SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Commission File Number 0-15900
Dupont Direct Financial Holdings, Incorporated
(Name of small business issuer in its charter)
For Fiscal Period Ended March 31, 2000
Georgia 59-3461241
(State or other jurisdiction of (IRS Employer identification
incorporation or organization) No.)
42 Broadway, Suite 1100-26
New York, New York 10004
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (917) 320-4800
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share.
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorterperiod that the Issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were $0.
Check whether the issuer has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes [ ] No [ ]
DOCUMENTS INCORPORATED BY REFERENCE
The contents of the following documents filed by the Company, with the
Securities and Exchange Commission (the "Commission") are incorporated by
reference into Annual Report on Form 10-KSB by reference and shall be deemed to
be a part thereof:
Annual Report on Form 10-KSB for F/Y/E 05/1999 dated February 8, 2000
Report SC 14F1 dated February 25, 2000
Current Report on Form 8-K dated April 20, 1999
Current Report on Form 8-K dated February 7, 2000
<PAGE>
All amendments to such Current Reports on Form 8-K that are subsequently
filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act.
The number of shares outstanding of the Registrant's common stock was
1,320,000 (according to the records of the transfer agent, American Stock
Transfer & Trust Company) as of May 5, 1999, and 7,161,964 as of the date of
this Annual Report on Form 10-KSB. The Company's Common Stock is listed for
trading on the NASD's Over-the-Counter-Electronic Bulletin Board (OTCEBB) under
the symbol DIRX.
<PAGE>
PART I.
Item 1. Description of Business.
A. F/Y/E 03/31/2000 Corporate Information.
During the shortened, transitional fiscal year between May 5, 1999,
and March 31, 2000, Dupont Direct Financial Holdings, Incorporated (OTCEBB:
DIRX; hereinafter DIRX or the Company)1 was engaged in the process of a
reorganization transaction (the 1999 Reorganization) of acquiring an operating
business interested in housing itself in a then-substantially dormant,
publicly-owned corporate entity such as the Company.2 During the fiscal year
ended May 4, 1999, the Company, then named Marci International Imports, Inc.
(Marci) believed it had consummated such a transaction as described in its ad
hoc interim report on Forms 8-K dated April 2, 1999, and amendments thereto
dated April 20, 21, and May 3, 1999. The 1999 Reorganization transaction was to
have taken place with the Company acquiring the operating financial services
companies of FAB Capital Corporation and certain other assets in exchange for
the Company's common stock.
The 1999 Reorganization did not "close" in a consummating
consolidating event, and instead it was left principally in a contractual
executory condition awaiting "closing" in an unscheduled piecemeal fashion.3 As
a consequence of the failure to "close" the 1999 Reorganization in a
consummating consolidating event, subsequent and/or previously unknown events,
matters, and occurrences, largely domiciled within FAB Capital Corporation and
its operating subsidiaries, arose or were discovered. These subsequent or
previously unknown matters, in the judgment and opinion of the Company's current
and former management, rendered the completion of the 1999 Reorganization unduly
burdensome, complex, and expensive, if not impossible. Therefore, late in the
third calendar quarter, or early in the fourth calendar quarter of 1999,
decisions were made by the previous management and Board for the executed
portions of the 1999 Reorganization to be rescinded, and the unexecuted portions
to be canceled. This is more fully discussed in prior filings.
<PAGE>
Substantially concomitantly with the decision to extricate itself
from the 1999 Reorganization, the Company's prior management and Board pursued
and consummated an alternative reorganization or business combination (the 2000
Reorganization). The 2000 Reorganization involved the Company acquiring the
financial advisory services operating assets, and certain other nonoperating
assets, of Wavecount, Inc. (WVCI). The 2000 Reorganization, however, could not
be completed in time to give the Company at least one full fiscal quarter of the
operations of the properties acquired in that Reorganization. Accordingly,
management determined to change its fiscal year, and report a shortened,
transitional fiscal year ending at March 31, 2000, just before the completion of
the 2000 Reorganization, and to synchronize the fiscal year ends of all its
acquired assets to the same date.
After the decision to rescind and cancel the 1999 Reorganization,
certain former officers of FAB Capital proposed an alternative business
combination (the 2000 Reorganization). After evaluating the proposal, the board
of directors of the Company agreed to issue 5,830,000 shares of the Company's
common stock to Wavecount, Inc. (Wavecount or WVCI), a privately-held financial
services holding company, in exchange for substantially all of the operating,
and certain investment, assets of Wavecount. The assets agreed to be transferred
to the Company in connection with the 2000 Reorganization include:
Dupont Securities Group, Inc. ("DSGI"), a registered United States
securities broker-dealer operating under the NASD's $100,000 net capital
requirements. DSGI is now 100% by owned DIRX, although the approval of the
acquisition by the National Association of Securities Dealers, Inc.
("NASD") pursuant to its rules is still pending. Such approval is
reasonably expected in due course.
Wavecount Futures, Inc. ("Futures"), an Introducing Futures Broker
registered with the National Futures Association (NFA) and the
Commodity Futures Trading Commission (CFTC);
Wavecount Asset Management, LLC. ("WAM"), an investment manager that is
a New York State Registered Investment Advisor (RIA).
A 49% equity interest in Native American Financial Services Company
("NAFSCO"). NAFSCO is a financial services company located in Window Rock,
Arizona, the capital of the Navajo Nation. Along with Murray Lee, the 51%
Navajo majority partner, Wavecount established NAFSCO as the first Native
American financial services company resident on a Native American
reservation.
<PAGE>
B&S Portfolio Management, GmbH ("B&S"), a registered securities broker
located in Munich, Germany which also operates as an asset management firm
and investment advisor. Wavecount has signed a letter of intent to acquire
B&S in exchange for 200,000 newly issued shares of the Company's common
stock.4
The non-operating assets agreed to be transferred, and transferred
following March 31, 2000, are as follows.
300,000 shares of King's Road Entertainment, Inc. (OTCBB: KREN);
250,000 shares of Chariot International Holdings, Inc. (OTCBB: CHIH);
250,000 shares of Immediate Entertainment Group, Inc, (OTCBB: IEGPE).
B. Corporate History Prior to F/Y/E May 4, 1999.
DIRX is a Georgia corporation formerly known as FAB Global, Inc.
(FABG), and before the first calendar quarter of 1999 as Marci International
Imports, Inc. (Marci). 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 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 the Company, authorized a series of changes
in the Company'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 began actively
seeking a business opportunity for the Company in the summer of 1998. After
investigating a number of potential opportunities, Capston negotiated a business
combination transaction (the 1999 Reorganization) 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"). Details of this are
included in the Company's prior recent filings. That transaction was never
completed, and to the extent it was partially performed, it was rescinded, and
the executory portions canceled, as described above.
<PAGE>
Prior to the 1999 Reorganization, the Company had no material
assets, liabilities or business operations. In substance, the Company was a
publicly held "shell" corporation whose sole business activity was the search
for a suitable business opportunity. As a result of the 1999 Reorganization, the
Company had certain contract rights as of May 5, 1999, the end of its then-most
recent fiscal year. Since the 1999 Reorganization was rescinded and canceled,
however, and the 2000 Reorganization was not completed until after the end of
the shortened, transitional fiscal year end, this Annual Report on Form 10-KSB
will treat the Company as a publicly held "shell" until after the date of the
2000 Reorganization. The transfer of WVCI's principal operating asset, the
broker-dealer Dupont Securities Group, Inc., was made on May 17, 2000, following
the expiration of a thirty day advance notice period required by NASD rules.
Unless otherwise noted, the discussion of historical events in this
Annual Report on Form 10-KSB relates to the operations of the Company prior to
the consummation of the 2000 Reorganization. Similarly, forward-looking
discussions relate to the ongoing business of the Company after the rescission
and cancellation of the 1999 Reorganization and the implementation of the 2000
Transaction.
C. Business of the Company after 2000 Reorganization.
1. DSGI.
The Company is a holding company that conducts its business
activities through four subsidiaries. Its present principal operating subsidiary
is Dupont Securities Group, Inc. (DSGI), a full-service retail and institutional
securities brokerage and dealer since 1996. Prior to its acquisition by WVCI,
DSGI was a substantially dormant broker/dealer. It had little preexisting
business operations, revenue, profits, assets or liabilities. Through its new
ownership and management provided by WVCI (and now DIRX), DSGI provides a broad
range of securities services to a diverse clientele, including high net worth
individuals, institutions, and other broker/dealers, and corporation finance and
investment banking services to a variety of businesses. The main business lines
center around Fixed Income Securities including Brokerage Execution Services,
Management of Funds to be invested in Fixed Income and assistance in raising
funds via Fixed Income offerings. As a specialty, the Company has focused on
providing assistance to Native American Nations in analyzing their financing
requirements, structuring offerings, evaluating business proposals for these
needs and raising funds and managing funds.
DSGI is registered as a broker-dealer with the Securities and
Exchange Commission (SEC) pursuant to section 15 of the Securities Exchange Act
of 1934,(`34 Act or Exchange Act), and is a member of the National Association
of Securities Dealers, Inc. (NASD), a national securities association registered
with the SEC pursuant to section 15A of the `34 Act. It is also registered with
the Municipal Securities Rulemaking Board (MSRB), a board appointed by the SEC
and under its supervision, and a subscriber to the coverage of the Securities
Investors Protection Corporation (SIPC). As a result of these various
qualifications, it is eligible to conduct its operations nationwide, including
its districts and territories, and is in fact licensed to conduct its business
in some 32 of those jurisdictions.
<PAGE>
DSGI is an introducing broker/dealer that ultimately clears and
settles all of its customer and proprietary trades through Schroder and Co.,5 an
internationally renowned investment banking firm headquartered in London, United
Kingdom, with offices worldwide. Through Schroder the firm's retail accounts are
insured up to $50 million ($100,000 for cash). This arrangement provides DSGI
with back office support, transaction processing on all principal, national and
international securities exchanges, and access to many other financial services
and products. This allows DSGI to provide or offer products and services
comparable to the world's largest and most prestigious securities firms.
DSGI provides principal dealing services to Institutional and Retail
Clients. Currently, the firm has opened as accounts a number of well-known
International Banks, Investment Funds and Quasi-Governmental Agencies to trade
in a variety of Investment Grade Securities. Generally, a salesmen will receive
a firm order to buy or sell a security or group of securities from an
Institutional account. Typically, these orders are executed with large
market-making bond dealers, usually those designated as Primary Dealers by the
Federal Reserve Bank of New York. DSGI trades with these large accounts by way
of a guaranty letter provided by Schroder, Inc.
DSGI also specializes in providing Fixed Income execution services
to small dealers without their own bond desks or by providing expertise to other
bond traders in specialized securities. DSGI's staff has many years of
experience in a wide variety of Fixed Income products. DSGI has established
alliances with other dealers.
Each of the Company's senior managers has over 20 years of
investment experience, particularly Fixed Income. The senior managers have an
established clientele of institutional investors and individual investors who
require a wide variety of analytical and brokerage services, and that demand
hands-on trading and order execution capabilities that are not generally
available through similar-sized competitive firms in the securities brokerage,
commodities brokerage and investment banking industries.
DSGI is a member of the NASD operating under Net Capital rules as a
$100,000 broker dealer. This entitles DSGI to provide a full line of investment
services including underwriting, market-making in both Fixed Income and
Equities, Private Placements, and regular transactional brokerage services. DSGI
has registered as an Insurance Agency in order to provide retail clients the
opportunity to purchase insurance-wrapped investment products such as annuities.
<PAGE>
Through Schroder, DSGI will shortly be able to provide Internet
access for trade execution and market information for retail clients. The
Company sees this as a significant growth area for Fixed Income business.
(Customers will also be able to electronically trade stocks). The service will
be available through DSGI's website under the name DupontDirect.com. Via a hot
link to Schroder, clients will be able to open accounts, receive market
information, execute trades and see the status of their account.
DSGI limits its investment banking activities to businesses in which
it has, through the experience of its senior staff, an in depth understanding of
a particular business's orientation and financial needs. The Company currently
limits its trading and investing to maintaining inventory for the servicing of
retail clients and investments in which the principals have particular
expertise.
2. Wavecount Asset Management, LLC.
Asset Management - Wavecount Asset Management has two unique
proprietary products. First, it has developed an advisor selection process
designed to analyze the returns generated by professional money managers in a
variety of investment products, particularly fixed income, currencies,
commodities and stock indices. Through this process, WAM can provide investors
with portfolios of advisors meeting desired investment performance
characteristics for return and risk. Second, WAM has a zero-coupon based yield
enhancement program, based solely on U.S. Government guaranteed zero coupon
bonds that is may improve yield on a fixed income portfolio by about 2 percent.
In the world of bonds yielding single digit returns, this is a huge increase in
performance for a bond portfolio.
Through its association with NAFSCO (see below), WAM is being
considered for management of funds held by Native American Nations.
3. Native American Business.
Native American Financial Services - One of DIRX's principal targets
for growth is the development and strengthening of relations with Native
Americans. For a variety of reasons, Native American Nations have had little
access to the capital markets. As a result they have not been able to raise the
funds needed to raise levels of employment and self-sufficiency by seeding and
supporting entrepreneurial activity on reservations or attracting outside
business to the reservation.
<PAGE>
In recent years, however, with changes in Bureau of Indian Affairs
regulations, tribes are taking more control of Trust Funds and revenue streams,
not only from well-known casino activity, but also from funds previously managed
in Washington and revenue from mineral resources. In many ways, these are
Developing Nations, with a need to increase skills in evaluating business
proposals, selecting advisors, training entrepreneurs, funding business loans
and industrial parks. Fixed Income expertise is particularly important for fund
raising for these projects. Very few Native American bond issues have been sold,
and almost none have been publicly traded. The Company's senior management
members are experts at structuring Fixed Income issues. In some cases, these
Nations can issue tax-exempt municipal bonds, which wealthy investors will find
appealing when they can be structured for safety and above normal yields.
4. Derivatives.
Derivative Brokerage--Wavecount Futures has been organized to
supplement DSGI's institutional or retail fixed income or equity index product
line. Since many investment products are derivative, an ability to provide
access to futures enhances the trade ideas that generate cash market bond
business. Through "Futures" the company can offer hedging or swap related fixed
income ideas. In addition, through its association with Top Gun Capital
Management, Inc. (TGCM), a registered CTA, Futures will provide investment ideas
in derivatives related to Fixed Income, currencies and Equity Indices. Through
its association with Alaron Trading, clearing through E.D.F. Man, one of the
largest futures brokers in the world, Futures can provide on-line trading and
account opening.
D. Competition and Regulation.
The Company's current principal operating subsidiary, DSGI, conducts
its business in the highly competitive and highly regulated securities industry.
The Company expects to encounter intense competition in all aspects of its
business, and expects this competition to increase. Principal competitors
include traditional investment banking and brokerage firms. Most of these
investment banking and brokerage firms have been established far longer, are far
better capitalized and staffed, and have much larger, established customer
bases. The Company's prospects for success in meeting such competition is
dependent on key personnel in providing creative ideas for fixed income products
and the development of significant Native American business volume for that
highly under-served clientele with whom the Company has a unique relationship.
This business requires the employment of highly skilled personnel. The
recruitment and retention of experienced investment professionals and managers
are particularly important to the Company's performance and success. The loss of
the services of any key personnel or the inability to recruit and retain
experienced investment professionals and managers in the future could have a
material adverse effect on business, financial condition and operating results.
Moreover, competition for such personnel is intense. The ability to compete
effectively depends on the ability to attract and retain the quality personnel
the Company's operations and development require.
<PAGE>
DSGI is registered as a broker-dealer with the SEC which has in
large part delegated ordinary, day-to-day oversight of broker-dealers to the
self-regulatory organizations of the stock market, i.e., the stock exchanges and
the NASD. The Designated Examining Authority (DEA) for DSGI is the NASD. DSGI is
subject to routine examination at any time by both the SEC and the NASD,
although it is subject to a cyclical routine examination by the NASD every two
years. As a regular matter in the ordinary course DSGI receives regulatory
inquiries on a wide range of securities industry subjects several times a year.
DSGI is also subject to the regulatory authority of every state jurisdiction in
which it is registered. If DSGI fails to comply with applicable laws and
regulations, it may face penalties or other sanctions that may be detrimental to
business. That is, for failure to comply with an applicable law or regulation,
government regulators and self regulatory organizations may institute
administrative or judicial proceedings against the Company 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 status
as a broker-dealer, the suspension or disqualification of officers or employees
or other adverse consequences. The imposition of any material penalties or
orders on DSGI could have a material adverse effect on the Company's business,
operating results and financial condition.
Item 2. Description of Property.
In connection with the 2000 Reorganization, the board of directors
of the Company agreed to issue 5,830,000 shares of the Company's common stock to
Wavecount in exchange for the following assets:
Dupont Securities Group, Inc.
Wavecount Futures, Inc.
Wavecount Asset Management, Inc.
Native American Financial Services Company 49% interest.
B&S Portfolio Management, GmbH Letter of Intent.
300,000 shares of King's Road Entertainment, Inc. (OTCEBB: KREN);
250,000 shares of Chariot International Holdings, Inc. (OTCEBB: CHIH);
250,000 shares of Immediate Entertainment Group, Inc, (OTCEBB: IEGPE).
DSGI, WAM, Futures and the stock owned by the Company are located at
the Company's headquarters in leased premises located at 42 Broadway, Suite
1100-26, New York, New York 10004. The lease is for a term of ten (10) years
that began on October 1, 1999, and is in the name of DSGI at the date of this
report. The terms of the lease specify that the leasehold transfers to the
Company as of the date of DSGI's acquisition by the Company.
NAFSCO is located in premises leased from one of the Company's
officers and directors located in Window Rock, Arizona. The lease, which
commenced May 1, 2000, is for a two year term with a balloon purchase obligation
at the end of the leased term.
B&S is located in leased premises in Munich, Germany.
Detailed disclosure relating to the 2000 Reorganization Properties
is included in the Company's Current Report on Form 8-K dated January 7, 2000
and as amended from time to time. Such disclosure is incorporated herein by this
reference.
Item 3. Legal Proceedings.
<PAGE>
As of March 31, 2000, there were none. Since March 31, to the date
of this Report several legal proceedings have been initiated against the Company
or its subsidiaries in the normal course of its business. All of these, however,
are based on matters and events occurring prior to the time that WVCI owned the
operating businesses acquired by the Company from WVCI. Management believes that
all of these proceedings are frivolous and have been brought at this time when
the claimants learned that the Company was no longer dormant and had acquired or
agreed to acquire viable operating businesses. All of these matters are so
recent that literally no discovery has taken place, but it is management's
intention to defend all such matters vigorously.
Item 4. Submission of matters to a vote of Security Holders.
No matters were submitted for a vote of the Company's security
holders during the fourth quarter of the period ended March 31, 2000, or during
the intervening period between the end of such period and the date of this
Annual Report on Form 10-KSB.
PART II.
Item 5. Market for Registrant's Common Equity.
The Company's Common Stock is listed for trading on the NASD's
OTCEBB under the symbol DIRX. The following table shows the reported high and
low bid prices for shares of the Company's common stock for the periods
presented. All values for periods prior to April 2, 1999 have been restated to
give retroactive effect to a 1 for 18 reverse stock split that was effected on
that date. The quoted prices reflect interdealer prices without retail markup,
markdown or commissions, and may not necessarily represent actual transactions.
Because the trading in the stock was sporadic and rare before the business
combination, the normal two year reporting of the High and Low of the prices for
the quarter, while reported, has little meaning. Please note that the high in
the last quarter of the 1999 fiscal year, was immediately after the stock
reverse split and business combination, while the rest of the prices were before
the stock reverse and have not been adjusted. However, when it did trade it
traded around the $18 mark with small trades.
Year ended May 5, 2000
High Low
First Quarter Ended August, 1999 ... 4.75 1.25
Second Quarter Ended November, 1999 . 1.50 .375
Third Quarter Ended in February, 2000 1.5938 .375
Period Ended March 31, 2000 ......... 2.75 1.25
Year ended May 4, 1999
First Quarter Ended August, 1998 ... .36 .36
Second Quarter Ended November, 1998 . .36 .36
Third Quarter Ended in February, 1999 .36 .18
Fourth Quarter Ended in May, `1999 .. 18.00 .36
<PAGE>
Item 6. Management Discussion and Analysis or Plan of Operations.
Financial Condition
As a result of its 1989 Bankruptcy, the Company had no assets,
liabilities, or ongoing operations and had not engaged in any business
activities since September 1990. The Company had no operations during the period
ended May 5, 1999 and except for certain contract rights under an agreement that
was subsequently rescinded in its entirety, had no material operations, assets
or liabilities as of March 31, 2000. As a result of the 2000 Reorganization, the
Company has recently become a diversified financial services holding company and
acquired the assets described in the Company's Current Report on Form 8-K dated
February 7, 2000, and as amended from time to time. Such disclosure is
incorporated herein by this reference.
Plan of Operations
Until the closing of the 2000 Reorganization, the Company was an
inactive publicly held "shell: that had no material assets, liabilities or
business operations. As a result of the 2000 Reorganization, the Company will
become a diversified financial services holding company engaged in the business
activities described elsewhere herein.
Item 7. Financial Statements.
The financial statements of the Company as of March 31, 2000 and for
the period ended May 4, 1999 are attached hereto.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
The Company's financial statements as of May 5, 1999 and for the
years ended May 5, 1999 and 1998 were audited by the firm Want and Ender, New
York, New York. The financial statements for the period ended March 31, 2000,
have been audited by the firm of Bernstein Pinchuk & Kaminsky ("BP&K"). During
the fiscal years set forth above, and the subsequent interim there have been no
reportable disagreements between the Company and its auditors on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. The change in auditors, which was approved by the Company's
Board of Directors, was made because BP&K have been the auditors for the
principal operating subsidiary, DSGI, for the past year, and the Company did not
wish to incur the expenses for two separate firms to perform the two audits.
PART III.
Item 9. Directors and Executive Officers of the Registrant.
Officers and Directors.
Name Age Position
Randy M. Strausberg 50 Dir., Chief Executive Officer/President
Steven A. Muchnikoff 44 Dir., Chief Operating Officer
David W. Parsons 46 Dir, Chief Legal Officer and
Secretary/Asst. Treasurer
Marc Greenspan 45 Dir.,Treasurer/Asst Secretary
Elroy Drake 58 Director
<PAGE>
Under the terms of the 2000 Reorganization, WVCI had the right to
replace the predecessor board of directors with its own nominees. WVCI has
nominated Randy M. Strausberg, Steven A. Muchnikoff, David W. Parsons, Marc
Greenspan, and Elroy Drake to serve as directors of the Company (the "New
Directors"). The predecessor board appointed WVCI's nominees as the New
Directors effective on or about March 13, 2000.
Randy M. Strausberg. Mr. Strausberg was a founder of Wavecount in or about
September 1998. Currently, he is President of Wavecount. He has also been
nominated to serve as a New Director. Mr. Strausberg is also an officer of
Capital, as explained in greater detail in prior recent filings. Mr. Strausberg
has served as the director of fixed income trading in the New York Office of
Credit Lyonnais, as a senior vice president, proprietary trading in the New York
office of HSBC Securities, as a senior vice president, manager of fixed income
in the New York office of Commerzbank Capital Markets and as a vice president,
treasury department in the New York office of Bank Austria. Mr. Strausberg
accumulated 24 years of experience as an employee and/or principal of several
securities firms, including S.V.P., Deputy Manager of Fixed Income at Nikko
Securities International, a Primary Dealer in U.S. Government Securities. 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.
Marc Greenspan. Mr. Greenspan is currently a director of Wavecount. He is also a
director of Capital, as explained in greater detail in prior recent filings. He
has over twenty years of experience in trading U.S. Government Securities. Mr.
Greenspan headed the U.S. Government Securities Department at L.F. Rothschild
and was Co-Manager of Arbitrage at Nikko Securities. Mr. Greenspan also helped
design the first issues of dealer created Zero-Coupon bonds at Paine Webber. He
has designed a proprietary risk free guaranty structure using U.S. Treasury
Zero-Coupon securities. Mr. Greenspan has a B.A. in Economics from Rutgers
University and is a government securities representative.
Steven A. Muchnikoff. Mr. Muchnikoff is a Director of Wavecount. He has over
twenty years of experience in fixed income, currencies and equities. He was Vice
President in charge of U.S. Treasury trading and sales for Nesbitt Burns
Securities, London. At First Interstate Bank he assisted in the design of their
U.S. Treasury Options program and also was Managing Director and Partner of
Atlantic Alliance Securities, Ltd., London. Mr. Muchnikoff has a B.S. in
Business Administration from the University of Southern California and is a
registered principal with the Securities and Futures Authority, United Kingdom.
He also has various U.S. licenses with the NASD.
<PAGE>
David W. Parsons. Mr. Parsons is General Counsel of Wavecount. Previously, Mr.
Parsons had served as the general counsel or assistant general counsel for
several other New York-based broker-dealers for approximately five years. He
also was special counsel for financial affairs at Antioch College. Mr. Parsons
has twenty years experience in the field of securities law including a total of
approximately eight years with the Division of Enforcement of the Securities and
Exchange Commission and 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).
Elroy Drake. Mr. Drake is a member of the Navajo Indian Nation, and received a
B.A. in Business Administration from Northern Arizona University. Mr. Drake
recently completed a four-year term as the Tax Commissioner of the Navajo Nation
during which, among other duties and responsibilities, he assisted in the
development of investment strategies for the $1.5 billion Navajo Nation
Permanent Trust Fund.. Prior to his term as Tax Commissioner, Mr. Drake was the
Chief Executive Officer of the Hoopa Valley Indians" Department of Enterprises
where he was instrumental in founding the Hoopa Valley Indian Gaming Casino. Mr.
Drake is presently engaged in independent financial consulting for several
Native American Nations, and recently assisted Kayenta Township, an independent
city on the Navajo Nation, in the development of a sales tax. Other Significant
Employees.
Lewis Goldman . Mr. Goldman is a Director of Wavecount, and a Senior Managing
Director, responsible for all of Fixed Income and Equity Sales & Trading and for
new business development for Dupont Securities Group, Inc. Mr. Goldman joined
Dupont Securities Group in February 2000. Prior to joining Dupont, Mr. Goldman
was a Managing Director of the Financial Products Group for FIMAT USA, Inc. (a
wholly owned subsidiary of Societe Generale). At FIMAT Mr. Goldman introduced
and built numerous riskless principal fixed income and derivative product
trading and sales distribution businesses. Products introduced at FIMAT always
complemented institutional clients needs. Those products offered at FIMAT
spanned the fixed income arena and ranged from Treasury Securities to Credit
Derivatives. In 1988, Swiss Bank Corporation, to provide both management
expertise and fixed income sales experience, recruited Mr. Goldman. Swiss Bank's
success in gaining Primary Dealer status was in large part due to Mr. Goldman's
efforts. Since graduating with a B.S. degree in Finance from the University of
Buffalo in 1979, Mr. Goldman spent 10 years working in the investment banking
and real estate divisions of Citicorp. At Citicorp, Mr. Goldman facilitated both
fixed income transactional business and consummated negotiated transactions for
the disposal of the banks real estate holdings. Mr. Goldman also worked for
Japan's largest investment bank, Nomura Securities structuring and marketing
over the counter swaps and structured notes. Gerald Heilpern. Mr. Heilpern is
Director of Sales for DSGI. He attended the Philadelphia College of Textiles and
Columbia University. He started his securities career at Bache & Co. (now
Prudential) in 1968. From 1974 to 1988 he was the manager of fixed income at
Phillips, Appel and Walden, a regional firm with over four hundred salesmen.
During his career in the securities industry, he has been a registered
representative, fixed income manager, branch office manager and Chief Operating
Officer at several broker-dealers. He holds the following securities industry
licenses: 4,7,24,53,55,63,and 73.
Item 10. Executive Compensation.
<PAGE>
Sally A. Fonner, the Company's sole director and Chief Executive
Officer until her resignation on or about March 13, 2000, in connection with the
implementation of the 2000 Reorganization, did not received any cash
compensation for services performed on behalf of the Company. Ms. Fonner did
receive, however, 96,400 shares of the Company's Common Stock for her services.
In connection with the new transaction, written employment
agreements were approved by Wavecount for the following executives: Randy M.
Strausberg, Steven A. Muchnikoff, Marc Greenspan and David W. Parsons. These
agreements require the executives and key employees to devote substantially all
of their business time to the affairs of the Company, its subsidiaries and
Wavecount, establish standards of conduct, prohibit the solicitation of existing
clients after termination, expressly affirm the Company's 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. Employee Position Term Salary Initial Stock Option Randy M.
Strausberg CEO 5 years $150,000 250,000 shares (1) David W. Parsons General
Counsel 5 years $100,000 125,000 shares (1) Steven Muchnikoff COO 5 years
$100,000 125,000 shares (1) Marc Greenspan Treasurer 5 years $100,000 125,000
shares (1) (1) stock options granted to our executives and key employees are
exercisable at a price of 50 cents per share (cash exercise) and will vest after
one year from February 1, 2000.
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 11. Security Ownership of Certain Beneficial Owners and Management
<PAGE>
In connection with the 1999 Reorganization, FAB Capital and Western
received a total of 11,400,000 shares of the Company's common stock that were
subsequently returned to the Company for cancellation. Further, in conformity
with plan of reorganization approved by the Company's stockholders, certain
persons designated by Capston received 300,000 shares of Common Stock for
administrative and management services, 150,000 shares of Common Stock were
issued to legal counsel for the parties and 570,000 shares of Common Stock were
issued to certain finders who assisted Capston in the identification of FAB
Capital and Western as potential business combination candidates, the
introduction of FAB Capital and Western to the Company, the collection and
analysis of due diligence information. All shares of Common Stock issued to
designees of Capston, legal counsel and the finder were registered under the
Securities Act of 1933 prior to issuance, and were subject to "bleed out" and
"lock-up" agreements which restrict the re-sale rights of the recipients
thereof. As a result of the foregoing, the Company had approximately 12,720,000
shares issued and outstanding after the execution of the agreements relating to
the 1999 Reorganization. After giving pro forma effect to the surrender of
11,400,000 shares in connection with the rescission of the 1999 Reorganization,
the Company had approximately 1,331,964 shares issued and outstanding prior to
the 2000 Reorganization.
In connection with the 2000 Reorganization, the Company has issued
5,830,000 new common shares to Wavecount and/or its designees. Therefore, at the
date of this Annual Report on Form 10-KSB, the Company has approximately
7,161,964 shares issued and outstanding.
The following table sets forth the number of shares of Common Stock
the identified person or entity is contractually entitled to own as of the date
of this Report (subject to bringing the transaction to completion or virtual
completion in all material respects), by (i) each executive officer and director
nominees or designates, (ii) all executive officers and directors, nominees or
designates, as a group, and (iii) each other person who owns of record or owns
beneficially, more than five percent (5%) of the Company's outstanding Common
Stock.
Name and Address of Shares Percent
Beneficial Owner
Wavecount, Inc.
42 Broadway, Suite 1101
New York, New York 10004 5,830,000 81.53%
Steven A. Muchnikoff(1)(2) 5,830,000 81.53%
Randy M. Strausberg (1)(2) 5,830,000 81.53%
David W. Parsons (1)(2) 5,830,000 81.53%
Marc Greenspan (1)(2) 5,830,000 81.53%
Executive Officers and Directors
as a Group (4 persons) 5,830,000 81.53%
1) c/o Wavecount, Inc., 42 Broadway, Suite 1101, New York, New York 10004.
<PAGE>
(2) Messrs. Strausberg and Muchnikoff are both directors and executive officers
of Wavecount, Mr. Greenspan is a director nominee of Wavecount, and Mr. Parsons
is both a director nominee and executive officer designate of Wavecount. They
therefore may be deemed to be beneficial owners of the shares of Common Stock
held, or entitled to be held, by Wavecount.
Item 12. Certain Relationships and Related Transactions.
Except for the stock-based compensation to Capston described
elsewhere herein, no officer, director or family member of an officer or
director has engaged in any material transaction with the Company since the
beginning of the Company's most recent fiscal year or is indebted to the Company
at the date of this Annual Report on Form 10-KSB.
Item 13. Exhibits - Financial Statement Schedules and Reports.
Financial statements filed with this report:
Balance Sheets as of March 31, 2000, and 1999
Statements of Operations for the periods ending March 31, 2000, and 1999
Statements of Changes in Shareholder's Equity/(Deficit) for the periods
ended March 31, 2000, and 1999;
Statements of Cash Flows for the years ending March 31, 2000, and 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dupont Direct Financial Holdings, Incorporated
Date: August 3, 2000 By______/S/______________
Randy M. Strausberg, President
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed below by the following person on behalf of the Registrant
and in the capacities and on the date indicated.
Date August 3, 2000 By______/S/______________
Randy M. Strausberg, Chairman and President
--------
1 Between April 2, 1999, and March 7, 2000, the Company was named FAB Global,
Inc. (FAB), and immediately prior to that it was named Marci International
Holdings, Inc. (Marci), all as described more fully in the Company's immediately
previous filings which are incorporated herein by reference as fully as though
set forth herein verbatim, by Exhibit or otherwise.
2 The plan for such a business reorganization was described in a Proxy Statement
dated May 7, 1998, incorporated herein be reference as fully as though set forth
here verbatim, by Exhibit or otherwise, and approved by the shareholders at the
shareholders' meeting conducted on June 19, 1998.
3 The facts and matters constituting the reasons the 1999 Reorganization was not
"closed" are subject to various interpretations, not all of which are in
harmony. Prior publicly-filed Reports of the Company concerning this subject
were made by the prior management of the Company, subject to review and comment
by some members of current management, but not subject to the current
management's control. 4 Although this acquisition and associated transfer was
expected to be completed by April 30, 2000, it has not yet occurred, and in the
opinion of management, the present probability of its completion is remote. 5
Schroder has recently been acquired by CitiGroup Salomon Smith Barney and it has
been announced that the Schroder clearing subsidiary will be divested. At this
time DIRX management is confident that the Schroder clearing subsidiary will be
acquired in-tact by another institution of equal reputation and wherewithal. In
the remote event that such does not occur, DSGI has secured tentative agreements
for other high-caliber clearing services that will allow DSGI to retain and
improve its customer relationships for the business lines in which the clearing
agent is an important ingredient.
<PAGE>
DUPONT DIRECT FINANCIAL HOLDINGS, INC.
(A Dormant State Registrant)
FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITORS' REPORT
FOR THE PERIODS
MAY 5, 1999 THROUGH MARCH 31, 2000
AND
MAY 5, 1998 THROUGH MARCH 31, 1999
(Unaudited)
<PAGE>
PAGE
Independent Auditors' Report 1
Financial Statements
Balance Sheets 2
Operations and Changes in Shareholders' Deficiency 3
Cash Flows 4
Notes to Financial Statements 5-6
<PAGE>
The Board of Directors
Dupont Direct Financial Holdings, Inc.
We have audited the accompanying balance sheet of Dupont Direct Financial
Holdings, Inc. (A Dormant State Registrant) as of March 31, 2000 and the related
statements of operations and changes in shareholders' deficiency and cash flows
for the period May 5, 1999 through March 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan to perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts of disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dupont Direct Financial
Holdings, Inc. as of March 31, 2000, and the results of its operations and cash
flows for the period then ended, in conformity with generally accepted
accounting principles.
The accompanying balance sheet of Dupont Direct Financial Holdings, Inc. as of
March 31, 1999 and the related statements of operations and changes in
shareholders' deficiency and cash flows for the period May 5, 1998 through March
31, 1999 were not audited by us, and, accordingly, we do not express and opinion
on them.
Bernstein Pinchuk & Kaminsky, LLP
New York, New York
August 2, 2000
<PAGE>
DUPONT DIRECT FINANCIAL HOLDINGS, INC.
(A Dormant State Registrant)
BALANCE SHEETS
MARCH 31,
2000 1999
------------ -------------
(Unaudited)
ASSETS
Cash $ - $ -
------------ -------------
Rent security deposit 68,329.00 -
------------ -------------
------------ -------------
Total Assets $ 68,329.00 $ -
============ =============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities
Accrued expenses $ 6,531.00 $ -
Corporate taxes payable 1,600.00 -
Due to stockholder 68,329.00 -
Deferred rent payable (Note 2) 31,495.00 -
------------ -------------
------------ -------------
Total Current Liabilities 107,955.00 -
------------ -------------
COMMITMENTS AND SUBSEQUENT EVENTS (Notes 2 and 3)
Shareholder's Deficiency
Common stock, par value $0.01 per share
Authorized...............20,000,000 shares
Issued and outstanding....1,331,964 shares 13,320.00 13,320.00
Paid in capital 41,574.00 37,119.00
Accumulated deficit (94,520.00) (50,439.00)
------------ -------------
Total Shareholders' Deficiency (39,626.00) -
------------ -------------
Total Liabilities and Shareholders' Deficiency $ 68,329.00 $ -
============ =============
<PAGE>
DUPONT DIRECT FINANCIAL HOLDINGS, INC.
(A Dormant State Registrant)
STATEMENTS OF OPERATION AND CHANGES IN SHAREHOLDERS' DEFICIENCY
FOR THE PERIODS MAY 5, 1999 THROUGH MARCH 31, 2000
AND MAY 5, 1998 THROUGH MARCH 31, 1999
2000 1999
----------- -----------
(Unaudited)
Income
Interest $ - $ -
----------- -----------
Expenses
Rent expense (Note 2) 31,495.00 -
Administrative expenses 10,986.00 40,734.00
----------- -----------
Loss before corporation tax expense (42,481.00) (40,734.00)
Corporation tax expense 1,600.00 -
----------- -----------
NET LOSS 44,081.00 40,734.00
Accumulated Deficit - at beginning of period (50,439.00) (9,705.00)
----------- -----------
Accumulated Deficit - at end of period (94,520.00) (50,439.00)
----------- -----------
Common Stock 13,320.00 13,320.00
----------- -----------
Additional paid-in capital - at beginning of period 37,119.00 6,707.00
Contributions during year 4,455.00 30,412.00
----------- -----------
Additional paid-in capital - at end or period 41,574.00 37,119.00
----------- -----------
Shareholders' Deficiency $(39,626.00) $ -
=========== ===========
Basic and fully diluted earnings (loss) per share $ (0.03) $ (0.03)
<PAGE>
DUPONT DIRECT FINANCIAL HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIODS MAY 5, 1999 THROUGH MARCH 31, 2000
AND MAY 5, 1998 THROUGH MARCH 31, 1999
2000 1999
----------- -----------
(Unaudited)
Cash flows from operating activities $(44,081.00) $(40,734.00)
Net loss
Adjustment to reconcile net loss to net cash
provided by operating activities
Changes in operating assets and liabilities
Increase in accrued liabilities 6,531.00 -
Increase in income taxes payable 1,600.00 -
Increase in deferred rent payable 31,495.00 -
----------- -----------
Net cash used in operating activities (4,455.00) (40,734.00)
----------- -----------
Cash flow from financing activities
Issuance of common stock - 10,322.00
Additional paid-in capital contributed 4,455.00 30,412.00
----------- -----------
Net cash provided by financing activities 4,455.00 40,734.00
----------- -----------
Net increase in cash and equivalents - -
Cash and equivalents, end of year $ - $ -
=========== ===========
Supplemental cash flow information:
Cash paid during the year for interest - -
=========== ===========
Cash paid during the year for taxes - -
=========== ===========
<PAGE>
Note 1. HISTORY OF THE REGISTRANT
Dupont Direct Financial Holdings, Inc. (the "Company") was incorporated under
the laws of the State of Georgia as Marci International Imports, Inc. The
Company subsequently changed its name to FAB Global, Inc. and, on March 7, 2000
further changed it to its current name of Dupont Direct Financial Holdings, Inc.
The Company conducted an initial public offering in February 1987 pursuant to a
Form S-18 Registration Statement under the Securities Act of 1933. As a result
of bankruptcy proceedings in 1989, the Company became inactive and had no
material assets, liabilities or business activities since that date.
The Company elected to change its fiscal reporting period to March 31,
commencing with the period ended March 31, 2000.
Note 2. COMMITMENTS
The Company is obligated under an operating lease for office space for a term of
10 years and 4 months with an escalation clause providing for annual increases
of minimum rent. In addition to the specified minimum rent, the company is
required to pay 2.1% of the increases in real estate taxes.
At March 31, 2000, the commitment for minimum rental payments was as follows:
Year ended March 31,
2001 $ 126,093
2002 159,810
2003 164,604
2004 169,542
2005 176,431
Thereafter 1,011,178
----------
$1,807,658
The total amount of rental payments due over the lease term is being charged to
rent expense on the straight-line method over the term of the lease. The
difference between rent expense recorded and the amount paid is credited or
charged to "Deferred rent payable", which is included in current liabilities in
the accompanying Balance Sheet.
<PAGE>
Note 3. SUBSEQUENT EVENTS
As a result of a business combination transaction subsequent to balance sheet
date , the Company issued 5,830,000 shares of the Company's common stock to
Wavecount, Inc. ("Wavecount"), a privately-held financial services holding
company, in exchange for substantially all of the assets of Wavecount. The
assets transferred to the Company in connection with this transaction include:
1. All of the outstanding stock of Dupont Securities Group, Inc. ("DSGI"),
a registered United States securities broker-dealer operating under the NASD's
$100,000 net capital requirements. DSGI is now 100% owned by Wavecount.
2. 100 shares of the common stock of Wavecount Futures, Inc., a futures
broker registered with the National Futures Association and the Commodity
Futures Trading Commission.
3. Sole managing membership in Wavecount Asset Management, Inc. ("WAM"), an
investment manager that is a New York State Registered Investment Advisor.
4. 245 shares of the common stock of Native American Financial Services
Company ("NAFSCO"), a financial services company located in Window Rock,
Arizona, the capital of the Navajo Nation. Together with the Navajo partner,
Wavecount established NAFSCO as the first native american financial services
company resident on a native american reservation.
5. A letter of intent in which Wavecount agreed to acquire B & S Portfolio
Management, GmbH, a registered securities broker located in Munich, Germany,
which also operates as an asset management firm and investment advisor, in
exchange for 200,000 newly issued shares of the Company's common stock.
6. 300,000 shares of King's Road Entertainment, Inc. (OTCBB: KREN).
7. 250,000 shares of Chariot International Holdings, Inc. (OTCBB: CHIH).
8. 250,000 shares of Immediate Entertainment Group, Inc. (OTCBB: IEGPE).
The Company has granted stock options to executives and key employees, which are
exercisable at a price of 50 cents per share and will vest one year from
February 1, 2000.
<PAGE>
Subsequent to March 31, 2000, the company became a defendant in a lawsuit
brought by the former chairman of the 1999 prospective purchaser of a majority
interest in the Company. The Company believes the case is without merit and
intends to defend it vigorously.
