UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 18, 2000
INSTITUTIONAL EQUITY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-27720 88-031770
(Commission File No.) (IRS Employer Identification No.)
5910 North Central Expressway, Suite 1480
Dallas, TX 75206
(Address of Principal Executive Offices) (Zip
Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (214) 237-3223
N.A.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
-1-
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 18, 2000, Institutional Equity Holdings, Inc. ("IEH")
completed the previously announced acquisition of one hundred percent (100%) of
the members' interests in First Atlanta Securities. L.L.C. ("FAS"), a Georgia
limited liability company. FAS is a full service brokerage firm engaged in the
purchase and sale of securities from and to the public and for its own account
and investment banking activities. As of August 18, 2000, FAS employed sixteen
(16) brokers registered with the National Association of Securities Dealers,
Inc. and four (4) support staff in its Atlanta, Georgia office.
The original purchase agreement dated April 20, 2000, among Networth
Financial Group, L.L.C., XCEL Capital, L.L.C., First Atlanta Financial Group,
L.L.C. (collectively, the "Sellers") and IEH and FAS was subsequently amended on
May 16, 2000 and further amended on August 18, 2000, the date of closing.
As consideration for for the purchase, IEH issued 1,300,000 share of its
unregistered, $0.01 par value per share, common stock, assumed $121,945 of FAS's
currently payable trade accounts payable and accrued liabilities, and assumed a
$100,000 demand note of FAS to XCEL Capital, L.L.C. ("XCEL") plus accrued
interest of $15,082. If the demand note is not repaid within sixty (60) days of
the date of closing, IEH will be required to issue 145,000 shares of its
unregistered common stock as settlement of the demand note plus accrued
interest.
One or more of the shareholders, who collectively holds a majority of
the then unsold and unregistered common shares issued in connection with the
August 18, 2000, acquisition of FAS, can demand registration of the unregistered
shares within sixty (60) days of IEH filing its Form 10-KSB for the years ended
December 31, 2000 or 2001. All cost of registration will be paid to IEH.
In addition to the transactions reported above, IEH on August 17, 2000,
entered into a consulting agreement with EXCEL for a period of one year
commencing on the date of the purchase agreement closing (August 18, 2000).
EXCEL's compensation was the issuance of 20,000 shares of IEH's unregistered
common stock. IEH agreed to register these shares with the SEC on its Form S-8
no later than October 31, 2000.
The description contained herein of the Purchase is qualified in its
entirety by reference to the Purchase Agreement, dated April 20, 2000, plus
amendment there to and the Press Release, dated August 31, 2000, which are
attached hereto as Exhibit 28.1-28.6 and Exhibit 28.6, respectively, and
incorporated herein by reference.
-2-
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements.
As of the date of filing of the Current Report on Form 8-K, the
Registrant has included the audited financial statements of FAS
for the fiscal years ended March 31, 1999 and 2000 and the
unaudited three month periods ended June 30, 1999 and 2000.
(b) Pro Forma Financial Information.
The registrant has included financial information in this Current
Report on Form 8-K as follows: o Pro Forma Balance Sheet as of June 30, 2000. o
Pro Forma Statement of Operations for the period ended June 30, 2000. o Pro
Forma Statement of Operations for the year ended December 31, 1999.
(c) Exhibits
The Exhibits to this report are listed in the Exhibit Index set
forth elsewhere herein.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Institutional Equity Holdings, Inc.
By:
--------------------------------------
Michael E. Vinez
Chief Financial Officer
Date: September 8, 2000
-3-
INSTITUITIONAL EQUITY HOLDINGS, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
On August 18,2000, Institutional Equity Holdings, Inc. ("the Company")
entered into a merger agreement whereby all of the outstanding ownership
interest in First Atlanta Securities, L.L.C. ("First Atlanta"), which is
primarily engaged in the brokerage of securities and other financial products in
Atlanta, Georgia, will be exchanged for 1,300,000 shares of the Company's common
stock. The acquisition of First Atlanta will be accounted for by the Company as
a purchase whereby the basis for accounting for First Atlanta's assets and
liabilities will be based upon their fair market values at the date of the
acquisition.
The unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1999 and the six months ended June 30, 2000, gives pro
forma effect to the acquisition of First Atlanta (and other adjustments as
described in the accompanying notes) as if it had occurred on January 1, 1999
and 2000, respectively. The Pro Forma Statements of Operations are based on the
historical results of operations of the Company and First Atlanta for the year
ended December 31, 1999 and the six months ended June 30, 2000. The Pro Forma
Condensed Combined Balance Sheets as of June 30, 2000 gives pro forma effect to
the acquisition of First Atlanta as if it had occurred on June 30, 2000. The Pro
Forma Statements of Operations and the Pro Forma Balance Sheets and the
accompanying notes (Pro Forma Financial Information) should be read in
conjunction with and are qualified by the historical financial statements of the
Company and the historical financial statements of First Atlanta and notes
thereto appearing elsewhere herein.
The Pro Forma Information is intended for informational purposes only and
is not necessarily indicative of the future financial position or results of
operations of the Company after the acquisition of First Atlanta, or the
financial position or the results of operations of the Company that would have
actually occurred had the acquisition of First Atlanta been effected as of the
date or for the periods presented.
F-1
INSTITUITIONAL EQUITY HOLDINGS, INC.
PRO FORMA BALANCE SHEETS
JUNE 30, 2000
<TABLE>
<CAPTION>
ASSETS
Pro Forma
Institutional First Atlanta Consolidating Pro Forma
Holdings, Inc. Securities, L.L.C Total Entries Total
-------------- ------------------ ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash $ 9,157 $ 8,511 $ 17,668$ - $ 17,668
Trading Securities, at market 513,372 - 513,372 - 513,372
Receivables
Commissions 109,550 7,043 116,593 - 116,593
Good Faith Deposits 438,267 25,000 463,267 - 463,267
Other 33,329 - 33,329 - 33,329
Prepaid Expenses and Other 56,845 3,300 60,145 16,976 (F) 77,121
----------- --------- ---------- ---------- ------------
Total Current Assets 1,160,520 43,854 1,204,374 16,976 1,221,350
Furniture and Equipment, net 343,321 - 343,321 - 343,321
Demand Note Receivable - 100,000 100,000 - 100,000
Other Assets 49,806 52 49,858 - 49,858
Goodwill - - - 1,196,561 (A) 1,196,561
-------------- ------------ ------- ---------- ----------
Total Assets $1,553,647 $143,906 $1,697,553 $1,213,537 $2,911,090
========== ======== ========== ========== ==========
</TABLE>
F-2
INSTITUITIONAL EQUITY HOLDINGS, INC.
PRO FORMA BALANCE SHEETS
JUNE 30, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT )
<TABLE>
<CAPTION>
Pro Forma
Institutional First Atlanta Consolidating Pro Forma
Holdings, Inc. Securities, L.L.C Total Entries Total
-------------- ------------------ ----------- -------------- ----------------
Current Liabilities
<S> <C> <C> <C> <C> <C>
Cash Overdraft $ 7,131 $ - $ 7,131 - $ 7,131
Loans Payable 100,000 100,000 200,000 - 200,000
Due to Brokers 340,617 63,166 403,783 (63,166) (B) 340,617
Securities Sold, not yet purchased 6,540 - 6,540 - 6,540
Accounts Payable and
Accrued Liabilities 1,538,813 72,399 1,611,212 (72,399) (B)
137,027 (A) 1,675,840
- -- --- ---------- ----------
Total Current Liabilities 1,993,101 235,565 2,228,666 1,462 2,230,128
Loan Subordinated to Claims of
General Creditors 100,000 - 100,000 - 100,000
Restricted Investment Loan 1,522,659 - 1,522,659 - 1,522,659
Due to Related Party 245,000 - 245,000 - 245,000
---------- ------- ----------- ---- --------
Total Liabilities 3,860,760 235,565 4,096,325 1,462 4,097,787
---------- -------- ---------- --------- ----------
Stockholders' Equity (Deficit)
10% Designated Series A Preferred Stock 10,600 - 10,600 - 10,600
10% Designated Series B Preferred Stock 750 - 750 - 750
Common Stock 23,820 - 23,820 13,000 (C)
200 (G) 37,020
Members Capital - 687,416 687,416 (687,416)(D) -
Additional paid-in capital 3,922,159 - 3,922,159 1,090,440 (C)
16,776 (G) 5,029,375
Retained (deficit) (6,132,192) (779,075) (6,911,267) 779,075 (D) (6,132,192)
---------- ----------- ---------- ---------- ----------
(2,174,863) (91,659) (2,266,522) 1,212,075 (1,054,447)
Less Treasury Shares, at cost (132,250) - (132,250) - (132,250)
----------- -- --------- --------------- --------
Total Shareholders'
Equity (Deficit) (2,307,113) (91,659) (2,398,772) 1,212,075 (1,186,697)
---------- ------------ ---------- ---------- -----------
Total Liabilities and
Shareholders' Equity (Deficit)$1,553,647 $ 143,906 $1,697,553 $1,213,537 $2,911,090
========== ========== ========== ========== ==========
</TABLE>
F-3
INSTITUITIONAL EQUITY HOLDINGS, INC.
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000
Pro Forma
<TABLE>
<CAPTION>
Institutional First Atlanta Consolidating Pro Forma
Holdings, Inc. Securities, L.L.C. (I) Total Entries Total
-------------- ----------------------- ----------- -------------- --------------
Revenues
<S> <C> <C> <C> <C> <C>
Commissions $ 3,179,288 $ 207,186 $3,386,474 $ - $ 3,386,474
Gain (loss) on firm securities accounts (675,256) 2,922 (672,334) - (672,334)
Underwriting and syndicate income 935,616 32,500 968,116 - 968,116
Other income 97,893 1,906 99,799 - 99,799
Interest income 45,891 3,076 48,967 - 48,967
------------- ------ ------- -- -------------
Total Revenue 3,583,432 247,590 3,831,022 - 3,831,022
Costs and Expenses
Commissions paid to other broker-dealers 387,138 199,270 586,408 - 586,408
Employee compensation 4,013,180 53,689 4,066,869 - 4,066,869
General and administrative expenses 1,751,255 144,068 1,895,323 39,885 (E)
8,490 (F) 1,943,698
Interest expense 119,654 2,749 122,403 - 122,403
----------- ------ -------- -- -------------
(Loss) Before Preferred Stock
Dividend and Federal Income
Tax Expense (2,687,795) (152,186) (2,839,981) (48,375) (2,888,356)
Preferred Stock Dividend (113,570) - (113,570) - (113,570)
Federal Income Tax Expense - - - - -
---- -- --- -- ------
Net (Loss) $(2,801,365) $(152,186) $(2,953,551) $(48,375) $(3,001,926)
=========== ========= =========== ======== ===========
Net (Loss) Per Share $ (1.19) $ (0.12) $ (0.81)
=============== ============ ==============
Pro forma weighted average number
of common shares outstanding 2,362,000 1,300,000 3,682,000 (H)
============ ========= ==========
</TABLE>
F-4
INSTITUITIONAL EQUITY HOLDINGS, INC.
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
Pro Forma
<TABLE>
<CAPTION>
Institutional First Atlanta Consolidating Pro Forma
Holdings, Inc. Securities, L.L.C. (I) Total Entries Total
-------------- ----------------------- ----------- -------------- -------------
Revenues
<S> <C> <C> <C> <C> <C>
Commissions $ 8,573,690 $1,109,164 $ 9,682,854 $ - $ 9,682,854
Gain (loss) on firm securities accounts (290,682) - (290,682) - (290,682)
Underwriting and syndicate income 1,155,840 505,204 1,661,044 - 1,661,044
Other income 256,119 - 256,119 - 256,119
Interest income 14,859 7,407 22,266 - 22,266
------------- ----------- ------------ ---- -------------
Total Revenue 9,709,826 1,621,775 11,331,601 - 11,331,601
Costs and Expenses
Commissions paid to other broker-dealers 1,024,590 179,651 1,204,241 - 1,204,241
Employee compensation 8,619,955 1,312,931 9,932,886 - 9,932,886
General and administrative expenses 2,538,642 192,946 2,731,588 79,770 (E)
16,976 (F) 2,828,334
Interest Expense 769,522 11,241 780,763 - 780,763
----------- ----------- ------------ ---- ---------
(Loss) Before Preferred
Stock Dividend and Federal
Income Tax Expense (3,242,883) (74,994) (3,317,877) (96,746) (3,414,623)
Preferred Stock Dividend (87,944) - (87,944) - (87,944)
Federal Income Tax Expense - - - - -
---- ------- ------- -- -----
Net (Loss) $(3,330,827) $ (74,994) $(3,405,821) $ (96,746) $(3,502,567)
=========== =========== =========== ========== ===========
Net (Loss) Per Share $ (1.64) $ (0.06) $ (1.05)
============== ============= ==============
Pro forma weighted average number
of common shares outstanding 2,028,000 1,300,000 3,348,000 (H)
============ ========== ==========
</TABLE>
F-5
INSTITUITIONAL EQUITY HOLDINGS, INC.
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
(A) The following summarizes the actual purchase amounts as of August 18, 2000:
<TABLE>
<S> <C>
Liabilities Assumes by the Company
Accounts Payable and
Accrued Liabilities $ 137,027
Note Payable 100,000
--------
Total Liabilities Assumed 237,027
Assets Purchased 143,906
----------
Net Liabilities Assumed 93,121
Estimated Purchase Price:
Issuance of 1,300,000 shares of
the Company's common stock
at an estimated fair value of $0.8488 1,103,440
----------
Goodwill $1,196,561
==========
</TABLE>
The estimated fair value of the Company's stock was determined by
averaging the bid price ($0.6875) and the asked price ($1.01) at August
18,2000.
Goodwill will be amortized over a fifteen (15) year period.
(B) Reverse June 30, 2000 accounts payable and accrued liabilities amounts of
First Atlanta.
(C) To record the par value and paid-in-capital related to the 1,300,000 shares
of common stock issued by the Company:
<TABLE>
<S> <C>
Number of Shares 1,300,000
Estimated Fair Value Per Share
at August 18,2000 x $0.8488
----------
1,103,440
Less: Par Value of 1,300,000 shares at $.01 (13,000)
---------
Paid-In-Capital $1,090,440
==========
</TABLE>
(D) Reverse the members' capital of First Atlanta at June 30, 2000.
F-6
INSTITUITIONAL EQUITY HOLDINGS, INC.
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
(E) Amortization of goodwill over a fifteen (15) year period:
Goodwill $1,196,561
Number of Years /15
----------
Yearly Amortization $ 79,770
/ 2
Six Month Amortization $ 39,885
===========
(F) The Company entered into a consulting agreement with one of First Atlanta's
members to provide consulting
services for a period of one year, commencing with the closing of the
transaction in exchange for 20,000 unregistered shares of the Company's
common stock.
Shares Issued 20,000
Fair Value Per Share x $0.8488
----------
Value of Consulting Services $ 16,976
/ 12
Monthly Amortization $1,415
Amortization Period as of
June 30, 2000 x 6
-------
Amortization Cost - June 30, 2000 $ 8,490
============
(G) Records the issuance of 20,000 shares of the Company's common stock
Number of Shares 20,000
Par Value Per Share x $0.01
-----------
$ 200
Additional Paid-In Capital 16,776
------------
Fair Value of Shares Issued $ 16,976
===========
F-7
INSTITUITIONAL EQUITY HOLDINGS, INC.
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
(H) Outstanding common share are as follows:
<TABLE>
<S> <C> <C>
December 31, June 30,
1999 2000
--------------- -----
Company's weighed average
number of common shares
outstanding 2,028,000 2,362,000
Shares issued in connection
with acquisition 1,300,000 1,300,000
Shares issued in connection
with consulting agreement 20,000 20,000
------- ----------
3,348,000 3,682,000
========== =========
</TABLE>
(I) The statement of operations for the six month period ended June 30, 2000,
includes the six month results of operations of IEH and the three month results
of operations for FAS. The statement of operations for the year ended December
31, 1999 includes the twelve months results of operations for IEH for the year
ended December 31, 1999 and includes the twelve months results of operations for
FAS for the fiscal year ended March 31, 2000.
F-8
RUBIO & COMPANY, PC
CERTIFIED PUBLIC ACCOUNTANTS One Securities Centre Suite 1212
3490 Piedmont Road
Atlanta, Georgia 30305
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
First Atlanta Securities, L.L.C.
We have audited the accompanying statement of financial condition of First
Atlanta Securities, L.L.C. as of March 31, 2000 and 1999, and the related
statements of operations, changes in members' equity (deficit) and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Atlanta Securities,
L.L.C. at March 31, 2000 and 1999, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
Our audit as of March 31, 2000 was conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole. The information
contained in Schedules I and II is presented for purposes of additional analysis
and is not a required part of the basic financial statements, but is
supplementary information required by Rule 17a-5 of the Securities and Exchange
Commission. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements, and in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
RUBIO & COMPANY, PC
April 26, 2000
Atlanta, Georgia
F-9
FIRST ATLANTA SECURITIES, L.L.C.
STATEMENT OF FINANCIAL CONDITION
ASSETS
<TABLE>
<CAPTION>
March 31,
----------------------------------------------
June 30,
2000 1999 2000
------------- --------------- ----------
(Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 53,824 $ 4,311 $ 8,511
Deposit with clearing broker-dealer 25,000 25,000 25,000
Receivable from clearing broker-dealer 81,109 4,279 7,043
Due from brokers 27,559 32,659 -
Due from officer (Note 3) - 24,050 -
Cash and cash equivalents, pledged
under subordinated note (Note 7) 100,000 100,000 100,000
Other assets 654 30 3,352
----------- ----------- ----------
Total Assets $ 288,146 $190,329 $ 143,906
LIABILITIES AND MEMBERS EQUITY (DEFICIT)
LIABILITIES:
Accounts Payable $1,102 $ 14,034 $18,638
Due to clearing broker dealer 176 3,224 -
Accrued liabilities:
Commissions and wages 115,759 32,883 41,179
Interest 10,582 4,667 12,582
Payable to brokers - - 63,166
-- -- -------
Total Liabilities 127,619 54,808 135,565
-------- ------- ----------
SUBORDINATED NOTE (NOTE 7) 100,000 100,000 100,000
-------- -------- ---------
MEMBERS' EQUITY (DEFICIT) (NOTE 8) 60,527 35,521 (91,659)
--------- --------- ----------
$ 288,146 $ 190,329 $ 143,906
</TABLE>
The accompanying notes are an integral part of these financial statements
F-10
<PAGE>
FIRST ATLANTA SECURITIES, L.L.C.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
March June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
--------- ------------- ---------------
REVENUES:
<S> <C> <C> <C> <C>
Commission $1,109,164 $ 341,431 $ 207,186 $171,048
Investment banking (Note 2) 505,204 - 32,500 -
Interest 7,407 2,797 3,076 1,181
Other - - 4,828 4,099
---------- ------------- -------- ----------
1,621,775 344,228 247,590 176,328
---------- ---------- ---------- --------
Expenses:
Employee compensation and benefits 1,139,677 504,038 264,447 89,700
Clearance fees 179,651 84,690 40,689 40,966
Management fees (Note 3) 173,254 17,550 - -
Communications and data processing 79,770 49,410 22,524 21,109
Interest (Note 7) 11,241 6,065 2,749 2,229
Other expense 113,176 129,826 69,367 11,332
--------- ---------- ----------- ---------
1,696,769 791,579 399,776 165,336
----------- ---------- ---------- --------
NET (LOSS) INCOME $ (74,994) $ (447,351) $(152,186) $ 10,992
</TABLE>
The accompanying notes are an integral part of these financial statements
F-11
<PAGE>
FIRST ATLANTA SECURITIES, L.L.C.
STATEMENT OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
AND THREE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Retained Paid-In (Accumulated
Earnings Equity Deficit)
<S> <C> <C> <C>
Total
BALANCE, MARCH 31, 1998 $184,416 $ (104,544) $ 79,872
Equity contributions 403,000 - 403,000
Net Loss - (447,351) (447,351)
---------- --------- --------
BALANCE, MARCH 31, 1999 587,416 (551,895) 35,521
Equity contribution 100,000 - 100,000
Net Loss - (74,994) (74,994)
---------- ------------ ---------
BALANCE, MARCH 31, 2000 $ 687,416 $(626,889) $ 60,527
Net Loss (Unaudited) - (152,186) (152,186)
---------- ----------- --------
BALANCE, JUNE 30, 2000
(Unaudited) $687,416 $(779,075) $(91,659)
</TABLE>
The accompanying notes are an integral part of these financial statements
F-12
FIRST ATLANTA SECURITIES, L.L.C.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
March 31, June 30,
2000 1999 2000 1999
--------- -------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (74,994) $(447,351) $ (152,186) $ 10,991
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Change in:
Receivable from clearing broker-dealer (76,830) 14,296 74,066 4,279
Due from (to) brokers 5,100 (32,659) 90,725 32,659
Other assets (625) 512 (2,698) (1,731)
Accounts payable and accrued expenses 75,860 40,958 (55,044) (1,416)
Due to clearing broker-dealer (3,048) (12,612) (176) (3,224)
-------- ---------- ---------- ---------
Net cash used by operating activities (74,537) (436,856) (45,313) 41,558
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Members' equity contributions 100,000 403,000 - -
------- ------- ---- ------------
Net cash provided by financing activities 100,000 403,000 - -
------- ------- ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Due from related parties - 5,475 - -
Advances to officer 24,050 24,050 - (29,623)
-------- -------- ---- ---------
Net cash provided (used) by investing activities 24,050 (18,575) - (29,623)
-------- -------- ----------- --------
NET INCREASE (DECREASE) FOR YEAR 49,513 (52,431) (45,313) 11,935
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 4,311 56,742 53,824 4,311
------ ------- --------- ----------
END OF YEAR $ 53,824 $ 4,311 $ 8,511 $ 16,246
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 5,331 $ 1,398 $ 749 $ 229
</TABLE>
The accompanying notes are and integral part of these financial statements
F-13
FIRST ATLANTA SECURITIES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
(Including Notes Applicable to the Unaudited Periods)
MARCH 31, 2000 AND 1999
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
First Atlanta Securities, L.L.C. (the "Company") is a Georgia Limited Liability
Company, which is primarily engaged in brokerage of securities and other
financial products to customers primarily located in the Southeast United
States.
Cash Equivalents
The Company considers all cash and money market instruments with a maturity of
ninety days or less to be cash and cash equivalents.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires the use of estimates in determining the Company's
assets, liabilities, revenues and expenses. Actual results may differ from those
estimates.
Income Taxes
The Company has elected to be taxed as a partnership. Partnerships are not
taxable entities under the provisions of the Internal Revenue Code, and
accordingly, the Company has not provided for federal or state income taxes. The
principles of the Company report their respective shares of the taxable income
or loss of the Company in their individual tax returns.
NOTE 2-RESTRICTED INVESTMENT
The investment banking revenues earned during the fiscal year ended March 31,
2000 were earned from approximately six customers.
NOTE 3-RELATED PARTIES
The Company has a management agreement with its controlling member/owner. Under
the agreement, the member/owner pays certain administrative expenses and
provides the Company with office facilities, including furniture, fixtures and
office equipment, in exchange for discretionary management fees. Discretionary
management fees are payable so long as such fees do not cause net capital to
fall below the amount of net capital required by the rules of the Securities and
Exchange Commission and any and all state securities commissions. The advances
to an officer at March 31, 2000, are non-interest bearing and are due on demand.
Financial position and results of operations would differ from the amounts in
the accompanying financial statements if the aforementioned related party
transactions had not occurred.
NOTE 4-LOSSES AND MEMBERS EQUITY
The Company incurred losses during 1999 and 1998, which were funded by capital
contributions from its members. The Company expects to receive additional
capital contributions, as needed, in future periods to fund any future losses
and provide adequate net capital.
F-14
FIRST ATLANTA SECURITIES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
(Including Notes Applicable to the Unaudited Periods)
MARCH 31, 2000 AND 1999
NOTE 5-NET CAPITAL REQUIREMENTS
The Company, as a registered broker-dealer, is subject to the Securities and
Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), which requires the
maintenance of minimum net capital and requires that the ratio of aggregate
indebtedness to net capital, both as defined, shall not exceed 15 to 1. At March
31, 2000, the Company had net capital of $132,314, which was $82,314 in excess
of its required net capital of $50,000 and the ratio of aggregate indebtedness
to net capital was .965 to 1.0.
NOTE 6-OMMITTED COMPUTATIONS AND SCHEDULES
The following statements and computations are not applicable at March 31, 2000,
and for the year then ended and accordingly, are not included herein.
(a) Computation for determination of the reserve requirements under Exhibit
A of S.E.C. Rule 15c3-3.
(b) Information relating to the possession or control requirements under
S.E.C. Rule 15c3-3.
NOTE 7-SUBORDINATED NOTE
The borrowing under a subordinated loan agreement is due on December 31, 2001,
bears interest at 8%, and is collateralized by money market assets of March 31,
2000 and municipal bonds at March 31, 1999 with a fair market value of
approximately $109,000, at March 31, 2000. During December 1999, the loan was
transferred by the original creditor to an entity related to the Company.
The subordinated borrowing is available in computing net capital under the
Securities and Exchange Commission's uniform net capital rule. To the extent
that such borrowings are required for the Company's continued compliance with
minimum net capital requirements, they may not be repaid.
NOTE 8-SUBSEQUENT EVENT
In April 2000, the members agreed to sell all of their interest in the Company
to Institutional Equity Holdings, Inc., a registered broker-dealer located in
Texas, in exchange for common stock of Institutional Equity Holdings, Inc.
F-15
SUPPLEMENTARY INFORMATION
FIRST ATLANTA SECURITIES, L.L.C.
SCHEDULE I
COMPUTATION OF NET CAPITAL UNDER RULE 15c3-1 OF THE SECURITIES AND EXCHANGE
COMMISSION
<TABLE>
<CAPTION>
MARCH 31, 2000
<S> <C>
Total members' equity qualified for net capital $ 60,527
Add: Liabilities subordinated to claims of general
creditors allowable in computation of net capital 100,000
Other deductions or allowable credits -
----
Total capital and allowable subordinated liabilities 160,527
Deductions for non-allowable assets (28,213)
--------
Net capital $132,314
Computation of Basic Net Capital Requirement
Minimum net capital required $ 50,000
Excess net capital $ 82,314
Aggregate indebtedness $127,619
Percentage of aggregate indebtedness to net capital 96.5%
</TABLE>
Reconciliation of net capital as computed by the Company on its FOCUS IIA report
for the quarter ended March 31, 2000, and the audited financial statements as of
that date:
There was no difference between net capital as computed above and net capital
reported on FOCUS IIA.
F-16
FIRST ATLANTA SECURITIES, L.L.C.
SCHEDULE II
SCHEDULE OF CHANGES IN LIABILITIES
SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
MARCH 31, 2000
Balance, March 31, 2000 and 1999 $100,000
F-17
