U.S. Securities and Exchange Commission
Washington, D. C. 20549
----------------------------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 8, 1999
LAIDLAW GLOBAL CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 33-37203-D 84-1148210
(State or other jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification Number)
100 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (212) 376-8800
FI-TEK V, INC.
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits
a. Financial Statements: Consolidated financial statements for Laidlaw
Global Corporation and its subsidiaries Laidlaw Holdings, Inc.,
Laidlaw Global Securities, Inc., Howe & Rusling, Inc. and Global
Electronic Exchange, Inc. (but not Westminster Securities Corporation)
for the quarter ended March 31, 1999 and 1998, for the year ended
December 31, 1998, for the period from June 1, 1997 to December 31,
1999, and for the fiscal year ended May 31, 1997, are located at pages
3 through 34 of this report.
b. Pro Forma Financial Information: Pro forma consolidated financial
statements of operations of Laidlaw Global Corporation and its
subsidiaries (including Westminster Securities Corporation) for the
year ended December 31, 1998 and for the period ended June 30, 1999
and pro forma balance sheet for Laidlaw Global Corporation and its
subsidiaries (including Westminster Securities Corporation) at June
30, 1999, are located at pages 35 through 39 of this report.
c. Exhibits:
Exhibit Number Description of Exhibit
-------------- ----------------------
2.1 Plan and Agreement of Reorganization among
Fi-Tek V, Inc., Laidlaw Holdings, Inc. and
Westminster Securities Corporation, dated May
27, 1999.*
17.1 Letter of Ronald J. Miller's resignation, dated
June 7, 1999.*
17.2 Letter of Frank L. Kramer's resignation, dated
June 7, 1999.*
23.3 Opinion of Auerbach, Pollak & Richardson, Inc.,
dated June 2, 1999.*
27.1 Financial Data Schedule for the year ended
December 31, 1999 (period ended June 30, 1999)
27.2 Financial Data Schedule for the year ended
December 31, 1998 (period ended June 30, 1999)
27.3 Financial Data Schedule for the year ended
December 31, 1998
27.4 Financial Data Schedule for the year ended
December 31, 1997
* The referenced exhibits have been previously filed as exhibits to the
Company's report on Form 8-K dated June 8, 1999 and are incorporated by
reference as part of this report.
2
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
LAIDLAW HOLDINGS, INC. AND SUBSIDIARIES
For the six months ended June 30, 1999 and 1998,
For the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
3
<PAGE>
C O N T E N T S
Page
----
Reports of Independent Certified Public Accountants 5 - 7
Financial Statements
Consolidated Balance Sheets 8
Consolidated Statements of Operations 9
Consolidated Statement of Changes in Stockholders' Equity (Deficit) 10
Consolidated Statements of Cash Flows 11 - 12
Notes to Consolidated Financial Statements 13 - 34
4
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Laidlaw Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Laidlaw Holdings,
Inc. and Subsidiaries as of December 31, 1998, and the related consolidated
statements of operations, changes in stockholders' deficit and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Laidlaw Holdings,
Inc. and Subsidiaries as of December 31, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ Grant Thornton LLP
- ----------------------
New York, New York
March 3, 1999, (except for Notes A, C, F, G, L, and R,
the date of which is August 9, 1999)
5
<PAGE>
KPMG
345 Park Avenue
New York, NY 10154
Independent Auditors' Report
The Board of Directors and Stockholders
Laidlaw Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Laidlaw Holdings,
Inc. and subsidiaries as of May 31, 1997 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Laidlaw Holdings,
Inc. and subsidiaries as of May 31, 1997, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
- ------------------
New York, New York
July 24, 1997
6
<PAGE>
KPMG
345 Park Avenue
New York, NY 10154
Independent Auditors' Report
The Board of Directors and Stockholders
Laidlaw Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Laidlaw Holdings,
Inc. and subsidiaries as of December 31, 1997 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the period from June 1, 1997 to December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Laidlaw Holdings,
Inc. and subsidiaries at December 31, 1997, and the results of their operations
and their cash flows for the period from June 1, 1997 to December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
- ------------------
New York, New York
March 6, 1998
7
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of As of As of As of
June 30, June 30, December 31, December 31,
1999 1998 1998 1997
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 4,476,416 $ 1,304,682 $ 1,939,429 $ 2,082,009
Escrow Deposit with clearing broker 5,131,774 -- -- --
Restricted cash - Limited Partnerships -- -- -- 134,547
Receivable from clearing broker 1,240,325 462,578 84,590 539,323
Securities owned 903,507 1,066,717 885,244 153,317
Equipment and leasehold improvements at
cost, net of accumulated depreciation and
Amortization 814,107 632,954 701,652 698,485
Goodwill, net of accumulated amortization 4,369,918 4,530,286 4,450,102 4,610,470
Investment banking and syndicate fees 1,045,144 464,187 421,823 33,291
receivable
Asset management fees receivable 49,950 62,393 113,500 238,642
Other receivables 92,568 119,382 70,102 184,690
Deposits 379,553 372,121 371,993 381,070
Prepaid and other assets 674,165 625,425 550,437 484,176
----------- ----------- ----------- -----------
Total assets $19,177,427 $ 9,640,725 $ 9,588,872 $ 9,540,020
=========== =========== =========== ===========
LIABILITIES AND EQUITY
Notes payable $ 1,150,000 $ 2,872,917 $ 2,775,000 $ 5,629,033
Private placement escrow fund payable 5,131,774 -- -- --
Accounts payable and accrued expenses 965,113 1,242,594 1,727,347 1,696,164
Commissions and compensation payable 761,080 548,235 643,952 775,312
Litigation reserve 198,501 536,046 470,000 720,000
Deferred revenue 633,495 619,740 584,464 496,115
Other liabilities 730,403 582,082 594,893 798,046
----------- ----------- ----------- -----------
Total liabilities 9,570,366 6,401,614 6,795,656 10,114,670
COMMITMENTS AND CONTINGENCIES
Convertible Subordinated Notes, 8% due 2003 -- -- 2,460,000 --
Senior Secured Euro-notes, 12% due 2002 2,305,000 2,305,000 2,220,000 2,305,000
Minority interest 378,092 397,073 382,286 283,341
Stockholders' equity
Preferred stock - Series C 1 250,000 250,000 250,000
Common stock 126 391,452 391,452 275,249
Additional paid-in capital 28,006,443 19,701,394 19,701,394 15,613,835
Accumulated deficit (21,082,601) (19,805,808) (22,611,916) (19,302,075)
----------- ----------- ----------- -----------
Total stockholders' equity (deficit) 6,923,969 537,038 (2,269,070) (3,162,991)
----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity (deficit) $19,177,427 $ 9,640,725 $ 9,588,872 $ 9,540,020
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the
For the For the period from
six months six months For the June 1, 1997 For the
ended ended year ended to year ended
June 30, June 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues
Commissions $ 3,616,835 $ 3,156,324 $ 5,803,642 $ 4,154,955 $ 10,545,182
Trading gains, net 3,245,084 1,961,261 3,195,045 1,372,643 3,951,377
Syndicate and underwriting 25,403 50,258 898,242 433,669 2,661,708
fees
Corporate finance fees 648,392 1,672,111 1,062,341 474,016 1,767,015
Asset management fees 2,998,499 3,098,751 5,978,185 3,148,193 1,784,820
Interest 127,548 137,887 298,972 147,725 350,416
Other 1,178,511 795,734 1,013,654 65,756 850,988
------------ ------------ ------------ ------------ ------------
Total revenues 11,840,272 10,872,326 18,250,081 9,796,957 21,911,506
------------ ------------ ------------ ------------ ------------
Expenses
Commissions 3,445,092 3,351,704 5,705,142 3,863,314 9,365,796
Salary and benefits 3,147,260 3,943,291 7,626,936 4,405,796 7,081,018
Professional fees 237,081 293,592 701,199 467,212 904,779
Communications and
Information systems 676,574 697,730 1,366,441 627,184 1,580,312
Clearing fees 632,295 580,823 1,195,581 826,666 1,577,188
Rent and utilities 599,592 613,271 1,389,420 829,391 1,413,644
Client-related marketing 407,503 397,095 940,217 473,313 567,394
Depreciation and amortization 259,832 262,519 379,256 421,247 365,812
Interest 424,108 417,403 741,944 405,048 501,419
Office 195,013 197,968 411,844 260,274 595,320
Other 129,324 506,932 1,002,998 582,832 1,368,485
------------ ------------ ------------ ------------ ------------
Total expenses 10,153,674 11,262,328 21,460,978 13,162,277 25,321,167
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
MINORITY INTEREST 1,686,598 (390,002) (3,210,897) (3,365,320) (3,409,661)
Minority interest (109,807) (113,732) (98,945) 22,988 (18,455)
------------ ------------ ------------ ------------ ------------
INCOME (LOSS)
BEFORE TAXES 1,576,791 (503,734) (3,309,842) (3,342,332) (3,428,116)
Provision for income taxes
-- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 1,576,791 $ (503,734) $ (3,309,842) $ (3,342,332) $ (3,428,116)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
<TABLE>
<CAPTION>
Common
stock
Preferred C Preferred D Preferred E Preferred F Amount
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at May 31, 1996 250,000 4,000,000 5,000,000 100 $ 36,712
Net loss -- -- -- -- --
Retirement of Preferred class D ( 80,000 shares) -- (4,000,000) -- -- --
Retirement of Preferred class E ( 100,000 shares) -- -- (5,000,000) -- --
Retirement of Preferred class F ( 1 share) -- -- -- (100) --
Capital contributions related to the conversion
of debt and preferred stock to common stock
(361,576 shares) -- -- -- -- 361,576
------------ ------------ ------------ ------------ ------------
Balance at May 31, 1997 250,000 -- -- -- 398,288
Net loss -- -- -- -- --
Issuance of common stock in settlement of payment
of Cumulative Dividends (5,106,695) shares -- -- -- -- (123,039)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1997 250,000 -- -- -- 275,249
Net loss -- -- -- -- --
Capital contributions related to the conversion
of PUSA Notes Receivable to common stock
(2,234,062 shares) -- -- -- -- 116,203
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 250,000 -- -- -- 391,452
Net income -- -- -- -- --
Reduction in par value of common stock -- -- -- -- (391,374)
Reduction in par value of preferred stock (249,999) -- -- -- --
Issuance of common stock to Fi-Tek (1,000,000 -- -- -- -- 10
shares)
Capital contribution related to the conversion of
8% Subordinated Notes (3,902,425 shares) -- -- -- -- 38
------------ ------------ ------------ ------------ ------------
Balance at June 30, 1999 $ 1 -- -- -- $ 126
============ ============ ============ ============ ============
<CAPTION>
Additional
paid-in Accumulated
capital deficit Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance at May 31, 1996 $ 4,735,645 $(12,531,627) $ 1,490,830
Net loss -- (3,428,116) (3,428,116)
Retirement of Preferred class D ( 80,000 shares) -- -- (4,000,000)
Retirement of Preferred class E ( 100,000 shares) -- -- (5,000,000)
Retirement of Preferred class F ( 1 share) -- -- (100)
Capital contributions related to the conversion
of debt and preferred stock to common stock
(361,576 shares) 10,755,151 -- 11,116,727
------------ ------------ ------------
Balance at May 31, 1997 15,490,796 (15,959,743) 179,341
Net loss -- (3,342,332) (3,342,332)
Issuance of common stock in settlement of payment
of Cumulative Dividends (5,106,695) shares 123,039 -- --
------------ ------------ ------------
Balance at December 31, 1997 15,613,835 (19,302,075) (3,162,991)
Net loss -- (3,309,842) (3,309,842)
Capital contributions related to the conversion
of PUSA Notes Receivable to common stock
(2,234,062 shares) 4,087,559 -- 4,203,762
------------ ------------ ------------
Balance at December 31, 1998 19,701,394 (22,611,917) (2,269,071)
Net income -- 1,529,316 1,529,316
Reduction in par value of common stock 391,374 -- --
Reduction in par value of preferred stock 249,999 -- --
Issuance of common stock to Fi-Tek (1,000,000 -- -- 10
shares)
Capital contribution related to the conversion of 8%
Subordinated Notes (3,902,425 shares) 7,663,676 -- 7,663,714
------------ ------------ ------------
Balance at June 30, 1999 $ 28,006,443 $(21,082,601) $ 6,923,969
============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
10
<PAGE>
Laidlaw Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
For the For the period from
six months six months For the June 1, 1997 For fiscal
ended ended year ended To year ended
June 30, June 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 1,576,791 $ (503,734) $(3,309,842) $(3,342,332) $(3,428,116)
Adjustments to reconcile net
income (loss) to net cash used in
operating activities
Depreciation and amortization 259,832 262,519 379,256 421,247 365,812
Bad debt expense -- -- -- -- 230,533
Minority interest in earnings 109,807 113,732 98,945 (22,988) 18,455
(Increase) decrease in operating assets
Restricted Cash-Limited Partnership -- 134,547 134,547 190,702 (325,249)
Receivable from clearing broker (1,155,735) 76,745 454,733 355,952 2,408,502
Securities owned (18,263) (913,400) (731,927) 79,168 2,899,598
Investment banking & syndicate
fees receivable (623,321) (450,896) (388,532) 547,987 (547,987)
Assets management fees
receivable 63,553 238,642 125,139 (238,642)
Notes receivable 859,929
Other receivables (22,462) 22,915 114,588 255,891 (290,460)
Deposits (7,560) 8,949 9,077 45,102 (97,986)
Prepaid and other assets (123,728) (141,249) (66,261) 38,185 (293,314)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (512,234) (453,570) 31,186 624,528 (722,954)
Commissions and compensation payable 117,128 (227,077) (131,360) (85,983) (768,569)
Deferred revenue 49,031 123,625 88,349 (79,959) 576,074
Litigation reserve (271,499) (183,954) (250,000) -- (369,592)
Other liabilities 139,148 (215,954) (203,153) (190,484) (102,349)
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities (419,512) (2,108,160) (3,645,255) (1,401,626) 412,327
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities
Minority interest -- -- -- -- 306,329
Dividends to minority shareholders (114,001) -- -- -- --
Goodwill -- -- -- -- (4,810,928)
Purchase of equipment & leasehold
improvements (292,103) (90,059) (183,460) (123,664) (196,553)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (406,104) (90,059) (183,460) (123,664) (4,701,152)
----------- ----------- ----------- ----------- -----------
</TABLE>
11
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
For the
For the For the period from
six months six months For the June 1, 1997 For fiscal
ended ended year ended To year ended
June 30, June 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities
Proceeds from issuance of notes payable -- $ 1,447,647 $ 2,425,000 $ 2,096,666 $ 4,977,368
Repayment of notes payable (1,625,000) -- (1,075,270) -- (2,346,318)
Payments for lease equipment (18,763) (26,756) (38,596) (68,801) (89,220)
Proceeds (repayment) of senior secured
Euro-note 85,000 -- (85,000) -- --
Proceeds from issuance of convertible
subordinated loan 4,829,163 -- 2,460,000 -- --
Proceeds of subordinated loan -- -- -- (625,000) 625,000
Proceeds from issuance of common stock -- -- -- -- 361,576
Stock acquired through reverse 1,500 -- -- -- --
acquisition
Purchase of common stock through
exercise of options 90,700 -- -- -- --
Capital contributions related to debt
and equity redemptions and conversions -- -- -- -- 10,755,151
Retirement of Class D preferred stock -- -- -- -- (4,000,000)
Retirement of Class E preferred stock -- -- -- -- (5,000,000)
Retirement of Class F preferred stock -- -- -- -- (100)
Debt placement costs -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by
Financing activities 3,362,600 1,420,891 3,686,134 1,402,865 5,283,457
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash 2,536,984 (777,328) (142,581) (122,425) 994,632
Cash, beginning of year 1,939,429 2,082,010 2,082,010 2,204,435 1,209,803
------------ ------------ ------------ ------------ ------------
Cash, end of year $ 4,476,413 $ 1,304,682 $ 1,939,429 $ 2,082,010 $ 2,204,435
============ ============ ============ ============ ============
Supplemental disclosure of cash flow Information:
Cash paid during the year for
Interest $ 171,817 $ 221,804 $ 716,564 $ 215,280 $ 423,396
Conversion of PUSA notes
Receivable to common stock -- 4,203,762 4,203,762 -- 1,304,366
Conversion of convertible
subordinated
notes to equity 7,289,163
Conversion of cumulative
Dividends to common stock -- -- -- 1,103,833 --
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
1. Organization
Laidlaw Holdings, Inc. (the "Company" or "Laidlaw Holdings") is a
privately held company whose wholly-owned subsidiary engages in
securities brokerage, investment banking, and asset management,
offering a broad range of investment services to individual investors,
corporations and institutions worldwide. In addition to its
wholly-owned subsidiary, the Company is the majority stockholder of
H&R Acquisition Corp. ("HRAC"), the holding company for Howe &
Rusling, Inc., a registered investment advisor managing assets for
institutions, pension plans and individuals.
On June 8, 1999 Fi-Tek V Inc. ("Fi-Tek") a nonoperating public company
with 1,000,000 common shares outstanding and immaterial net assets
acquired more than 99% of the outstanding common stock of Laidlaw
Holdings in exchange for 9,999,333 shares of Fi-Tek (the
"Acquisition"). Simultaneously with the closing of the acquisition,
Fi-Tek changes its name from Fi-Tek V Inc. to Laidlaw Global
Corporation. Under generally accepted accounting principles, the
acquisition is considered to be a capital transaction in substance,
rather than a business combination. That is, the Acquisition is
equivalent to the issuance of stock by Laidlaw for the net monetary
assets of Fi-Tek, accompanied by a recapitalization, and is accounted
for as a change in capital structure. Accordingly, the accounting for
the acquisition is identical to that resulting from a reverse
acquisition, except that no goodwill is recorded. Under reverse
takeover accounting, the post reverse acquisition comparative
historical financial statements of the "legal acquirer" Fi-Tek, are
those of the "legal acquiree" Laidlaw Holdings (i.e. the accounting
acquirer). Laidlaw Global Corporation and Laidlaw Holdings are
collectively considered the Company.
The Company is a majority-owned subsidiary of Pacific USA Holdings
Corp. ("PUSA"), a wholly-owned subsidiary of Pacific Electric Wire &
Cable Co., Ltd., a Taiwanese industrial company. In addition to PUSA,
Europe Continents Holdings ("EC") is the other major stockholder of
the Company. Together, PUSA and EC own 68.03% and 99.53% of the
Company at June 30, 1999 and December 31, 1998.
2. Principles of Consolidation
The consolidated financial statements include the Company and its
wholly-owned and majority-owned subsidiaries. They have been prepared
in accordance with generally accepted accounting principles. All
significant intercompany transactions and balances among the
consolidated entities have been eliminated.
13
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE A (continued)
3. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
these estimates.
4. Reclassification
Certain reclassifications have been made to prior period amounts to
conform to the current period presentation.
5. Cash and Cash Equivalents
Cash and cash equivalents include cash in bank accounts and deposits
in money market accounts.
6. Securities Transactions
Customers' securities transactions are recorded on a settlement-date
basis with related commission income and expenses recorded on a
trade-date basis. Proprietary securities transactions are recorded on
a trade-date basis. Profit and loss arising from all securities
transactions entered into for the account and risk of the Company are
recorded on a trade-date basis.
Marketable securities are valued at market value, and securities not
readily marketable are valued at fair value as determined by
management. The resulting difference between cost and market (or fair
value) is included in trading gains, net.
7. Securities Sold, But Not Yet Purchased
Marketable securities sold, but not yet purchased, consist of trading
securities at quoted market values. The difference between the
proceeds received from securities sold short and the current market
value is included in trading gains, net.
8. Commissions
Commissions and related clearing expenses are recorded on a trade-date
basis as securities transactions occur.
14
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE A (continued)
9. Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation is recognized
on a straight-line basis over the estimated useful lives of property
and equipment ranging from five to seven years. Leasehold improvements
are amortized on a straight-line basis over the lesser of their
estimated useful lives or the terms of the related leases.
Equipment and leasehold improvements held and used by the Company are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable.
10. Goodwill
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis
over thirty years, the expected period to be benefited. The Company
assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows
of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows
expected to be realized from the intangible asset to its recorded
value. The assessment of the recoverability of goodwill will be
impacted if estimated future operating cash flows are not achieved.
Accumulated amortization was $397,845 and $360,845 as of June 30, 1999
and 1998, respectively, and $360,825 and $200,457 as of December 31,
1998 and 1997, respectively.
11. Deferred Rent Liability
The Company's lease for office space provides for no rental payments
during the first fourteen months of the lease and schedules lease
payments that increase during the term of the lease. Although rental
payments are not made on a straight-line basis, the Company has
recorded a deferred lease liability to recognize rental expense on a
straight-line basis over the life of the lease as required by
generally accepted accounting principles.
15
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE A (continued)
12. Syndicate and Underwriting Fees
Syndicate and underwriting fees include gains, losses and fees, net of
syndicate expenses, arising from securities offerings in which the
Company acts as an underwriter or agent. These fees are recorded on
the offering date, sales concessions on the settlement date and
underwriting fees at the time the underwriting is completed and the
income is reasonably determinable.
13. Corporate Finance Fees
Corporate finance fees are received from providing advisory and due
diligence services for proposed financings that do not result in
either the offering of private or public financing. Fees are
recognized when earned.
14. Asset Management Fees
The Company computes income and commissions expense on a quarterly
basis and amortizes them for financial statement purposes on a monthly
basis.
15. Income Taxes
The Company files a consolidated Federal income tax return and a
combined return for state and city purposes with its subsidiaries. The
consolidated or combined taxes payable are generally allocated between
the Company and its subsidiaries based on their respective
contributions to consolidated or combined taxable income.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
16
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE A (continued)
16. Interim Period Information
The unaudited combined financial statements as of June 30, 1999 and
1998 for the six months ended June 30, 1999 and 1998 have been
prepared in accordance with generally accepted accounting principles
for interim financial information and the instruction to Form 10-QSB
and do not include all of the information and notes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments consisting
of normal recurring accruals considered necessary for a fair
presentation of the results for the interim period have been included.
NOTE B - SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED
Securities owned and securities sold, but not yet purchased (included
in "other liabilities") consist of trading and investment securities
at market values, as follows:
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998 December 31, 1998 December 31, 1997
------------- ------------- ----------------- -----------------
Sold, but Sold, but Sold, but Sold, but
not yet not yet not yet not yet
Owned purchased Owned purchased Owned purchased Owned purchased
----- --------- ----- --------- ----- --------- ----- ---------
(unaudited) (unaudited) (unaudited)(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity $ 31,562 $ 2,035 $ 47,469 $ 6,345 $ 47,469 $ 6,345 $153,317 $100,308
securities
Money market
investments 871,945 833,824 833,824
Corporate bonds -- -- 3,950 -- 3,950 -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
--------
$903,507 $ 2,035 $885,243 $ 6,345 $885,243 $ 6,345 $153,317 $100,308
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
17
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE C - LIQUIDITY AND REORGANIZATION
During the period from January 1, 1998 to December 31, 1998, the Company
continued to suffer losses from operations. For the period from January 1,
1998 to December 31, 1998, the Company incurred a loss of $3,309,842.
For the six months ended June 30, 1999, the Company had net income of
approximately $1,577,000.
On February 16, 1999, the Board of Directors of PUSA passed a resolution
authorizing sufficient, financial support for the Company for a period up
to twelve months from the date of the resolution to ensure that the Company
maintains its operational liquidity needs. Financial support is defined as
providing capital, loans, director or indirect guarantees of loans made by
unrelated parties, or other direct or indirect injections of funds into the
Company, such as through long-term commitments to fund certain services or
costs (i.e., commissions or transactions costs). This resolution neither
expires nor is unilaterally cancelable by PUSA for a period ending twelve
months from the date of the resolution.
In the past, the Company's reliance on external sources to finance a
significant portion of its day-to-day operations made access to long-term
financing important. The cost and availability of unsecured financing
generally are dependent on the Company's short-term and long-term perceived
creditworthiness. During the six months ended June 30, 1999, the Company
raised capital through the issuance of an additional $5,540,000 of 8%
Convertible Subordinated Notes.
The creditworthiness of the Company has improved substantially as a result
of the conversion, completed by June 30, 1999, of $8,000,000 of the 8%
convertible Subordinated Notes were converted into 3,902,425 shares of
common stock. Additionally, approximately $1,900,000 of the outstanding
Senior Secured Euro-Notes were converted into 912,682 shares of common
stock between July 1, 1999 and August 9, 1999. The change in debt structure
of the company will reduce interest expense by approximately $250,000 for
the remainder of the fiscal year ending December 31, 1999. The conversion
of these notes will contribute to a substantial improvements in the net
worth of the Company.
On July 1, 1999, the Company acquired more than 99% of the issued and
outstanding common stock of Westminister Securities Corporation
("Westminister") in exchange for 3,000,000 shares of common stock of
Laidlaw. Westminster had net income of $772,676 for the six months ended
June 30, 1999, and $827,686 for the twelve months ended December 31, 1998.
18
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE C (continued)
Management believes that the cash provided from continuing operations,
support from PUSA during fiscal-year 1999, the reorganization plans, and
the issuance of convertible debt converted into common stock should be
reasonably sufficient to cover any operating loss that may be incurred
during the remainder of the year. As reflected by the unaudited financial
statements for the six months ended June 30, 1999, the Company is operating
profitably.
Cash commitments for debt maturing, legal settlements, and noncancelable
long-term operating real and personal property leases during the remainder
of 1999 are approximately $1,600,000.
NOTE D - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of:
June 30, December 31,
------------------------ ----------------------
1999 1998 1998 1997
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Furniture and equipment $1,855,534 $1,378,313 $1,667,608 $1,232,638
Leasehold improvements 181,165 146,156 167,459 115,463
---------- ---------- ---------- ----------
2,036,699 1,524,469 1,835,067 1,348,101
Accumulated depreciation
and amortization 1,222,592 891,515 1,133,415 649,616
---------- ---------- ---------- ----------
Equipment and leasehold
improvements, net $ 814,107 $ 632,954 $ 701,652 $ 698,485
========== ========== ========== ==========
19
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE E - NOTES PAYABLE
Notes payable at June 30, 1999, June 30, 1998, December 31, 1998 and 1997
consist of the following:
<TABLE>
<CAPTION>
December 31,
June 30, June 30, --------------------
1999 1998 1998 1997
---------- ---------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
8% note payable to PUSA, principal and interest due $500,000 $ 500,000
January 20, 2000
8% note payable to PUSA, principal and interest due
May 28, 1998 $3,935,289
8% note payable, principal and interest due
March 1, 1999 375,000
10% note payable, principal and interest due on demand 200,000 250,000
15% note payable, principal and interest due December
1999 and December 2000 1,000,000 1,000,000 1,000,000
Note payable with floating interest rate linked to
prime, payable at $100,000 in January 1999 and balance
at $50,000 per month 150,000 400,000 400,000
Note payable with floating interest rate linked to
prime, payable monthly, principal due July 14, 1998 772,917 772,917
Note payable with floating interest rate linked to
prime, payable monthly, principal due December 31,
1998 400,000
10% note payable, principal and interest due April 2, 250,000
1999
8% note payable in operating installments of $104,167,
plus quarterly interest, secured by the personal
property of HRAC, and a life insurance policy on
Thomas G. Rusling - - - 520,827
---------- ---------- ---------- ----------
$1,150,000 $2,872,917 $2,775,000 $5,629,033
========== ========== ========== ==========
</TABLE>
20
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE E (continued)
The following schedule illustrates the maturity of the notes payable for
the next five years as of December 31, 1998:
Year ending December 31, Matured notes payable
------------------------ ---------------------
1999 $1,775,000
2000 1,000,000
2001 --
2002 --
2003 and thereafter --
----------
$2,775,000
==========
NOTE F - SENIOR SECURED EURO-NOTES
The 12% Senior Secured Euro-Notes ("Notes") were issued in 1997 in units of
$100,000 with a five-year warrant to purchase 6,881 shares of the Company's
nonvoting common stock, $.05 par value per share, at the exercise price of
$6.54 per share. The Notes are redeemable at the option of the Company, in
whole or in part, together with accrued and unpaid interest except that no
redemption may be made prior to December 31, 1999. The Notes contain
certain covenants that limit the ability of the Company to pay dividends or
make distributions, repurchase equity interests or sell or otherwise
dispose of assets of the Company's subsidiaries.
The Notes are collateralized by the outstanding shares of the Company's
subsidiary, Howe & Rusling Acquisition Corporation ("HRAC"), which owns
100% of the outstanding common stock of Howe & Rusling, with 20% subject to
Howe & Rusling Inc. employee options. In addition to the Notes, a portion
of its shares of capital stock of HRAC are pledged to PUSA. Each of the
Noteholders and PUSA have a proportionate security interest in HRAC stock.
Between July 1, 1999 and August 9, 1999, approximately $1,900,000 of the
outstanding Euro-notes were converted to 912,682 shares of common stock at
an exchange rate of $2.05 per share.
21
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE G - CONVERTIBLE SUBORDINATED NOTES
During the period from June 1998 to December 1998 $2,460,000 was raised
through a private placement offering for five-year, 8% Convertible
Subordinated Notes due June 9, 2003 ("the Offering"). During the six months
ended June 30, 1999, the Company raised an additional $5,540,000, through
the Offering. Noteholders have the right to "put" or to sell (the "Put") to
Pacific USA Holdings Corp. ("PUSA") such Notes for full payment, on
December 31, 1999 (the "Initial Put Date"), of principal and accrued
interest.
During the month of June, all of the 8% convertible subordinated notes
($8,000,000) were converted to 3,902,425 shares of Laidlaw common stock.
NOTE H - RELATED PARTY TRANSACTIONS
The Company's subsidiary pays certain operating expenses on its behalf in
its ordinary course of subsidiary business, for which the Company
reimburses the subsidiary. At December 31, 1998, the subsidiary had an
amount due to the Company of $34,976, which resulted from a net overpayment
by the Company of the advances made by the subsidiary.
A subsidiary of the Company has an agreement with Howe & Rusling Inc.
("H&R"), a majority-owned subsidiary, whereby it provides H&R with
management services. For these services, the subsidiary receives from H&R a
fee equal to 50% of H&R's adjusted annual net income with actual payments
not to exceed $200,000 per year. Any amounts earned in excess of $200,000
are accrued and paid by H&R in future years when the required payments are
less than $200,000.
During 1998, the Board of Directors of PUSA converted its $3,935,288 note
receivable and accrued interest of $268,474 to 2,324,062 shares of common
stock. Additionally, PUSA acquired 1,073,088 shares in the Company from a
former officer, increasing PUSA's ownership in the Company by approximately
26% to 81% as of December 31, 1998.
NOTE I - NET CAPITAL REQUIREMENTS
The Company's broker-dealer subsidiary is subject to the Securities and
Exchange Commission's Uniform Net Capital Rule (SEC 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 December 31, 1998, the subsidiary had net capital of $505,364,
which was $405,364 in excess of its required net capital of $100,000. At
June 30, 1999 the subsidiary had net capital of $195,445, which was $70,053
in excess of its required net capital of $125,392.
22
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE J - STOCKHOLDERS' EQUITY
The authorized, issued and outstanding shares of capital stock as of June
30, 1999, June 30, 1998, December 31, 1998 and December 31, 1997, are as
follows:
1. Preferred Stock - Series C - floating rate, cumulative, convertible
preferred stock of $100 per share, 20,000 shares authorized, 2,500
shares outstanding.
Series C Preferred Stock is entitled to cumulative annual dividends at
the rate of the three-month London Interbank Offer Rate ("LIBOR") plus
three hundred basis points. Unpaid cumulative dividends related to the
Series C Preferred Stock amount to approximately $140,000 at December
31, 1998, which approximated $56 on a per share basis.
In connection with the recapitalization on June 8, 1999 (see Note
A.1), the numbers of authorized preferred shares increased to
1,000,000 and the par value per share decreased to $0.00001.
2. Common Stock - At May 31, 1997, the Company had 398,288 authorized
shares of common stock of which 398,288 shares were issued and
outstanding with a par value of $1.
During July, 1997, the Company increased the number of authorized
shares to 8,400,000, decreased par value to $.05 and created a second
class of non-voting common stock. At December 31, 1998, June 30, 1998
and December 31, 1997 there were 7,829,045, 5,504,983, and 5,504,983
shares of common stock issued and outstanding.
In connection with the recapitalization on June 8, 1999, the
authorized number of voting common shares increased to 50,000,000
shares and par value decreased to $0.00001. At June 30, 1999 there
were 12,644,980 shares issued and outstanding. In addition, the
Company eliminated the 6,100,000 shares of authorized $0.05 par value
non-voting common stock.
23
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE K - CONCENTRATIONS OF CREDIT RISK
The Companies subsidiaries are engaged in various trading and brokerage
activities in which counterparties primarily include broker-dealers, banks,
and other financial institutions. In the event counterparties do not
fulfill their obligations, the Company may be exposed to risk. The risk of
default depends on the creditworthiness of the counterparty or issuer of
the instrument. It is the Company's policy to review, as necessary, the
credit standing of each counterparty.
NOTE L - COMMITMENTS AND CONTINGENCIES
1. The Company leases office space under noncancelable leases generally
varying from eight to twelve years, with certain renewal options.
At December 31, 1998, the Company's aggregate minimum rental payments
based upon the original term (including escalation clauses), under all
noncancelable leases which have an initial or remaining term of one
year or more, were as follows:
Year ending December 31,
1999 $ 1,168,212
2000 1,068,338
2001 1,053,848
2002 1,053,848
2003 1,053,848
Thereafter 4,984,068
-----------
10,382,162
Sublease payments (340,648)
-----------
Net lease commitments $10,041,514
===========
Rent expense for the six months ended June 30, 1999 and 1998 were
$599,592 and $613,271, respectively. Rent expense for the year ended
December 31, 1998 and for the period from June 1, 1998 to December 31,
1998 were $1,178,950 and $1,096,664, respectively. Rent expense for
the fiscal year ended May 31, 1997 was $1,413,644.
2. The Company leases computers under long-term leases and has the option
to purchase the computers for a nominal amount at the termination of
the lease.
24
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE L (continued)
Future minimum payments for capitalized leases were as follows at
December 31, 1998.
Fiscal year ending December 31,
1999 $ 19,525
2000 9,750
2001 9,750
-------
Total minimum payments 39,025
Less amount representing interest (5,076)
---------
Present value of net minimum
lease payments $ 33,949
=========
Subsequent to December 31, 1998, the Company entered into an
additional computer lease for $80,206 effective over a three year
period.
1. Litigation
In 1996, the Company settled a lawsuit with a former customer where
the Company agreed to pay $1,030,000 during the period from October
21, 1996 through December 31, 1998 payable in three actual
distributions of $200,000 due December 31, 1997 , $200,000 due June
30, 1998, and $200,000 due December 31, 1998. At December 31, 1998 and
1997, the Company accrued the unpaid remaining liability of $200,000
and $600,000 respectively. These amounts were paid in full by April
1999.
The Company is subject to various legal actions arising out of the
conduct of its business, including those relating to claims for
damages alleging violations of Federal and state securities laws. In
the opinion of management of the Company, amounts accrued for awards
or assessments in connection with these matters are adequate and
ultimate resolution of these matters will not have a material effect
on the Company's financial position, results of operations or cash
flows.
25
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE L (continued)
2. Redemption Agreement With Stockholder
Under the terms of a redemption agreement between the Company and a
former stockholder, the Company is obligated to pay up to $1,050,000,
payable in installments equal to 30% of the Company's consolidated
quarterly after-tax net income up to $1,050,000 payable 30 days after
the end of each fiscal quarter through May 31, 2001. On May 15, 1999,
this agreement was modified to provide for the payment by the issuance
of a convertible note for $393,750. In August 1999, this note was
converted to 15,136 shares of common stock.
NOTE M - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Company's subsidiaries perform
customer activities that involve the execution and settlement of various
customer securities transactions. These activities may expose the Company
to off-balance-sheet risk in the event the customer or other broker is
unable to fulfill its contracted obligations and the Company has to
purchase or sell the financial instrument underlying the contract at a
loss.
The Company's customer securities activities are transacted on either a
cash or margin basis. In margin transactions, the clearing broker extends
credit to the Company's customers, subject to various regulatory margin
requirements, collateralized by cash and securities in the customers'
accounts. However, the Company is required to contact the customer and to
either obtain additional collateral or to sell the customer's position if
such collateral is not forthcoming. The Company is responsible for any
losses on such margin loans.
The Company seeks to control the risks associated with these activities by
reviewing the credit standing of each customer and counterparty with which
it does business. Further, working with the clearing broker, it requires
customers to maintain collateral in compliance with various regulatory and
internal guidelines. Required margin levels are monitored daily pursuant to
such guidelines. Customers are requested to deposit additional collateral
or reduce security positions when necessary. The Company's exposure to
these risks becomes magnified in volatile markets.
In addition, the Company has sold securities that it does not currently own
and will, therefore, be obligated to purchase such securities at a future
date. The Company has recorded these obligations in the financial
statements at June 30, 1999 and 1998 and at December 31, 1998 and 1997 at
market values of the related securities, and will incur a loss if the
market values of the securities subsequently increase.
26
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE N - INCOME TAXES
The Company files a consolidated tax return for Federal tax purposes and
combined tax returns for state and city taxes. Taxes have not been provided
on the June 30,1999 net income because the Federal and state and local
taxes would be substantially offset by utilization of NOL carryforwards. As
of December 31, 1998, the Company has net operating loss carryforwards for
Federal income tax purposes of $16,526,296 available to offset future
taxable income. At June 30, 1999, the net operating loss carry forward
available to offset future taxable income was $12,330,216. Such
carryforwards reflect income taxes incurred which will expire as follows:
Fiscal year ending December 31,
2005 969,836
2006 through 2018 15,556,460
-----------
Total Carryforwards $16,526,296
===========
27
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE N (continued)
The components of the net deferred tax asset as of December 31, 1998 and
1997 consist of the following:
December 31,
June 30, --------------------------
1999 1998 1997
----------- ----------- -----------
(unaudited)
Federal $ 4,316,000 $ 4,717,000 $ 7,376,747
State and local 2,789,000 3,049,000
Temporary differences 51,248
----------- ----------- -----------
7,105,000 7,766,000 7,427,995
Valuation reserve (7,105,000) (7,766,000) (7,427,995)
----------- ----------- -----------
Recorded net tax asset $ -- $ -- $ --
=========== =========== ===========
The Company believes it is unlikely there will be any benefit realized from
the net operating loss carryforward. Accordingly, the deferred tax asset
applicable to operations subsequent to December 31, 1998 has been reduced
in its entirety by a valuation allowance.
28
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE O - TAX DEFERRED SAVINGS PLAN
The Company maintains a deferred compensation plan which covers
substantially all employees who are employed by the Company and its
affiliates who have attained the age of 21. The Company has appointed
individual trustees under the Plan and the assets are held with an outside
agent. All investments are stated at fair value. Additionally, the employer
reserves the right to terminate the Plan, in whole or in part, at any time.
The Plan allows each participant to contribute 15% of the participant's
annual compensation to the Plan. Employee contributions are vested
immediately. Furthermore, discretionary employer matching contributions are
made to the Plan. The Company has declared an employer matching
contribution for the 1998 Plan year in an amount equal to 25% of each
participant's salary deferrals to the extent such participant's
contribution does not exceed 4% of compensation. Vesting in the Company
match occurs ratably over a period of four years.
Expenses relating to the tax deferred savings plan were $20,657 and $35,978
for the six months ended June 30, 1999 and June 30, 1998, respectively.
Expenses related to the tax deferred savings plan were $71,341 and $41,616
for the year ended December 31, 1998 and for the period from June 1, 1997
to December 31, 1997. Expenses related to the tax deferred savings plan for
the fiscal year ended May 31, 1997 were $97,012.
NOTE P - INDUSTRY SEGMENTS
In 1998 and prior years, the Company operated in two principal segments of
the financial services industry: Asset Management and Broker Dealer
activities. Corporate services consist of general and administrative
services are provided to the segments from a centralized location and are
included in corporate and other.
Asset Management: Activities include raising and investing capital and
providing financial advice to companies and individuals throughout the U.S.
and abroad. Through this group the company provides client advisory
services and pursues direct investment in a variety of areas.
Broker Dealer: Activities include underwriting public offerings of
securities, arranging private placements and providing client advisory
services, trading, conducting research on, originating and distributing
equity and fixed income securities on a commission basis and for their own
proprietary trading accounts.
29
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE P (continued)
The following table sets forth the net revenues of these industry segments
of the Company's business.
<TABLE>
<CAPTION>
For the
period
Period ended Period ended Year ended June 1, 1997 to Year ended
June 30, June 30, December 31, December 31 May 31,
1999 1998 1998 1997 1997
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue from external
customers:
Asset management $ 2,154,597 1,860,118 $ 4,721,527 $ 2,910,306 $ 3,190,531
Broker-dealer 9,504,620 6,904,804 13,319,445 6,630,122 17,844,525
Corporate and
Other 181,055 2,107,404 209,109 256,529 876,450
----------- ----------- ----------- ----------- -----------
Total external
revenue $11,840,272 $10,872,326 $18,250,081 $ 9,796,957 $21,911,506
Intersegment revenues
Asset management -- -- -- 142,081 141,574
Broker-dealer 249,900 99,900 199,800 -- --
Corporate and other -- -- -- 250,000 300,000
----------- ----------- ----------- ----------- -----------
Total inter-
segment
revenue $ 249,900 99,900 $ 199,800 392,081 441,574
Interest revenue
Asset management -- -- -- 46,737 21,797
Broker-dealer -- -- 290,364 98,908 263,313
Corporate and other 127,548 137,887 8,608 2,080 65,306
----------- ----------- ----------- ----------- -----------
Total interest
revenue $ 127,548 $ 137,877 $ 298,972 $ 147,725 $ 350,416
</TABLE>
30
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE P (continued)
<TABLE>
<CAPTION>
For the
period
Period ended Period ended Year ended June 1, 1997 to Year ended
June 30, June 30, December 31, December 31 May 31,
1999 1998 1998 1997 1997
------------ ------------ ------------ --------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Interest expense
Asset Management 53,168 75,158 165,183 117,015 89,235
Broker-Dealer -- -- 31,955 10,617 --
Corporate and Other 370,940 342,245 554,806 277,416 412,184
------------ ------------ ------------ ------------ ------------
Total interest
expense 424,108 417,403 751,944 405,048 501,419
Depreciation and
amortization expense:
Asset management -- -- 86,328 54,563 --
Broker-dealer -- -- -- 531 --
Corporate and other 259,832 262,519 292,928 366,153 365,812
------------ ------------ ------------ ------------ ------------
Total depreciation
and amorti-
zation expense 259,832 262,519 379,256 421,247 365,812
Net income (loss)
Asset management 468,125 484,854 1,024,376 (30,836) 137,889
Broker-Dealer 1,526,656 (1,621,896) 690,697 (2,810,713) (3,068,056)
Corporate and Other (417,990) (633,308) (5,024,915) (500,783) (497,949)
------------ ------------ ------------ ------------ ------------
Total net income
(loss) 1,576,791 (1,770,350) (3,309,842) (3,342,332) (3,428,116)
Total Assets
Asset management 3,362,653 3,697,144 5,434,924 5,175,971 5,214,233
Broker-dealer 9,681,486 2,537,810 2,502,844 2,541,879 3,986,203
Corporate and other 6,133,288 3,405,771 1,651,104 1,822,170 2,033,937
------------ ------------ ------------ ------------ ------------
Total Assets $ 19,177,427 $ 9,640,725 $ 9,588,872 $ 9,540,020 $ 11,234,373
============ ============ ============ ============ ============
</TABLE>
31
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE Q - STOCK OPTIONS
During 1998, the Company established a stock option plan accounted for
under APB Opinion No. 25 and related interpretations. The plan allows the
Company to grant options to employees for up to 1,579,900 shares of common
stock at June 30, 1999. Options currently outstanding are exercisable
either immediately or up to three years from the grant date and expire five
years after the grant date. No compensation cost has been recognized for
the plan for the six months ended June 30, 1999 and 1998, for the year
ended December 31, 1998, for the period from June 1, 1997 to December 31,
1998 and for the fiscal year ended May 31, 1997. Had compensation cost for
the plan been determined based on the fair value of the options at the
grant dates consistent with the method of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation ("SFAS No.
123"), the Company's net income (loss) would have decreased from $1,576,791
and $(503,733) to the pro forma amount of $1,576,791 and $(503,733), for
the six months ended June 30, 1999 and June 30, 1998. The Company's net
loss would have decreased from $(3,309,842) to the pro forma amount of
$(4,287,565) for the year ended December 31, 1998. For the period from June
1, 1997 to December 31, 1997 and for the fiscal year ended May 31, 1997 the
Company's net loss would have increased from $(3,342,332) and $(3,428,116),
to a proforma amount of $(3,374,612) and $ (3,432,116), respectively.
A summary of the option activity for the six months ended June 30, 1999 and
1998, for the year ended December 31, 1998, for the period from June 1,
1997 to December 31, 1997 and for the fiscal year ended May 31, 1997 is as
follows:
<TABLE>
<CAPTION>
Six months ended June 30, Period from
---------------------------------------- June 1, 1997 -
Year ended December 31, Fiscal year
1999 1998 December 31, 1998 1997 May 31, 1997
------------------ ------------------ ------------------ ------------------ ------------------
Weighted- Weighted- Weighted- Weighted- Weighted-
average average average average average
exercise exercise exercise exercise exercise
Shares price Shares price Shares price Shares price Shares price
------ --------- ------ --------- ------ --------- ------ ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning
of period 1,003,500 $2.37 907,000 $0.10 907,000 $0.10 807,000 $0.10
Granted 757,400 $2.90 250,000 $3.50 96,500 $2.37 100,000 0.10 807,000 0.10
Balance, end of period 1,760,900 2.60 1,157,000 3.50 1,003,500 2.37 907,000 0.10 807,000 0.10
</TABLE>
32
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE Q (continued)
The status of outstanding stock options is summarized as of December 31,
1998 as follows:
Weighted- Weighted-
Range of average remaining average exercise
exercise Options contractual Options price of options
price outstanding life (years) exercisable exercisable
----- ----------- ------------ ----------- -----------
$0.10 907,000 4.47 907,000 $0.10
$1.25 503,500 4.55 -- --
$3.50 500,000 4.36 500,000 $3.50
The weighted-average fair value at date of grant for those options granted
in fiscal 1998 was $2.30. The fair value of each option at date of grant
was estimated using the Black-Scholes option pricing model utilizing the
following weighted-average assumptions:
<TABLE>
<CAPTION>
Year ended Period from Fiscal year
June 1, - ended
Six months ended June 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
<S> <C> <C> <C> <C> <C>
Expected dividend yield -- -- -- -- --
Risk-free interest rate 5.77% 5.77% 5.00% - 5.77% 5.64% 5.64%
Expected stock price
volatility 56 - 57% 42% 42% - 58% 37% - 38% 37% - 38%
Expected life of options 5 years 5 years 5 years 5 years 5 years
</TABLE>
33
<PAGE>
Laidlaw Holdings Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 1999 and 1998 (unaudited),
for the year ended December 31, 1998,
for the period from June 1, 1997 to December 31, 1997,
and for the fiscal year ended May 31, 1997
NOTE R - SUBSEQUENT EVENTS
On July 1, 1999, Laidlaw acquired more than 99% of the issued and
outstanding common stock of Westminster for 3,000,000 shares of common
stock of Laidlaw. Westminster is a registered broker-dealer of securities
based in New York, which is a member firm of the New York Stock Exchange
("NYSE"). Additionally, Laidlaw assumed the obligations of options granted
to certain employees of Westminster and, therefore, granted options to
purchase 60,000 shares of its common stock at a price per share of $3.50.
The acquisition will be accounted for as a purchase.
34
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Description of Transaction
On May 27, 1999, Laidlaw Holdings, Inc. ("Holdings"), Fi-Tek V, Inc. ("Fi-Tek")
and Westminster Securities Corporation ("Westminster") entered into a Plan and
Agreement of Reorganization ("the Agreement"). The transactions contemplated by
the Agreement were intended to be a reorganization. The Agreement also
contemplated the conversion of the Holdings 8% Convertible Subordinated Notes
("Subordinated Notes") to common stock at the rate of $2.05. In addition, as of
July 1, 1999 the holders of Holdings 12% Senior Secured Euro-Notes ("Euro
Notes") were granted the right to convert the Euro-Notes to common stock at the
rate of $2.05. These transactions, including the combination of the three
companies, are referred to collectively as the "reorganization".
On June 8, 1999, Fi-Tek acquired 99% of Holdings for 9,999,333 shares of common
stock ("the Acquisition"). Simultaneously with the acquisition Fi-Tek changed
its name to Laidlaw Global Corporation ("Global" or "the Company"). In
accordance with the reorganization, immediately prior to the acquisition Fi-Tek
caused a 1 for 32.4778 reverse stock split reducing the issued and outstanding
stock to 1,000,000 shares.
Under generally accepted accounting principles, the Acquisition is considered to
be a capital transaction in substance rather than a business combination. For
financial reporting and accounting purposes the Acquisition has been accounted
for as a reverse acquisition whereby Holdings is deemed to have acquired Fi-Tek.
Since Fi-Tek was a non-operating public company with immaterial assets, the
merger was recorded as the issuance of stock for the net monetary assets of
Fi-Tek accompanied by a recapitalization and no goodwill or other intangible
assets were recorded. Accordingly, the Company's financial statements reflect
the results of operations of Holdings for all prior periods presented and the
acquisition of Fi-Tek on June 8, 1999.
On July 1, 1999, Global acquired 99% of the issued and outstanding common stock
of Westminster for 3,000,000 shares of Global common stock valued at $1.25 per
share. The transaction has been accounted for as a purchase and resulted in the
recognition of $3,705,444 of goodwill. Goodwill will be amortized over 15 years
using the straight-line method.
Basis of Presentation
The accompanying pro forma statements of operations are presented for the year
ended December 31, 1998 and for the interim period ended June 30, 1999. The pro
forma statements are based upon historical results of the combining entities as
follows: Global and its accounting predecessor Holdings for the year ended
December 31, 1998 and the six months ended June 30, 1999; Fi-Tek for the period
ended November 30, 1998 and the six months ended June 30, 1999; Westminster for
the year ended January 31, 1999 and the six months ended June 30, 1999.
The pro forma balance sheet gives effect to the reorganization as if it had
occurred on January 1, 1999 and the pro forma statements of operations give
effect to the transactions as if it had occurred at the beginning of each of the
respective periods. The pro forma information set forth in the following tables
and the information included in the accompanying notes is presented for
informational purposes only.
In the opinion of management of the Company, all adjustments necessary to
present fairly such pro forma unaudited financial statements have been made. The
adjustments included in the unaudited pro forma financial statements represent
the Company's preliminary determination of those adjustments based on available
information. There can be no assurances that the actual adjustments will not
differ significantly from the pro forma adjustments reflected in the pro forma
consolidated financial information. The unaudited pro forma consolidated
financial statements are not necessarily indicative of what the actual financial
position and result of operations would have been had the reorganization
occurred on the dates indicated above, nor do they purport to represent the
future financial position or results of operations of the Company.
35
<PAGE>
Pro Forma Combined Balance Sheet
At June 30, 1999
<TABLE>
<CAPTION>
Proforma Adjustments
Historical Historical Subordinated Euro Note
---------- ---------- ------------ ---------
Laidlaw Global Westminster Westminster Notes Conversion Combined
-------------- ----------- ----------- ----- ---------- --------
Corp. June 30, Adjustments (Unaudited) (Unaudited) Notes June 30, 1999
----- -------- ----------- ----------- ----------- ----- -------------
June 30, 1999 1999 (4) (3) (Unaudited)
------------- ---- -----------
(Unaudited)
-----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents 4,476,416 $ 7,719 $ 160,865 $ 114,000 4,759,000
Escrow deposits with clearing broker 5,131,774 107,434 5,239,208
Due from clearing broker and other
receivables 2,397,867 2,397,867
Goodwill, net of accumulated
amortization 4,369,918 3,705,444 (1,2) 8,075,362
Equipment and leasehold improvements,
net of accumulated depreciation 564,828 564,828
Other 2,236,624 954,203 (111,124) 3,079,703
---------- --------- --------- ------- ------- ----------
Total Assets 19,177,427 1,069,356 3,705,444 160,865 2,876 24,115,968
---------- --------- --------- ------- ------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable 1,150,000 600,000 1,750,000
Private placement escrow fund payable 5,131,774 5,131,774
Accounts payable, accrued expenses and
other 3,288,592 $424,800
---------- ---------
3,713,392
----------
Total Liabilities 9,570,366 $1,024,800
---------- ---------
10,595,166
----------
COMMITMENTS AND CONTINGENCIES
12% SENIOR SECURED EURO- NOTES, DUE
JULY 2002 2,305,000 (1,912,000) 405,000
MINORITY INTEREST 378,092 378,092
STOCKHOLDERS' EQUITY Preferred C Stock;
$.00001 par value; 1,000,000 shares
authorized of the Company at June 30,
1999 and $100 par value; 20,000 shares
authorized of the Predecessor at
December 31, 1998; 2,500 shares issued
and outstanding by the Company on June
30, 1999 and by the Predecessor on
December 31, 1998 1 1
Common Stock; $.00001 par value;
50,000,000 shares authorized of the
Company at June 30, 1999 and $.05 par
value; 15,000,000 shares authorized of
the Predecessor at December 31, 1998;
12,644,980 shares issued and outstanding
by the Company on June 30, 1999 and
7,829,045 shares issued by the
Predecessor on December 31, 1998 126 30 9 (1) 165
Additional paid-in capital 28,006,443 3,749,970 1,782,345 (1) 33,526,758
(34,210)
Accumulated deficit (21,082,601) 44,556 (44,556) 195,075 132,522 (1,2)(20,789,214)
------------ ------ -------- ------- ------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 6,923,969 44,556 3,705,444 160,865 1,914,876 12,771,920
--------- ------ --------- ------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $19,177,427 $1,069,356 $3,705,444 $160,865 $2,876 24,150,178
======================================================================= ==========
</TABLE>
36
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Historical Historical Pro-forma Adjustments
---------- ---------- ---------------------
Holdings Fi-tek Westminster Subordinate
-------- ------ ----------- -----------
For the for the for the six Note EuroNote Combined
------- ------- ----------- ---- -------- --------
six months six months months Westminster Conversion Conversion June 30,
---------- ---------- ------ ----------- ---------- ---------- --------
ended ended (5) ended Adjustments (Unaudited) (Unaudited) 1999
----- --------- ----- ----------- ----------- ----------- ----
June 30, 1999 June 30, 1999 June 30, 1999 (6) (8) (7) (Unaudited)
------------- ------------- ------------- --- --- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Gross Commissions 6,629,501 $ 1,522,031 $8,151,532
Asset Management Fees 2,998,499 2,998,499
Investment income,
trading profit and
Corporate finance fees 1,847,819 1,847,819
Other 364,453 1,778,295 2,142,748
\ ---------- --------- ---------
Total Revenue 11,840,272 3,300,326 15,140,598
---------- --------- ----------
EXPENSES:
Salaries and other 3,147,260
employee costs 1,663,780 4,811,040
Commissions 3,445,092 3,445,092
Clearance and occupancy 1,405,365 159,218 1,564,583
Other (34,210) (18,522)
2 155,957 10,420 704,652 123,515 (160,864) (114,000) 2,666,948
--------- ------ ------- ------- --------- --------- ---------
Total expenses 10,153,674 10,420 2,527,650 123,515 (195,075) (132,522) 12,487,662
---------- ------ --------- ------- --------- --------- ----------
Income (loss) before
minority interest and
income taxes 1,686,598 (10,420) 772,676 (123,515) 195,075 132,522 2,652,936
--------- -------- ------- --------- ------- ------- ---------
Minority interest 109,807 109,807
Income (loss) before
income taxes 1,576,791 (10,420) 772,676 (123,515) (195,075) (132,522) 2,543,129
========================================================================================================
Income taxes -- --
NET INCOME (LOSS) $1,576,791 (10,420) $ 772,676 (123,515) (195,075) $ (132,522) 2,543,129
========================================================================================================
Basic EPS $.12 $.01 $.26 $.15
========================================== ===========
Diluted EPS $.12 $.26 $.15
============ ================= ===========
Weighted Shares
Outstanding:
Basic 12,644,152 1,000,000 3,000,000 16,644,152
========================================== ===========
Diluted 12,803,117 3,000,000 16,803,117
============ ================= ===========
</TABLE>
37
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro-Forma Adjustments
---------------------
Historical Fi-Tek Historical SubordinatedNote Euro Note Combined
---------- ------ ---------- ---------------- --------- --------
Holdings December Westminster Westminster Conversion Conversion December 31,
-------- -------- ----------- ----------- ---------- ---------- ------------
December 31, 1998 January 1, Adjustments (Unaudited) (Unaudited) 1998
-------- -------- ---------- ----------- ----------- ----------- ----
31, 1998 (5) 1999 (6) (8) (7) (Unaudited)
-------- --- ---- --- --- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Gross Commissions $5,803,642 $3,847,670 9,651,312
Asset Management Fees 5,978,185 5,978,185
Other Revenues 6,468,254 1,926,064 8,394,318
Total revenue 18,250,081 5,773,734 24,023,815
------------ ---------- ------------
OPERATING EXPENSES:
Employee costs & benefits 13,332,078 2,333,963 15,666,041
Clearance, Occupancy &
Corporate Finance 3,525,218 732,054 4,257,272
Other Expenses (55,355)
------------
4,603,682 4,115 1,173,475 247,030 (64,903) (228,001) 5,680,043
------------ ---------- ------------ ----------- ------------ ------------ ------------
Total operating expenses 21,460,978 4,115 4,239,492 247,030 (64,903) (283,356) 25,603,356
------------ ---------- ------------ ----------- ------------ ------------ ------------
(Loss) income from
operations (3,210,897) (4,115) 1,534,242 (247,030) 64,903 283,356 (1,579,541)
------------ ---------- ------------ ----------- ------------ ------------ ------------
(Loss) income before
minority
Interests and income taxes (3,210,897) (4,115) 1,534,242 (247,030) 64,903 283,356 (1,579,541)
------------ ---------- ------------ ----------- ------------ ------------ ------------
Minority interests 98,945 98,945
Net (loss) income before (3,309,842) (4,115) 1,534,242 (247,030) 64,903 283,356 (1,678,486)
------------ ---------- ------------ ----------- ------------ ------------ ------------
taxes
Income taxes -- 718,700 718,700
Net Income (loss) $ (3,309,842) (4,115) $ 815,542 (247,030) $ 64,903 $ 283,356 $ (2,397,186)
==================================================================================== =============
Basic EPS $ (.41) -- $ .27 $ (.19)
============ ============ =============
Weighted Shares
Outstanding:
Basic 8,043,675 1,000,000 3,000,000 12,043,675
======================================= =============
</TABLE>
38
<PAGE>
Notes to Pro Forma Balance Sheet
(1) Reflects purchase of Westminster and capitalization of goodwill in
Westminster.
(2) Reflects the amortization of goodwill in Westminster for the six months
ended June 30, 1999.
(3) Reflects the conversion of the Euro Notes to common stock, including
reducing additional paid in capital by the capitalized financing charges
and the reversal of related interest paid and/or payable on the notes as of
June 30, 1999. Assumes $1,912,000 of the notes were issued and converted as
of January 1, 1999.
(4) Reflects the conversion of the Subordinated Notes to common stock and the
reversal of related interest paid and/or payable on the notes as of June
30, 1999. Assumes the notes were issued and converted as of January 1,
1999.
Notes to Pro Forma Statement of Operations
(5) Reflects reverse acquisition and capital transaction to record issuance of
stock to Fi-Tek.
(6) Reflects purchase of Westminster and Westminster amortization expense for
the periods presented.
(7) Reflects the conversion of the Euro Notes to common stock and add back of
related interest expense and finance charge amortization for the periods
presented.
(8) Reflects the conversion of the Subordinated Notes to common stock and add
back of related interest expense and finance charge amortization for the
periods presented.
39
<PAGE>
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 hereunto duly authorized.
LAIDLAW GLOBAL CORPORATION
September 3, 1999 By: /s/ Roger Bendelac
------------------------
Roger Bendelac,
Executive Vice President
40
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,476,416
<RECEIVABLES> 7,559,761
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 0
<TOTAL-ASSETS> 19,177,427
<SHORT-TERM> 1,150,000
<PAYABLES> 6,857,967
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 2,305,000
0
1
<COMMON> 126
<OTHER-SE> 6,923,842
<TOTAL-LIABILITY-AND-EQUITY> 19,177,427
<TRADING-REVENUE> 3,245,084
<INTEREST-DIVIDENDS> 127,548
<COMMISSIONS> 3,616,835
<INVESTMENT-BANKING-REVENUES> 4,850,805
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 6,592,352
<INCOME-PRETAX> 1,576,791
<INCOME-PRE-EXTRAORDINARY> 1,576,791
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,576,791
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,304,682
<RECEIVABLES> 1,108,540
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 0
<TOTAL-ASSETS> 9,640,725
<SHORT-TERM> 2,872,917
<PAYABLES> 1,790,829
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 2,305,000
0
250,000
<COMMON> 391,452
<OTHER-SE> (104,414)
<TOTAL-LIABILITY-AND-EQUITY> 9,640,725
<TRADING-REVENUE> 1,961,261
<INTEREST-DIVIDENDS> 137,887
<COMMISSIONS> 3,156,324
<INVESTMENT-BANKING-REVENUES> 5,616,854
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 7,294,995
<INCOME-PRETAX> (503,734)
<INCOME-PRE-EXTRAORDINARY> (503,734)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (503,734)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,939,429
<RECEIVABLES> 690,015
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 0
<TOTAL-ASSETS> 9,588,872
<SHORT-TERM> 2,775,000
<PAYABLES> 2,371,299
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 4,680,000
0
250,000
<COMMON> 391,452
<OTHER-SE> (2,910,522)
<TOTAL-LIABILITY-AND-EQUITY> 9,588,872
<TRADING-REVENUE> 3,195,045
<INTEREST-DIVIDENDS> 298,972
<COMMISSIONS> 5,803,642
<INVESTMENT-BANKING-REVENUES> 8,952,422
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 13,332,078
<INCOME-PRETAX> (3,309,842)
<INCOME-PRE-EXTRAORDINARY> (3,309,842)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,309,842)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,082,009
<RECEIVABLES> 995,946
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 0
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0
250,000
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<INCOME-PRETAX> (3,342,332)
<INCOME-PRE-EXTRAORDINARY> (3,342,332)
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</TABLE>
