation may adversely affect the
viability of electronic commerce;
o Insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times or
increased costs; and
o Adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage its acceptance and growth.
Conducting investment-banking operations through the Internet involves a
new approach to the securities business. We may have to undertake intensive
marketing and sales efforts to educate prospective clients on the uses and
benefits of our services and products in order to generate demand. For example,
corporate issuers may be reluctant to accept our online underwriting
capabilities.
Questions related to the security of our systems and our ability to
transmit confidential information over the Internet may adversely impact our
business. The need to securely transmit confidential information over the
Internet has been a significant barrier to electronic commerce and
communications. We are potentially vulnerable to attempts by unauthorized
computer users to penetrate our network security. If successful, those
individuals could misappropriate proprietary information or cause interruptions
in our online services. We may be required to expend significant capital and
resources to protect against the threat of such security breaches or to
alleviate problems. In addition to security breaches, inadvertent transmission
of computer viruses could expose us to the risk of disruption of our business,
loss and possible liability. Continued concerns over the security of Internet
transactions and the privacy of its users may also inhibit the growth of the
Internet generally as a means of conducting commercial transactions.
Failure of our encryption technology could compromise the confidentiality
of our customer transactions and adversely affect our business. We rely upon
encryption and authentication technology, including public key cryptography
technology licensed from third parties, to provide the security and
authentication necessary to effect secure transmission of confidential
information over the Internet. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments could result in a
compromise or breach of the procedures we use to protect customer transaction
data. If any such compromise of our security occurs, our business, financial
condition and operating results could be materially adversely affected.
Shares eligible for future sale by our current stockholders may adversely
affect our stock price. A substantial amount of our Common Stock, including
shares issued upon the exercise of outstanding options, will eventually be
available for sale in the public market. The future sale of these shares by our
current stockholders may adversely affect our stock price.
We do not anticipate paying dividends. We have never declared or paid any
cash dividends on our Common Stock and do not expect to do so in the foreseeable
future. We currently intend to retain any earnings to finance the expansion and
development of our business. Any future payment of dividends will be made at the
discretion of our Board of Directors based upon conditions then existing,
including our earnings, financial condition and capital requirements as well as
such economic and other conditions as our Board of Directors may deem relevant.
Item 4.
CHANGES IN THE REGISTRANT'S CERTIFYING ACCOUNTANT.
The financial statements of Marci for the fiscal years ended May 1998 and
1997 were audited by the accounting firm of Want & Ender, New York, New York.
The financial statements of FAB Securities for the years ended December 31, 1998
and 1997 are being audited by the accounting firm of Marx Lange & Gutterman, LLP
Certified Public Accountants, New York, NY. The financial statements of FAB
Germany for the year ended December 31, 1998 were audited by the accounting firm
of Dewisa GmbH, Offenbach am Main, Germany. In connection with Transaction, the
firm of Richard A. Eisner & Co., LLP, Certified Public Accountants, has been
retained to audit the financial statements of FAB Global and its subsidiaries as
of April 30, 1999 and our related statements of income, cash flows and
shareholders equity for the fiscal year then ended. During the fiscal years set
forth above, and the subsequent interim periods preceding the appointment of
Richard A. Eisner & Co., LLP there have been no reportable disagreements between
Marci, FAB Securities or FAB Germany and their respective auditors on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
Item 5.
OTHER EVENTS
In connection with the Transaction, and at the request of FAB Capital and
Western, FAB Global will, effective April 30, 1999, change from a 52/53-week
accounting year to a fiscal year ended April 30.
Item 6.
RESIGNATIONS OF DIRECTORS.
No director has resigned or declined to stand for re-election to the Board
of Directors since the date of the last annual meeting of stockholders because
of any disagreement with Marci on any matter relating to Marci's operations,
policies or practices.
As a condition of the Transaction, Ms. Fonner agreed to resign as the
Company's sole director and appoint three New Directors nominated by FAB Capital
and Western. FAB Capital and Western have nominated Phillip G. Cook, David W.
Dube and Randy M. Strausberg to serve as New Directors of FAB Global. The
proposed changes in our board of directors will not become effective and the New
Directors will not assume office until 10 days after we file an Information
Statement and Notice of Change in the Majority of the Board of Directors with
the SEC and send copies of the Notice to our stockholders. At that time, Sally
A. Fonner will appoint the New Directors and then resign as a director of the
Company. Thereafter, the New Directors will manage our business.
Our Board does not currently have any committees. After the appointment of
the New Directors, the Board intends to form an Audit Committee and a
Compensation Committee. The Audit Committee will review the services provided by
our independent accountants, consult with our independent accountants on audits,
review certain filings with the SEC, assess need for internal auditing
procedures and assess the adequacy of internal controls. The Compensation
Committee will determine executive compensation and review transactions between
the Company and our affiliates, including any associates of affiliates.
Compensation of Executive Officers and Directors. Ms. Fonner has not
received any cash compensation for services performed during the two years
prior to the Transaction. In connection with the plan of reorganization
approved by Marci's stockholders, certain persons designated by Capston
received 300,000 shares of Common Stock for administrative and management
services. Ms. Fonner received 96,400 of these shares of Common Stock for her
personal account.
Executive Employment Contracts. Prior to the Transaction, FAB Capital had
authorized employment agreements between certain executives and key employees
and the companies that were transferred to Marci in connection with the
Transaction. These executives and key employees included Phillip G. Cook, Randy
M. Strausberg, David W. Dube, Judith L. Kaufman and Davis Parsons. These
agreements require the executives and key employees to devote substantially all
of their business time to the affairs of FAB Global and our subsidiaries,
establish standards of conduct, prohibit the solicitation of our existing
clients after termination, expressly affirm our rights respecting the ownership
and disclosure of confidential information, provide for the acts and events that
would give rise to termination of such agreements and provide express remedies
for a breach of the agreement by the employee or the Company. The following
table summarizes the compensation payable to executives and key employees under
the terms of their respective employment agreements.
<TABLE>
<CAPTION>
Initial Stock Options
Employee Position Term Salary Granted
<S> <C> <C> <C> <C>
Phillip G. Cook ... Chairman/CEO 5 years $100,000 600,000 shares (1)
Randy M. Strausberg Chief Operating Officer 5 years $180,000 250,000 shares (2)
David W. Dube ..... CFO/Treasurer 5 years $180,000 175,000 shares (2)
Judith L. Kaufman . Secretary 5 years $ 84,000 125,000 shares (2)
David W. Parsons .. General Counsel 5 years $102,000 125,000 shares (2)
<FN>
(1) The stock options granted to Mr. Cook are fully vested and immediately
exercisable at a price of $1 per share. These options were issued to Mr.
Cook in consideration of his agreement to reduce his cash salary to
$100,000 per year until January 1, 2000.
(2) The stock options granted to our other executives and key employees are
exercisable at a price of $1 per share and will vest at the rate of 20% per
year commencing on February 1, 2000.
</FN>
</TABLE>
In addition, each of the executives and key employees identified above will
participate, without cost, in our standard employee benefit programs, including
medial/hospitalization insurance and group life insurance, as in effect from
time to time.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of acquired businesses.
As permitted by Item 7(a)(4) of Form 8-K, the audited financial statements
of the acquired businesses will be filed within 60 days after the date of
this Report.
(b) Pro forma financial information.
An unaudited pro forma consolidated balance sheet of FAB Securities of
America, Inc. (formerly RAS Securities Corp.) and FAB Finanz- und Anlagen-
Beratung und Vermittlung GmbH as of December 31, 1998 and 1997, together
with the related unaudited pro forma consolidated statements of income for
the years then ended are included in this Current Report on Form 8-K. These
pro forma financial statements are based on the audited historical
financial statements of FAB Securities and FAB Germany and include all
required intercompany adjustments.
An unaudited pro forma consolidated balance sheet of FAB Securities of
America, Inc., FAB Finanz- und Anlagen- Beratung und Vermittlung GmbH, FAB
Corporate Funding, Inc., FAB Capital Markets, Inc., FAB Futures, Inc., and
Momentum Capital Funding Corp. as of April 5, 1998, together with the
related unaudited pro forma consolidated statements of income for the
period then ended are included in this Current Report on Form 8-K.
As permitted by Item 7(a)(4) of Form 8-K, complete pro forma financial
statements of the Registrant and its recently acquired subsidiaries will be
filed within 60 days after the date of this Report.
(c) Exhibits.
(2.1) Reorganization Agreement, dated April 5, 1999, between and among the
Registrant, FAB Capital Corporation and Western Union Leasing Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FAB GLOBAL, INC., a Georgia corporation (formerly known as Marci International
Imports) April 20, 1999
By: /s/
Phillip G. Cook, Chief Executive Officer
<PAGE>
<TABLE>
<CAPTION>
FAB GLOBAL INC.
CONSOLIDATED BALANCE SHEET
1997-1998
(Pro-forma audited statements of predecessor entities)
ASSETS 12/31/97 12/31/98
<S> <C> <C>
Cash & cash equivalents .................................... $ 63,895 $ 76,564
Receivables from brokers & dealers ......................... 1,044,652 1,191,233
Receivables from others .................................... 1,180,656 148,220
Securities owned (at lower of cost or market) .............. 1,208,780 822,804
Real estate ................................................ 1,297,727 0
Total Current Assets .......................... 4,795,710 2,238,821
Investments ................................................ 0 0
Property & equipment, net .................................. 218,638 657,842
Other assets ............................................... 129,519 3,127,699
TOTAL ASSETS ............................................... $ 5,143,867 $ 6,024,362
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 12/31/97 12/31/98
<S> <C> <C>
Payable to brokers ........................................ $ 871,309 $ 969,609
Securities held and not yet purchased (at ................. 15,000 0
market)
Obligations under capitalized leases ...................... 16,241 7,469
Accounts payable and accrued expenses ..................... 5,057,402 3,668,953
Total Current Liabilities ....................... 5,959,952 4,646,031
Commitments and contingencies ............................. 0 0
Liabilities subordinated to claims of ..................... 490,000 490,000
general creditors
SHAREHOLDERS' EQUITY
Common stock, no-par value, 300,000 shares ................ 29,512 235,394
at December 31, 1997 and 1998 and 12,720,000
shares at April 5, 1999
Preferred stock ........................................... 0 383,700
Additional paid-in-capital ................................ 803,791 1,400,147
Retained earnings (deficit) ............................... (2,139,387) (1,130,910)
Total shareholders' equity ................................ (1,306,084) 888,331
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY .................. $ 5,143,868 $ 6,024,362
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
1997-1998
(Pro-forma audited statements of predecessor entities)
12/31/97 12/31/98
<S> <C> <C>
REVENUES
Commissions ................................................ $ 6,442,609 $ 4,765,080
Syndicate and underwriting income .......................... 2,256,436 824,555
Trading profit (loss) ...................................... 115,546 (196,633)
Other ...................................................... 2,093,128 937,474
TOTAL REVENUES ............................................. 10,907,719 6,330,476
EXPENSES
Salaries, commissions and employee benefits ................ 5,722,191 4,092,677
Clearing fees, including floor brokerage ................... 952,877 536,961
Communications ............................................. 721,308 674,006
Office expenses ............................................ 547,999 154,185
Regulatory fees and expenses ............................... 55,524 69,923
Interest expense ........................................... 313,258 22,881
Travel and entertainment ................................... 94,731 61,322
Occupancy and equipment rentals ............................ 396,553 337,501
Professional fees .......................................... 1,119,347 159,568
State and local income taxes ............................... 4,759 97,662
Other operating expenses ................................... 561,544 209,146
TOTAL EXPENSES ............................................. 10,490,091 6,415,832
NET INCOME (LOSS) .......................................... $ 417,628 $ (85,356)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FAB GLOBAL INC.
4/5/99
CONSOLIDATED BALANCE SHEET
(Pro-forma unaudited statement)
ASSETS 4/5/99
<S> <C>
Cash & cash equivalents .................................... $ 521,604
Receivables from brokers & dealers ......................... 58,558
Receivables from others .................................... 541,751
Securities owned (at lower of cost or market) .............. 7,309,605
Real estate ................................................ 0
Total Current Assets .......................... 8,431,518
Investments ................................................ 872,427
Property & equipment, net .................................. 196,373
Other assets ............................................... 681,801
TOTAL ASSETS ............................................... $10,182,119
LIABILITIES AND SHAREHOLDERS' EQUITY
Payable to brokers ........................................ $ 557,834
Securities held and not yet purchased (at ................. 6,093
market)
Obligations under capitalized leases ...................... 5,189
Accounts payable and accrued expenses ..................... 1,188,458
Total Current Liabilities ....................... 1,757,574
Commitments and contingencies ............................. 0
Liabilities subordinated to claims of ..................... 0
general creditors
SHAREHOLDERS' EQUITY
Common stock, no-par value, 300,000 shares .............. 1,021,971
at December 31, 1997 and 1998 and 12,720,000
shares at April 5, 1999
Preferred stock ........................................... 508,650
Additional paid-in-capital ................................ 6,839,856
Retained earnings (deficit) ............................... 54,070
Total shareholders' equity ................................ 8,424,547
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY .................. $10,182,121
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
Period Ended 4/5/99
(Pro-forma unaudited statement)
4/5/99
<S> <C>
REVENUES
Commissions ................................................ $3,961,190
Syndicate and underwriting income .......................... 261,869
Trading profit (loss) ...................................... 250,916
Other ...................................................... 80,798
TOTAL REVENUES ............................................. 4,554,773
EXPENSES
Salaries, commissions and employee benefits ................ 1,717,129
Clearing fees, including floor brokerage ................... 127,383
Communications ............................................. 150,121
Office expenses ............................................ 139,768
Regulatory fees and expenses ............................... 11,865
Interest expense ........................................... 11,430
Travel and entertainment ................................... 89,036
Occupancy and equipment rentals ............................ 85,721
Professional fees .......................................... 177,960
State and local income taxes ............................... 868
Other operating expenses ................................... 711,746
TOTAL EXPENSES ............................................. 3,223,027
NET INCOME (LOSS) .......................................... $1,331,746
</TABLE>
