SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-KSB
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Commission File Number 0-15900
FAB Global, Inc.
(Name of small business issuer in its charter)
For Fiscal Year Ended May 4, 1999
Georgia 59-3461241
(state or other jurisdiction (IRS Employer
of incorporation or organization) identification No.)
42 Broadway, Suite 1101
P.O. Box 1887, Bowling Green Station
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 shorter period 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:
Current Report on Form 8-K dated April 20, 1999 Current Report on Form 8-K
dated February 7, 2000
All amendments to such Current Reports on Form 8-K that are subsequently
filed by the Company pursuant to Section 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 7,150,000 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 under the
symbol FABVE.
<PAGE>
PART I
Item 1 Description of Business
Corporate Background Information
FAB Global Inc. (the "Company") 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 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 "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 agreement dated April 5, 1999,
FAB Capital and Western agreed to transfer certain assets to the Company solely
in exchange for newly issued shares of the Company's common stock.
In the winter of 1999, it became evident that FAB Capital and Western were
incapable of fully performing all of their obligations under the agreements
relating to the original reorganization transaction. After carefully reviewing
the relevant facts, the board of directors of the Company, the board of
directors of FAB Capital and the trustee of Western concluded that reformation
of original reorganization transaction would likely prove unduly complex,
burdensome and expensive. They also jointly concluded that such a reformation
would not give the Company's stockholders the value that was contemplated by the
original reorganization transaction. Accordingly, the board of directors of the
Company, the board of directors of FAB Capital and the trustee of Western
jointly agreed in late January of 2000 to rescind the original reorganization
transaction in its entirety. In connection therewith, FAB Capital and Western
returned an aggregate of 11,400,000 shares of common stock to the Company for
cancellation.
In connection with the decision to rescind the original reorganization
transaction, certain former officers of FAB Capital proposed an alternative
business combination (the "New Transaction"), which would permit the Company to
continue in business as a diversified financial services holding company. 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"),
a privately-held financial services holding company, in exchange for
substantially all of the operating assets of Wavecount. The operating assets
transferred to the Company in connection with the New Transaction include:
1. 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 Wavecount, 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.
2. Wavecount Futures, Inc. ("Futures"), an Introducing Futures Broker
registered with the National Futures Association (NFA) and the Commodity
Futures Trading Commission (CFTC);
3. Wavecount Asset Management, Inc. ("WAM"), an investment manager that has
applied for Registration as an Registered Investment Advisor (RIA). WAM has
an association with Jordan Advisory, a minority owned RIA, which manages
approximately $800 million. Jordan as a sub-advisor for Fixed Income assets
will list WAM as soon as its registration is effective.
4. 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.
5. 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 and it is anticipated that this transaction will close on or before
April 30, 2000.
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).
As a result of the New Transaction, it is anticipated that the Company's
name will be changed to Dupont Direct Financial Holdings, Inc., and a new slate
of directors and executive officers will be appointed.
Prior to April 5, 1999, 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 original reorganization transaction, the Company
had certain contract rights as of May 5, 1999, the end of its most recent fiscal
year. Since the original reorganization transaction was subsequently rescinded
as a result of the failure of performance by FAB Capital and Western, this
Annual Report on Form 10-KSB will treat the Company as a publicly held shell
until the date of the New Transaction.
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 New Transaction. Similarly, forward-looking discussions
relate to the ongoing business of the Company after the rescission of the
original reorganization transaction and the implementation of the New
Transaction.
Business of the Company after New Transaction
The Company is a holding company that conducts its business activities
through five subsidiaries. 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, we have 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. We expect to use our website for on-line sales to supplement our
person-to-person investment business.
Expected Growth in Demand for Fixed Income Products
Our mission is to provide high quality service in fixed income brokerage,
funding, asset management and advisory to Institutions, individuals and Native
American Nations. We believe Fixed Income products will soon enjoy a renaissance
of investor interest for several reasons.
First, the recent rise in interest rates foretells the resurgence of Fixed
Income products. Not only have Government bond rates risen but corporate and
Federal Agency bonds have seen greater rises in interest rates as the economies
of Europe and Japan have recovered along with Oil prices. Inflation indicators
have been rising for over a year. When interest rates on investment grade
securities approach 8%, investor interest rises.
Second, in the next few years, Baby Boomers will begin to cash in their
stock market profits as they retire. Their need for predictable income will
increase and that increases demand for Fixed Income products, not only directly
but also through mutual funds and annuities.
Third, since Social Security taxes (FICA) have been counted with general
government revenues, the budget balancing effects will reverse as Baby Boomers
retire, and begin to pull money out of the Social Security System. More
attractive interest rates will result.
Fourth, the rise in the stock market has gone on for so long, bonds were
often forgotten by investors. But, except for tech stocks, rising rates and
retirement needs will flatten out the stock market rise and bonds will again be
competitive investments. Even now, the broad market and most equity mutual funds
have failed to keep pace with the headline tech stocks and bonds are already
competitive in most cases. The Lipper Mutual Fund averages for December 9, 1999,
and Index calculations, as reported in Barron's show the following:
Mutual Funds
U.S. Equity Funds: Range from -8% for Real Estate to +107% for Technology
Average General Equity Fund: +19%
Returns by Industry Group
Basic Materials: +20%
Consumer Cyclical +15%
Consumer Non Cyclical: -5%
Energy: +14%
Financial: +3%
Industrial: -1%
Indexes without Dividend Reinvestment
(Reinvestment adds about 1%) Year to Date
Dow Industrials: +21%
S&P 500: +15%
NYSE Composite: +7%
Russell 2000: +10%
Wilshire 5000: +17%
S&P Transports: -10%
S&P Utilities:: -16%
Technology: +49%
These are important results for Bond Dealers: Without the upward pull of
technology stocks most indexes and funds have reverted to the historic stock
market returns. We believe individuals will be buying bonds from our salesmen
and website as easily as they today buy stocks on the Internet.
Securities Brokerage--One of the Company's wholly owned subsidiaries,
Dupont Securities Group, Inc. ("DSGI"), is securities broker-dealer that
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. and First Montauk Securities. Corp.(FMFK). DSGI clears through
Schroder and FMFK. Through Schroder, DSGI arranges Repurchase Agreement (Repo)
financing for customers at competitive rates. Shortly, we will be able to
provide Execution and Repo services in multiple currencies.
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 begun to establish alliances
with other dealers, starting with its clearing partner, FMFK, which has over 400
salesmen.
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, 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.
DSGI can also provides execution in Equities and is currently a NASDAQ market
maker in several Over The Counter (OTC) stocks.
Internet Based Trading and Account Services
Through Schroder, DSGI will shortly be able to provide Internet access to
accounts trade execution and market information for retail clients. We see this
as a significant growth area for our 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.
In preparation for this, and to provide links to DSGI's site, Wavecount has
transferred the following investment related Internet domain names to the
Company:
<PAGE>
Fixed Income Securities:
USTreasuryzerocoupons.com
USTreasurybond.com
Mortgagebackedbonds.com
InterestIncome.com
InterestIncome.net
USTreasurystrips.com
Municipalbondmarket.com
Eurocurrencybonds.com
Yankeebond.com
Mutual Funds:
Mutualfundinvestments.net
Noloadmutualfunds.net
Loadmutualfunds.com
Openendmutualfunds.com
Equities and Options:
OTCmarketmaker.com
OTCequitytrading.com
Americandepositoryreceipts.com
RegulationD.com
OTCoptionstrading.com
Retirement Planning:
401Kpensionplan.com
Lifeinsuranceannuity.com
VariableAnnuity.com
Derivatives:
Oilderivatives.com
Crudeoilproducts.com
Weatherriskhedging.com
Financialswaps.com
<PAGE>
Fixed Income and Market Research--DSGI in concert with WAM will provide
market analysis that focuses fixed income products, macroeconomic trends and
technical analysis of Bond and Currency markets.
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 and Jordan Advisors, WAM is being
considered for management of funds held by Native American Nations.
Native American Financial Services - We consider one of our main focuses of
growth to be developing and strengthening our 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.
However, in recent years, 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 American Indian bond issues have been sold,
and almost none have been publicly traded. We are experts at structuring Fixed
Income issues. In some cases, these Nations can issue tax-exempt municipal
bonds, which we believe wealthy investors will find appealing when they can be
structured for safety and above normal yields.
Through our ownership of a minority interest in NAFSCO, we have enjoyed
some degree of success with Native American Nations. Wavecount presented a
seminar in bond financing and business plan evaluation to the Senior Government
Officials of The Navajo Nation, the largest tribe in America. NAFSCO has been
selected to manage a Business Development Program, including training, loan
guarantees and business proposal evaluation leading to bond issuance for
Industrial and Business Development.
Through its relationship to Charles Jordan, NAFSCO will receive commission
dollars from managers investing Tribal Trust funds. In addition, NAFSCO itself
is being considered as a manager of those funds with the assistance of WAM and
Jordan Advisors. The Navajo Nation has about $1.7 billion in funds under
management. NAFSCO is the only Navajo preference financial services company. In
connection with providing a full investment service to Native Americans,
Wavecount owns the following Web Domain names:
Navajosecurities.com
NavajoNationsecurities.com
MashantucketPequotNation.com
EasternPequotNation.com
PequotNation.com
Pequotsecurities.com
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 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.
Investment Banking--DSGI limits its investment banking activities to
companies in which it has, through the experience of its senior staff, an in
depth understanding of a particular company's business or an investment.
Principal Trading and Investments--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 or ownership.
Through our five operating units, the Company intends to provide a full
range of Fixed Income investment services to sophisticated individual and
institutional investors. Each of our senior managers has over 20 years of
investment experience, particularly Fixed Income. We have established a
clientele of institutional investors and individual 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 and
investment banking industries. In particular, we have developed unique niche
with Native American Nations in advising on funding, business development, money
management and brokerage services.
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 financial markets. These
risks include the failure to continue to develop and extend our brokerage and
on-line service capabilities, the rejection of our services by potential
clients, increased competition and the ability to attract, retain and motivate
qualified personnel. In particular, Native American Nations are sovereign and
political considerations within those Governments or changes in Federal
Government policies may inhibit our growth. 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, recent performance should not be an
indicator of the rate of revenue growth, if any, we can expect in the future.
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. Substantial legal liability or a regulatory action
against us could have a material adverse financial effect on us.
Our retail brokerage and investment banking groups currently focus on
raising capital from traditional institutional and venture capital sources and
strategic investors. There is no guaranty these sources of funds will support
our clients or projects. Failure of our proposed European affiliates may impair
our ability to establish additional offices in the future. We may not be able to
expand our business internationally, and if we do, we face risks relating to
international operations and regulations.
A component of our strategy is our planned increase in efforts to attract
more institutional customers and strategic affiliations with other
broker-dealers to increase our Fixed Income business. We cannot assure you that
we will be able to successfully market our services and products in domestic or
international markets. In addition, in doing business in international markets
or with Sovereign American Indian Nations, we face risks, such as unexpected
changes in regulatory requirements, tariffs and other trade barriers,
difficulties in staffing and managing such operations, political instability,
fluctuations in currency exchange rates, reduced protection for intellectual
property rights in some countries, issues of sovereignty as they affect contract
enforcement, seasonal reductions in business activity during the summer months
and potentially adverse tax consequences, any of which could adversely impact
our 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 acquire technologies and
enhance our existing services and products. We must also add 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. We are particularly dependent on our clearing Brokers, Schroder, Inc. and
First Montauk, to develop these technologies and make them available to us. 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 bond or 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. The public markets have
historically experienced significant volatility not only in the number and size
of offerings, but also in the secondary market trading volume and prices of
newly issued securities. 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 institutional and individuals for our
products. Financing activity, particularly by Native American Nations, may not
increase for a number of reasons. Demand for Fixed Income products may not grow
as expected due to market uncertainty regarding inflation, interest rates and
related issues.
In those few areas where we engage in corporate investment banking or stock
market making activity, disappointments in quarterly performance relative to
analysts' expectations can affect our profitability. Changes in long-term
prospects for an industry can also adversely affect capital raising activities
to a significant degree.
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 managers are particularly important to our performance and success. The loss
of the services of any of our key personnel or the inability to recruit and
retain experienced investment professionals and managers 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.
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. If our
current senior management has difficulty managing a rapidly growing enterprise,
it will affect our results. 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. 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. For many
of these functions, we are dependent on the ability of our clearing Brokers to
handle these transactions and develop the systems necessary to meet growth. We
may experienced disruptions in our Web site service due to failures in our
telecommunications system and our Web servers. 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 many of the technological changes affecting the Securities business,
including the Internet and development of securities derivatives. 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 (Y2K) compliant, which could significantly disrupt our business.
It should be noted that both the New York Stock Exchange and the National
Association of Securities Dealers have made significant efforts to assure that
all broker-dealers, including DSGI, First Montauk and Schroder, can meet the
challenges posed by Y2K. Nevertheless, we may realize exposure and risk if the
systems on which we are dependent to conduct our operations are not Y2K
compliant. Any significant disruption of this computer infrastructure caused by
the Y2K 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. We
are especially dependent on systems operated by our clearing Brokers for both
normal clearing and processing and Internet based activity. If our present
efforts to address Y2K 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.
As part of our program to market Fixed Income products to individuals, we
intend to use the Internet technology made available to us by our clearing
broker, among others. The development of the Internet as a commercial
marketplace is still uncertain. Our individual clients will also be able,
through Schroder, to transact equity business over the Internet. The markets for
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. Sales of some 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:
1. Electronic commerce is at an early stage and buyers may be unwilling to
shift their purchasing from traditional vendors to online vendors;
2. The necessary network infrastructure for substantial growth in usage of the
Internet may not be adequately developed;
3. Increased government regulation or taxation may adversely affect the
viability of electronic commerce;
4. Insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times or
increased costs; and
5. Adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage its acceptance and growth.
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 will have to work closely with our clearing broker
and may have to expend 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.
All of our salespersons and traders receive information, quotes and news
over the Internet. As a result, any failure of systems, vendors, and
communications networks may impact our ability to conduct our business. Failure
of encryption provided by our vendors or clearing broker could compromise the
confidentiality of our customer transactions and adversely affect our business.
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 2. Description of Property
In connection with the New Transaction, 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:
1. 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 Wavecount, 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.
2. Wavecount Futures, Inc. ("Futures"), an Introducing Futures Broker
registered with the National Futures Association (NFA) and the Commodity
Futures Trading Commission (CFTC);
3. Wavecount Asset Management, Inc. ("WAM"), an investment manager that has
applied for Registration as an Registered Investment Advisor (RIA). WAM has
an association with Jordan Advisory, a minority owned RIA, which manages
approximately $800 million. WAM will be listed by Jordan as a sub-advisor
for Fixed Income assets as soon as its registration is effective.
4. 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.
5. 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 and it is anticipated that this transaction will close on or before
April 30, 2000.
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).
Detailed disclosure relating to the New Transaction 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
None.
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 year ended May 5, 1999, or during the
intervening period between the end of such year 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 Over the
Counter Electronic Bulletin Board under the symbol FABVE. 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. On February, 2000, the closing market price for
the Common Stock was $1.5937 per share. 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 fthe 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
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, 2000 18.00 .36
Item 6. Management Discussion and Analysis of Financial Condition and Results of
Operations.
Financial Condition
As a result of its 1989 Bankruptcy, the Registrant has no assets,
liabilities, or ongoing operations and has 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 assets or
liabilities as of May 5, 1999. As a result of the New Transaction, 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 New Transaction, the Company was an inactive
publicly held shell that had no material assets, liabilities or business
operations. As a result of the New Transaction, the Company will become a
diversified financial services holding company engaged in the business
activities described elsewhere herein. The Company's future plan of operations
will be determined by the new directors and executive officers of the Company.
Item 7. Financial Statements.
The financial statements of the Company as of May 5, 1999 and for the
years ended May 5, 1999 and 1998 are attached hereto. The financial statements
of the businesses acquired in connection with the New Transaction will be filed
as an amendment to the Company's Current Report on Form 8-K dated February 7,
2000. Such financial statements are incorporated herein by this reference.
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. At this time, the Company has not made any decision to change future
accounting and auditing services. 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.
PART III
Item 9. Directors and Executive Officers of the Registrant
At the date of this Annual Report on Form 10-KSB, the sole director of the
Company is Ms. Sally A. Fonner, age 51, of Clearwater, Florida. Ms. Fonner is
the president and sole stockholder of Capston. Ms. Fonner has been an
independently employed business consultant for most of the past fifteen years.
She graduated from Stephens University in 1969 with a Bachelor of Arts Degree in
Social Systems. After a stint in the private sector, Ms. Fonner returned to
further her education and obtained her MBA Degree from the Executive Program of
the University of Illinois in 1979. In many of her assignments as a business
consultant, she is frequently engaged in dealings, which involve financiers and
large monetary transactions. During the preceding two years, Ms. Fonner has
served as the sole director of Arnox Corporation, Webcor Electronics, Inc.
Bio-Response, Inc. and the Company. Each of these companies was a publicly held
shell that was re-activated by Capston and Ms. Fonner pursuant to a plan of
reorganization that is similar to the plan approved by the stockholders of the
Company. During 1999, each of these companies entered into a reorganization
agreement with a previously unrelated company and in connection therewith, Ms.
Fonner resigned as director.
In connection with the New Transaction, Ms. Fonner has agreed to appoint
four persons designated by Wavecount to serve as executive officers of the
Company. Our new executive officers, and the positions held by each such
executive officer are set forth below. It is anticipated that these designated
executive officers will continue to serve in such capacities for the foreseeable
future.
Name Age Position
Randy M. Strausberg 50 Chief Executive Officer/President
Steven A. Muchnikoff 44 Chief Operating Officer
David W. Parsons 46 Chief Legal Officer and Secretary/Asst. Treasurer
Marc Greenspan 45 Treasurer/Asst Secretary
Under the terms of the New Transaction, Wavecount has the right to replace
the current board of directors with its own nominees. Wavecount has nominated
Randy M. Strausberg, Steven A. Muchnikoff, David W. Parsons, and Marc Greenspan
to serve as directors of the Company (the "New Directors"). The proposed changes
in the 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 the business.
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 below. Mr. Strausberg served for one
year as the director of fixed income trading in the New York Office of Credit
Leona's, one year as a senior vice president, proprietary trading in the New
York office of HSBC Securities, one year as a senior vice 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 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 below. He has over
twenty years of experience in trading U.S. Government Securities. He headed up
the U.S. Government Securities Department at L.F. Rothschild and was Co-Manager
of Arbitrage at Nikko Securities. Mr. Greenspan 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. He has a B.A. in Economics from Rutgers University and is a
government securities s principal.
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. Steven 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.
David W. Parsons. Mr. Parsons is General Counsel of Wavecount. Previously,
Mr. Parsons had 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. He also was 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).
Murray Lee. Mr. Lee is the President of NAFSCO. He is a member of the
Navajo Nation, living on the reservation. He graduated from Northern Arizona
State University. During his career, he was Liaison for U.S. Government programs
for the Navajo Nation and Chief Aide to the Speaker of the Council, an 88 member
legislative arm of the Navajo (also called Dine) People, representing the more
than 100 Chapters (towns) on the Nation. Previously, he directed the Small
Business Program for The Navajo Nation and served on the PL93-638 Task Force
that transferred management of the social service functions from the Bureau of
Indian Affairs to the Tribal management.
Dennis K. Smith. Mr. Smith is Director of the Native American Division of
Wavecount and is Senior Vice President of NAFSCO. He has over 25 years in all
aspects of the financial markets and investment advisory services. He started
his career with Merrill Lynch in 1973 and later as a member and trader on the
New York Futures and Philadelphia Foreign Currency Exchanges for Paine Webber.
Mr. Smith has been a financial advisor to Native American Tribes for the past
five years and has lectured extensively on International Finance and Fixed
Income. He has a degree in psychology from St. Leo's College.
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 FAB Securities. He holds the following
licenses: 4,7,24,53,55,63,and 73.
Item 10. Executive Compensation.
Ms. Fonner has not received any cash compensation for services performed on
behalf of the Company. In connection with the 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. Ms.
Fonner received 96,400 of these shares of Common Stock for her personal account.
In connection with the new transaction, it is expected that employment
agreements will be written and 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, our
subsidiaries and Wavecount, 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.
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 Director 5 years $100,000 125,000 shares (1)
Marc Greenspan Director 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
In connection with the original reorganization transaction, 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 original reorganization transaction. After giving pro forma effect to the
surrender of 11,400,000 shares in connection with the rescission of the original
reorganization transaction, the Company had approximately 1,320,000 shares
issued and outstanding prior to the New Transaction.
In connection with the New Transaction, 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 7,150,000
shares issued and outstanding, as compared to the 12,720,000 shares issued and
outstanding after the execution of the agreements relating to the original
reorganization transaction.
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 Beneficial Owner Shares Percent
Owned of Class
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. (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 Sheet as of May 5, 1999 and May 4, 1998
Statements of Operations for the years ending May 5, 1999 and May 4, 1998
Statement of Changes in Shareholder's Equity/(Deficit) for the years ended
May 5, 1999 and May 4, 1998
Statements of Cash Flows for the years ending May 5, 1999 and May 4, 1998
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.
FAB Global, Inc.
Date February 7, 2000 By______/S/______________
Sally Fonner,
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 February 7, 2000 By______/S/______________
Sally Fonner
Sole Director,
Chief Accounting Officer
<PAGE>
WANT & ENDER, CPA, P.C. 386 Park Ave. S. Room 1618
CERTIFIED PUBLIC ACCOUNTANTS New York, NY 10016
MARTIN ENDER. CPA Telephone (212) 684-2414
STANLEY Z.WANT, CPA, CFP Fax (212) 684-5433
Independent Auditor's Report
To the Shareholders and Board of Directors
FAB Global, Inc..
We have audited the accompanying balance sheet of FAB Global, Inc.. (A Dormant
State Registrant) at May 4, 1999 and May 4, 1998 and the related statements of
operations, changes in shareholders equity/(deficit), and cash flows for each of
the two years for the period ended May 4, 1999 and May 4, 1998. These financial
statements are the responsibility of the Registrant's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe 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 FAB Global, Inc.. (A Dormant
State Registrant) at May 4, 1999 and May 4, 1998 and the results of its
operations and its cash flows for each of the two years for the period ended May
4, 1999 and May 4, 1998 in conformity with generally accepted accounting
principles.
/s/
Martin Ender
Want & Ender CPA, P.C.
Certified Public Accountants
New York, NY
February 7, 2000
<PAGE>
FAB Global, Inc.
(A Dormant State Registrant)
Balance Sheet
May 4, 1999 and May 4, 1998*
1999 1998
---- ----
Assets
Organization Cost .................................. $ 0 $ 0
Total Assets ...................................... 0 0
Liabilities and Shareholder's Equity
Stockholders' Equity
Common Stock par value at $.01 per share;
20,000,000 shares authorized of common stock;
1,320,000shares issued and outstanding ............. 13,200 2,878
Paid in Capital .................................... 37,239 6,827
Retained Earnings (Deficit) ........................ (9,705) (591)
Net Income/Loss for the Year ....................... (40,734) (9,114)
-------- --------
Total Shareholders' Equity ......................... 0 0
-------- --------
Total Liabilities and Shareholders Equity .......... $ 0 $ 0
======== ========
* year end is base on 52 weeks
See accompanying notes to financial statements
<PAGE>
FAB Global, Inc.
(a Dormant State Registrant)
Statements of Operations for the years ending
May 4, 1999 and May 4, 1998 *
1999 1998
Current year 05-04-97
-------- --------
Revenues ................................... $ 0 $ 0
Expenses
Administrative Expenses .................... $ 40,734 $ 9,114
Filing Fees ................................ $ $
Net Income/Loss for the year ............... $(40,734) $ (9,114)
======== ========
* year end is base on 52 weeks
See accompanying notes to financial statements
<PAGE>
FAB Global, Inc.
(a Dormant State Registrant)
Statement of Changes in Shareholder's Equity/(Deficit) for the
years ended May 4, 1999 and May 4, 1998
1999 1998
05-04 05-04
Common Stock
(1,320,000shares issued
& outstanding) ............................... $ 13,200 $ 2,878
Additional Paid in Capital ................... 37,239 6,827
Balance May 4, 1998* ......................... (9,705) (591)
Net Income/(loss) for the year ............... (40,734) (9,114)
Balance May 4, 1999* ......................... $ 0 $ 0
* year end is base on 52 weeks
See accompanying notes to financial statements
<PAGE>
FAB Global, Inc..
(A Dormant State Registrant)
Statements of Cash Flows for the years ending
May 4, 1999 and May 4, 1998
Current Year 1998
05-04-98 05-04-97
Cash Flows from Operating Activities
Net Income .................................... $(40,734) $ (9,114)
Net Cash Provided (used) /
By Operating Activities ........................ 0 0
Expenses Paid by Capston ....................... 40,734 9,114
Net Increase (Decrease) in Cash ................ 0 0
Cash at Beginning of Period .................... 0 0
-------- --------
Cash at End of Period .......................... $ 0 $ 0
======== ========
* year end is base on 52 weeks
See accompanying notes to financial statements
<PAGE>
FAB Global, Inc.
(A Dormant State Registrant)
May 4, 1999
Note 1. HISTORY OF THE REGISTRANT
FAB Global Inc. (the "Company") 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 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 "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 agreement dated April 5, 1999,
FAB Capital and Western agreed to transfer certain assets to the Company solely
in exchange for newly issued shares of the Company's common stock.
In the winter of 1999, it became evident that FAB Capital and Western were
incapable of fully performing all of their obligations under the agreements
relating to the original reorganization transaction. After carefully reviewing
the relevant facts, the board of directors of the Company, the board of
directors of FAB Capital and the trustee of Western concluded that reformation
of original reorganization transaction would likely prove unduly complex,
burdensome and expensive. They also jointly concluded that such a reformation
would not give the Company's stockholders the value that was contemplated by the
original reorganization transaction. Accordingly, the board of directors of the
Company, the board of directors of FAB Capital and the trustee of Western
jointly agreed in late January of 2000 to rescind the original reorganization
transaction in its entirety. In connection therewith, FAB Capital and Western
returned an aggregate of 11,400,000 shares of common stock to the Company for
cancellation.
In connection with the decision to rescind the original reorganization
transaction, certain former officers of FAB Capital proposed an alternative
business combination (the "New Transaction"), which would permit the Company to
continue in business as a diversified financial services holding company. 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"),
a privately-held financial services holding company, in exchange for
substantially all of the operating assets of Wavecount. The operating assets
transferred to the Company in connection with the New Transaction include:
1. 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 Wavecount, 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.
2. Wavecount Futures, Inc. ("Futures"), an Introducing Futures Broker
registered with the National Futures Association (NFA) and the Commodity
Futures Trading Commission (CFTC);
3. Wavecount Asset Management, Inc. ("WAM"), an investment manager that has
applied for Registration as an Registered Investment Advisor (RIA). WAM has
an association with Jordan Advisory, a minority owned RIA, which manages
approximately $800 million. Jordan as a sub-advisor for Fixed Income assets
will list WAM as soon as its registration is effective.
4. 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.
5. 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 and it is anticipated that this transaction will close on or before
April 30, 2000.
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).
As a result of the New Transaction, it is anticipated that the Company's
name will be changed to Dupont Direct Financial Holdings, Inc., and a new slate
of directors and executive officers will be appointed.
Prior to April 5, 1999, 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 original reorganization transaction, the Company
had certain contract rights as of May 5, 1999, the end of its most recent fiscal
year. Since the original reorganization transaction was subsequently rescinded
as a result of the failure of performance by FAB Capital and Western, this
Annual Report on Form 10-KSB will treat the Company as a publicly held shell
until the date of the New Transaction.
Note 2. PAID IN CAPITAL
Capston is currently not entitled to reimbursement for any expenses incurred by
it on behalf of the Registrant. However, because Sally Fonner is both the Acting
President of FAB Global, Inc.. and Capston, prior Staff Accounting Bulletins
required under generally accepted accounting the treatment of debiting the
expenses with corresponding credit to paid-in capital. These expenses are actual
cash expenditures and do not reflect any costs associated with the operation of
Capston nor any personnel time or cost.
Note 3. OUTSTANDING SHARES
The 1,320,000 shares outstanding as of May 4, 1999 is a result of the following
actions:
Reverse split of 18 to 1 of 1998's outstanding 5,181,085 shares
Contractual shares issued to Capston Network Company
Shares issued for business and legal consulting on the rescinded
transaction and
Shares cancelled that had been issued for assets that were never
transferred on the rescinded transaction.
The shares outstanding as of February 7, 2000, the date of this report, are
7,150,000 due to the issuance of new shares for the new acquisition.
