AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 2000
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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LAIDLAW GLOBAL CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 6211 84-1148210
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
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100 PARK AVENUE
NEW YORK, NY 10017
(212) 376-8800
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
ANASTASIO CARAYANNIS
LAIDLAW GLOBAL CORPORATION
100 PARK AVENUE
NEW YORK, NY 10017
(212) 376-8800
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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COPIES TO:
MICHAEL BECKMAN, ESQ.
BECKMAN, MILLMAN & SANDERS LLP
116 JOHN STREET
NEW YORK, NEW YORK 10038
(212) 406-4700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered Security Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.00001 par 2,745,940 $9.61 $26,388,483 $6,966.56
value, to be Resold
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.00001 par
value, issuable upon exercise of 18,891 $4.36(2) $82,364.76 $21.74
Common Stock Purchase
Warrants
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.00001 par
value, issuable upon exercise of 398,696 $2.60(2) $1,036,609.60 $273.66
Class A Common Stock
Purchase Warrants
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.00001 par
value, issuable upon exercise of 398,696 $4.33(2) $1,726,353.60 $455.76
Class B Common Stock
Purchase Warrants
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Total 3,562,223 $7,717.72
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended. Based on the average
of the bid and asked price reported for the Common Stock on the OTC Bulletin
Board on February 8, 2000.
(2) The exercise price of the warrants, calculated pursuant to Rule 457(g) under
the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 14, 2000
3,562,223 Shares
LAIDLAW GLOBAL CORPORATION
Common Stock
This is an offering of shares of common stock of Laidlaw Global
Corporation, a Delaware corporation. Certain securityholders of the Company are
offering to sell 3,562,223 shares of common stock ("the Resale Shares").
The Resale Shares are being offered for sale from time to time by the
Selling Security Holders at the prevailing market price or in negotiated
transactions. Of the Resale Shares offered:
o up to 2,745,940 shares are presently outstanding;
o up to 18,891 shares are issuable upon the exercise of Common Stock
Purchase Warrants of the Company exchanged or to be exchanged for
Warrants issued by Laidlaw Holdings, Inc. together with its 12% Senior
Secured Euro-Notes;
o up to 797,392 shares are issuable upon the exercise of Class A and B
Common Stock Purchase Warrants of the Company.
The Resale Shares may be sold by the Selling Security Holders to customers
of our broker-dealer subsidiary Laidlaw Global Securities, Inc. Commissions will
be paid to Laidlaw Global Securities, Inc. for such sales at negotiated rates
within NASD guidelines. See "Plan of Distribution."
Of the Resale Shares covered by this prospectus, approximately 2,764,831
shares are subject to a lock-up agreement which precludes the resale of such
shares for 30 days following the effective date of this prospectus.
The Company's Common Stock is quoted on the OTC Bulletin Board under the
symbol LAIG. The average of the bid and asked price for the Common Stock on
February 8, 2000 as reported by the OTC Bulletin Board was $9.61 per share. See
"Price Range of Common Stock."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 6.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATIONS MADE TO THE
CONTRARY IS A CRIMINAL OFFENSE
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THE DATE OF THIS PROSPECTUS IS __________________, 2000
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary ......................................................... 1
Risk Factors ............................................................... 6
Selected Consolidated Financial Data ....................................... 13
Capitalization ............................................................. 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................. 15
Business ................................................................... 22
Price Range of Common Stock ................................................ 32
Management ................................................................. 33
Certain Relationships and Related Transactions ............................. 39
Stock Ownership of Management and Principal Shareholders ................... 40
Description of Securities .................................................. 42
Plan of Distribution ....................................................... 46
Selling Security Holders ................................................... 47
Transfer Agent and Registrar ............................................... 52
Legal Opinions ............................................................. 52
Experts .................................................................... 52
Where You Can Find Additional Information .................................. 52
Index to Financial Statements .............................................. 53
-----------------------
In this prospectus, "the Company," "we," "us," and "our" each refers to
Laidlaw Global Corporation and, where appropriate, to our subsidiaries.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the securities. You should read the entire prospectus
carefully, especially the risks of investing in the securities discussed under
"Risk Factors" on pages 6.
Our Business
We are a global investment banking, asset management and brokerage firm
doing business through our subsidiaries. We provide a broad range of investment
services and products to individuals, corporations and institutions around the
world. We are increasing the coordination of our investment banking and
syndicate and trading activities, as well as focusing such activities on growth
companies in selectively targeted industries, worldwide. We have accelerated our
focus on international business, and intend to increase strategic ties with our
foreign investment partners and alliances.
We have carefully developed a strategic plan involving internal
restructuring and selective aggressive expansion in order to focus our resources
on achieving our goal of becoming a high quality, highly profitable, global
financial services institution. We seek to specialize in middle market
investment opportunities while servicing a strong client base of high net-worth
individuals and institutions worldwide. We will specifically concentrate on
building sales and distribution, investment banking activities, assets under
management and securities brokerage.
Our Operating Subsidiaries
o Laidlaw Global Securities, Inc.: Laidlaw Global Securities, Inc.,
formerly known as Laidlaw Equities, Inc. ("Laidlaw Global Securities")
is a New York based financial services corporation which was
incorporated in October 23, 1986. It is a broker-dealer which is a
member firm of the National Association of Securities Dealers
("NASD"), the Securities Investor Protection Corporation ("SIPC") and
the Securities Industry Association ("SIA"). Its principal activities
are institutional and retail brokerage, trading and sales, investment
banking and research. Laidlaw Global Securities conducts a large
amount of its brokerage business in foreign securities markets. In
addition to its New York offices, Laidlaw Global Securities presently
maintains offices, representative offices and associate representative
offices in Hong Kong, China; Athens, Greece; Miami, Florida; Paris,
France; Geneva, Switzerland; Barcelona, Spain; and Nassau, Bahamas.
o Westminster Securities Corporation: Westminster Securities Corporation
("Westminster") is a New York based comprehensive professional
investment services corporation which was incorporated in 1971. It is
a member of the New York Stock Exchange ("NYSE"), NASD and SIPC.
Westminster's principal activities are investment banking,
institutional and retail brokerage, market making and asset
management. Westminster also maintains an office in Miami, Florida.
1
<PAGE>
o Howe & Rusling, Inc.: The Company owns an 81% interest in H&R
Acquisition Corp., which owns a 100% interest in Howe & Rusling, Inc.
("Howe & Rusling"), a 68 year old asset management company based in
Rochester, New York. Howe & Rusling's principal activity is
professional investment management.
o Global Electronic Exchange, Inc.: Global Electronic Exchange, Inc.
("GEE"), a 59% owned subsidiary of the Company, is a New York based
development stage corporation which was incorporated in January 26,
1999. It was established by the Company to create and develop an
Internet based international investment services business, including
operations in securities trading, investment banking, asset management
and real estate.
o Lead Capital S.A.: Lead Capital S.A. ("Lead Capital") is an
Athens-based brokerage firm which was incorporated under the laws of
Greece. Lead Capital is registered with the Greek Securities
Commission.
o Laidlaw Pacific (Asia) Ltd.: Laidlaw Pacific (Asia) Ltd. ("Laidlaw
Pacific") is a Hong Kong based investment advisor which was
incorporated in June 2, 1992. Laidlaw Pacific is a registered Dealer
and Investment Advisor with the Hong Kong Securities and Futures
Commission. Its principal activities are corporate financial advisory
services . The transaction to acquire Laidlaw Pacific has not closed
and is in the process of being renegotiated.
2
<PAGE>
Recent Developments
The Reorganization
We have recently completed a series of reorganization transactions
constituting a fundamental restructuring of our businesses and capital
structures. The principal transactions in this reorganization are the following:
o On June 8, 1999, the Company, formerly known as Fi-Tek V, Inc.
acquired approximately 99% of the issued and outstanding shares of
common stock of Laidlaw Holdings, Inc. ("Laidlaw Holdings").
Simultaneous with this acquisition, the Company changed its name from
Fi-Tek V, Inc. to Laidlaw Global Corporation.
o On July 1, 1999, the Company acquired substantially all of the issued
and outstanding common stock of Westminster after receiving approval
by the NYSE.
o The Company entered into an agreement with PUSA Investment Company to
acquire 100% of the issued and outstanding common stock of its
subsidiary Laidlaw Pacific. The parties are currently renegotiating
the terms of this agreement and do not intend to complete the
transactions as originally contemplated.
o On December 15, 1999, the Company acquired 100% of the issued and
outstanding shares of common stock of Lead Capital, an Athens-based
brokerage firm registered with the Greek Securities Commission.
This prospectus describes the reorganization transactions in greater detail
on page 23.
The 3-for-2 Stock Split
On September 9, 1999, a majority of the stockholders and the Board of
Directors approved a 3-for-2 stock split in the form of a stock dividend. One
share of common stock of the Company was issued for each two outstanding shares
of pre-split common stock to stockholders of record as of September 23, 1999
(the "Forward Stock Split"). Furthermore, the number of shares and the exercise
price of all warrants and options issued by the Company were adjusted in
accordance with the Forward Stock Split.
All references in this prospectus to shares of common stock, warrants and
options issued by the Company, as well as the exercise price of such warrants
and options, have been adjusted to reflect the Forward Stock Split.
3
<PAGE>
The Offering
Common Stock offered by the Selling Security Holders......... 3,562,223
Common Stock to be outstanding prior to offering............. 26,874,247(1)
Common Stock to be outstanding after the offering............ 27,690,530(2)
OTC Bulletin Board Symbol.................................... LAIG
- ----------
(1) Does not include 2,465,696 shares of Common Stock issuable upon exercise of
outstanding warrants and employee stock options including: (a) 94,454 Common
Stock Purchase Warrants of the Company exchanged or to be exchanged for Warrants
issued by Laidlaw Holdings together with its 12% Senior Secured Euro-Notes (the
"Common Stock Purchase Warrants"); (b) 398,696 Class A Common Stock Purchase
Warrants (the "Class A Warrants"); (c) 398,696 Class B Common Stock Purchase
Warrants (the "Class B Warrants"); and (d) 1,573,850 employee stock options
granted under the 1999 Laidlaw Global Corporation Omnibus Plan which are
exercisable within 60 days of January 20, 2000.
(2) Assumes the exercise of Common Stock Purchase Warrants and Class A and B
Warrants into shares of common stock being offered in this prospectus.
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
The following financial information has been derived from our consolidated
financial statements included elsewhere in this prospectus. This data should be
read in conjunction with those consolidated financial statements and related
notes.
<TABLE>
<CAPTION>
Year Ended Seven Months Year Nine Months Ended
May 31 Ended Ended September 30,
------------ ------------ -------- -----------------
1997 12/31/97 12/31/98 1998 1999
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues:
Commissions 10,545 4,155 5,804 4,558 8,245
Trading gains, net 3,951 1,373 3,195 2,684 4,954
Asset management fees 1,784 3,148 5,978 4,530 4,422
Investment banking fees 4,429 907 1,961 2,013 1,087
Interest 351 148 299 235 405
Others 851 66 1,013 878 1,228
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Total revenues 21,911 9,797 18,250 14,898 20,341
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Operating Expenses:
Commissions 9,366 3,863 5,705 4,629 6,428
Salary and benefits 7,081 4,406 7,627 5,660 4,986
Professional fees 905 467 701 435 551
Legal and arbitration settlements -- -- 404 290 60
Communications and information systems 1,580 627 1,366 1,067 1,110
Clearing fees 1,577 827 1,196 876 905
Rent and utilities 1,414 830 1,390 1,194 1,172
Travel and entertainment 345 146 513 298 431
Client-related marketing 567 473 427 309 114
Depreciation and amortization 366 421 379 204 262
Office 595 260 412 292 369
Other 1,525 842 1,341 965 919
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Total operating expenses 25,321 13,162 21,461 16,219 17,307
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Net income (loss) before minority interest (3,410) (3,365) (3,211) (1,321) 3,034
Extraordinary Item
Minority Interest (18) 23 (99) (182) (187)
Provision for Income Taxes
------------------------------------------------------------
NET INCOME (LOSS) (3,428) (3,342) (3,310) (1,503) 2,847
============================================================
Net income (loss) per share
Basic $(21.48) $(0.83) $(0.48) $(0.23) $0.16
============================================================
Diluted (21.48) (0.83) (0.48) (0.23) 0.13
============================================================
Weighted average number of shares outstanding
Basic 159,632 4,045,927 6,957,522 6,667,014 17,718,245
============================================================
Diluted 159,632 4,045,927 6,957,522 6,667,014 21,527,960
============================================================
<CAPTION>
As of
As of May 31 As of December 31 September 30,
------------ -------------------------- -------------
1997 1997 1998 1999
(In thousands)
<S> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash 2,530 2,217 1,939 3,903
Total assets 11,234 9,540 9,589 22,910
Long-term obligations, net of current portion 3,072 3,999 6,953 2,349
Redeemable convertible preferred stock
Total stockholders' equity (deficiency) 179 (3,163) (2,269) 13,881
</TABLE>
5
<PAGE>
RISK FACTORS
An investment in the Common Stock involves a number of risks, some of
which, including market, liquidity, credit, operational, legal and regulatory
risks, could be substantial and are inherent in our businesses. You should
carefully consider the following information in this prospectus before buying
shares of Common Stock.
One of Our Subsidiaries Has a History of Operating Losses
Our subsidiary, Laidlaw Holdings, has incurred operating losses during the
past 3 years aggregating $3,027,533 for the year ended May 31, 1996, $3,428,116
for the year ended May 31, 1997, $3,342,332 for the seven months ended December
31, 1997 and $3,309,842 for the year ended December 31, 1998. While Laidlaw
Holdings generated a net profit of $2,814,377 for the nine months ended
September 30, 1999, we cannot be certain that Laidlaw Holdings will continue to
be profitable.
Our Share Price May Decline Due to the Large Number of Shares Eligible for
Future Sale
Sales of substantial amounts of common stock, or the possibility of such
sales, may adversely affect the price of the common stock and impede our ability
to raise capital through the issuance of equity securities.
Upon consummation of this offering, there will be 27,690,530 shares of
common stock outstanding, assuming the exercise of Common Stock Purchase
Warrants and Class A and B Warrants into shares of common stock being offered in
this prospectus. Of the 27,690,530 shares, 1,891,100 shares will be freely
tradable, a portion of which are being offered in this prospectus. Of the
3,562,223 shares being offered in this prospectus, 797,392 shares issuable upon
exercise of the Class A and B Warrants will be freely transferable for immediate
sale without restriction or further registration under the Securities Act of
1933, as amended (the "Securities Act"). The remaining 2,764,831 shares of
common stock will be available for future sale upon the expiration or the waiver
of a certain 30 day lock-up. Such shares will be released from lock-up 30 days
after the Registration Statement has been declared effective by the Securities
and Exchange Commission (the "Commission"). See "Description of Securities -
Shares Eligible for Future Sale."
Additionally, approximately 406,292 outstanding shares of common stock held
by former shareholders of the Company are locked-up pursuant to section 7(p) of
the reorganization agreement dated May 27, 1999 by and among the Company,
Laidlaw Holdings, Westminster and the principal shareholders of such companies.
See "Business - Recent Developments." Of the 406,292 locked-up shares, 52,445
shares will be released from lock-up, pursuant to sections 7(p) and 11(o)(i) of
the reorganization agreement, as additional shares are issued by the Company. Of
the 52,445 shares, 26,229 shares will be freely tradable and 26,216 will be
purchased by certain designees of the Company. Pursuant to section 7(p) and
11(o)(ii) of the reorganization agreement, the remaining 353,847 shares will be
released from lock-up beginning on March 8, 2000. All such shares are held by
non-affiliates of the Company and will be resold under Rule 144 of the
Securities Act. See "Description of Securities - Shares Eligible for Future
Sale."
6
<PAGE>
A Sustained Downturn in the United States and Foreign Financial Markets
Can Adversely Affect All Aspects of Our Business
All aspects of our securities business can be adversely affected by
conditions in the financial markets and economic conditions generally, both in
the United States and elsewhere around the world. In the event of a market
downturn, our businesses could be adversely affected in many ways, including
those described below. Our revenues are likely to decline in such circumstances
and, if we were unable to reduce expenses at the same pace, our profit margins
would erode.
We May Generate Lower Revenues from Commissions and Asset Management Fees in a
Market Downturn
A sustained decline in the United States and foreign financial markets
could lead to a decline in the volume and size of transactions that we execute
for our customers and, therefore, to a decline in the revenues we receive from
commissions and spreads. Also, because asset management fees are, in large part,
based on the value of client securities holdings, a market downturn that reduces
the value of our clients' portfolios or increases the amount of client account
withdrawals or account closings would reduce the revenue we receive from our
asset management business.
Other Commission or Fee Related Revenues May Decline in Adverse Market
Conditions
There would likely be a reduction in transactions in which we provide
underwriting, private placements and other services. Our Investment Banking
revenues, in the form of financial advisory and underwriting fees, are directly
related to the number and size of the transactions in which we participate and
would therefore be adversely affected by a sustained market downturn.
Market Volatility Can Adversely Affect Our Trading Activities
We generally do not maintain any trading and investment positions in the
fixed income or currency markets or any large positions in equity securities.
However, to the extent that we have long positions, a downturn in those markets
could result in losses from a decline in the value of those long positions. To
the extent that we have short positions (sold securities that we do not own), an
upturn in those markets could expose us to potentially unlimited losses as we
attempt to cover our short positions by acquiring assets in a rising market.
We May be Exposed to Unanticipated Risks
Our risk management policies and procedures are continuing to increase and
we expect to continue to do so in the future. However, our policies and
procedures to identify, monitor and manage risks may not be fully effective.
Some of our methods of managing risk are based upon our use of observed
historical market behavior. As a result, these methods may not predict future
risk exposures, which could be significantly greater than the historical
measures indicate. Other risk management methods depend upon evaluation of
information regarding markets, clients or other matters that is publicly
available or otherwise accessible by the Company. This information may not in
all cases be accurate, complete, up-to-date or properly evaluated. Management of
operational, legal and regulatory risk requires, among other things, policies
and procedures to record properly and verify a large number of transactions and
events, and these policies and procedures may not be fully effective.
7
<PAGE>
A Lack of Liquidity Could Adversely Affect Our Ability to Fund Operations
and Jeopardize Our Financial Condition
The access to capital is essential to our businesses. In the recent past
and prior to Laidlaw Holdings becoming a public company, we have relied upon
borrowings through private transactions to finance our activities. As a public
company, we believe that we will be able to raise capital both through the sale
of equities and debt securities, should the need arise.
A Lack of Access to Capital Could Adversely Affect Our Liquidity
Our access to capital in amounts adequate to finance our activities could
be impaired by factors that affect the Company in particular or the industry in
general. If we incurred large losses in our business, if the level of our
business activity decreased due to a market downturn, if regulatory authorities
took significant action against us or if we discovered that one of our employees
had engaged in serious unauthorized or illegal activity, our ability to obtain
debt or equity capital could be impaired. Severe disruption of the financial
markets or negative views about the prospects for the securities industry, in
general, could have the same effect.
There is Always a Risk That Third Parties Will Not Perform Their Obligations
The securities business in general is always exposed to the risk that third
parties that owe money, securities or other assets will not perform their
obligations. These parties include trading counterparties, customers, clearing
agents, exchanges, clearing houses and other financial intermediaries as well as
issuers whose securities we hold. These parties may default on their obligations
due to bankruptcy, lack of liquidity, operational failure or other reasons.
Political Unrest Can Adversely Affect Our Business With Foreign Clients and
Trading Partners
Country, regional and political risks are components of credit risk, as
well as market risk. Economic or political pressures in a country or region,
including those arising from local market disruptions or currency crises, may
adversely affect the ability of clients or counterparties located in that
country or region to obtain foreign exchange or credit and, therefore, to
perform their obligations to us.
The Volatility of Financial Markets Could Result in Defaults by Large Financial
Institutions
Many financial institutions could be materially affected by trading,
clearing, credit or other relationships between the institutions. As a result,
concerns about, or a default by, one institution could lead to significant
liquidity problems or losses in, or default by, other institutions. It may
adversely affect financial intermediaries, such as clearing houses, banks,
securities firms and exchanges, with which we interact on a daily basis.
8
<PAGE>
Year 2000 Disclosure
Most businesses, financial and other institutions around the world are
reviewing and modifying their computer systems to ensure that they are Year 2000
compliant. The issue, in general terms, is that many existing computer systems
and microprocessors (including those in non- information technology equipment
and systems) use only two digits to identify a year in the date field with the
assumption that the first two digits of the year are always "19". Consequently,
on January 1, 2000, computers that were not Year 2000 compliant may have read
the year as 1900. Systems that calculate, compare or sort using the incorrect
date may have malfunctioned.
At and since January 1, 2000, Year 2000 problems have not been significant
and wide-spread computer failures have not materialized. However, Year 2000
problems could still occur, especially on February 29, 2000, at quarter end and
at year end.
We May Experience a Failure or Malfunction by Our Computer Systems
As with all companies in the securities industry, we are extremely
dependent upon the proper functioning of our computer systems. Any failure of
our systems to be Year 2000 compliant, or unknown errors or defects in our
system, would have a material adverse effect on us. Failure of this kind could,
for example, cause settlement of trades to fail, lead to incomplete or
inaccurate accounting, recording or processing of trades in securities and cause
the generation of erroneous results (or no results at all) or give rise to
uncertainty about our exposure to trading risks and our need for liquidity. If
not remedied, potential risks include business interruption or shutdown,
financial loss, regulatory actions, reputational harm and legal liability.
To date, to the best of our knowledge, we have not experienced any material
disruptions in our operations as a result of Year 2000 problems, nor have we
incurred any unplanned expenses to address Year 2000 concerns.
There Can be a Failure or Malfunction of the Computer Systems of Third Parties
That Are Important to Our Business
We depend upon the proper functioning of the computer systems of others.
These parties include trading counterparties, financial intermediaries such as
securities, depositories, clearing agencies, clearing houses and commercial
banks and vendors such as providers of telecommunication services and other
utilities. We continue to evaluate with whom we have important financial or
operational relationships to determine the extent of their Year 2000 compliance.
We do not possess adequate information from all such parties about the effect of
the Year 2000 on their systems to evaluate the effectiveness of their efforts.
In many instances, we are not in a position to verify the accuracy or
completeness of the information we receive from third parties and as a result
are dependent on their willingness and ability to disclose, and to address,
their Year 2000 problems.
9
<PAGE>
The Nature of Our Business Exposes Us to Legal And Regulatory Risk
If we were to incur any major liability from litigation or if the
regulatory agencies which have jurisdiction over us were to sanction, fine or
suspend us from any business operations, it would likely have a material adverse
affect on our business.
Our Exposure to Legal Liability is Significant
There are significant legal risks in the securities business and the volume
and amount of damages claimed in litigation appears to be on the increase
overall. Claims in the industry regularly arise from customers. During a
prolonged market downturn, we would expect these types of claims to increase. We
are also subject to claims arising from disputes with employees for alleged
discrimination or harassment, among other things. These risks often may be
difficult to assess or quantify and their existence and magnitude often remain
unknown for substantial periods of time. We incur legal expenses every year in
defending against litigation, and we expect to do so in the future.
The Regulatory Aspects of Our Business is Subject to Penalties, Fines and
Sanctions
The securities industry is subject to extensive regulation. We are subject
to regulation by governmental and self-regulatory organizations in other
jurisdictions in which we may operate outside the United States.
Requirements imposed by our regulators are geared towards the protection of
customers and other third parties who deal with the Company and to ensure the
integrity of the marketplace. These regulations often limit our activities,
including through net capital, customer protection and market conduct
requirements. We face the risk of significant intervention by regulatory
authorities, including extended investigation and surveillance activity,
adoption of costly or restrictive new regulations and judicial or administrative
proceedings that may result in substantial penalties. Among other things, we
could be fined or prohibited from engaging in some of our business activities.
We Can Be Adversely Affected By Employee Misconduct
There have been a number of well-known cases involving employer fraud or
other misconduct in the securities industry in recent years, and we run the risk
that employee misconduct could occur. Executing unauthorized trades for
customers or inducing customers to purchase securities which do not comply with
their investment objectives, which, in either case, may result in unknown and
unmanaged risks or losses. Employee misconduct could also involve the improper
use or disclosure of confidential information, which could result in regulatory
sanctions and serious reputational or financial harm. It is not always possible
to deter employee misconduct and the precautions we take to prevent and detect
this activity may not be effective in all cases.
10
<PAGE>
The Financial Industry is Intensely Competitive and Rapidly Consolidating
The financial services industry is intensely competitive, and we expect it
to remain so. We compete on the basis of a number of factors, including
transaction execution, our products and services, innovation, reputation and
price. We have experienced intense price competition in all areas of our
business. We believe that we may experience pricing pressures in these areas in
the future as some of our competitors seek to obtain market share by reducing
prices.
There is a Trend Towards Consolidation in the Securities Industries Giving Our
Competitors Substantially Greater Resources By Which They Can Compete
In recent years, there has been substantial consolidation among companies
in the financial services industry. In particular, a number of large commercial
banks, insurance companies and other broad-based financial services firms have
established or acquired broker-dealers or have merged with other financial
institutions. Many of these firms have the ability to offer a wide range of
products, including asset management, brokerage and investment banking services,
which may enhance their competitive position. They also have the ability to
support investment banking and securities products with commercial banking,
insurance and other financial services revenues in an effort to gain market
share, which could result in greater competition and pricing pressure in our
businesses.
This trend toward consolidation has significantly increased the capital
base and geographic reach of our competitors. This trend has also hastened the
globalization of the securities and other financial services markets. As a
result, we have had to commit capital to support our international operations
and to execute large global transactions.
Our Ability to Expand Internationally Will Depend on Our Ability to Compete With
or Procure Strategic Alliances With Local Financial Institutions
We believe that some of our most significant opportunities will arise
outside the United States. In order to take advantage of these opportunities, we
will have to procure strategic alliances to compete successfully with financial
institutions based in important markets outside the United States, particularly
in Europe. Some of these institutions with which we will compete are larger,
better capitalized and have a stronger presence and a longer operating history
in these markets.
Internet and Other New Trading Systems Could Adversely Affect Us
Securities and futures transactions are now being conducted through the
Internet and other alternative, non-traditional trading systems, and it appears
that the trend toward alternative trading systems will continue and probably
accelerate. A dramatic increase in computer-based or other electronic trading
may adversely affect our commission and trading revenues, reduce our
participation in the trading markets and associated access to market information
and lead to the creation of new and stronger competitors. Although the Company
is developing GEE in order to gain market share in the online financial services
industry, there is no assurance that GEE will be a successful enterprise or that
it will be able to compete with companies offering alternative trading systems.
11
<PAGE>
We Are Exposed to Special Risks in Emerging and Other Markets
In conducting our business in major markets around the world, including
many developing markets in Asia, Latin America and Eastern Europe, we are
subject to political, economic, legal, operational and other risks that are
inherent in operating in other countries. These risks range from difficulties in
settling transactions in emerging markets to possible nationalization,
expropriation, price controls and other restrictive governmental actions. We
also face the risk that exchange controls or similar restrictions imposed by
foreign governmental authorities may restrict our ability to convert local
currency received or held by us in their countries into U.S. dollars or other
currencies, or to take those dollars or other currencies out of those countries.
To date, a relatively small part of our businesses has been conducted in
emerging and other markets. As we expand our businesses in these areas, our
exposure to these risks will increase.
Turbulence in Emerging Markets May Adversely Affect Our Businesses
In the last several years, various emerging market countries have
experienced severe economic and financial disruptions, including significant
devaluations of their currencies and low or negative growth rates in their
economies. The possible effects of these conditions include an adverse impact on
our businesses and increased volatility in financial markets generally.
Moreover, economic or market problems in a single country or region are
increasingly affecting other markets generally. A continuation of these
situations could adversely affect global economic conditions and world markets
and, in turn, could adversely affect our businesses. Among the risks are
regional or global market downturns and, as noted above increasing liquidity and
credit risks.
Compliance with Local Laws and Regulations May be Difficult
In many countries, the laws and regulations applicable to the securities
and financial services industries are uncertain and evolving, and it may be
difficult for us to determine the exact requirements of local laws in every
market. Our inability to remain in compliance with local laws in a particular
foreign market could have a significant and negative effect not only on our
businesses in that market but also on our reputation generally. These
uncertainties may also make it difficult for us to structure our transactions in
such a way that the results we expect to achieve are legally enforceable in all
cases.
12
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
The following financial information has been derived from our consolidated
financial statements included elsewhere in this prospectus. This data should be
read in conjunction with those consolidated financial statements and related
notes. Our balance sheet data is presented on an actual basis and on an adjusted
basis giving effect to the sale of the common stock, issuable upon the exercise
of: (i) 18,891 Common Stock Purchase Warrants; (ii) 398,696 Class A Warrants;
and (iii) 398,696 Class B Warrants, being offered in this prospectus and the
application of the proceeds from the sale.
<TABLE>
<CAPTION>
Year Ended Seven Months Year Nine Months Ended
May 31 Ended Ended September 30,
---------- -------- -------- -------------------
1997 12/31/97 12/31/98 1998 1999
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues 21,911 9,820 18,250 14,898 20,341
Net Income (loss)
(3,428) (3,342) (3,310) (1,503) 2,847
Net income per share
Basic (21.48) (0.83) (0.48) (0.23) 0.16
Diluted (21.48) (0.83) (0.48) (0.23) 0.13
Weighted average number of shares
outstanding
Basic 159,632 4,045,927 6,957,522 6,667,014 17,718,245
Diluted 159,632 4,045,927 6,957,522 6,667,014 21,527,960
<CAPTION>
As of September 30, 1999
------------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Balance Sheet Data:
Cash 3,903 6,715
Working capital 5,102 7,920
Total assets 22,910 25,722
Long-term obligations, less current portion 2,349 2,349
Liability related redeemable convertible preferred stock --
Total stockholders' equity 13,881 16,693
</TABLE>
13
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999.
Our capitalization is presented on an actual basis and on an adjusted basis
giving effect to the sale of the common stock, issuable upon the exercise of (i)
18,891 Common Stock Purchase Warrants; (ii) 398,696 Class A Warrants; and (iii)
398,696 Class B Warrants being offered in this prospectus and the application of
the proceeds from the sale.
<TABLE>
<CAPTION>
As of September 30, 1999
------------------------
(In thousands)
Actual As Adjusted
------ -----------
<S> <C> <C>
========================
Current portion of long-term obligations $ 575 $ 575
========================
Long-term obligations, less current porition 2,349 2,349
Stockholders' equity (deficiency}
Preferred C Stock, $.00001 par value, 1,000,000 shares
authorized of the Company at September 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 September 30,1999 and by the Predecessor on December 31,
1998.
Common Stock, $.00001 par value, 50,000,000 shares authorized of
the company at September 30, 1999 and $.05 par value,
15,000,000 shares authorized of the Predecessor at December
31, 1998; 18,898,760 shares issued and outstanding by the
Company on September 30, 1999 and 7,829,040 shares issued by
the Predecessor on December 31, 1998.
Additional paid-in capital 33,646 36,458
Accumulated deficit (19,765) (19,765)
------------------------
Total stockholders' equity (deficiency) 13,881 16,693
------------------------
Total capitalization $ 16,230 19,042
========================
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and related notes included elsewhere in this prospectus. The results
shown in this prospectus do not necessarily indicate the results to be expected
in any future periods. This discussion contains forward-looking statements based
on current expectations that involve risks and uncertainties. Actual results and
the timing of certain events may differ significantly from those projected in
such forward-looking statements due to a number of factors, including those set
forth in the section entitled "Risk Factors" and elsewhere in this prospectus.
Overview
We are a global financial services firm engaged in three principal lines of
business: investment banking, sales and trading and asset management. Our
operating subsidiaries including Laidlaw Global Securities, Howe & Rusling and
Westminster are engaged in all three lines of business. Our newest subsidiary,
GEE is a development stage company established to create a global online trading
network through its intended broker-dealer subsidiary Globeshare. Since all of
the operating subsidiaries were acquired by the Company during calendar 1999,
and prior thereto the Company was in its development stage, this discussion
refers to the present operations of the recently acquired operating subsidiaries
and comparative prior periods for such operating subsidiaries although they were
not owned by the Company.
Our results of operations may be materially affected by market fluctuations
and economic factors. In addition, results of operations in the past have been
and in the future may continue to be materially affected by several factors of a
global nature including economic and market conditions; the availability of
capital; the level of volatility of equity prices and interest rates; currency
values and other market indices; technological changes and events (such as the
increased use of the Internet and Year 2000 issues); the availability of credit;
inflation; investor sentiment; and legislative and regulatory developments. Such
factors may also have an impact on our ability to achieve our strategic
objectives on a global basis, including but not limited to growth in assets
under management, global investment banking and brokerage services activities as
well as the development and expansion of GEE which will require substantial
capital and resources.
Our securities business, particularly our involvement in primary and
secondary markets in domestic and overseas markets is subject to substantial
positive and negative fluctuations due to a variety of factors that cannot be
predicted with great certainty, including variations in the fair market value of
securities and other financial products and the volatility and liquidity of
global trading markets. Fluctuations also occur due to the level of market
activity, which, among other things, affect the flow of investment dollars into
bonds and equity, and the size, number and timing of transactions or client
assignments.
15
<PAGE>
Results of operations also may be materially affected by competitive
factors. Recent and continuing global convergence and consolidation in the
financial services industry will lead to increased competition from larger
diversified financial services organizations. We may be affected by such
competition even though our strategy has been to situate the Company in markets
where we believe we have a strong edge over competition due to strong local
connections and access to markets. The Company, though global in its structure
and strategy, wants to position itself as the "local player" in all competitive
markets. Revenues in any particular period may not be representative of
full-year results and may vary significantly from year to year and from quarter
to quarter. The Company intends to manage its competitive position in the global
financial services industry through diversification of its revenue sources and
enhancement of its global franchise. The Company's overall financial results
will continue to be guided by its ability and success in maintaining high level
and profitable business activities, emphasizing fee-based assets that are
designed to generate a continuing stream of revenues, and effective risk
management in its securities and asset management businesses. In addition, the
complementary trends in the financial services industry of consolidation and
globalization present, among other things, technological, risk management and
other infrastructure challenges that will require effective resource allocation
in order for the Company to remain profitable and competitive.
Global market and economic conditions in the quarter and nine months ended
September 30, 1999 were generally favorable. Financial markets in many regions
continued to exhibit signs of recovery from the financial concerns that
persisted in the third and fourth quarters of fiscal 1998. During this period,
extreme volatility, low levels of liquidity and increased credit spreads created
difficult market conditions. On an internal basis, the Company's new management
team has effected an internal restructuring of its operations with an emphasis
on an overall reduction of its fixed cost structure. This allowed a quick
adaptation to unexpected market conditions.
Management intends to focus its activities in areas that take into
consideration the cost structure of the Company and the constraint to allocate
resources efficiently and in priority to ventures that can reasonably be
expected to self-finance on a short term basis. With the formation of strategic
alliances with foreign syndicate members, it is anticipated that the development
of GEE could be very promising to our business. Management has stated its goal
of signing in excess of 500,000 customers to access GEE's investment platform.
While there are no assurances that management will achieve this goal prior to
year-end, it is the current objective to have the GEE project fully functional
prior to year-end.
Preamble to Management's Discussion and Analysis of Financial Condition and
Results of Operations filed with our periodic report on Form 10-QSB for the nine
months ended September 30, 1999 and incorporated herein
16
<PAGE>
The approach of reproducing the recent MD&As without attempting an analysis
based on previous management's stewardship has been chosen since prior to the
Reorganization, the Company operating as Fi-Tek V, Inc. had no operating
business. Laidlaw Holdings, the subsidiary with a history of losses has only
been recently managed by current management. Prior to September 1998 when the
current management took full control of the Company, the applied business model
was not part of the forward views of management. The losses accumulated prior to
this management taking over were part of a model that attempted to maintain a
full service firm in an environment where such firms required capitalization in
excess of a $1 billion as demonstrated by the largest competitors in the
industry. The current management by focusing on specific target audiences
including overseas markets and small to medium size institutions has
demonstrated that an Investment Bank and Brokerage firm that focuses on a
specific niche has the ability to be successful as demonstrated by the turn
around in operating results shown in 1999.
The Company's current Management believes that under the extreme
competitive environment in which the industry operates it has chosen the course
that makes the most sense in light of the Company's competitive position.
Members of Management handling the traditional business at Laidlaw Global
Securities is operating under the assumption that there is room for a boutique
approach with respect to Institutional Business. That approach consists of
creating added value for our institutional customers through the ability to
react quickly to market development. That ability has been demonstrated by
Laidlaw Global Securities through its delivery of targeted advice in markets
that are not saturated by larger institutions, i.e., Southern Europe and
Emerging Markets. Our NYSE subsidiary Westminster has been operating under the
same model applied to domestic markets, i.e., the ability to deliver timely and
diligent executions for the institutional investor that is in a market size not
sufficient to obtain the required attention from larger competitors. Westminster
has demonstrated that ability over the years by maintaining in good and bad
market environments a steady flow of execution business from small and middle
institutions. Recently, Westminster has shown its ability to innovate through
its offering of direct access to the floor of the NYSE to its large high
net-worth individual investors and to its institutional customers. With respect
to the Corporate Finance aspect of the business, both subsidiaries Laidlaw
Global Securities and Westminster have focused on advisory roles, Private
Placements and catering to new ventures and smaller corporations. Management
considers Howe & Rusling, our asset management subsidiary, to be a more
conservative component of our business. The new element with respect to Howe &
Rusling will be the near completion of an Offshore Fund dedicated to raising
money to be managed by Howe & Rusling that could significantly increase the
amount of funds under management. However, while this is an objective, there is
no guarantee of success in 2000 with respect to the stated goal of increasing
the funds under management.
The most challenging venture for the Company will be the attempt to compete
through GEE in the on-line trading brokerage business. While the field is
extremely competitive, the Company believes that GEE has created a unique
approach to the business. The heavy reliance on overseas alliances will allow
GEE to overcome the most obvious issues when attempting to establish a cross-
border business in a highly regulated industry. Each partnership will allow a
localized approach to each market while at the same time insuring that each
partner is fully attuned to the cultural and regulatory specificities of each
market environment. The other advantage to the GEE approach is the ability of
all the partners in the alliance to rely on each other's strengths while
creating a pool of customers that can be served by all, thus reducing the
extremely high costs of acquiring clients as defined by the on-line industry in
its present business model.
17
<PAGE>
The Year 2000 issue addressed in previous MD&A sections has been
successfully managed. After full testing of all the systems, it now appears that
the Company, to the best of its knowledge, has not experienced any Year 2000
complications materially adverse to its business operations. The Company
nevertheless remains vigilant and intends to fully re-assess the issue at the
end of the first quarter of 2000 when several operating restrictions in bringing
changes and alterations to current computer systems are lifted.
Management's Discussion and Analysis of Financial Condition and Results of
Operations filed with our periodic report on Form 10-QSB for the nine months
ended September 30, 1999
Results of Operations
The Company's net income of $1.3 Million for the three month period ended
September 30, 1999 confirmed the turnaround demonstrated by the results of the
first six months of 1999.
Net income for the three month period ended September 30, 1999 increased
from the comparable prior year period. Diluted earnings per common share were
$.04 (after giving retroactive effect to the recent 3-for-2 stock split of the
Company's common stock) in the quarter ended September 30, 1999 as compared to
net losses of $999,347 in the quarter ended September 30,1998 which cannot be
reduced to a per share item since the Company was not a public entity then and
had a different capital structure. The Company's annualized return on common
equity was 9.15% for the three month period ended September 30, 1999 and 20.5%
for the nine-month period ended September 30, 1999. The same comparison for 1998
is not relevant in light of the losses incurred in 1998 while the Company was
still in the process of rationalizing its operations under the leadership of its
new management team.
The increase in net income for the three month period ended September 30,
1999 from the comparable prior year periods was primarily due to higher
commissions generated out of emerging and foreign markets. The Laidlaw Global
Securities subsidiary has experienced a great level of success in establishing
the Laidlaw Global Securities brand locally with our strategic partners. The
appreciation of these results has to take into consideration the fact that
August is traditionally a slow month for the industry from an earnings
viewpoint. This year did not make an exception to this monthly seasonal pattern.
Private placement offerings and advisory work mostly generated investment
banking revenues. The third quarter of 1999 saw extensive activities for our
Investment Banking Department in Asia and particularly in China, a region for
which we intend to make a strong representation in our future earnings. The
Westminster subsidiary, which only became part of the Company in July 1, 1999,
had to absorb several one time cost items related to the relocation of its
offices from downtown Manhattan to 100 Park Avenue. Furthermore the Westminster
subsidiary started a service that will allow direct access to the floor of the
New York Stock Exchange for large institutional and private customers, a service
for which there is limited competition and a large demand from first rate
investment outfits.
18
<PAGE>
LAIDLAW GLOBAL CORP
Statements of Income
<TABLE>
<CAPTION>
For the three months For the nine months
Ended September 30 Ended September 30
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Gross Commissions $ 6,203,571 $ 2,021,706 $ 12,833,072 $ 7,060,825
Asset Management Fees 1,423,445 1,431,597 4,421,944 4,530,348
Investment Income, Trading Profit & Corporation
Finance Fees 379,459 435,283 2,227,278 1,901,256
Other Revenue 494,241 136,690 858,694 1,405,173
------------ ------------ ------------ ------------
Total Revenues 8,500,716 4,025,276 20,340,988 14,897,602
Expenses
Salaries and Other employee costs 1,838,540 1,716,558 4,985,800 5,659,849
Commissions 2,982,887 1,277,498 6,427,979 4,629,202
Clearing and Occupancy 671,998 692,968 2,077,363 2,069,397
Other Expenses 1,659,938 1,269,414 3,815,895 3,860,318
------------ ------------ ------------ ------------
Total Expenses 7,153,363 4,9656,438 17,307,037 16,218,766
------------ ------------ ------------ ------------
Income (Loss) before minority interest 1,347,353 (931,162) 3,033,951 (1,321,164)
Minority Interest 77,195 68,185 187,002 181,917
------------ ------------ ------------ ------------
Income (Loss) before taxes: 1,270,158 (999,347) 2,846,949 (1,503,081)
Income Taxes -- -- -- --
------------ ------------ ------------ ------------
Net Income (Loss) 1,270,158 (999,347) 2,846,949 (1,503,081)
------------ ------------ ------------ ------------
Accumulated Deficit
Balance beginning of period (21,035,122) (19,805,808) (22,611,913) (19,302,075)
------------ ------------ ------------ ------------
Balance end of period $(19,764,964) $(20,805,155) $(19,764,964) $(20,805,156)
============ ============ ============ ============
NET INCOME PER SHARE
Basic $ 0.05 $ -- $ 0.16 $ --
============ ============ ============ ============
Diluted $ 0.04 $ -- $ 0.13 $ --
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 27,299,268 -- 17,718,245 --
============ ============ ============ ============
Diluted 30,237,162 -- 21,527,960 --
============ ============ ============ ============
</TABLE>
In the U.S., difficult market conditions and continuing market volatility
contributed to a stagnation of the volume of customer securities transactions,
including listed agency and over-the-counter equity products. Nevertheless,
revenues from markets in Southern Europe with a special emphasis on Greece
created good opportunities for the Company notwithstanding the increased
volatility also experienced by the foreign markets.
19
<PAGE>
Average Balance Sheet Analysis
Three Months Ended September 30, 1999
LAIDLAW GLOBAL CORPORATION
CONSOLIDATED BALANCE SHEETS
UNAUDITED
Average for
three mos.
Ended
Sept. 30, 1999
-------------
ASSETS
Cash and Cash equivalents $ 4,189,946
Escrow Deposit with Clearing Broker 3,556,742
Due from Clearing Broker & Other Receivables 2,825,527
Goodwill in H&R Acquisition Corp, net 6,171,716
Property, Equipment and Leasehold Improvements 695,100
Other Assets 3,604,580
-----------
TOTAL ASSETS $21,043,610
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITES
Notes Payable $ 1,375,000
Private Placement Escrow Fund Payable 3,556,742
Accounts Payable, Accrued Expenses & Other Liabilities 3,943,843
-----------
TOTAL LIABILITIES 8,875,585
-----------
COMMITMENTS AND CONTIGENCIES
12% Senior Secured Euro-Notes, due July 8, 2002 1,349,000
Minority Interest 416,690
STOCKHOLDER'S EQUITY
Preferred C Stock; $.00001 par value; 1,000,000 shares authorized;
2,500 shares issued 1
Common Stock; $.00001 par value; 50,000,000
shares authorized; 18,898,760 shares issued 727
Additional Paid-In-Capital 30,825,390
Accumulated (Deficit) (20,423,783)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 10,402,335
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $21,043,610
===========
Liquidity and Capital Resources
The credit worthiness of the Company has improved substantially as a result
of the convertible note holder's conversion of $8 Million of debt into equity.
An offer to exchange the Laidlaw Holdings 12% Senior Secured Euro Note into
shares of common stock of the Company yielded a strong response from the Note
holders who have agreed to the exchange $1.9 Million of the issue out of $2.305
Million that represents the entire issue. The change in debt structure of the
Company has started to have a material impact on the Company's cash flow.
20
<PAGE>
The Company currently anticipates that its cash resources and available
credit facilities will be sufficient to fund its expected working capital and
capital expenditure requirements for the foreseeable future. However, in order
to more aggressively expand its business, respond to competitive pressures,
develop additional products and services, or take advantage of strategic
opportunities, the Company may need to raise additional funds. Funds will
initially be raised through the issuance of private equity securities in the GEE
subsidiary. Though the Company's existing shareholders may experience additional
dilution in ownership percentages or book value, the search for funding through
private financing at the level of the subsidiaries along with direct application
to the specific projects of these funds will result in a reduced dilution
effect. The Company cannot give any assurance that additional funds will not be
needed to respond to industry changes, competitive pressures and unforeseen
events. If such funds are needed, there can be no assurance that additional
financing will be available.
The Balance Sheet
The following table sets forth our total assets, adjusted assets, leverage
ratios and book value per share:
As of As of
September 1999 September 1998
(in $ except for ratios)
Adjusted Assets (1) 22,909,792 9,587,128
Leverage Ratio (2) 1.65 20.74
Adjusted Leverage Ratio (3) 1.65 20.74
Book value per share (4) 1.21 (0.06)
(1) Adjusted assets represent total assets.
(2) Leverage ratio equals total assets divided by equity capital.
(3) Adjusted leverage ratio equals adjusted assets divided by equity capital.
(4) Book value per share as of September was based on common shares
Outstanding.
21
<PAGE>
BUSINESS
General
Through our subsidiaries, we provide a broad range of investment services
and products to individuals, corporations and institutions around the world. We
are increasing the coordination of our investment banking and syndicate and
trading activities, as well as focusing such activities on growth companies in
selectively targeted industries, worldwide. We have accelerated our focus on
international business, and intend to increase strategic ties with our foreign
investment partners and alliances.
Our Operating Subsidiaries
Laidlaw Global Securities, Inc.: Laidlaw Global Securities, formerly known
as Laidlaw Equities, Inc., is a New York based financial services corporation
which was incorporated in October 23, 1986. It is a broker-dealer which is a
member firm of the NASD, SIPC and SIA. Its principal activities are
institutional and retail brokerage, trading and sales, investment banking and
research. Laidlaw Global Securities conducts a large amount of its brokerage
business in foreign securities markets. In addition to its New York offices,
Laidlaw Global Securities presently maintains offices, representative offices
and associate representative offices in Hong Kong, China; Athens, Greece; Miami,
Florida; Paris, France; Geneva, Switzerland; Barcelona, Spain; and Nassau,
Bahamas.
Westminster Securities Corporation: Westminster is a New York based
comprehensive professional investment services corporation which was
incorporated in 1971. It is a member of the NYSE, NASD and SIPC. Westminster's
principal activities are investment banking, institutional and retail brokerage,
market making and asset management. Westminster also maintains an office in
Miami, Florida.
Howe & Rusling, Inc.: The Company owns an 81% interest in H&R Acquisition
Corp., which owns a 100% interest in Howe & Rusling, a 68 year old asset
management company based in Rochester, New York. Howe & Rusling's principal
activities are professional investment management.
Global Electronic Exchange, Inc.: GEE, a 59% owned subsidiary of the
Company, is a New York based development stage corporation which was
incorporated in January 26, 1999. It was established by the Company to create
and develop an Internet based international investment services business,
including operations in securities trading, investment banking, asset management
and real estate.
Lead Capital S.A.: Lead Capital is an Athens-based brokerage firm which was
incorporated under the laws of Greece. Lead Capital is registered with the Greek
Securities Commission.
Laidlaw Pacific (Asia) Ltd.: Laidlaw Pacific is a Hong Kong based
investment advisor which was incorporated in June 2, 1992. Laidlaw Pacific is a
registered Dealer and Investment Advisor with the Hong Kong Securities and
Futures Commission. Its principal activities are corporate financial advisory
services . The transaction to acquire Laidlaw Pacific has not closed and is in
the process of being renegotiated.
22
<PAGE>
Recent Developments
The Reorganization
On June 8, 1999, the Company, formerly known as Fi-Tek V, Inc., acquired
approximately 99% of the issued and outstanding shares of common stock of
Laidlaw Holdings pursuant to a Plan and Agreement of Reorganization among
Laidlaw Holdings, Fi-Tek V, Inc., Westminster and the principal stockholders of
such companies, dated May 27, 1999. The transactions contemplated by the
Reorganization Agreement were intended to be a reorganization of the corporate
parties under either or both of Sections 351 and 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended. As a result of such transactions, on June 8,
1999, the Company issued 14,998,999 shares of its common stock to stockholders
of Laidlaw Holdings. Immediately prior to closing, the Company caused a 1-
for-32.4778 reverse split of its common stock (the "Reverse Stock Split") and
thereby reduced its issued and outstanding shares of common stock to 1,500,000
shares. Simultaneous with closing, the Company changed it name from Fi-Tek V,
Inc. to Laidlaw Global Corporation.
Also, pursuant to the Reorganization Agreement, on July 1, 1999, the
Company acquired substantially all of the issued and outstanding common stock of
Westminster for 4,500,000 shares of common stock of the Company. This
transaction was approved by the NYSE. Pursuant to the Reorganization Agreement,
the Company acquired more than 99% of the issued and outstanding common stock of
Westminster for 4,500,000 shares of common stock of the Company. Additionally,
the Company assumed the obligations of options granted to certain employees of
Westminster and therefore granted options to purchase 90,000 shares of its
common stock at a price per share of $.83. As a condition of closing,
Westminster agreed to have capital, as defined under Rule 15c3-1 of the
Securities Exchange Act of 1934 (the "Exchange Act"), of at least $600,000 at
closing. Such capital was provided in the form of subordinated loans advanced by
three stockholders of Westminster who retained nominal shareholdings in
Westminster for purposes of making such loans in compliance with applicable
Commission and NYSE rules.
The Company entered into an agreement with PUSA Investment Company to
acquire 100% of the issued and outstanding common stock of its subsidiary
Laidlaw Pacific. The parties are currently renegotiating the terms of this
agreement and do not intend to complete the transactions as originally
contemplated.
On December 15, 1999, the Company acquired 100% of the issued and
outstanding shares of common stock of Lead Capital, an Athens-based brokerage
firm registered with the Greek Securities Commission.
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The 3-for-2 Stock Split
On September 9, 1999, a majority of the stockholders and the Board of
Directors approved a 3-for-2 stock split in the form of a stock dividend. One
share of common stock of the Company was issued for each two outstanding shares
of pre-split common stock to stockholders of record as of September 23, 1999.
Furthermore, the number of shares and the exercise price of all warrants and
options issued by the Company were adjusted in accordance with the Forward Stock
Split.
All references in this prospectus to shares of common stock, warrants and
options issued by the Company, as well as the exercise price of such warrants
and options, have been adjusted to reflect the Forward Stock Split.
Our Strategy
We have carefully developed a strategic plan involving internal
restructuring and selective aggressive expansion in order to focus our resources
on achieving our goal of becoming a high quality, highly profitable, global
investment bank. We seek to specialize in middle market investment opportunities
while servicing a strong client base of high net-worth individuals and
institutions worldwide. We will specifically concentrate on building sales and
distribution, investment banking activities, assets under management and
securities brokerage.
Through our stockholders, senior management team, and strategic alliances,
we have access to resources, companies and investors worldwide. We are confident
that our relative size enhances our ability to service middle market
corporations, and to provide proprietary products for our clients more
efficiently than larger firms.
We continue to build a sales and marketing team of professionals committed
to asset management, corporate finance and securities brokerage. By developing a
team that drives the entire organization, the Company can objectively source and
generate a high quality deal flow of new middle market clients based on an
investment driven approach to the business. Our strategic plan focuses on the
following areas:
o Cost Containment. We will seek to minimize operating costs and convert
fixed costs to variable costs, where appropriate. Recently, decisions
were made to enhance the profitability of the Company by reviewing and
reorganizing the Company's operating infrastructure, which resulted in
significant expense reduction. Select regional offices were closed in
order to build the core business in New York and concentrate human and
financial capital on those areas which more efficiently serve the
Company's focus as a global firm.
o Brokerage. A focal point of our strategic initiative is to restructure
and build our brokerage base. Management intends to use its industry
contacts and the Company's full range of available products and
services to attract high net-worth retail and institutional sales
producers.
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o Asset Management. Going forward, we intend to further integrate the
operations of our subsidiaries which provide asset management
services, and increase assets under management. We plan to accomplish
this by aggressively marketing our asset management business,
leveraging the long standing quality reputation of Howe & Rusling,
Westminster and Laidlaw Pacific and continuing the successful
management of portfolios.
o Capital Markets. We intend to increase our origination of domestic and
international equity and fixed income products. To implement this
strategy, we are increasing the coordination of our research,
investment banking, syndicate and equity trading activities to focus
on middle market and growth companies in a group of core industries.
By focusing our activities, we expect to enhance our reputation in
such industry groups and increase our penetration, leading to the
execution of a greater volume of higher margin transactions.
Additionally, we expect to increasingly leverage our relationships
with the Company's foreign affiliates and partners, in order to
participate and originate products from and for the international
markets.
o Global On-Line Trading. Because we believe that the needs of our
clients are global and that the online brokerage industry is
experiencing rapid growth, we have launched a unique online trading
platform that allows investors to have access to international
financial markets through the increasingly convenient and reliant
medium of the Internet.
Lines of Business
Traditional Trading and Brokerage Services
Laidlaw Global Securities: Laidlaw Global Securities provides professional
brokerage services to both institutional and individual investors. Laidlaw
Global Securities is focused to meet the needs of the sophisticated investor by
offering a full range of investment strategies and services including domestic
and international equities, bonds, debt securities, mutual funds, government
securities, new public and private offerings, retirement services and life
insurance/annuity products. In addition, Laidlaw Global Securities provides
proprietary product offerings for investment clients by specializing in firm
research and client underwriting of small to mid-capitalization companies with
market capital under $500 million.
An experienced trading staff and syndicate department at Laidlaw Global
Securities allow the Company's institutional and individual clients to
participate in new debt and equity offerings. During the course of the 1999
syndicate year, Laidlaw Global Securities participated in numerous syndicate
offerings, originating both in the United States and in foreign markets.
Laidlaw Global Securities offers its clients financial services, securities
transaction, and account maintenance capabilities available through an alliance
with Pershing, a Division of Donaldson, Lufkin and Jenrette Securities Corp.
("Pershing"), a leading provider of correspondent brokerage clearing house
services. Pershing offers Laidlaw Global Securities clearing capabilities and
investment services specifically developed for the securities industry.
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For non-dollar denominated equity and debt transactions, Laidlaw Global
Securities clears through Arnold & S. Bleichroeder, Inc., which provides access
to stocks listed on over 40 exchanges throughout the world and with substantial
coverage in the leading emerging market countries.
Westminster: Westminster provides professional execution services for
investors interested in trading in virtually every financial market. Westminster
buys and sells equities, options, fixed-income securities, mutual funds and unit
investment trusts while offering very competitive commission prices.
Westminster, which is a member of the NYSE, trades on all major exchanges and is
a principal market maker in several select Over-the-Counter securities. In
trading, Westminster focuses on maximizing clients' financial security by
providing informed, intelligent investment services.
Through Pershing, Westminster offers a full range of retirement plans to
individuals, corporate employees, and self-employed professionals. Westminster
also provide fee-based management account programs that offer access to top
institutional money managers. Through Pershing, Westminster also offers PROCASH,
a consolidated asset management account combining brokerage services, free check
writing, a MasterCard(R) Debit card, and other cash flow management activities.
Westminster believes that by employing its strategic initiative to build a
relatively small but high quality group of brokers, it will be able to
efficiently provide a high level of support and service to its core broker base
thereby increasing broker productivity, expanding production, and improving the
quality of the business generated. Furthermore, by providing a flexible
environment with access to proprietary products, management support, individual
attention and full product and staff support, Westminster believes that it will
be able to retain and improve broker productivity and recruit experienced higher
revenue producing brokers.
Lead Capital: Lead Capital provides professional brokerage services to
investors primarily investing in securities listed on the Athens Stock Exchange.
As of the date of this prospectus, Lead Capital did not contribute a significant
amount of income to the operations of the Company.
Global On-Line Trading and Investment Services
GEE: GEE is a newly formed corporation which intends to establish itself as
an Internet based international investment services business, including
operations in securities trading, investment banking, asset management and real
estate. Through its wholly owned broker-dealer subsidiary Globeshare, Inc.
("Globeshare"), GEE provides international trading through a network of member
firms. Globeshare intends to operate as an Internet based securities firm
through its World Wide Web site Globeshare.com. Globeshare initially commenced
operations as a division of Laidlaw Global Securities. To date, Globeshare has
only conducted business within the United States and has not generated
significant revenue. The Company also presently owns the domain names
GlobeBond.com and GlobeProperty.com and will utilize these names to develop
future Internet based businesses.
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On January 27, 2000, GEE, through Globeshare, Inc., launched global trading
operations using Globeshare.com as its online trading platform. Globeshare
recently became a member of the NASD. Prior to becoming a member of the NASD,
securities trades were executed through the Company's affiliate Laidlaw Global
Securities.
The system launched and currently being developed by Globeshare will
eventually link it with brokerage firms in approximately 50 countries.
Capitalizing on the foreign contacts of the Company, its subsidiaries and
affiliates, GEE intends to develop strategic affiliations with established
brokerage firms throughout the world, and to date has entered into agreements
with 11 foreign registered brokerage firms representing 16 exchanges located
outside the United States. The affiliations with foreign registered securities
firms will result in an international network of member firms. The agreements
with the network members provides for exclusivity with Globeshare. This
membership network provides investors of these member firms to utilize the
Globeshare web site to trade securities throughout the world. Investors are able
to trade in the countries where Globeshare has a network affiliate member by
either becoming a client of Globeshare or an online customer of the member firm
where the investor resides. For example, an individual residing in the United
States may now enter the Globeshare.com web site and place an order to sell or
buy securities on any foreign exchange where the Company has a foreign
affiliate, such as an exchange located in France or Spain. Similarly, investors
residing in Spain may enter the GlobeShare.com web site and enter an order to
trade on the French or United States exchanges.
GEE expects earns a transaction fee on every securities transaction which
is initiated through the Globeshare.com web site. Depending upon the agreement
obtained by the Company with the affiliate member firm, Globeshare obtains a
commission of between 20-40% of the commission earned, the customer's brokerage
firm receives approximately 20% of the commission paid to Globeshare and the
executing brokerage firm receives the bulk of the commissions. For trades
executed in the United States equity markets, the Company charges $29.95 per
trade and, as the executing broker, Globeshare retains 80% of the commission
charges.
As of January 20, 2000, the Company had entered into letters of intent and
agreements with five foreign broker-dealers, which allow customers to execute
trades in exchanges including all United States exchanges, and the Belgian,
Luxembourg, EASDAQ, Hong Kong and Paris Bourses. The Company expects to reach
affiliate agreements with other brokerage firms in Spain, Japan, Brazil, German,
Greece, Argentina and the United Kingdom in the next few months and will
continue to expand its affiliations.
Investment Banking
Laidlaw Global Securities: Laidlaw Global Securities has the platform to
emerge as a global investment bank for middle-market companies. Laidlaw Global
Securities' investment banking professionals have completed numerous private
placements, public stock offerings, and secondary equity and debt offerings.
Since January of 1997, Laidlaw Global Securities has acted as either lead
underwriter or co-underwriter in the following public offerings: Puro Water,
Inc., Asia Pacific Wire & Cable Company, Augment Systems, Inc., Scheid
Vineyards, Inc., JinPan International, Ltd. and Newmark Homes Corp. Laidlaw
Global Securities also acts as a financial advisor to a number of middle-market
companies in developing strategies for maximizing shareholder value. Laidlaw
Global Securities provides fairness opinions and valuations, advice on
recapitalization, mergers and acquisitions, advice on selling companies, and
assistance with the private placement and public distribution of securities in
the United States and abroad.
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By providing experienced counsel to middle-market and growth companies,
where the market capitalizations are less than $500 million, Laidlaw Global
Securities is well-positioned in a important market niche. Laidlaw Global
Securities' investment professionals offer domestic clients an opportunity to
extend their investment offerings beyond the United States, to key international
markets, while also assisting international companies who desire access to the
United States.
Westminster: Westminster offers a full range of investment banking
services, principally corporate finance and merger and acquisition services to
emerging growth and middle-market companies.
Westminster has considerable experience and expertise in arranging public
offerings, both initial and secondary, and private placement offerings for firms
ranging from small start-up companies to well-established corporations. Since
1997, Westminster has served as an underwriter for the public offering of
foreignTV.com Inc.
Westminster assists clients in raising debt, mezzanine and equity capital
through both public and private markets. Maintaining relationships with a large
number of lenders and equity investors, both institutional and high net-worth
investors, enables Westminster to generate significant levels of private
financing. Additionally, Westminster is capable of underwriting equity offerings
and providing bridge financing through its retail brokerage operations and
institutional sales people.
Westminster also provides merger and acquisition advisory services.
Westminster's banking staff assist clients in selling all or part of their
businesses by preparing offering memoranda, identifying appropriate qualified
financial buyers from extensive contact lists, and conducting management
presentations and due diligence reviews. In addition, Westminster assists
acquirers by identifying attractive investment opportunities, and by creatively
structuring and placing acquisition financing.
Laidlaw Pacific: Laidlaw Pacific offers a full range of corporate financial
advisory services to clients including arranging initial public offerings,
placing rights issues, takeovers, corporate restructuring and the underwriting
of equities. Laidlaw Pacific has launched various fund raising activities
throughout the Pacific Rim and in the United States. It has acted as sponsor and
underwriter of numerous takeover, merger and acquisition activities. Laidlaw
Pacific's investment banking strategy is to focus on initial public offerings by
Internet corporations.
Asset Management and Investment Services
Howe & Rusling: The Company owns an 81% interest in H&R Acquisition Corp.
whose wholly owned subsidiary Howe & Rusling is primarily engaged in asset
management and services. Howe & Rusling was founded in 1930, and has
successfully built and managed investment portfolios for over 470 institutional
and high net-worth clients. Howe & Rusling's client base includes high-net worth
individuals, qualified retirement plans, and endowment funds and corporations.
Howe & Rusling's successful investment approach is based on a conservative
philosophy of building long term asset growth through low volatility
investments. Management believes that this investment approach has resulted in
one of the highest client retention rates among investment management firms.
Howe & Rusling's average client retention is 98% per year. Nelson Publication's
"World's Best Money Managers" ranked Howe & Rusling in the top 4% of 303
Balanced Managers for the three years ending 1998. In addition, Money Manager
Review's "The Best Performing Managers" ranked Howe & Rusling in the top 1% of
314 Balanced Managers as of year-end 1998.
Since the Company's purchase of majority control of Howe & Rusling, assets
under management have grown from approximately $450 million in October 1996 to
$765 million as of November 30, 1999. The key element of our strategic plan is
to build our asset management business by globally expanding the base of
institutional and high net-worth clients.
Laidlaw Global Securities: Our registered investment advisor, a division of
Laidlaw Global Securities, provides services including performance monitoring
selection of third party investment managers, and discretionary asset
management. The investment advisory services offered by Laidlaw Global
Securities are tailored for a variety of clients, including individuals, pension
and profit-sharing plans, trusts and estates, charitable organizations,
corporations and other businesses.
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Employees
As of January 20, 2000, we had 125 employees, of which 63 are employed
full-time and 3 are employed part-time at Laidlaw Global Securities, 15 are
employed full-time and 2 are employed part- time at Westminster, 22 are employed
full-time at Howe & Rusling, 4 are employed full-time and 8 are employed
part-time at GEE, and 8 are employed full-time at Lead Capital. We believe that
one of our strengths is the quality and dedication of our employees and the
shared sense of being a part of a team. We strive to maintain a work environment
that fosters professionalism, excellence, diversity and cooperation among our
employees. Our future success will depend, in part, on our ability to continue
to attract, retain and motivate highly qualified technical and management
personnel, for whom competition is intense. Our employees are not covered by any
collective bargaining agreement, and we have never experienced a work stoppage.
We believe our relations with our employees are good.
Properties
Our principal executive offices, which are occupied by Laidlaw Global
Securities, Westminster and GEE, are located on the 25th, 27th, 28th and 29th
floors at 100 Park Avenue, New York, New York and comprise approximately 30,467
square feet of leased space. The lease of space located on the 25th and 27th
floors expires in 2005 and the lease of space located on the 28th and 29th
floors expires in 2010. Outside New York, Laidlaw Global Securities occupies 900
square feet of office space in Miami, Florida. Westminster occupies 650 square
feet of office space in Miami, Florida. Howe & Rusling's executive office is
located at 120 East Avenue, Rochester, New York. Howe & Rusling leases office
space aggregating approximately 7,333 square feet under a lease that expires on
February 28, 2000.
Consistent with our global approach to our business, Laidlaw Global
Securities also occupies 500 square feet of office space in Paris, France and
approximately 2,000 square feet of office space in Athens, Greece. Lead Capital
occupies 2,000 square feet of office space in Athens, Greece.
Competition
The financial services industry is intensely competitive, and we expect it
to remain so. Our competitors are other brokers and dealers, online brokerage
businesses, investment banking firms, insurance companies, investment advisors,
mutual funds, hedge funds, commercial banks and merchant banks. We compete with
some of our competitors globally and with some others on a national and regional
basis. We compete on the basis of a number of factors, including transaction
execution, our products and services, innovation, reputation and price.
Competition is also intense for the attraction and retention of qualified
employees. Our ability to continue to compete effectively in our businesses will
depend upon our ability to attract new employees and retain and motivate our
existing employees.
In recent years there has been a significant consolidation and convergence
in the financial services industry. Commercial banks and other financial
institutions have established or acquired broker-dealers or have merged with
other financial institutions. These firms have the ability to offer a wide range
of products, from loans, deposit-taking and insurance to brokerage, asset
management and investment banking services which may enhance their competitive
position. They also have the ability to support investment banking and
securities products with commercial banking, insurance and other financial
services revenues in an effort to gain market share.
We believe that some of our most significant challenges and opportunities
will arise outside the United States. In order to take advantage of these
opportunities, we will have to compete successfully with financial institutions
based in important foreign markets, particularly in Europe. Some of these
institutions are larger, better capitalized and have a stronger local presence
and a longer operating history in these markets.
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Many of our competitors have significantly greater financial, technical,
marketing and other resources than we do. Some of our competitors also offer a
wider range of products and services than we do and have greater name
recognition, more established reputations and more extensive client and customer
bases. These competitors may be able to respond more quickly to new or changing
opportunities, technologies and customer requirements due to superior systems
capabilities. They may also be better able to offer more attractive terms to
customers and clients and adopt more aggressive pricing and promotional policies
compared to our firm.
Once our online brokerage business becomes operational through GEE, it is
anticipated that we will compete with discount brokerage firms, which generally
execute transactions for customers while offering other services such as
research, portfolio valuation and investment recommendations. We will compete
directly with approximately one hundred discount brokerage firms already
operating on the Internet. The number of online discount brokers will likely
increase rapidly if the favorable treatment of these firms by the equity market
continues. It is also anticipated that our online brokerage business will also
encounter competition from established full-commission brokerage firms. Many of
these brokerage firms have also begun conducting business online.
Trademarks
We have applied for registration for a variety of trademarks in the United
States and abroad for use in the businesses of our subsidiaries. In the United
States we have applied for the trademarks LAIDLAW GLOBAL, GLOBEBOND, GLOBAL
ELECTRONIC EXCHANGE, GLOBEPROPERTY and GLOBESHARE. The GLOBESHARE trademark has
also been applied for in Argentina, Brazil, China, the European Union, Hong
Kong, Japan and Thailand. To date, no registrations have yet been issued.
We regard our intellectual property as being an important factor in the
marketing of the Company. We are not aware of any facts which would negatively
impact our continuing use of our trademarks.
Regulation
Regulation of the Securities Industry and Broker-Dealers: The securities
industry - and all of our businesses - is subject to extensive regulation under
both federal and state laws. In the United States, the Commission is the federal
agency responsible for the administration of the federal securities laws.
Laidlaw Global Securities and Westminster are member NASD firms and registered
investment advisors with the Commission. Howe & Rusling is also a registered
investment adviser with the Commission. Securities firms are subject to
regulation by the Commission and by self- regulatory organizations ("SROs"),
including but not limited to the NASD, the Municipal Securities Review Board
(the "MSRB") and national securities exchanges such as the NYSE. Securities
firms are also subject to regulation by state securities administrators in those
states in which they conduct business. Laidlaw Global Securities is a registered
broker-dealer in 50 states, the District of Columbia and the Commonwealth of
Puerto Rico. Failure to comply with the laws, rules or regulations of the
Commission, SROs and state securities commissions may result in censure, fine,
the issuance of cease-and-desist orders or the suspension or expulsion by such
entities of a broker- dealer, an investment adviser, officers, or employees. The
Commission and SROs regulate many aspects of our business including trade
practices among broker-dealers, capital structure and withdrawals, sales
methods, use and safekeeping of customers' funds and securities, the financing
of customers' purchases, broker-dealer and employee registration and the conduct
of directors, officers and employees. Additional legislation, changes in the
rules promulgated by SROs or changes in the interpretation of enforcement of
existing rules, either in the United States or elsewhere, may directly affect
the mode of operation and profitability of the Company.
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We are subject to foreign law and the rules and regulations of foreign
governmental and regulatory authorities in virtually all countries where we have
offices. This may include laws, rules and regulations relating to any aspect of
the securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of customers' funds and securities, capital
structure, record-keeping, the financing of customers' purchases, broker-dealer
and employee registration requirements and the conduct of directors, officers
and employees.
Effect of Net Capital Requirements: As a registered broker-dealer and
member of various SROs, we are subject to the Uniform Net Capital Rule under the
Exchange Act. The Uniform Net Capital Rule specifies the minimum level of net
capital a broker-dealer must maintain and also requires that at least a minimum
part of its assets be kept in relatively liquid form. As of December 31, 1999,
our broker-dealer subsidiaries including Laidlaw Global Securities and
Westminster were required to maintain minimum net capital of $158,519 and
$100,000 respectively and had total net capital of approximately $3,853,487 and
$1,326,231 respectively. Of the net capital maintained by Westminster, $600,000
was advanced in the form of subordinated debt by the shareholders of the
company.
The Commission and various SROs impose rules that require notification when
net capital falls below certain predefined criteria, dictate the ratio of debt
to equity in the regulatory capital composition of a broker-dealer and constrain
the ability of a broker-dealer to expand its business under certain
circumstances. Additionally, the Uniform Net Capital Rule imposes certain
requirements that may have the effect of prohibiting a broker-dealer from
distributing or withdrawing capital and requiring prior notice to the Commission
for certain withdrawals of capital.
We are an active participant in the international fixed income and equity
markets. Many of our subsidiaries that participate in those markets are subject
to comprehensive regulations that include some form of capital rule and other
customer protection rules.
Compliance with net capital requirements of these and other regulators
could limit those operations of our subsidiaries that require the intensive use
of capital, such as underwriting and trading activities and the financing of
customer account balances, and also could restrict our ability to withdraw
capital from our regulated subsidiaries, which in turn could limit our ability
to repay debt or pay dividends on our common stock.
Application of Securities Act and Exchange Act to Internet Business: The
Securities Act governs the offer and sale of securities. The Exchange Act
governs, among other things, the operation of the securities markets and
broker-dealers. When enacted, the Securities Act and the Exchange Act did not
contemplate the conduct of a securities business through the Internet. Although
the Commission, in releases and no-action letters, has provided guidance on
various issues related to the offer and sale of securities and the conduct of a
securities business through the Internet, the application of the laws to the
conduct of a securities business through the Internet continue to evolve.
Uncertainty regarding these issues may adversely affect the viability and
profitability of our business.
Legal Matters
In the normal course of business, we are subject to various legal
proceedings. However, in management's opinion, there are no legal proceedings
pending against us or any of our subsidiaries that would have a material adverse
effect on our financial position, results of operations or liquidity.
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PRICE RANGE OF COMMON STOCK
The common stock of the Company is traded on the OTC Bulletin Board. Since
the acquisition of Laidlaw Holdings on June 8, 1999, the common stock has been
traded under the symbol LAIG. Prior to the acquisition, the common stock was
traded under the symbol FTKV. The following table sets forth the closing high
and low sales prices for each of the periods indicated below for the Company's
common stock. The market prices have been adjusted to give retroactive effect to
the Reverse Stock Split and the Forward Stock Split.
Year Quarter High Low
1998 First -- --
Second -- --
Third -- --
Fourth -- --
1999 First -- --
Second $14.08 $2.33
Third $21.33 $12.67
Fourth $20.75 $12.96
As of January 20, 2000, there were approximately 195 stockholders of
record. The Company does not anticipate paying any cash dividends in the
foreseeable future. The Company currently intends to retain future earnings to
fund the development and growth of the business.
In January 2000, the Company made application to trade its common stock on
The American Stock Exchange. No assurance can be given that such application
will be approved, nor can the Company predict when any action will be taken
under such application.
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MANAGEMENT
Directors and Executive Officers
As a condition of the Reorganization Agreement, the officers and directors
of Laidlaw Holdings became the officers and directors of the Company. The
Reorganization Agreement also provided that John P. O'Shea, the President and
Director of Westminster, would serve as a director of the Company. The following
table lists the executive officers and directors of the Company:
Name Age Position
Anastasio Carayannis ....... 40 Chairman of the Board, Chief
Executive Officer and Director
Roger Bendelac ............. 42 President, Chief Operating Officer,
Chief Financial Officer,
Secretary and Director
Daniel Bendelac ............ 50 Vice-Chairman of the Board and
Executive Director
Larry D. Horner ............ 65 Chairman Emeritus and Director
Jean-Marc Beaujolin ........ 55 Director
Billimac C. Bradley ........ 65 Director
Robert K. F. Ma ............ 45 Director
John P. O'Shea ............. 42 Director
----------
Anastasio Carayannis has served as Chief Executive Officer and as Chairman
of the Board of the Company since November 1999. From June 1999 to November
1999, he served as President, Chief Operating Officer and Director of the
Company. From January 1999 to November 1999, he served as President, Chief
Operating Officer and Director of Laidlaw Holdings. He has also served as an
executive officer and director of Laidlaw Global Securities since March 1999 and
as Chairman of the Board and Chief Executive Officer of GEE since its inception
in February of 1999. From 1994 to 1996, Mr. Carayannis served as head of
Prudential Securities Private Alliance Group. From 1989 to 1994, he served as
the Director of Private Client Alliance at Oppenheimer & Co., Inc., where he
successfully established strategic alliances in Europe, Latin America and Asia.
Roger Bendelac has served as President and Chief Operating Officer of the
Company since November 1999. He has also served as Chief Financial Officer,
Secretary and Director of the Company since June 1999. From July 1997 to
November 1999, Mr. Bendelac served as Chief Financial Officer, Secretary and as
a member of the Board of Laidlaw Holdings. He has also served as an executive
officer and director of Laidlaw Global Securities since March 1999 and as
President, Chief Financial Officer, Secretary, Treasurer and Director of GEE
since its inception in February of 1999. From 1989 to 1997, Mr. Bendelac served
as an investment executive with Westminster Securities Corporation.
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Daniel Bendelac has served as the Vice-Chairman of the Board and Executive
Director since November 1999. He has also served as a director of the Company
since June 1999. From July 1997 to November 1999, he served as a director of
Laidlaw Holdings. He has also served as Vice Chairman of the Board of GEE since
its inception in February of 1999. From 1992 to August 1998 Mr. Bendelac served
as a Managing Director at First Intercontinental Group.
Larry D. Horner has served as Chairman Emeritus and as a member of the
Board of the Company since November 1999. From June 1999 to November 1999, he
served as Chief Executive Officer, Chairman of the Board and Director of the
Company. From June 1999 to November 1999, he served as Chief Executive Officer,
Chairman of the Board and Director of Laidlaw Holdings. Mr. Horner has served as
Chairman of the Board of Laidlaw Pacific since October 1994. He has also served
as Chairman of the Board of Laidlaw Global Securities since March 1999 and as a
director of GEE since its inception in February of 1999. Mr. Horner has spent
over 36 years with KPMG International as well as KPMG Peat Marwick (U.S.A.)
where he served as Chairman of the Board and Chief Executive Officer from 1984
to 1990. Mr. Horner also serves as a board member to several corporations
including Pacific USA Holdings Corp., Asia Pacific Wire & Cable Co., Ltd.,
American General Corp., Phillips Petroleum Company, Lotus Biochemical, Inc.,
Newmark Homes, Corp. and Atlantis Plastic Corporation.
Billimac C. Bradley has served as a director of the Company since June 1999
and as a director of Laidlaw Holdings since July 1995. Since 1991, Mr. Bradley
has served as the Chief Executive Officer of Pacific USA Holdings Corp., where
he is responsible for developing the United States operation's basis strategies
and operating plans. Before joining Pacific USA Holdings Corp., Mr. Bradley
spent 23 years as a partner of KPMG Peat Marwick and served on its Board of
Directors.
Jean-Marc Beaujolin has served as a director of the Company since June 1999
and as a director of Laidlaw Holdings since October of 1994. Since 1974, Mr.
Beaujolin has served as the Chairman of the Board of Europ Continents Holding, a
holding company quoted on the Luxembourg stock exchange and principally engaged
in distribution, real estate and financial services in South East Asia. Europ
Continents Holding deals specifically in industrial goods and equipment such as
medical supplies and automotive parts.
Robert K. F. Ma has served as a director of the Company since June 1999 and
as a director of Laidlaw Holdings since July 1995. Mr. Ma has also held various
Executive Director positions at Laidlaw Pacific Financial Services (Holdings)
Limited, the parent company of Laidlaw Pacific, and all of its subsidiaries
since 1994. Since March 1997, he has served as the Chief Financial Officer and
Director of Asia Pacific Wire & Cable Corp., Ltd. He is also a Director, or
Alternate Director, of Texwinca Holdings Limited and Pudong Development Holdings
Limited which are companies listed on various foreign exchanges. From 1986 to
1991, he served as Vice President and Senior Account Executive of NMB Postbank
Groep N.V. were he was responsible for loan origination and syndication work
prior to heading its merger and acquisition team. Mr. Ma is a fellow member of
the Institute of Chartered Accountants in England & Wales, an associate member
of the Institute of Chartered Accountants of Canada and a fellow of the Hong
Kong Society of Accountants. He has also participated in direct investments in
advisory and principal roles throughout Asia and the United States.
John O'Shea has served as a director of the Company since July 1, 1999.
Since September 1998, he has served as President and Chief Operating Officer of
Westminster. He joined the Board of Directors of Westminster in January 1997,
after serving 10 years as Vice President. From 1982 to 1987, Mr. O'Shea served
as Syndicate Manager of Yammer & Co., an American Stock Exchange Member Firm. He
is an Allied Member of the NYSE and is a Member of the New York Board of Trade.
He is also the owner of the Las Vegas Coyotes, a professional roller hockey
team. He received a BA and MA in Economics from the University of Cincinnati.
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<PAGE>
Key Employees
Thomas Rusling has served as the President of Howe & Rusling since 1965. He
is a member of Howe & Rusling's Executive Committee, Investment Committee and
Strategy Group. Mr. Rusling has more than three decades of portfolio management
and corporate experience. He received a BA in Economics from Yale University and
later achieved the Chartered Financial Analyst designation.
Jack Anderson has served as the Executive Vice President of Howe & Rusling
since 1977. He is a member of Howe & Rusling's Executive and Investment
Committees. Prior to joining Howe & Rusling, Mr. Anderson served as a financial
accountant for a Fortune 500 company and as an account executive for a respected
brokerage firm. He received a BS in Engineering from Brown University and an MBA
from Boston University.
Daniel Luskind has served as the Co-Chairman of the Board of Westminster
since September 1998. Prior to becoming Co-Chairman, he served as President of
Westminster since its inception in 1971. Mr. Luskind is a Certified Public
Accountant.
Henry Krauss has served as the Co-Chairman and Secretary of Westminster
since September 1998. Prior to becoming Co-Chairman, he served as Secretary and
Treasurer of Westminster since its inception in 1971.
Committees on the Board
The Board of Directors has established a Stock Option Committee, composed
of Larry D. Horner, the Chairman Emeritus and an independent director of the
Company, and Jean-Marc Beaujolin, an independent director of the Company, who
are responsible for administering the Company's 1999 Omnibus Plan. The members
of the Stock Option Committee are no longer eligible to participate in the
Omnibus Plan and qualify as disinterested persons for purposes of Rule
16b-3(c)(2)(i) of the Exchange Act.
Our Board of Directors has also established an Audit Committee, also
composed of Messrs. Horner and Beaujolin. The Audit Committee will review the
results and scope of the audit and other services provided by our independent
auditors as well as review our accounting and control procedures and policies.
Executive Compensation
The following table summarizes calendar 1997, 1998 and 1999 compensation
for services in all capacities of our executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Securities LTIP All Other
Name and Principal Salary Bonus Underlying Payouts Compensation
Position Year ($) ($)(1) Options (#) ($) ($)(2)
-------- ---- --- ------ ----------- --- ------
<S> <C> <C> <C> <C> <C>
Anastasio Caryannis, 1999 175,000 302,000 62,700 -- 629,469
Chief Executive Officer
1998 158,333 -- -- -- 242,200
1997 150,000 -- -- -- 216,697
Roger Bendelac, 1999 101,250 98,000 62,700 -- 177,067
President, Chief Operating
Officer, Chief Financial
Officer and Secretary
1998 -- -- 225,000 -- 154,233
1997 -- -- -- -- 66,410
Daniel Bendelac, 1999 150,000 100,000 62,700 -- 34,103
Executive Vice President
1998 50,577 -- 375,000 -- 10,000
1997 -- -- -- -- --
</TABLE>
- ----------
(1) Bonuses awarded in 1999 were accrued in December 1999 and paid in January
2000.
(2) All other compensation was earned from commissions generated by the Laidlaw
Global Securities business.
35
<PAGE>
Options Granted
The following table sets forth information with respect to stock options
granted under the Omnibus Plan between May 15, 1997 and May 28, 1999 to
executive officers of the Company and its subsidiaries.
Options Granted from the Period Beginning May 15, 1997 and Ending January
20, 2000
<TABLE>
<CAPTION>
Percentage of Potential
Total Options Realizable Value
Granted to at Assumed
Employees in Annual Rates of
Number of the period Stock Price
Securities beginning May Exercise Appreciation for
Underlying 15, 1997 and Price Per Option Terms(3)
Options ended January Share Expiration
Name Granted(1) 20, 2000(2) ($) Date 5% ($) 10% ($)
---- ---------- ----------- --- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Anastasio 62,700 2.10% 2.33 5/28/04 479,655 509,124
Carayannis
Roger Bendelac 225,000 7.55% 2.33 1/15/03 1,721,250 1,827,000
62,700 2.10% 2.33 5/28/04 479,655 509,124
Daniel Bendelac 375,000 12.60% 2.33 9/3/03 2,868,750 3,045,000
62,700 2.10% 2.33 5/28/04 479,655 509,124
</TABLE>
- ----------
(1) Such options are incentive options granted pursuant to and in accordance
with the Laidlaw Global Corporation 1999 Omnibus Plan.
(2) Based on an aggregate of 2,984,750 options granted to employees during the
period beginning May 15, 1997 and ending January 20, 2000.
(3) In accordance with the rules of the Commission, shown are the hypothetical
gains or "option spreads" that would exist for the respective options.
These gains are based on assumed rates of annual compounded stock price
appreciation of 5% and 10% from the date the option was granted over the
full option term, assuming a fair market value equal to the exercise price
per share on the date of grant. The 5% and 10% assumed rates of
appreciation are mandated by the Commission and do not represent our
estimate projection of future increases in the price of our common stock.
Aggregate Option Exercises and Option Values
The following table sets forth information as of January 20, 2000 with
respect to exercisable and unexercisable stock options held by the executive
officers of the Company and its subsidiaries.
Aggregate Option Exercises as of January 20, 2000
<TABLE>
<CAPTION>
Number of
Securities
Shares Underlying Value of
Acquired Unexercised Unexercisable In-
on Options at January the-Money Options
Exercise Value 20, 2000 at January 20, 2000
-------- Realized Exercisable / Exercisable /
Name (#) ($) Unexercisable Unexercisable(1)
----- --- --- ------------- ----------------
<S> <C> <C> <C> <C>
Anastasio Carayannis 1,210,500 8,679,285 62,700 / 0 --
Roger Bendelac 150,000 1,075,500 287,700 / 0 --
</TABLE>
- ----------
(1) Based on the fair market value of our common stock at January 20, 2000, of
$9.50 per share, less the exercise price for such shares.
36
<PAGE>
Executive Officer Employment Agreements
We have entered into one-year employment agreements with Anastasio
Carayannis, as our Chairman of the Board of Directors and Chief Executive
Officer, Roger Bendelac as our President, Chief Operating Officer, Chief
Financial Officer and Secretary, and Daniel Bendelac as our Vice- Chairman of
the Board of Directors. The executives are entitled to base salaries per annum,
initially as follows: Anastasio Carayannis, $185,000; Roger Bendelac, $165,000;
and Daniel Bendelac, $165,000. Anastasio Carayannis and Roger Bendelac are also
entitled to a 40% payout on all gross commissions generated from their customer
accounts. The executives are each entitled to annual bonuses as the compensation
committee of our board of directors may determine based upon the performance and
achievement of specified goals of the Company. If, by March 30, 2000, no bonus
plan has been implemented, and the Company's net income for the year ending
December 31, 2000 shall equal that earned by the Company for the year ended
December 31, 1999, then the executives will each be entitled to a bonus of no
less than 50% of the bonus they will each receive for the prior year. Each of
the executives have agreed not to compete with us during the term of employment.
Each of the employment agreements include customary provisions entitling us to
terminate the executive's employment for cause or upon incapacitation or
extended disability of the executive. The employment agreements also include
customary provisions to protect our confidential information and ensure that we
will own, among other things, customer lists, products and business plans.
Benefit Plans
Laidlaw Global Corporation Omnibus Plan
The Omnibus Plan: On July 2, 1999, the Board and Directors and our
stockholders approved the assumption by the Company of the obligations of
exercise of options granted by Laidlaw Holdings under the Laidlaw Holdings, Inc.
1997 Omnibus Plan and of options granted by Westminster under a similar plan.
The 1999 Laidlaw Global Corporation Omnibus Plan (the "Omnibus Plan"), provides
for the grant of: (a) options which may be designated as (i) "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or (ii) non qualified stock options; (b) stock appreciation rights; (c)
restricted stock awards; (d) performance awards; or (e) other forms of
stock-based incentive awards.
The Company's directors, officers, employees, consultants and advisors, or
any subsidiaries of the Company now existing or hereafter formed or acquired, as
determined by the Stock Option Committee, are eligible to participate in the
Omnibus Plan. Shares of the Company's common stock may be granted under the
Omnibus Plan. Subject to certain adjustments, the maximum number of shares which
may be issued under the Omnibus Plan shall not exceed 2,900,000 shares of Common
Stock.
The Omnibus Plan is administered by our board of directors. Our board of
directors may amend the Omnibus Plan as desired without further action by our
stockholders except as required by applicable law and to the extent not causing
any material adverse effect on any rights or benefits of the holders of
outstanding options. The Omnibus Plan will continue in effect until terminated
by the board of directors.
The consideration for each award under the Omnibus Plan has been
established by the Board of Directors, and will continue to be established by
the Board of Directors and the Stock Option Committee, but in no event will the
option price for incentive stock options be less than the fair market value of a
share of common stock on the date of grant or 110% with respect to optionees who
own at least 10% of the outstanding common stock. Nonqualified options will have
an option price to be determined by the Stock Option Committee, not less than
the fair market value of the common stock on the date the option is granted. The
board of directors and Stock Option Committee has the authority to determine the
time or times at which incentive stock options granted under the Omnibus Plan
become exercisable, provided that the options expire no later than ten years
from the date of grant or five years with respect to optionees who own at least
10% of the outstanding common stock. Incentive stock options may be exercised
only by an employee while employed by us or within 30 days after termination of
employment, within one year for termination resulting from disability, or within
three years from termination resulting from death.
37
<PAGE>
Unless otherwise determined by the board of directors or Stock Option
Committee, the exercisability of options outstanding under the Omnibus Plan will
accelerate upon a change in control of the Company, which includes but is not
limited to the merger of the Company, with or into another corporation where our
stockholders no longer own 50% or more of the stock of the Company we merge
into, or the sale of substantially all our assets, regardless of whether the
options are assumed or new options are issued by the successor corporation.
As of January 20, 2000, we had options outstanding for the purchase of
2,786,413 shares of common stock under the Omnibus Plan. These options have
exercise prices ranging from $1.25 to $8.00 per share, and are held by
approximately 118 individuals or entities.
Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, we may indemnify
our directors and officers against liabilities as they may incur in such
capacities, including liabilities under the Securities Act. Our Bylaws provide
that the Company may indemnify its directors and officers and we intend to enter
into agreements to indemnify our directors to the full extend permitted by law.
These arrangements, among other things, will indemnify our directors for
expenses, including attorneys' fees, judgments, fines and settlement amounts
incurred by such person in any action or proceeding including, but not limited
to any action by or in the right of the Company, on account of services as a
director of the Company, or as a director or officer of any other company or
enterprise to which the person provides services at our request. We also intend
to purchase liability insurance covering our directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors or officers pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment by the Company
of expenses incurred or paid by a director of officer of the Company in the
successful defense of any action, suit or proceeding, is asserted by such
director or officer in connection with the securities being registered, the
Company will, unless in the opinion of our counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Our certificate of incorporation provides that our directors shall not be
liable for monetary damages for breach of such director's fiduciary duty of care
to us and our stockholders except for liability for breach of the director's
duty of loyalty to us or our stockholders, for acts or omissions not in good
faith or involving intentional misconduct or knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware Law. This provision does not eliminate the duty of care and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware Law. The provision
also does not affect a director's responsibilities under any other law such as
the federal or state securities or environmental laws.
There is no pending litigation or proceeding involving any of our
directors, officers, employees or other agents as to which indemnification is
being sought, no are we aware of any pending or threatened litigation that may
result in claims for indemnification by any director, officer, employee or other
agent.
38
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 20, 1998, we have not been a party to any transaction or
series of similar transactions in which the amount involved exceeds $60,000 and
in which any director, executive officer, or holder of more than 5% of our
common stock had or will have a direct or indirect material interest other than
o normal compensation arrangements which are described under
"Management- Executive Compensation" above; and
o the transactions described below.
All future transactions, including loans, if any, between us and our
officers, directors and principal shareholders and their affiliates and any
transactions between us and any entity with which our officers, directors or
principal shareholders are affiliated will be subject to the approval of a
majority of our board of directors, including the majority of the independent
and disinterested outside directors of the board of directors and must be on
terms no less favorable to us than could be obtained from unaffiliated third
parties.
Shares Exchanged for Laidlaw Holdings, Inc. 12% Senior Secured Euro-Notes
Subsequent to the Reorganization, the Company granted to holders of the
Laidlaw Holdings 12% Senior Secured Euro-Notes (the "Euro-Notes") the right to
exchange the Euro-Notes and Warrants issued with the Euro-Notes for shares of
Common Stock of the Company at the rate of $2.05 per share for each Euro-Note
exchanged, and the right to obtain Common Stock of the Company upon exercise of
the Warrants issued with the Euro-Notes upon the same terms and conditions of
such Warrants. To date, 15 holders of Euro-Notes aggregating $1,876,000 in
principal amount have exchanged their notes for shares of Common Stock of the
Company.
Share Exchanged for Laidlaw Holdings, Inc. 8% Convertible Subordinated Notes
Subsequent to the Reorganization, the Company assumed the obligations of
Laidlaw Holdings with respect to the conversion rights of holders of the Laidlaw
Holdings 8% Convertible Notes (the "Convertible Notes"). As a result, holders of
the Convertible Notes could convert such notes into Common Stock of the Company
at the rate of $2.05 per share, upon the same terms and conditions of conversion
privileges set forth in the Convertible Notes. To date, 69 holders of
Convertible Notes aggregating $8 million in principal amount have converted
their notes into shares of Common Stock of the Company
Finder's Fee to John O'Shea
Pursuant to a Letter of Intent dated April 30, 1999 between Laidlaw
Holdings and Westminster to enter into the Reorganization, Laidlaw Holdings paid
a finder's fee of $50,000 to John O'Shea, one of our directors.
Sale of Subsidiary of PUSA Investment Company
On December 15, 1999, PUSA Investment Company, the owner of 28.94% of our
common stock, sold its wholly owned subsidiary Newmark Homes, Corp. Laidlaw
Global Securities served as investment banker in connection with the transaction
and earned a fee of $2,150,000.
39
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 20, 2000, by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock; (ii) each director of the Company; (iii) each
executive officer of the Company; and (iv) all executive officers and directors
of the Company as a group. See "Description of Securities."
Number of Shares Percentage of Common
Beneficially Equity Beneficially
Name of Beneficial Owner Owned(1) Owned(2)
- ------------------------ -------- --------
PUSA Investment Company(3) 8,491,983 28.94%
Europ Continents Holding(4) 2,076,516 7.08%
Larry Horner(5) 62,700 0.21%
Anastasio Carayannis(6) 1,273,200 4.34%
Roger Bendelac(7) 437,700 1.49%
Daniel Bendelac(8) 437,700 1.49%
Billimac C. Bradley(9) 0 0%
Jean-Marc Beaujolin(10) 0 0%
Robert K. F. Ma(11) 0 0%
John O'Shea 1,500,000 5.11%
Daniel Luskind 1,500,000 5.11%
Henry Krauss 1,500,000 5.11%
All Directors and Executive
Officers as a Group 3,711,300 12.65%
- ----------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In general, a person who has voting power and/or investment
power with respect to securities is treated as a beneficial owner of those
securities. For purposes of this table, shares subject to the Common Stock
Purchase Warrants, Class A and B Warrants and options exercisable within 60
days of January 20, 2000 are considered as beneficially owned by the person
holding such securities. To our knowledge, except as set forth in the
footnotes to this table, we believe that the persons named in this table
have sole voting and investment power with respect to the shares shown.
Except as otherwise indicated, the address of each of the
40
<PAGE>
directors and executive officers and 5% stockholders in this table is as
follows: Laidlaw Global Corporation, 100 Park Avenue, New York, New York
10017.
(2) Percentage beneficially owned is based upon 29,339,943 shares of Common
Stock issued and outstanding as of January 20, 2000 including 2,465,696
shares of Common Stock issuable upon exercise of outstanding warrants and
employee stock options including: (a) 94,454 Common Stock Purchase
Warrants; (b) 398,696 Class A Common Stock Purchase Warrants; (c) 398,696
Class B Common Stock Purchase Warrants; and (d) 1,573,850 employee stock
options granted under the 1999 Laidlaw Global Corporation Omnibus Plan
which are exercisable within 60 days of January 20, 2000.
(3) The address for PUSA Investment Company is 2740 North Dallas Parkway, Suite
200, Plano, Texas 75093.
(4) The address for Europ Continents Holding is 4 Avenue Laurent Cely, 92606
Asnieves Codex, France. Jean-Marc Beaujolin, a director of the Company, is
also the Chairman of the Board of Directors of Euro Continents Holding.
(5) Includes 62,700 shares of common stock issuable upon the exercise of
options exercisable within 60 days of January 20, 2000. Larry Horner is
also the Chairman of the Board of Directors of Pacific USA Holdings Corp
which is the parent company of PUSA Investment Company, the 28.94% owner of
our common stock.
(6) Includes 62,700 shares of common stock issuable upon the exercise of
options exercisable within 60 days of January 20, 2000.
(7) Includes 287,700 shares of common stock issuable upon the exercise of
options exercisable within 60 days of January 20, 2000.
(8) Includes 437,700 shares of common stock issuable upon the exercise of
options exercisable within 60 days of January 20, 2000.
(9) The address for Billimac Bradley is 2740 North Dallas Parkway, Suite 200,
Plano, Texas 75093. Billimac Bradley is also the Chief Executive Officer of
Pacific USA Holdings Corp. which is the parent company of PUSA Investment
Company, the 28.94% owner of our common stock.
(10) The address for Jean-Marc Beaujolin is 4 Avenue Laurent Cely, 92606
Asnieves, Codex, France.
(11) The address for Robert K. F. Ma is 39 Gloucester Road, Wanchai, Hong Kong.
41
<PAGE>
DESCRIPTION OF SECURITIES
Capital Stock
The Company's authorized capital stock consists of 300,000,000 shares of
Common Stock and 20,000,000 shares of Preferred Stock, each with a par value of
$0.00001 per share. As of January 20, 2000 there were 26,874,247 shares of
Common Stock issued and outstanding, not including the shares issuable upon the
exercise of the Common Stock Purchase Warrants and the Class A and B Warrants.
All outstanding shares of Common Stock are validly issued, full paid and
nonassessable.
Preferred Stock
Our Certificate of Incorporation provides for 20 million authorized shares
of Preferred Stock, of which none is outstanding. The existence of authorized
but unissued Preferred Stock may enable the Board of Directors to render more
difficult or to discourage an attempt to obtain control of us by means of a
merger, tender offer, proxy contest or otherwise. For example, if in the due
exercise of its fiduciary obligations, the Board of Directors were to determine
that a takeover proposal is not in our best interests, the Board of Directors
could cause shares of preferred stock to be issued without stockholder approval
in one or more private offerings or other transactions that might dilute the
voting or other rights of the proposed acquirer or insurgent stockholder group.
In this regard, our Certificate of Incorporation grants the Board of Directors
broad power to establish the rights and preferences of authorized and unissued
Preferred Stock. The issuance of shares of Preferred Stock pursuant to the Board
of Directors' authority described above could decrease the amount of earnings
and assets available for distribution to holders of shares of Common Stock and
adversely affect the rights and powers, including voting rights, of such holders
and may have the effect of delaying, deterring or preventing a change in control
of us. The Board of Directors currently does not intend to seek stockholder
approval prior to any issuance of Preferred Stock, unless otherwise required by
law.
Common Stock
Each share of Common Stock is entitled to one vote for all purposes and
cumulative voting is not permitted in the election of directors. Accordingly,
the holders of more than 50% of all of the outstanding shares of Common Stock
can elect all of the directors. Significant corporate transactions such as
amendments to the articles of incorporation, mergers, sales of assets and
dissolution or liquidation require approval by the affirmative vote of the
majority of the outstanding shares of Common Stock. Other matters to be voted
upon by the holders of Common Stock normally require the affirmative vote of a
majority of the shares present at the particular stockholders' meeting.
42
<PAGE>
Subject to the preferential rights of any holders of any outstanding
Preferred Stock, the holders of Common Stock will be entitled to such dividends
and distributions, whether payable in cash or otherwise, as may be declared from
time to time by our Board of Directors from legally available funds. Subject to
the preferential rights of holders of any outstanding preferred stock, upon our
liquidation, dissolution or winding-up and after payment of all prior claims,
the holders of Common Stock will be entitled to receive pro rata all our assets.
Any dividend in shares of Common Stock paid on or with respect to shares of
Common Stock may be paid only with shares of Common Stock.
There are no preemptive, subscription, conversion or redemption rights
pertaining to the Common Stock. The absence of preemptive rights could result in
a dilution of the interest of existing stockholders should additional shares of
Common Stock be issued.
Warrants
On January 24, 1992, the Company, doing business as Fi-Tek, completed its
initial public offering after selling approximately 398,695 Units. Each Unit
consists of one share of Common Stock, one Class A warrant and one Class B
warrant. Each Class A warrant and each Class B warrant will be exercisable for
one share of Common Stock of the Company at a price of $2.60 per share and $4.33
per share respectively, any time through July 9, 2000 and may be transferred
separately from the Common Stock. The Company may redeem the warrants at a price
of $0.00001 per warrant upon 30 days notice, reduce the exercise price, or
indefinitely extend the exercise period of the warrants. As of January 20, 2000,
797,391 Class A and B Warrants were issued and outstanding, of which none were
exercised.
12% Senior Secured Euro-Notes Due 2002
From April 1997 to May 1997, Laidlaw Holdings offered, on a "best efforts"
basis a minimum of 50 Units and a maximum of 80 Units, each Unit consisting of 5
year 12% Senior Secured Notes in the principal amount of $100,000 and a 5 year
Warrant to purchase 6,881 shares of non-voting Common Stock of Laidlaw Holdings,
at an exercise price of $4.36 per share. Euro- Notes in the aggregate principal
amount of $2,305,000 were sold. The Euro-Notes were sold to (i) 3 domestic
accredited investors pursuant to an exemption from registration under Regulation
D of the Securities Act; and to (ii) 15 foreign accredited investors under
Regulation S of the Securities Act.
Subsequent to the Reorganization, the Company granted to holders of the
Euro-Notes the right to exchange the Euro-Notes and Warrants issued with the
Euro-Notes for shares of Common Stock of the Company at the rate of $2.05 per
share for each Euro-Note exchanged, and the right to obtain Common Stock of the
Company upon exercise of the Warrants issued with the Euro-Notes upon the same
terms and conditions of such Warrants. To date, 15 holders of Euro-Notes
aggregating $1,876,000 in principal amount have exchanged their notes for shares
of Common Stock of the Company.
43
<PAGE>
8% Convertible Subordinated Notes Due 2000
From July 1998 to June 1999, Laidlaw Holdings offered, on a "best efforts"
basis, 8% Convertible Notes due 2000 in the minimum aggregate amount of
$1,000,000 and a maximum of $8,000,000. The Convertible Notes, are convertible
into Common Stock of Laidlaw Holdings at a price of $2.05 per share, subject to
adjustment under certain conditions. Interest on the Convertible Notes shall
accrue on a semi-annual basis until the date of the conversion. Convertible
Notes in the aggregate principal amount of $8 million were sold. The Convertible
Notes were sold to (i) 19 domestic accredited investors pursuant to an exemption
from registration under Regulation D of the Securities Act; and to (ii) 50
foreign accredited investors under Regulation S of the Securities Act.
Subsequent to the Reorganization, the Company assumed the obligations of
Laidlaw Holdings with respect to the conversion rights of holders of the
Convertible Subordinated Notes. As a result, holders of the Convertible Notes
could convert such notes into Common Stock of the Company at the rate of $2.05
per share, upon the same terms and conditions of conversion privileges set forth
in the Convertible Subordinated Notes. To date, 69 holders of Convertible
Subordinated Notes aggregating $8 million in principal amount have converted
their notes into shares of Common Stock of the Company.
Shares Eligible for Future Sale
Sales of a substantial number of shares of common stock by the Selling
Security Holders could adversely affect the market price of common stock and
could impair our ability to raise capital through the sale of equity securities.
Upon consummation of this offering, there will be 27,690,530 shares of common
stock outstanding, assuming the exercise of Common Stock Purchase Warrants and
Class A and B Warrants into shares of common stock being offered in this
prospectus. Of the 27,690,530 shares, 1,891,100 shares will be freely tradable,
a portion of which are being offered in this prospectus, except for any shares
purchased by an "affiliate" of the Company which will be subject to the
limitations of Rule 144 adopted under the Securities Act. Of the 3,562,223
shares being offered in this prospectus, 797,392 shares issuable upon the
exercise of the Class A and B Warrants will be freely transferable for immediate
sale without restriction or further registration under the Securities Act . The
remaining 2,764,831 shares of common stock will be available for future sale
upon the expiration or the waiver of a certain 30 day lock-up. Such shares will
be released from lock-up 30 days after the Registration Statement has been
declared effective by the Commission.
Additionally, approximately 406,292 outstanding shares of common stock held
by former shareholders of the Company are locked-up pursuant to section 7(p) of
the Reorganization Agreement. See "Business - Recent Developments." Of the
406,292 locked-up shares, 52,445 shares will be released from lock-up, pursuant
to sections 7(p) and 11(o)(i) of the Reorganization Agreement, as additional
shares are issued by the Company. Of the 52,445 shares, 26,229 shares will be
freely tradable and 26,216 will be purchased by certain designees of the Company
at a price of $2.33 per share. Pursuant to section 7(p) and 11(o)(ii) of the
Reorganization Agreement, the remaining 353,847 shares will be released from
lock-up beginning on March 8, 2000. All such shares are held by non-affiliates
of the Company and will be resold under Rule 144 of the Securities Act.
44
<PAGE>
In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person who has beneficially owned restricted shares for at least
one year, is entitled to sell within any three- month period a number of shares
that does not exceed the greater of:
o 1% of the then-outstanding shares of common stock; or
o the average weekly trading volume of our common stock during the four
calendar weeks before the date of the sale.
Sales under Rule 144 also are subject to requirements pertaining to the
manner and notice of the sales and the availability of current public
information pertaining to the Company.
Under Rule 144(k), a person who is not deemed to have been affiliated with
the Company at any time during the 90 days before a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell these shares without regard to the requirements described
above. To the extent that shares were acquired from an affiliate of the Company,
the transferee's holding period for the purpose of effecting a sale under Rule
144(k) commences on the date of transfer from the affiliate.
Delaware Takeover Statute
We are also subject to Section 203 of the Delaware General Corporation Law.
In general, Section 203 prohibits a publicly held Delaware corporation form
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the stockholder became an interested stockholder,
unless
o before that date the board of directors of that corporation approves
either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder;
o upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the
time that the transaction commenced, excluding for purposes of
determining the number of shares outstanding, shares owned by:
o persons who are both directors and officers, and
o employee stock plans that do not provide employees with the right
to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or
o on or after that date the business combination is approved by the
board and authorized at a meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested
stockholder.
45
<PAGE>
A "business combination" includes a merger, consolidation, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock.
The restrictions imposed by Section 203 will not apply to a corporation if,
among other things, (1) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by Section 203; or
(2) 12 months have passed after the corporation, by action of its stockholders
holding a majority of the outstanding stock, adopts an amendment to its
certificate of incorporation or bylaws expressly electing not to be governed by
Section 203.
We have not opted out of Section 203 of the Delaware General Corporation
Law. Therefore, the restrictions that Section 203 imposes will apply to us.
PLAN OF DISTRIBUTION
The Resale Shares registered by the Selling Security Holders may be sold
from time to time on a continuous basis. The Resale Shares may be sold by the
Selling Security Holders to customers of our broker-dealer subsidiary Laidlaw
Global Securities. Commissions will be paid to Laidlaw Global Securities for
such sales at negotiated rates within NASD guidelines. Alternatively, the
Selling Security Holders may from time to time offer such securities through
underwriters, dealers and agents. The distribution of the Resale Shares may be
effected in one or more transactions that may take place on the over-the-counter
market, including ordinary broker's transactions, privately- negotiated
transactions or through sales to one or more broker-dealers for resale of such
shares as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may be paid
by the Selling Security Holders in connection with the sale of the Resale
Shares. The Selling Security Holders and intermediaries through whom such
securities are sold may be deemed "underwriters" whin the meaning of the
Securities Act with respect to the securities offered, and any profits realized
or commissions received may be deemed underwriting compensation.
46
<PAGE>
SELLING SECURITY HOLDERS
This prospectus relates to the resale of 3,562,223 shares of Common Stock
by the Selling Security Holders of which 2,745,940 are currently issued and
outstanding and up to 816,283 shares are to be issued upon (i) exercise of
Common Stock Purchase Warrants to purchase up to 18,891 shares; (ii) exercise of
Class A Warrants outstanding to purchase up to 398,696 shares; and (iii)
exercise of Class B Warrants outstanding to purchase up to 398,696 shares.
The following table below sets forth certain information concerning those
persons known to the Company, based on information known to the Company and/or
obtained from such persons, with respect to the beneficial ownership of Resale
Shares currently issued and outstanding. Unless indicated otherwise, all Selling
Security Holders set forth in the table below own less than 1% of the Company's
issued and outstanding shares of common stock prior to and after this offering.
This table does not set forth the resale of the shares issuable upon the
exercise of the Common Stock Purchase Warrants or the Class A and B Warrants.
<TABLE>
<CAPTION>
Shares of Securities Shares of Securities Shares Owned After
Selling Security Holder(1) Beneficially Owned to be Sold Resale
- ----------------------- ------------------ ---------- ------
<S> <C> <C> <C>
Aleutian Capital Corp. 330,000(2) 330,000 0
Acquasco Navigation S.A. 274,500(3) 274,500 0
Societe d'Equipment Generale
Internationale 235,500 235,500 0
Troy Investment Corp. 207,658 204,732 2,926
Letta Trading Inc. 181,080 135,000 46,080
Calmuny Ltd. 108,000 108,000 0
Robert B. Fields 54,951 37,390 17,561
International Publishing Holdings,
Inc. 36,585 7,317 29,268
Oman International Development
and Investment Co. 36,585 7,317 29,268
WPC Capital 161,705 32,341 129,364
Walco & Cie 163,168 32,634 130,534
King Eagle Investments Ltd. 182,926 36,585 146,341
George Stengos 150,000 30,000 120,000
Andreas Stengos 138,750 27,750 111,000
</TABLE>
47
<PAGE>
<TABLE>
<S> <C> <C> <C>
Maria Ntoutsia 36,564 7,313 29,251
Spyridon Zavitsanos 10,975 2,195 8,780
Dimitriadis Mixalio 25,609 5,122 20,487
Joelle Mekers 18,022 3,604 14,418
Emmanouil Galounis 7,317 1,463 5,854
Pictet Bank & Trust 373,170(4) 74,634 298,536(4)
Chaparro 37,500 7,500 30,000
Seymour Maritime Inc. 75,000 15,000 60,000
Panagiotis Mayros 36,564 7,313 29,251
Leonida Exarhos 19,017 3,803 15,214
Vasilios Euaggelou 46,024 9,205 36,819
Dionisios Tsoukalas 38,407 7,681 30,726
Manolas Manolis 14,982 2,996 11,986
Ioannis Anastassakos 10,975 2,195 8,780
Athanassios Liaggos 72,333 14,467 57,866
Dimitrios Ranios 14,640 1,200 13,440
Christin Deliggiani 34,464 6,893 27,571
Theodore Kokkoris 7,317 1,463 5,854
Stylianos Mixailidis 19,609 3,922 15,687
Cheltenham Pension Fund
Management Limited 202,500 40,500 162,000
Contalexis Financial Service, Inc. 73,170 14,634 58,536
John Tsourtis 10,975 2,195 8,780
Ioannis Tsourtis & Barbara
Tsourtis 402,439(5) 80,488 321,951(5)
John Psomopoulos 36,892 7,378 29,514
Drossos Skyllas 91,464 18,293 73,171
Elias Schizas 51,219 10,244 40,975
</TABLE>
48
<PAGE>
<TABLE>
<S> <C> <C> <C>
Astiram Trading 36,585 7,317 29,268
George Selamis 14,634 2,927 11,707
Charterwell Maritime 412,464(6) 82,493 329,971(6)
Eurasian Investments 36,585 7,317 29,268
Brewster International 73,170 14,634 58,536
Athanassios Konstantakis 46,098 9,220 36,878
Luther Investments 73,170 14,634 58,536
Alain and Janine Perget 15,366 3,073 12,293
Societe Generale 124,389 7,805 116,584
Van Moer Santerre 731,706(7) 146,341 585,365(7)
Pictet & Cie as Fiduciary
(Gestilac SA) 256,096 51,219 204,877
Nokoletta Panopoulos Lemos 182,926 36,585 146,341
Union Bancaire Privee 362,194(8) 72,439 289,755(8)
Lloyds Bank PLC Geneva 73,170 14,634 58,536
LGT Bank In Liechtenstein AG V 73,170 14,634 58,536
CBG Compagnie Bancaire Geneve 73,170 14,634 58,536
Pio Verges 5,853 1,171 4,682
UBS Zurich (reference ICSOS) 146,341 29,268 117,073
Amro International, S.A. 109,756 21,951 87,805
Esther Fitzgerald 73,170 14,634 58,536
Robert Bergmann 73,170 14,634 58,536
Jonathan Collett 14,634 2,927 11,707
Elliot Eder 73,170 14,634 58,536
Gitel Family Partnership 36,585 7,317 29,268
Kantor, Davidoff, Wolfe,
Mandelker & Kass Pension Trust 73,170 14,634 58,536
Robert D. Millstone 3,658 732 2,926
</TABLE>
49
<PAGE>
<TABLE>
<S> <C> <C> <C>
Dov Perlysky 21,951 4,390 17,561
Barry C. Portnoy 73,170 14,634 58,536
Rachel Family Partnership 36,585 7,317 29,268
Bruce Ramsey, P.C. 73,170 14,634 58,536
Max Rosenblum 3,658 732 2,926
Paul G. Ruddy 73,170 14,634 58,536
Jack R. Talan 73,170 14,634 58,536
Susan Wagner 25,609 5,122 20,487
Deborah Salerno 73,170 14,634 58,536
Michael Beckman 3,658 732 2,926
Albert Primo 1,464 293 1,171
Tysha and Doris Lilley 29,268 5,854 23,414
Jeffrey Wilkes 10,975 2,195 8,780
UBS AG 355,608(9) 71,122 284,486(9)
Pictet & CIE 219,511 43,902 175,609
Marios and Theodora Kyriacou 146,341 29,268 117,073
George Kouvaras 73,170 14,634 58,536
Spyros Margielis 73,170 14,634 58,536
</TABLE>
- ----------
(1) Selling Security Holder has agreed not to sell or otherwise dispose all
Resale Shares during the 30-day period following the date of this prospectus.
(2) Aleutian Capital Corp owns 1.23% of the common stock issued and outstanding
prior to the offering.
(3) Acquasco Navigation S.A. owns 1.02% of the common stock issued and
outstanding prior to the offering.
(4) Pictet Bank & Trust owns 1.39% of the common stock issued and outstanding
prior to the offering and will own 1.08% of the common stock issued and
outstanding upon consummation of the offering.
50
<PAGE>
(5) Ioannis Tsourtis & Barbara Tsourtis own 1.50% of the common stock issued and
outstanding prior to the offering and will own 1.16% of the common stock issued
and outstanding upon consummation of the offering.
(6) Charterwell Maritime owns 1.53% of the common stock issued and outstanding
prior to the offering and will own 1.19% of the common stock issued and
outstanding upon consummation of the offering.
(7) Van Moer Santerre owns 2.72% of the common stock issued and outstanding
prior to the offering and will own 2.11% of the common stock issued and
outstanding upon consummation of the offering.
(8) Union Bancaire Privee owns 1.35% of the common stock issued and outstanding
prior to the offering and will own 1.05% of the common stock issued and
outstanding upon consummation of the offering.
(9) UBS AG owns 1.32% of the common stock issued and outstanding prior to the
offering and will own 1.03% of the common stock issued and outstanding upon
consummation of the offering.
Certain former affiliates of the Company are offering shares issuable upon
exercise of the Class A and B Warrants as follows: Frank Kramer, 13,854 shares;
Maurice Laflamme, 23,092 shares; Maurice Laflamme and Mary-Ann Laflamme, 23,092
shares; and Ronald Miller, 76,204 shares. From August 3, 1989 to June 8, 1999,
Frank Kramer served as the President and Director of the Company. During this
period, Mr. Kramer was also owned more than 10% of the issued and outstanding
common stock of the Company. For the three year period prior to June 8, 1999,
Maurice Laflamme was an affiliate of the Company where he owned more than 10% of
the issued and outstanding shares of common stock of the Company. Mary-Ann
Laflamme is the wife of Maurice Laflamme. From August 3, 1989 to June 8, 1999,
Ronald Miller served as the Secretary, Treasurer and Director of the Company.
During this period, Mr. Miller also owned more than 10% of the issued and
outstanding common stock of the Company.
51
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock of the Company is
Corporate Stock Transfer, 3200 Cherry Creek Drive South, Suite 430, Denver,
Colorado 80209.
LEGAL OPINIONS
The validity of Common Stock offered by this prospectus has been passed
upon for the Company by Beckman, Millman & Sanders, L.L.P., a Professional
Limited Liability Partnership, New York, New York. Members of the firm of
Beckman, Millman & Sanders own 3,658 shares of Common Stock of the Company.
EXPERTS
Our financial statements and schedules included in this prospectus and
elsewhere in the registration statement to the extent and for the periods
indicated in their reports have been audited by Grant Thornton LLP, Marcum &
Kliegman LLP and KPMG LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included in the prospectus in reliance
upon the authority of these firms as experts in giving such reports.
WHERE YOU CAN FIND MORE INFORMATION
The Company is a reporting company under the Exchange Act and is required
to file, and will continue to file, annual, quarterly and current reports, proxy
statements and other information with the Commission. You may read and copy any
documents filed by us at the Commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference room. Our filings
with the Commission are also available to the public through the Commission's
Internet site at http://www.sec.gov and through the NYSE, 20 Broad Street, New
York, New York 10005, on which our common stock is listed
We have filed a registration statement on Form SB-2 with the Commission.
This prospectus is a part of the registration statement and does not contain all
of the information in the registration statement. Whenever a reference is made
in this prospectus to a contract or other document of the Company, please by
aware that such reference is not necessarily complete and that you should refer
to the exhibits that are a part of the registration statement at the
Commission's public reference room in Washington, D.C., as well as through the
Commission's Internet site.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants ................. F-1 to F-2
Consolidated Balance Sheets
As of September 30, 1999 and 1998 (unaudited) and
December 31, 1998 and 1997 .................................... F-3
Consolidated Statements of Operations
For nine months ended September 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 .................................................. F-4
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For nine months ended September 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 .................................................. F-5
Consolidated Statements of Cash Flows
For nine months ended September 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 .................................................. F-6 to F-7
Notes to Consolidated Financial Statements ......................... F-8 to F-28
Pro Forma Combined Financial Statements (unaudited) ................ P-1 to P-2
Westminster Securities Corporation
Report of Independent Certified Public Accountants ............ W-1
Statements of Financial Condition
As of January 31, 1999 and 1998 ............................... W-2 to W-3
Statements of Income
As of January 31, 1999 and 1998 ............................... W-4
Statements of Changes in Stockholders' Equity
As of January 31, 1999 and 1998 ............................... W-5
Statements of Changes in Liabilities
Subordinated to Claims of General Creditors
As of January 31, 1999 and 1998 ............................... W-6
Statements of Cash Flows
As of January 31, 1999 and 1998 ............................... W-7 to W-8
Notes to Financial Statements ...................................... W-9 to W-15
Unaudited Financial Statements
Description of Transaction .................................... W-16
Balance Sheet of June 30, 1999 (unaudited) .................... W-17
Income Statements for the five months ended
June 30, 1999 and 1998 (unaudited) ............................ W-18
Statements of cash flows for the
five months ended June 30, 1999
and 1998 (unaudited) .......................................... W-19
53
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Laidlaw Global Corporation
We have audited the accompanying consolidated balance sheet of Laidlaw Global
Corporation formerly 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
presently fairly, in all material respects, the financial position of Laidlaw
Global Corporation formerly Laidlaw Holdings, Inc. and Subsidiaries as of
December 31, 1998, and the results of their operation 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
F-1
<PAGE>
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
F-2
<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
F-2
<PAGE>
Laidlaw Global Corp. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
------------ ------------------------------
1999 1998 1997
------------ ------------ ------------
(unaudited)
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 3,903,476 $ 1,939,429 $ 2,082,009
Escrow deposit with clearing broker 1,981,710 --
Restricted cash - Limited Partnerships -- 134,547
Receivable from clearing broker 2,985,640 84,590 539,323
Securities owned 1,990,110 885,244 153,317
Equipment and leasehold improvements at
cost, net of accumulated depreciation and
amortization 825,371 701,652 698,485
Goodwill, net of accumulated amortization 7,973,513 4,450,102 4,610,470
Investment banking and syndicate fees receivable 745,688 421,823 33,291
Asset management fees receivable 110,010 113,500 238,642
Other receivables 68,762 70,102 184,690
Deposits 394,816 371,993 381,070
Secured Demand Notes receivable-fully collateralized 600,000
Prepaid and other assets 1,330,696 550,437 484,176
------------ ------------ ------------
$ 22,909,792 $ 9,588,872 $ 9,540,020
============ ============ ============
LIABILITIES AND EQUITY
Notes payable 1,000,000 $ 2,775,000 $ 5,629,033
Private placement escrow fund payable 1,981,710 -- --
Accounts payable and accrued expenses 1,577,200 1,727,347 1,696,164
Commissions and compensation payable 1,429,272 643,952 775,312
Litigation reserve 203,411 470,000 720,000
Deferred revenue 643,413 584,464 496,115
Other liabilities 745,797 594,893 798,046
------------ ------------ ------------
8,180,803 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 393,000 2,220,000 2,305,000
Notes payable subordinated to claims of
general creditors, 6%, due 2002 600,000
Minority interest 455,288 382,286 283,341
Stockholders' equity
Preferred stock - Series C 1 250,000 250,000
Common stock 189 391,452 275,249
Additional paid-in capital 33,645,475 19,701,394 15,613,835
Accumulated deficit (19,764,964) (22,611,916) (19,302,075)
------------ ------------ ------------
13,880,701 (2,269,070) (3,162,991)
------------ ------------ ------------
$ 22,909,792 $ 9,588,872 $ 9,540,020
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Laidlaw Global Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
June 1 Fiscal
Nine months ended Year ended to year ended
September 30, December 31, December 31, May 31,
----------------------------- ------------ ------------ ------------
1999 1998 1998 1997 1997
------------ ------------ ------------ ------------ ------------
---------(unaudited)---------
<S> <C> <C> <C> <C> <C>
Revenues
Commissions $ 8,244,946 $ 4,558,350 $ 5,803,642 $ 4,154,955 $ 10,545,182
Trading gains, net 4,953,637 2,684,263 3,195,045 1,372,643 3,951,377
Syndicate and underwriting fees 201,482 37,085 898,242 433,669 2,661,708
Corporate finance fees 885,969 1,975,576 1,062,341 474,016 1,767,015
Asset management fees 4,421,945 4,530,348 5,978,185 3,148,193 1,784,820
Interest 404,509 234,631 298,972 147,725 350,416
Other 1,228,500 877,349 1,013,654 65,756 850,988
------------ ------------ ------------ ------------ ------------
Total revenues 20,340,988 14,897,602 18,250,081 9,796,957 21,911,506
------------ ------------ ------------ ------------ ------------
Expenses
Commissions 6,427,979 4,629,202 5,705,142 3,863,314 9,365,796
Salary and benefits 4,985,800 5,659,849 7,626,936 4,405,796 7,081,018
Professional fees 551,092 434,893 701,199 467,212 904,779
Communications and
information systems 1,110,490 1,066,767 1,366,441 627,184 1,580,312
Clearing fees 904,884 875,538 1,195,581 826,666 1,577,188
Rent and utilities 1,172,479 1,193,859 1,389,420 829,391 1,413,644
Client-related marketing 544,785 606,918 940,217 473,313 567,394
Depreciation and amortization 182,034 120,276 379,256 421,247 365,812
Interest 523,084 572,174 741,944 405,048 501,419
Office 369,160 292,716 411,844 260,274 595,320
Other 535,250 766,574 1,002,998 582,832 1,368,485
------------ ------------ ------------ ------------ ------------
Total expenses 17,307,037 16,218,766 21,460,978 13,162,277 25,321,167
------------ ------------ ------------ ------------ ------------
Income (loss) before
Minority interest 3,033,951 (1,321,164) (3,210,897) (3,365,320) (3,409,661)
Minority interest 187,002 181,917 (98,945) 22,988 (18,455)
------------ ------------ ------------ ------------ ------------
Income (loss)
before taxes 2,846,949 (1,503,081) (3,309,842) (3,342,332) (3,428,116)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 2,846,949 $ (1,503,081) $ (3,309,842) $ (3,342,332) $ (3,428,116)
============ ============ ============ ============ ============
Net income (loss) per share
Basic $ 0.16 $ (0.23) $ (0.48) $ (0.83) $ (21.48)
============ ============ ============ ============ ============
Diluted $ 0.13 $ (0.23) $ (0.48) $ (0.83) $ (21.48)
============ ============ ============ ============ ============
Weighted average number of
shares outstanding
Basic 17,718,245 6,667,014 6,957,522 4,045,927 159,632
============ ============ ============ ============ ============
Diluted 21,527,960 6,667,014 6,957,522 4,045,927 159,632
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Laidlaw Global Corp. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Nine months ended September 30, 1999
and 1998 (unaudited), year ended
December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
<TABLE>
<CAPTION>
Preferred C Preferred D Preferred E Preferred F
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at May 31, 1996 250,000 4,000,000 5,000,000 100
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)
------------ ------------ ------------ ------------
Balance at May 31, 1997 250,000 -- -- --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balance at December 31, 1997 250,000 -- -- --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balance at December 31, 1998 250,000 -- -- --
Net income -- -- -- --
Reduction in par value of preferred stock (249,999) -- -- --
------------ ------------ ------------ ------------
Balance at June 30, 1999 1 -- -- --
Net Income
Additional issuance of common stock
Balance at September 30, 1999 1 -- -- --
<CAPTION>
Common Additional
stock paid-in Accumulated
Amount capital deficit Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at May 31, 1996 $ 36,712 $ 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) 361,576 10,755,151 -- 11,116,727
------------ ------------ ------------ ------------
Balance at May 31, 1997 398,288 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) 123,039 -- --
------------ ------------ ------------ ------------
Balance at December 31, 1997 275,249 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) 116,203 4,087,559 -- 4,203,762
------------ ------------ ------------ ------------
Balance at December 31, 1998 391,452 19,701,394 (22,611,917) (2,269,071)
Net income -- -- 2,846,953 2,846,953
Reduction in par value of common stock (391,360) 391,360 -- --
Reduction in par value of preferred stock -- 249,999 -- --
Issuance of common stock to Fi-Tek (1,000,000 shares) 10 1,490 -- 1,500
Capital contribution related to the conversion of 8%
Subordinated Notes (3,902,425 shares) 38 7,578,580 -- 7,578,618
Capital contribution related to the conversion of 12%
Senior Secured Euro Notes (915,122 shares) 9 1,803,272 -- 1,803,281
Issuance of common stock related to the acquisition of
Westminster Securities Corporation (3,000,000 shares) 30 3,749,970 -- 3,750,000
Capital contribution related to exercise
of stock options 10 169,410 -- 169,420
------------ ------------ ------------ ------------
Balance of September 30, 1999 189 33,645,475 (19,764,964) 13,880,701
============ ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
Laidlaw Global Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
June 1 Fiscal
Nine months ended Year ended to year ended
September 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
----------- ----------- ----------- ----------- -----------
---------(unaudited)------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) 2,846,949 (1,503,081) $(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 262,179 204,219 379,256 421,247 365,812
Bad debt expense -- -- 230,533
Minority interest in earnings 98,945 (22,988) 18,455
(Increase) decrease in operating
assets
Restricted cash - Limited 134,547 190,702 (325,249)
Partnership
Receivable from clearing broker (2,347,518) 451,694 454,733 355,952 2,408,502
Securities owned (1,104,886) (825,230) (731,927) 79,168 2,899,598
Investment banking and syndicate
fees receivable (388,532) 547,987 (547,987)
Asset management fees
Receivable (110,010) 125,139 (238,642) --
Notes receivable (600,000) 859,929
Other receivables (219,144) (293,955) 114,588 255,891 (290,460)
Deposits (22,823) 10,785 9,077 45,102 (97,986)
Prepaid and other assets (723,652) (171,879) (66,261) 38,185 (293,314)
Increase (decrease) in operating
liabilities
Accounts payable and accrued (455,003) (183,829) 31,186 624,528 (722,954)
expenses
Commissions and compensation payable 1,098,610 (467,817) (131,360) (85,983) (768,569)
Deferred revenue 54,240 138,781 88,349 (79,959) 576,074
Litigation reserve (266,589) (371,890) (250,000) -- (369,592)
Other liabilities 147,179 (206,703) (203,153) (190,484) (102,349)
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities (1,440,468)) (3,218,905) (3,645,255) (1,401,626) 412,327
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities
Minority interest 73,002 181,918 -- -- 306,329
Goodwill -- -- (4,810,928)
Purchase of equipment and leasehold
improvements (203,865) (38,308) (183,460) (123,664) (196,553)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (130,863) 143,610 (183,460) (123,664) (4,701,152)
----------- ----------- ----------- ----------- -----------
</TABLE>
F-6
<PAGE>
Laidlaw Global Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Period from
June 1 Fiscal
Nine months ended Year ended to year ended
September 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
----------- ----------- ----------- ----------- -----------
---------(unaudited)------
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities
Proceeds from issuance of notes payable $ 830,522 $ 2,343,526 $ 2,425,000 $ 2,096,666 $ 4,977,368
Repayment of notes payable (1,775,000) (1,075,270) -- (2,346,318)
Payments for lease equipment (38,596) (68,801) (89,220)
Proceeds (repayment) of senior secured
Euro-note 1,827,000 (85,000) -- --
Proceeds from issuance of convertible
subordinated loan 2,460,000 2,460,000 -- --
Proceeds of subordinated loan -- -- (625,000) 625,000
Proceeds from issuance of common stock 192,856 116,203 -- -- 361,576
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)
------------ ------------ ------------
Net cash (used in) provided by
financing activities 3,535,318 2,459,729 3,686,134 1,402,865 5,283,457
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash 1,964,047 (615,566) (142,581) (122,425) 994,632
Cash, beginning of year 1,939,429 2,216,556 2,082,010 2,204,435 1,209,803
------------ ------------ ------------ ------------ ------------
Cash, end of year $ 3,903,476 $ 1,600,990 $ 1,939,429 $ 2,082,010 $ 2,204,435
============ ============ ============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest 684,445 641,602 $ 716,564 $ 215,280 $ 423,396
Conversion of PUSA notes
Receivable to common stock 8,000,000 3,900,000 4,203,762 -- 1,304,366
Conversion of convertible
subordinated
notes to equity 1,876,000
Conversion of cumulative
dividends to common stock -- 1,103,833 --
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
1. Organization
Laidlaw Global Corp. (formerly Laidlaw Holdings, Inc. ("Holdings")
("the Company") is a holding company whose wholly or majority owned
operating subsidiaries include Laidlaw Global Securities, Inc.,
Westminster Securities Corp., (Westminster) (acquired July 1, 1999),
H&R Acquisition Corp. (HRAC) an 81% owned subsidiary which maintains a
100% interest in Howe & Rusling, Inc., a registered investment
advisory firm and Global Electronic Exchange Inc. a 59% owned
development stage internet based investment services business. The
Company's business activities include securities brokerage, investment
banking, asset management and investment advisory services to include
individual investors, corporations, pension plans and institutions
worldwide.
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 changed 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
acquistion, 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 was 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") was the other major stockholder of
the Company. Together, PUSA and EC owned 99.53% of the Company
December 31, 1998.
On July 1, 1999, Global acquired 99% of the issued and outstanding
common stock of Westminster for 4,500,000 shares of Global common
stock valued at $.82 per share. The transaction has been accounted
for as a purchase and resulted in the recognition of $3,705,444 of
goodwill. Goodwill is being amortized over 15 years using the
straight-line method.
As a result of the converstion of the convertible subordinated notes
during June 1999, the conversion of approximately $1,900,000 of senior
secured Euro notes during July and August 1999 and the acquisition of
Westminster, the majority ownership of the company by PUSA and EC
decreased to approximately 36% as of September 30, 1999.
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.
F-8
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and 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 with maturities of three months or less when
purchased.
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.
F-9
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and 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 a periods of fifteen to thirty years, the expected periods 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 $542,878, $360,825 and
$200,457 as of September 30, 1999, 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.
F-10
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and 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.
F-11
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE A (continued)
16. Interim Period Information
The unaudited consolidated financial statements as of September 30,
1999 for the nine months ended September 30, 1999 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.
17. Stock Split
On September 9, 1999, the majority of the stockholders and the board
of directors of the Company approved a stock split of the existing
Common Stock of the Company on the basis of three (3) shares of post
split Common Stock, par value $0.00001 per share, being issued in
exchange for two (2) outstanding shares of pre-split Common Stock. The
stock split was effected through a stock dividend distributed in
October, 1999 to stockholders of record on September 23, 1999. All
references in the financial statements with regard to the number of
shares and earnings per share for all periods reflect the retroactive
effect of the aforementioned stock split.
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>
September 30, December 31,
----------------------- -------------------------------------------------
1999 1998 1997
----------------------- ----------------------- -----------------------
Sold, but Sold, but Sold, but
not yet not yet not yet
Owned Purchased Owned purchased Owned purchased
---------- ---------- ---------- ---------- ---------- ----------
-----(unaudited)------
<S> <C> <C> <C> <C> <C> <C>
Equity $ 574,111 $ 17,520 $ 47,469 $ 6,345 $ 153,317 $ 100,308
securities
Money market
Investments 1,415,399 -- 833,824
Corporate bonds -- -- 3,950 -- -- --
---------- ---------- ---------- ----------
$1,990,110 $ 17,520 $ 885,243 $ 6,345 $ 153,317 $ 100,308
========== ========== ========== ========== ========== ==========
</TABLE>
F-12
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and 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.
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.
For the nine months ended September 30, 1999 the Company had net income of
approximately $2,847,000.
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 nine months ended September 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 into 3,902,425 shares of common stock.
Additionally, approximately $1,900,000 of the outstanding Senior Secured
Euro-Notes were converted into 915,122 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 $432,560 for the remainder of
the fiscal year ending December 31, 1999. The conversion of these notes
will contribute to a substantial improvement in the net worth of the
Company.
F-13
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and 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 nine months ended September 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 $861,960.
NOTE D - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of:
September 30, December 31,
------------ ----------------------
1999 1998 1997
------------ ---------- ----------
(unaudited)
Furniture and equipment $ 1,857,767 $1,667,608 $1,232,638
Leasehold improvements 181,165 167,459 115,463
------------ ---------- ----------
2,038,932 1,835,067 1,348,101
Accumulated depreciation
and amortization 1,213,561 1,133,415 649,616
------------ ---------- ----------
Equipment and leasehold
Improvements, net $ 825,371 $ 701,652 $ 698,485
============ ========== ==========
F-14
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE E - NOTES PAYABLE AND SUBORDINATED BORROWINGS
Notes payable and borrowings under subordination agreements at September
30, 1999 and 1998, and December 31, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
------------ --------------------------
1999 1998 1997
------------ ---------- ----------
(unaudited)
<S> <C> <C> <C>
8% note payable to PUSA, principal and interest due $ 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 250,000
15% note payable, principal and interest due December
1999 and December 2000 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 400,000
Note payable with floating interest rate linked to
prime, payable monthly, principal due July 14, 1998 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, 1999 250,000
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
6% secured demand note collateral agreements, principal due
July 1, 2002 and Interest payable quarterly 600,000 -- --
------------ ---------- ----------
$ 1,600,000 $2,775,000 $5,629,033
============ ========== ==========
</TABLE>
Borrowings subordinated to the claims of general creditors at September 30,
1999, obtained by Westminster on July 1, 1999 from several of its principal
offices and directors, are available in computing net capital under the
Securities and Exchange Commission's (SEC's) uniform capital rule. To the
extent that such borrowings are required for Westminster's continued
compliance with minimum net capital requirements, they may not be repaid.
F-15
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and 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
$4.36 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.
Through September 30, 1999, approximately $1,876,000 of the outstanding
Euro-notes have been converted to common stock at an exchange rate of $2.05
per share.
F-16
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE G - RELATED PARTY TRANSACTIONS
The Company receives loans from its affiliate "PUSA", for which the Company
pays interest. The loans are used to help pay operating expenses and fund
capital requirements of one of its subsidiaries. Interest on loans from
PUSA amounted to $17,222 for the nine months ended September 30, 1999 and
$0 for the quarter ended September 30, 1999 .
On July 1, 1999, Westminster obtained 6% 3-year subordinated loans in the
amount of $600,000 from several of its principal officers and directors.
The purpose of these loans were to provide Westminster with working
capital.
NOTE H - NET CAPITAL REQUIREMENTS
The Company's broker-dealer subsidiaries are 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, Laidlaw Global Securities had net capital of
$505,364, which was $405,364 in excess of its required net capital of
$100,000. At September 30, 1999, the subsidiaries had net combined capital
of $2,990,938, which was $2,724,715 in excess of their combined required
net capital of $266,223.
F-17
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE I - STOCKHOLDERS' EQUITY
The authorized, issued and outstanding shares of capital stock as of
September 30, 1999 and December 31, 1998 and 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 and December
31, 1997, there were 7,829,045 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 September 30, 1999,
there were 18,898,760 shares issued and outstanding. In addition, the
Company eliminated the 6,100,000 shares of authorized $0.05 par value
non-voting common stock.
F-18
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE J - CONCENTRATIONS OF CREDIT RISK
The Company's 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 K - 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 (580,648)
Net lease commitments $ 9,801,514
Rent expense for the nine months ended September 30, 1999 were
$399,409 . 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.
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.
F-19
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE K (continued)
Future minimum payments for capitalized leases were as follows at
December 31, 1998.
Fiscal year ending December 31,
2000 $ 49,357
2001 43,650
2002 43,650
--------
Total minimum payments 136,657
Less amount representing interest (22,502)
Present value of net minimum
lease payments $114,155
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.
F-20
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE K (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 22,704 shares of common stock.
NOTE L - 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 September 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.
F-21
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE M - 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 September 30, 1999 net income because the Federal and state and
local taxes would be substantially offset by utilization of net operating
losses 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 September 30, 1999, the net
operating loss carry-forward available to offset future taxable income was
$11,100,000. Such carryforward reflects income taxes incurred which will
expire as follows:
Fiscal year ending December 31,
2005 $ 969,836
2006 through 2018 15,556,460
-----------
Total minimum payments $16,526,296
===========
F-22
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE M (continued)
The components of the net deferred tax asset as of September 30, 1999,
December 31, 1998 and 1997 consist of the following:
December 31,
September 30, -------------------------
1999 1998 1997
----------- ----------- -----------
(unaudited)
Federal $ 3,890,000 $ 4,717,000 $ 7,376,747
State and local 2,515,000 3,049,000 51,248
----------- ----------- -----------
Temporary differences 6,405,000 7,766,000 7,427,995
Valuation allowance (6,405,000) (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.
F-23
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE N - 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 $32,112 for the
nine months ended September 30, 1999 . 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 to December 31, 1997. Expenses related to
the tax deferred savings plan for the fiscal year ended May 31, 1997 were
$97,012.
NOTE O - 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 that 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.
F-24
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE O (continued)
The following table sets forth the net revenues of these industry segments
of the Company's business.
<TABLE>
<CAPTION>
Period Fiscal
Period ended Year ended June 1 to year ended
September 30, December 31, December 31, May 31,
------------ ------------ ------------ ------------ ------------
1999 1998 1998 1997 1997
------------ ------------ ------------ ------------ ------------
----------(unaudited)----------
<S> <C> <C> <C> <C> <C>
Revenue from external
customers
Asset management $ 3,240,292 $ 2,825,103 $ 4,721,527 $ 2,910,306 $ 3,190,531
Broker-dealer 16,680,763 11,635,313 13,319,445 6,630,122 17,844,525
Corporate and
other (7,087,983) (695,346) 209,109 256,529 876,450
------------ ------------ ------------ ------------ ------------
Total external
revenue $ 12,833,072 $ 7,060,825 $ 18,250,081 $ 9,796,957 $ 21,911,506
Intersegment revenue
Asset management -- -- 142,081 141,574
Broker-dealer 149,850 149,850 199,800 -- --
Corporate and other -- -- 250,000 300,000
------------ ------------ ------------ ------------
Total inter-
segment
revenue 149,850 149,850 199,800 392,081 441,574
Interest revenue
Asset management -- 46,737 21,797
Broker-dealer 359,701 226,107 290,364 98,908 263,313
Corporate and other 44,808 21,882 8,608 2,080 65,306
------------ ------------ ------------ ------------ ------------
Total Net
Income $ 404,509 $ 247,989 $ 298,972 $ 147,725 $ 350,416
============ ============ ============ ============ ============
</TABLE>
F-25
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE O (continued)
<TABLE>
<CAPTION>
Period Fiscal
Period ended Year ended June 1 to year ended
September 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
------------ ------------ ------------ ------------ ------------
-----------(unaudited)--------
<S> <C> <C> <C> <C> <C>
Interest expense
Asset management $ 92,390 $ 102,749 $ 65,183 $ 117,015 $ 89,235
Broker-dealer 26,666 31,293 31,955 10,617 --
Corporate and other 405,230 432,212 554,806 277,416 412,184
------------ ------------ ------------ ------------ ------------
Total interest
expense 524,286 566,254 751,944 405,048 501,419
Depreciation and
amortization expense
Asset management 52,444 52,444 86,328 54,563 --
Broker-dealer 2,875 -- 531 --
Corporate and other 350,430 278,157 292,928 366,153 365,812
------------ ------------ ------------ ------------ ------------
Total depreciation
and amorti-
zation expense 405,749 330,601 379,256 421,247 365,812
Net income (loss)
Asset management 797,218 775,541 1,024,376 (30,836) 137,889
Broker-dealer 2,873,514 (1,583,276) 690,697 (2,810,713) (3,068,056)
Corporate and other (823,783) (695,346) (5,024,915) (500,783) (497,949)
------------ ------------ ------------ ------------ ------------
Total net income
(loss) 2,846,949 (1,503,081) (3,309,842) (3,342,332) (3,428,116)
Total assets
Asset management 3,795,406 4,149,790 5,434,924 5,175,971 5,214,233
Broker-dealer 10,202,006 2,454,853 2,502,844 2,541,879 3,986,203
Corporate and other 8,912,380 2,982,485 1,651,104 1,822,170 2,033,937
------------ ------------ ------------ ------------ ------------
Total assets $ 22,909,792 $ 9,587,128 $ 9,588,872 $ 9,540,020 $ 11,234,373
============ ============ ============ ============ ============
</TABLE>
F-26
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE P - 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 1,016,100 shares of common
stock at September 30, 1999. Options currently outstanding are exercisable
either immediately or up to five years from the grant date and expire five
years after the grant date. No compensation cost has been recognized for
the plan for the nine months ended September 30, 1999 and 1998, for the
year ended December 31, 1998, for the period from June 1 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(increased) from
$2,846,949 and $(1,503,081) to the pro forma amounts of $1,244,881 and
$(1,896,686), for the nine months ended September 30, 1999 and 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 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 pro forma amount of $(3,374,612) and $(3,432,116),
respectively.
A summary of the option activity for the nine months ended September 30,
1999 and 1998, for the year ended December 31, 1998, for the period from
June 1 to December 31, 1997 and for the fiscal year ended May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
Period from
Nine months ended September 30, Year ended June 1 to Fiscal year
----------------------------------------- December 31, December 31, ended
1999 1998 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>
Balance, beginning of
Period 1,072,775 $1.25 -- $-- 907,000 $0.10 807,000 $0.10 -- $--
Granted 838,500 2.93 1,072,775 1.25 96,500 $2.37 100,000 0.10 807,000 0.10
Balance, end of period 1,910,275 1.99 1,072,775 1.25 1,003,500 2.37 907,000 0.10 807,000 0.10
</TABLE>
F-27
<PAGE>
Laidlaw Global Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nine months ended September 30, 1999 and 1998 (unaudited),
year ended December 31, 1998,
period from June 1 to December 31, 1997,
and fiscal year ended May 31, 1997
NOTE P (continued)
The status of outstanding stock options is summarized as of December 31,
1998 as follows:
<TABLE>
<CAPTION>
Weighted- Weighted-
Range of average remaining average exercise
exercise Options Contractual Options price of options
price Outstanding life (years) exercisable exercisable
- -------- ----------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C>
$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
</TABLE>
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>
Period from Fiscal
Nine months ended Year ended June 1 to year ended
September 30, December 31, December 31, May 31,
1999 1998 1998 1997 1997
------- ------- ------- ------- -------
------(unaudited)--------
<S> <C> <C> <C> <C> <C>
Expected dividend yield -- -- --
Risk-free interest rate 5.02%-5.77% 5.02%-5.77% 5.00%-5.77% 5.64% 5.64%
Expected stock price
volatility 56%-57% 42%-58% 42%-58% 37%-38% 37%-38%
Expected life of options 5 years 5 years 5 years 5 years 5 years
</TABLE>
NOTE Q - EARNINGS PER COMMON SHARE
Earnings per common share are computed in accordance with SFAS No. 128,
"Earnings Per Share." Basic earnings per share excludes the dilutive effects of
options and convertible securities and is calculated by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects all potentially
dilutive securities. Set forth below is the reconciliation of net income
applicable to common shares and weighted-average common and common equivalent
shares of the basic and diluted earnings per common share computations:
<TABLE>
<CAPTION>
For the
Nine months Period from
ended Year ended June 1 to Fiscal year
September 30, December 31, December 31, ended
1999 1998 1997 May 31, 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NUMERATOR:
Net (loss) income $ 2,846,949 $(3,309,842) $ 3,342,332) $(3,428,116)
Preferred stock dividends
Net (loss) income applicable to common shares for
Basic earnings per share 2,846,949 (3,309,842) (3,342,332) (3,428,116)
Effect of dilutive securities:
Net (loss) income applicable to common shares
For diluted earnings per share 2,846,949 (3,309,842) (3,342,332) (3,428,116)
----------- ----------- ----------- -----------
DENOMINATOR:
Weighted-average common shares for basic earnings
Per share 17,718,245 6,957,552 4,045,927 159,632
Weighted-average effect of dilutive securities:
Employee stock options 3,809,715 -- -- --
Dilutive potential common shares
Weighted-average common and common equivalent
Shares for diluted earnings per share . 21,527,960 6,957,522 4,045,927 159,632
EARNINGS PER COMMON SHARE:
Basic $ 0.16 $ (0.48) $ (0.83) $ (21.48)
=========== =========== =========== ===========
Diluted $ 0.13 $ (0.48) $ (0.83) $ (21.48)
=========== =========== =========== ===========
</TABLE>
Because the company reported a net loss in each of the periods above, the
calculation of diluted earnings per share does not include convertible
securities, options and warrants, as they are anti-dilutive and would result in
a reduction of the net loss per share. If the Company had reported net income,
there would have been additional shares as of September 30, 1999, December 31,
1998 and 1997 respectively, included in the calculation of diluted earnings per
share.
F-28
<PAGE>
UNAUDITED PRO-FORMA COMBINED FINANCIAL STATEMTENTS
At September 30, 1999
On July 1, 1999, Global acquired 99% of Holdings 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.
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 occurred at the beginning of the nine months
ending September 30, 1999. The pro forma information set forth in the following
tables and the information included in the accompanying notes is presented for
informational purposes only.
The accompanying pro forma statements of operations are presented for the year
ended December 31, 1998 and for the interim period ended September 30, 1999. The
pro forma statements are based upon historical results of the combining entities
as follows: Laidlaw Global Corporation and its accounting predecessor Laidlaw
Holdings, Inc. for the year ended December 31, 1998 and nine months ended
September 30, 1999; Fi-tek for the period ended December 31, 1998; Westminster
for the year ended January 31, 1999 and for the six months ended June 30, 1999.
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
combined information. The unaudited combined 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.
<TABLE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Pro-Forma Adjustments
------------------------------------------------------
Subordinated
Historical Historical Note Euro Note Combined
Holdings Fi-Tek Westminster Westminster Conversion Conversion December 31,
December 31, December 31, January 1, Adjustments (Unaudited) (Unaudited) 1998
1998 1998(1) 1999 (2) (4) (3) (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 taxes (3,309,842) (4,115) 1,534,242 (247,030) 64,903 283,356 (1,678,486)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income taxes -- 718,700 718,700
Net Income (loss) $ (4,115) $ 815,542 (247,030) $ 64,903 $ 283,356 $ (2,397,186) (3,309,842)
============ ============ ============ ============ ============ ============ ============
Basic EPS $ (.48) -- $ .18 $ (.19)
============ ============ ============ ============
Weighted Shares
Outstanding:
Basic 6,957,522 1,500,000 4,500,000 12,957,522
============ ============ ============ ============
</TABLE>
NOTES TO PROFORMA COMBINED STATEMENTS OF OPERATIONS
(1) Reflects reverse acquisition and capital transaction to record issuance of
stock to Fi-Tek.
(2) Reflects purchase of Westminster and Westminster amortization expense for
the periods presented.
(3) Reflects the conversion of the Euro Notes to common stock and add back of
related interest expense and finance charge for the periods presented.
(4) Reflects the conversion of the Subordinated Notes to common and add back of
related interest expense and finance charge amortization for the periods
presented.
P-1
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Historical
For the nine
months
ended Westminster Combined
September June 30, Adjustments September,
30,1999 1999 (2) 30, 1999
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Gross Commissions $12,833,072 $ 1,522,031 $14,355,103
Asset Management Fees 4,421,944 4,421,944
Investment income, trading
profit and Corporate finance fees 2,227,278 2,227,278
Other 858,694 1,778,295 2,636,989
----------- ----------- -----------
Total Revenue 20,340,988 3,300,326 23,641,314
EXPENSES:
Salaries and other
employee costs 4,985,800 1,663,780 6,649,580
Commissions 6,427,979 6,427,979
Clearance and occupancy 2,077,363 159,218 2,236,581
Other 3,815,895 704,652 123,515 4,644,062
----------- ----------- ----------- -----------
Total expenses 17,307,037 2,527,650 123,515 19,858,202
Income (loss) before 3,033,951 772,676 (123,515) 3,683,112
minority interest and
income taxes
Minority interest 187,002 187,002
Income (loss) before 2,846,949 772,676 (123,515) 3,496,110
income taxes
Income taxes -- --
NET INCOME (LOSS) $ 2,846,949 $ 772,676 $ (123,515) $ 3,496,110
----------- ----------- ----------- -----------
Basic EPS $ 0.16 $ 0.17 $ 0.16
Diluted EPS $ 0.13 $ 0.17 $.0.13
Weighted Shares
Outstanding:
Basic 17,718,245 4,500,000 22,218,245
Diluted 21,527,960 4,500,000 26,027,960
</TABLE>
P-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Westminster Securities Corporation
New York, NY
We have audited the accompanying statements of financial condition of
Westminster Securities Corporation as of January 31, 1999 and 1998 and the
related statements of income, changes in stockholders' equity, changes in
liabilities subordinated to claims of general creditors 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 Westminster Securities
Corporation as of January 31, 1999 and 1998 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Marcum & Kliegman LLP
March 3, 1999
New York, New York
W-1
<PAGE>
WESTMINSTER SECURITIES CORPORATION
STATEMENTS OF FINANCIAL CONDITION
January 31, 1999 and 1998
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
1999 1998
---------------------
<S> <C> <C>
Cash $ 78,321 $ 24,063
Marketable securities owned, at market value 568,076 809,942
Due from clearing broker 2,144,499 2,387,185
Floor brokerage receivable 32,789 37,743
Prepaid expenses 8,250 6,511
Property and equipment, net 28,820 34,434
Security deposits and other assets 21,981 21,981
Secured demand notes receivable from subordinated lenders
collateralized by cash and marketable securities 675,000 775,000
---------- ----------
TOTAL ASSETS $3,557,736 $4,096,859
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
W-2
<PAGE>
WESTMINSTER SECURITIES CORPORATION
STATEMENTS OF FINANCIAL CONDITION
January 31, 1999 and 1998
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
---------- ----------
LIABILITIES
Marketable securities sold, but not yet purchased,
at market value $ 384,614 $1,576,607
Accounts payable and accrued expenses 122,615 291,814
Due to floor brokers 76,422 51,658
Corporate income taxes payable 335,963 254,200
---------- ----------
TOTAL LIABILITIES 919,614 2,174,279
---------- ----------
COMMITMENTS AND CONTINGENCIES
LIABILITIES SUBORDINATED TO CLAIMS OF
GENERAL CREDITORS 675,000 775,000
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, class "A" voting $1.00 par value;
1,000 shares authorized; 361 shares issued and 361 361
outstanding
Common stock, class "B" non-voting $2.00 par value;
1,000 shares authorized - none issued -- --
Additional paid in capital 424,054 424,054
Retained earnings 1,538,707 723,165
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,963,122 1,147,580
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $3,557,736 $4,096,859
========== ==========
The accompanying notes are an integral part of these financial statements.
W-3
<PAGE>
WESTMINSTER SECURITIES CORPORATION
STATEMENTS OF INCOME
For the Years Ended January 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
---------- ----------
REVENUES
Realized gains on marketable securities $ 89,684 $ 121,399
Commission income 3,847,670 4,069,685
Underwriting fees 152,031 242,736
Dividend and interest income 1,684,349 461,251
---------- ----------
TOTAL REVENUES 5,773,734 4,895,071
---------- ----------
EXPENSES
Floor brokerage and clearance 664,837 610,059
Officers' compensation and benefits 1,261,737 1,149,861
Employees compensation and benefits 991,978 942,968
Interest expense 50,835 42,090
Subscriptions and research 146,403 305,564
Office expense 281,280 247,155
Tickers, quotation services and telephone 229,957 205,953
Insurance 73,403 59,455
Payroll taxes 80,248 84,830
Dues and assessments 128,832 147,833
Professional fees 178,558 88,451
Rent expense 67,217 67,855
Meals and entertainment 24,536 34,474
Auto lease 17,640 18,251
Depreciation 5,614 5,427
Other expenses 36,417 62,266
---------- ----------
TOTAL EXPENSES 4,239,492 4,072,492
---------- ----------
INCOME BEFORE TAXES 1,534,242 822,579
INCOME TAXES 718,700 381,141
---------- ----------
NET INCOME $ 815,542 $ 441,438
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 361 361
========== ==========
EARNINGS PER SHARE BASIC AND DILUTED $ 2,259 $ 1,223
========== ==========
The accompanying notes are an integral part of these financial statements.
W-4
<PAGE>
WESTMINSTER SECURITIES CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended January 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Additional
Common Common Paid in Retained
Stock Stock Capital Earnings Total
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY -
February 1, 1997 $ 361 $ -- $ 424,054 $ 281,727 $ 706,142
NET INCOME -- -- -- 441,438 441,438
---------- ----- ---------- ---------- ----------
STOCKHOLDERS' EQUITY -
January 31, 1998 361 -- 424,054 723,165 1,147,580
NET INCOME -- -- -- 815,542 815,542
---------- ----- ---------- ---------- ----------
STOCKHOLDERS' EQUITY -
January 31, 1999 $ 361 $ -- $ 424,054 $1,538,707 $1,963,122
========== ===== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
W-5
<PAGE>
WESTMINSTER SECURITIES CORPORATION
STATEMENTS OF CHANGES IN LIABILITIES SUBORDINATED
TO CLAIMS OF GENERAL CREDITORS
For the Years Ended January 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
--------------------------
SUBORDINATED LIABILITIES - Beginning $ 775,000 $ 775,000
Decreases:
Payment of subordinated notes (100,000) --
--------- ---------
SUBORDINATED LIABILITIES - Ending $ 675,000 $ 775,000
========= =========
The accompanying notes are an integral part of these financial statements.
W-6
<PAGE>
WESTMINSTER SECURITIES CORPORATION
STATEMENTS OF CASH FLOWS
For the Years Ended January 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 815,542 $ 441,438
----------- -----------
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 5,614 5,427
Decrease (increase) in marketable securities owned,
at market value 241,866 (228,565)
Decrease (increase) in due from clearing broker 242,686 (1,349,008)
Decrease (increase) in floor brokerage receivables 4,954 (5,699)
Increase in prepaid expenses (1,739) (929)
Increase in security deposits and other assets -- (3,940)
(Decrease) increase in marketable securities sold,
but not yet purchased, at market value (1,191,993) 934,758
(Decrease) increase in accounts payable and accrued
expense (169,199) 61,112
Increase in due to floor broker 24,764 17,153
Increase in corporate income taxes payable 81,763 141,200
----------- -----------
TOTAL ADJUSTMENTS (761,284) (428,491)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 54,258 12,947
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment -- (28,074)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured demand notes receivable from
subordinated lenders collateralized by cash and marketable
securities 100,000 --
Repayment of liabilities subordinated to claims of general
creditors (100,000) --
----------- -----------
NET CHANGES IN FINANCING ACTIVITIES $ -- $ --
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
W-7
<PAGE>
WESTMINSTER SECURITIES CORPORATION
STATEMENTS OF CASH FLOWS, continued
For the Years Ended January 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
---------------------
NET INCREASE IN CASH $ 54,258 $ (15,127)
CASH - Beginning 24,063 39,190
--------- ---------
CASH - Ending $ 78,321 $ 24,063
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the years for:
Interest $ 65,159 $ 53,967
Income taxes $ 636,937 $ 239,941
The accompanying notes are an integral part of these financial statements.
W-8
<PAGE>
WESTMINSTER SECURITIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Principles
Nature of Business
Westminster Securities Corporation (the "Company") is engaged in the
business of a "broker" and "dealer" as those terms are defined in the
Securities Exchange Act of 1934, as amended, and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
The Company has engaged a clearing broker, on a fully disclosed basis, to
perform all trade, settlement and related activities under a clearing
agreement. The Company pays the broker for clearing services in accordance
with terms as specified under the clearing agreement.
Marketable Securities
Securities owned and securities sold, but not yet purchased, are valued at
market value. The resulting difference between cost and market value is
included as unrealized gain or loss.
Property and Equipment
Property and equipment is stated at cost. Maintenance and repairs are
charged to expense as incurred; cost of major additions and betterments are
capitalized. When property and equipment is sold or otherwise disposed of,
the cost and related accumulated depreciation are eliminated from the
accounts and any resulting gain or loss is reflected in income.
Depreciation
Depreciation is provided for using straight-line methods over the estimated
useful lives of the related assets.
Income Taxes
The Company's method of accounting for income taxes is the liability method
required by the Financial Accounting Standard Board's ("FASB") SFAS No. 109
"Accounting for Income Taxes". Income taxes are provided for the tax
effects of transactions reported in the financial statements and consist of
taxes currently due and deferred taxes, if any.
Revenue Recognition
Transactions in securities, listed options and related commissions revenue
and expense are recorded on a trade date basis.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
W-9
<PAGE>
WESTMINSTER SECURITIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Principles, continued
Fair Value of Financial Instruments
The financial instruments of the Company are reported in the statement of
financial condition at market or fair values, or at carrying amounts that
approximate fair values because of the short maturity of the instruments.
Accounting Developments
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities",
effective for transactions occurring after December 31, 1996, which has
been deferred to December 31, 1997 by publishing of SFAS No. 127. SFAS No.
125 establishes standards for distinguishing transfers of financial assets
that are accounted for as sales from transfers that are accounted for as
secured borrowings. This Statement requires that the collateral obtained in
certain types of secured lending transactions be recorded on the balance
sheet with a corresponding liability reflecting the obligation to return
such collateral to its owner. The Company adopted this standard in fiscal
1999 and the implementation of this standard did not have any material
impact on its financial statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share"
("EPS"), effective for periods ending after December 15, 1997, with
restatement required for all prior periods. SFAS No. 128 establishes new
standards for computing and presenting EPS. This Statement replaces primary
and fully diluted EPS with "basic EPS", which excludes dilution, and
"diluted EPS", which includes the effect of all potentially dilutive common
shares and other dilutive securities. Because the Company has not
historically reported EPS, the adoption of this Statement has no impact on
the Company's historical financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", effective for fiscal years beginning after December 15, 1997, with
reclassification of earlier periods required for comparative purposes. SFAS
No. 130 establishes standards for the reporting and presentation of
comprehensive income and its components in the financial statements. The
Company adopted this standard in fiscal 1999. This Statement is limited to
issues of reporting and presentation and, therefore, will not affect the
Company's results of operations or financial condition.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", effective for fiscal years
beginning after December 15, 1997, with reclassification of earlier periods
required for comparative purposes. SFAS No. 131 establishes the criteria
for determining an operating segment and establishes the disclosure
requirements for reporting information about operating segments. Because
the Company has not historically reported segment information, the adoption
of this standard has no impact on the Company's historical financial
statements. In addition, the Company has determined that under SFAS No.
131, it operates in one segment of service and its customers and operations
are within the United States.
W-10
<PAGE>
WESTMINSTER SECURITIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Principles, continued
Accounting Developments, continued
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", effective for fiscal
years beginning after December 15, 1997, with restatement of disclosures
for earlier periods required for comparative purposes. SFAS No. 132 revises
certain employers' disclosures about pension and other post-retirement
benefit plans. The Company adopted this standard in fiscal 1999 and the
implementation of this standard did not have any impact on its financial
statements.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("ASEC of AICPA") issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", effective for
fiscal years beginning after December 15, 1998. SOP No. 98-1 requires that
certain costs of computer software developed or obtained for internal use
be capitalized and amortized over the useful life of the related software.
The Company does not expect that the adoption of this standard will have a
material impact on its financial statements.
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the
Costs of Start-up Activities", and effective for fiscal years beginning
after December 15, 1998. SOP 98-1 requires the costs of start-up activities
and organization costs to be expensed as incurred. The Company does not
expect that the adoption of this standard will have a material impact on
its financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning
after June 15, 1999, which has been deferred to June 30, 2000 by publishing
of SFAS No. 137. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. This Statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative
instrument depends on its intended use and the resulting designation. The
Company does not expect that the adoption of this standard will have a
material impact on its financial statements.
NOTE 2 - Securities Owned and Sold, but Not Yet Purchased
Marketable securities owned and sold, but not yet purchased consist of
trading and investment securities at market values, as illustrated below:
W-11
<PAGE>
NOTE 2 - Securities Owned and Sold, but Not Yet Purchased, continued
January 31,1999 January 31, 1998
-------------------------------------------------
Sold, but Sold, but
Not Yet Not Yet
Owned Purchased Owned Purchased
---------- ---------- ---------- ----------
Corporate stocks $ 547,112 $ 384,614 $ 809,942 $1,555,071
Options and warrants 20,964 -- -- 21,536
---------- ---------- ---------- ----------
$ 568,076 $ 384,614 $ 809,942 $1,576,607
========== ========== ========== ==========
NOTE 3 - Property and Equipment
Property and equipment are comprised of the following at January 31, 1999
and 1998:
Estimated
1999 1998 Useful Lives
-------------------------------------------------
Computer and office equipment $69,974 $69,974 5 years
Less: accumulated depreciation 41,154 35,540
------- -------
Property and Equipment, net $28,820 $34,434
======= =======
Depreciation expense for the years ended January 31, 1999 and 1998 was
$5,614 and $5,427, respectively.
NOTE 4 - Liabilities Subordinated to Claims of General Creditors
Subordinated liabilities evidenced by secured demand note collateral
agreements approved by the New York Stock Exchange, Inc. mature on the
following dates. These notes bear interest at 3% and have an automatic
rollover provision, which extends their maturities annually.
January 31 January 31
Maturity Dates 1999 1998
- -------------- ---------------------------------
February 2, 1998 $ -- $100,000
February 2, 2000 315,000 315,000
December 31, 2000 360,000 360,000
-------- --------
$675,000 $775,000
======== ========
W-12
<PAGE>
NOTE 4 - Liabilities Subordinated to Claims of General Creditors, continued
Any subordinated debt can be repaid only if, after giving effect to such
payment, the Company meets the Securities and Exchange Commission's capital
regulations governing the withdrawal of subordinated debt.
NOTE 5 - Income Taxes
The provision for income taxes for the years ended January 31, 1999 and
1998 consists of the following:
1999 1998
-------------------
Current
Federal $430,700 $229,695
State and Local 288,000 151,446
-------- --------
$718,700 $381,141
======== ========
The following is a reconciliation of income tax computed at the Federal
statutory rate to the provision for taxes:
1999 1998
-------------------
Income tax provision at 34% $521,642 $279,677
State and local income taxes net of federal benefit 186,805 100,155
Expenses not deductible for income tax purposes 10,253 1,309
-------- --------
$718,700 $381,141
======== ========
NOTE 6 - Commitments and Contingencies
Litigation
The Company is involved in litigations through the normal course of
business. The Company believes that the resolution of these matters will
not have a material adverse effect on the financial position of the
Company.
W-13
<PAGE>
NOTE 6 - Commitments and Contingencies, continued
Lease Commitment
The Company occupies office space under a lease agreement expiring July 31,
1999. Also, the Company leases vehicles under various operating leases
expiring in October 2001. Future minimum annual rentals for office space
and equipment are as follows:
For the Year Ending
January 31, Amount
------------------------------------------
2000 $35,954
2001 17,648
2002 13,236
-------
Total $66,838
=======
In addition, the Company is obligated to pay its proportionate share of
utilities, operating costs and real estate taxes of the leased building.
Rent expense for the years ended January 31, 1999 and 1998 was $67,217 and
$67,855, respectively.
NOTE 7 - Net Capital Requirement
The Company is subject to the Securities and Exchange Commission (SEC)
Uniform Net Capital Rule (Rule 15c-3-1), 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 January 31,
1999, the Company's net capital amounted to $2,448,993, which was
$2,348,993 in excess of its required net capital of $100,000. The Company's
net capital ratio was 0.22 to 1.
NOTE 8 - Off-Balance Sheet Risks
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of due from clearing
broker. As indicated in Note 1, the Company engages a clearing broker, on a
fully disclosed basis, to perform all trade, settlement and related
activities under a clearing agreement. The Company is therefore dependent
on the clearing broker in order to conduct its day-to-day operations.
W-14
<PAGE>
NOTE 8 - Off-Balance Sheet Risks, continued
In the normal course of business, the Company enters into various debt and
equity transactions as principal or agent. The execution, settlement, and
financing of those transactions can result in off-balance sheet risk or
concentration of credit risk.
The Company is exposed to off-balance sheet risk of loss on unsettled
transactions between trade date and settlement date in the event counter
parties are unable to fulfill contractual obligations.
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 January 31, 1999, at market values of the related securities
and will incur a loss if the market value of the securities increases
subsequent to January 31, 1999. Such loss, is any, is not reflected in the
accompanying statement of financial condition.
The Company's policy is to continuously monitor its exposure to market and
counter party risk through the use of a variety of financial position, and
credit exposure reporting and control procedures. In addition, the Company
has a policy of reviewing the credit standing of each broker/dealer,
clearing organization and/or other counter parties with which it conducts
business.
W-15
<PAGE>
UNAUDITED FINANCIAL STATEMENTS - WESTMINSTER SECURITIES CORPORATION
Description of Transaction
On July 1, 1999, Laidlaw Global Corporation ("Global") acquired 99% of the
issued and outstanding common stock of Westminster Securities Corporation
("Westminster") for 4,500,000 shares of Global common stock valued at $.82 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 unaudited balance sheet, income statements and statements of
cash flows are presented for the interim periods ended June 30, 1999 and June
30, 1998.
W-16
<PAGE>
UNAUDITED BALANCE SHEET AT JUNE 30, 1999
Historical
Westminster
June 30, 1999
(unaudited)
-------------
ASSETS
Cash $ 7,719
Marketable securities owned, at market 311,758
value
Due from clearing broker 74,645
Floor brokerage receivable 32,789
Prepaid expenses 7,750
Property and equipment, net 25,695
Security deposits and other assets 9,000
Secured demand notes receivable from
subordinated lenders
Collateralized by cash and marketable securities 600,000
----------
Total Assets 1,069,356
----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Marketable securities sold, but not yet purchased, at
Market value $ 8,550
Accounts payable and accrued expenses 163,678
Due to floor brokers 50,973
Corporate income taxes payable 201,599
Total Liabilities $ 424,800
----------
COMMITMENTS AND CONTINGENCIES
LIABILITIES SUBORDINATED TO CLAIMS OF
GENERAL CREDITORS 600,000
STOCKHOLDERS' EQUITY
Common stock, class "A" voting $1.00 par value; 1,000
Shares authorized; 3,000,000 shares issued and outstanding $ 3
Common stock, class "B" nonvoting $2.00 par value;
1,000 shares authorized - none issued --
Additional paid-in capital 3,524
Retained Earnings 41,029
----------
TOTAL STOCKHOLDERS' EQUITY 44,556
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,069,356
==========
W-17
<PAGE>
UNAUDITED INCOME STATEMENTS FOR THE FIVE MONTHS ENDED JUNE 30, 1999 AND 1998
Historical Historical
Westminster Westminster
For the five for the five
months months
ended ended
June 30, 1999 June 30, 1998
------------- -------------
(unaudited) (unaudited)
REVENUES
Realized gains (losses) $ 307,916 $ (106,955)
Commission income 1,260,004 1,993,518
Underwriting fees 845,909 118,417
Dividend and interest income 423,657 568,157
----------- -----------
Total Revenue 2,837,486 2,573,137
----------- -----------
EXPENSES:
Floor brokerage and clearance 103,087 259,711
Officers compensation and benefits 962,307 721,150
Employees compensation and benefits 479,528 381,398
Interest Expense 20,084 20,992
Subscriptions and research 52,302 32,871
Office expense 108,285 112,362
Tickers, quotation services and
telephone 102,598 112,999
Insurance 30,131 34,166
Payroll taxes 30,935 30,274
Dues and assessments 38,394 53,069
Professional fees 28,649 54,083
Rent expense 36,153 27,343
Meals and entertainment 14,213 7,787
Depreciation 3,125 2,000
Other expenses 55,019 91
----------- -----------
Total expenses 2,064,810 1,850,296
----------- -----------
Income before income taxes $ 772,676 $ 722,841
Income taxes -- 333,700
-----------
Net income 772,676 389,141
=========== ===========
Basic EPS $.17 $.09
==== ====
Diluted EPS $.17 $.09
==== ====
Weighted Shares Outstanding:
Basic 4,500,000 4,500,000
=========== ===========
Diluted 4,500,000 4,500,000
=========== ===========
W-18
<PAGE>
UNAUDITED STATEMENTS OF CASH FLOWS THE FIVE MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
Historical Historical
Westminster Westminster
For the For the
five months five months
Ended Ended
June 30, June 30,
1999 1998
------------ -----------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income 772,676 389,141
Adjustments to reconcile net income
to net cash used in operating
activities
Depreciation and amortization 3,125 2,000
(Increase) decrease in operating
assets
Marketable securities owned, at market
value 256,318 201,337
Due from clearing broker 2,069,854 477,047
Prepaid expenses 500 1,500
Security deposits and other assets 12,981 (5,597)
Marketable securities sold, but not yet
Purchased, at market value (376,064) (1,078,093)
Accounts payable and accrued expense 41,063 36,612
Due to floor broker (25,449) (2,916)
Corporate income taxes payable (134,364) (15,680)
Net cash used provided by activities 2,620,640 5,351
---------- ----------
Cash flows from financing activities
Repayment of liabilities subordinated to claims of
Retirement of class A, voting common stock (2,691,242)
Net cash used in financing activities (2,691,242) --
---------- ----------
NET (DECREASE) INCREASE IN CASH (70,602) 5,351
Cash at beginning of year 78,321 24,063
Cash at end of year 7,719 29,414
</TABLE>
W-19
<PAGE>
No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to sell
or to buy only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
----------
TABLE OF CONTENTS
Page
----
Prospectus Summary ................................................... 1
Risk Factors ......................................................... 6
Selected Consolidated Financial Data.................................. 13
Capitalization........................................................ 14
Management's Discussion and Analysis
of Financial Condition and
Results of Operations ....................................... 15
Business ............................................................. 22
Price Range of Common Stock .......................................... 32
Management ........................................................... 33
Certain Relationships and Related
Transactions ................................................ 39
Stock Ownership of Management and
Principal Stockholders ...................................... 40
Description of Securities ............................................ 42
Plan of Distribution ................................................. 46
Selling Security Holders ............................................. 47
Transfer Agent and Registrar ......................................... 52
Legal Opinions ....................................................... 52
Experts .............................................................. 52
Where You Can Find Additional Information ............................ 52
Index to Financial Statements ........................................ F-1
3,562,223 Shares
LAIDLAW GLOBAL
CORPORATION
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DATED _________, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of common stock being registered. All
amounts are estimates except for the Commission registration fee:
Registration fee ............................... $7,717.72
Legal fees and expenses ........................ $135,000
Accounting fees and expenses ................... $50,000
Blue Sky fees and expenses ..................... $20,000
Transfer agent and registrar fees ..............
and expenses ................................... $10,000
Printing and engraving expenses ................ $5,000
Miscellaneous .................................. $20,000
Total ..................................... $247,717.72
Item 14. Indemnification of Directors and Officers
See "Management-Indemnification of Directors and Officers."
Item 15. Recent Sales of Unregistered Securities
12% Senior Secured Euro-Notes Due 2002 and Non-Voting Common Stock Purchase
Warrants. From April 11, 1997 to May 31, 1997, Laidlaw Holdings sold Euro-Notes
in the aggregate principal amount of $2,305,000. The Euro-Notes were sold to (i)
3 U.S. accredited investors pursuant to an exemption from registration under
Regulation D of the Securities Act; and to (ii) 15 foreign accredited investors
under Regulation S of the Securities Act.
<PAGE>
Subsequent to the Reorganization, the Company granted to holders of the
Euro-Notes the right to exchange the Euro-Notes and Warrants issued with the
Euro-Notes for shares of Common Stock of the Company at the rate of $2.05 per
share for each Euro-Note exchanged, and the right to obtain Common Stock of the
Company upon exercise of the Warrants issued with the Euro-Notes upon the same
terms and conditions of such Warrants. As of July 15, 1999, 15 holders of Euro-
Notes aggregating $1,876,000 in principal amount have exchanged their notes for
shares of Common Stock of the Company.
8% Convertible Subordinated Notes Due 2002: From July 1998 to June 1999,
Laidlaw Holdings sold its Convertible Notes in the aggregate principal amount of
$8 million. The Convertible Notes were sold to (i) 19 U.S. accredited investors
pursuant to an exemption from registration under Regulation D of the Securities
Act; and to (ii) 50 foreign accredited investors under Regulation S of the
Securities Act.
Subsequent to the Reorganization, the Company assumed the obligations of
Laidlaw Holdings with respect to the conversion rights of holders of the
Convertible Notes. As a result, holders of the Convertible Notes could convert
such notes into Common Stock of the Company at the rate of $2.05 per share, upon
the same terms and conditions of conversion privileges set forth in the
Convertible Notes. To date, holders of Convertible Notes aggregating $8 million
in principal amount have converted their notes into shares of Common Stock of
the Company.
Item 16. Exhibits and Financial Statement Schedules
Exhibits
EXHIBIT NO. DESCRIPTION
2.1 Amended and Restated Plan and Agreement of Reorganization
by and among Laidlaw Holdings, Inc., Fi-Tek V, Inc.,
Westminster Securities Corporation and shareholders of the
companies, dated May 27, 1999(1)
3.1 Certificate of Incorporation of Registrant and amendments
thereto(2)
3.2 By-laws of Registrant(3)
4.1 Specimen Laidlaw Global Corporation Common Stock
Certificate(4)
4.2 Specimen Fi-Tek V, Inc. Class A Warrant(5)
4.3 Specimen Fi-Tek V, Inc. Class B Warrant(6)
5.1 Legal Opinion of Beckman, Millman and Sanders, LLP, dated
as of _________, 2000(7).
<PAGE>
10.1 Registrant's 1999 Omnibus Stock Option Plan.(7)
10.2 Employment Agreement between Registrant and Anastasio
Carayannis, dated as of January 1, 2000.
10.3 Employment Agreement between Registrant and Roger
Bendelac, dated as of January 1, 2000.
10.4 Employment Agreement between Registrant and Daniel
Bendelac, dated as of January 1, 2000.
10.5 Form of Strategic Alliance Agreement between Global
Electronic Exchange Inc. and Foreign Affiliates.(7)
10.6 Form of Lock-Up Agreement between Registrant and certain
Selling Security Holders.(7)
21.1 List of Subsidiaries.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Marcum & Kliegman LLP.
24.1 Powers of Attorney (included in the signature pages hereto).
- ----------
(1) Such document if hereby incorporated herein by reference to Exhibit 23.3 of
the Registrant's Current Report on Form 8-K dated June 8, 1999.
(2) Such document if hereby incorporated herein by reference to Exhibit 2 of the
Registrant's Registration Statement on Form 8-A dated October 15, 1999.
(3) Such document if hereby incorporated herein by reference to Exhibit 3 of the
Registrant's Registration Statement on Form 8-A dated October 15, 1999.
(4) Such document if hereby incorporated herein by reference to Exhibit 4 of the
Registrant's Registration Statement on Form 8-A dated October 15, 1999.
(5) Such document if hereby incorporated herein by reference to Exhibit 5 of the
Registrant's Registration Statement on Form 8-A dated October 15, 1999.
(6) Such document if hereby incorporated herein by reference to Exhibit 6 of the
Registrant's Registration Statement on Form 8-A dated October 15, 1999.
(7) To be filed by amendment.
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to (i) include
any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and (iii) include any additional or changed
material information on the plan of distribution;
(2) For determining any liability under the Securities Act, treat
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant under Rule 424(b)(1) or (4)
or Rule 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective; and
(3) For determining any liability under the Securities Act, treat each
post- effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement; and that offering of the securities at that time as the
initial bona fide offering of those securities.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, therunto duly authorized, in the City of New York, State of New
York, on February 14, 2000.
LAIDLAW GLOBAL CORPORATION
/s/ Roger Bendelac
By: -----------------------------------------
Roger Bendelac,
Executive Vice President, Chief Financial
Officer, Secretary and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Roger Bendelac and Anastasio Carayannis,
and each of them, as his attorney-in-fact, with full power of substitution, for
him in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments), and any and all
Registration Statements, and amendments to the same, filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this Registration Statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming his signatures as it may be signed by his said attorney
to any and all amendments to this Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form SB-2 has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/ Anastasio Carayannis
- ------------------------ Chairman of the Board and
Anastasio Carayannis Chief Executive Officer February 14, 2000
/s/ Roger Bendelac
- ------------------------ President, Chief Operating Officer,
Roger Bendelac Chief Financial Officer, Secretary
and Director February 14, 2000
/s/ Daniel Bendelac
- ------------------------ Vice-Chairman of the Board and February 14, 2000
Daniel Bendelac Executive Director
/s/ Billimac Bradley
- ------------------------ Director February 14, 2000
Billimac Bradley
/s/ Jean-Marc Beaujolin
- ------------------------ Director February 14, 2000
Jean-Marc Beaujolin
/s/ Robert Ma
- ------------------------ Director February 14, 2000
Robert Ma
/s/ John O'Shea
- ------------------------ Director February 14, 2000
John O'Shea
/s/ Larry D. Horner
- ------------------------ Chairman Emeritus and Director February 14, 2000
Larry D. Horner
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 2000, by and between LAIDLAW
GLOBAL CORORATION, a Delaware corporation, with its offices at 100 Park Avenue,
New York, New York 10017 (the "Company"), and Anastasio Carayannis, an
individual residing at ______________________________________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to secure the services of the Executive upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as Chairman of the Board of Directors
and Chief Executive Officer of the Company, subject to the terms and conditions
set forth in this Agreement.
Section 2. Duties. The Executive shall serve as Chairman of the Board of
Directors and Chief Executive Officer and shall properly perform such duties as
may be assigned to him from time to time by the Board of Directors of the
Company. If requested by the Company, the Executive shall serve on any committee
thereof without additional compensation. During the term of this Agreement, the
Executive is not required to devote all of his business time to the performance
of his duties and may pursue other activities which do not conflict with his
obligations to the Company under this Agreement.
Section 3. Term of Employment. The term of the Executive's employment shall
be for a period of one (1) year commencing on the date hereof (the "Term"),
subject to earlier termination by the parties pursuant to Section 6 hereof.
Section 4. Compensation of Executive.
4.1 Salary. The Company shall pay to the Executive an annual salary equal
to one hundred eighty five thousand dollars ($185,000) per annum for the
period from January 1, 2000 through December 31, 2000 (the "Base Salary")
less such deductions as shall be required to be withheld by applicable law
and regulations. All salaries payable to the Executive shall be paid at
such regular weekly, biweekly or semi-monthly time or times as the Company
makes payment of its regular payroll in the regular course of business.
1
<PAGE>
4.2 Bonus. In addition to Base Salary, the Company shall pay an annual
bonus to the executive as the compensation committee of the Board of
Directors may determine based upon the performance and achievement of the
Company (the "Bonus"). If, by March 30, 2000, no bonus plan has been
implemented, and the Company's net income for the year ending December 31,
2000 shall equal or exceed that earned by the Company for the year ended
December 31, 1999, then the Executive will be entitled to a bonus of no
less than 50% of the bonus he will receive for the prior year.
4.3 Other Compensation. In addition to the Base Salary and Bonus, the
Company shall pay to the Executive a commission of 40% of all gross
commissions generated from his customer accounts with any subsidiary of the
Company.
4.4 Expenses. During the employment period, the Company shall reimburse the
Executive for all reasonable and necessary travel expenses and other
disbursements incurred by the Executive on behalf of the Company, in
performance of the Executive's duties hereunder.
Section 5. Disability of the Executive. If the Executive is incapacitated
or disabled by accident, sickness or otherwise so as to render the Executive
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of sixty (60) consecutive days or
longer or for any ninety (90) days in any period of one hundred eighty (180)
consecutive days (a "Disability"), the Company may, at the time or any time
thereafter, at its option, terminate the employment of the Executive under this
Agreement immediately upon giving the Executive notice to that effect.
Section 6. Termination. The Company may terminate the employment of the
Executive and all of the Company's obligations under this Agreement at any time
for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
mean (i) the Executive's misconduct could reasonably be expected to have a
material adverse effect on the business and affairs of the Company, (ii) the
Executive's disregard of lawful instructions of the Company's Board of Directors
consistent with the Executive's position relating to the business of the Company
or neglect of duties or failure to act, which, in each case, could reasonably be
expected to have a material adverse effect on the business and affairs of the
Company, (iii) the commission by the Executive of an act constituting common law
fraud, or a felony, or criminal act against the Company or any affiliate thereof
or any of the assets of any of them, (iv) the Executive's material breach of any
of the agreements contained herein or (v) the Executive's resignation hereunder.
A termination pursuant to Section 6(i), (ii) or (iv) shall take effect 30 days
after the giving of the notice contemplated hereby unless the Executive shall,
during such 30-day period, remedy to the satisfaction of the Board of Directors
of the Company the misconduct, disregard, abuse or breach specified in such
notice; provided, however, that such termination shall take effect immediately
upon the giving of such notice if the Board of Directors of the Company shall
have determined that such misconduct, disregard, abuse or breach is not
remediable (which determination shall be stated in such notice). A termination
pursuant to Section 6(iii) or (v) shall take effect immediately upon the giving
of the notice contemplated hereby.
2
<PAGE>
Section 7. Effect of Termination of Employment. Upon the termination of the
Executive's employment for a Disability neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement.
Section 8. Disclosure of Confidential Information. Executive recognizes
that he has had and will continue to have access to secret and confidential
information regarding the Company, including but not limited to its customer
list, products, know-how, and business plans. Executive acknowledges that such
information is of great value to the Company, is the sole property of the
Company, and has been and will be acquired by him in confidence. In
consideration of the obligations undertaken by the Company herein, Executive
will not, at any time, during or after his employment hereunder, reveal, divulge
or make known to any person, any information acquired by Executive during the
course of his employment, which is treated as confidential by the Company,
including but not limited to its customer list, and not otherwise in the public
domain. The provisions of this Section 8 shall survive Executive's employment
hereunder.
Section 9. Covenant Not To Compete.
(a) Executive recognizes that the services to be performed by him hereunder
are special, unique and extraordinary. The parties confirm that it is reasonably
necessary for the protection of the Company that Executive agrees, and
accordingly, Executive does hereby agree, that he shall not, directly or
indirectly, at any time during the term of the Agreement:
(i) except as provided in Subsection (c) below, engage in the sale,
distribution or manufacture of any products or provide technical
assistance, advice or counseling on any products or services competitive to
the Company's products or services in any state in the United States or in
any foreign country in which the Company or any affiliate thereof is
engaged in business, either on his own behalf or as an officer, director,
stockholder, partner, consultant, associate, executive, owner, agent,
creditor, independent contractor, or coventurer of any third party; or
(ii) employ or engage, or cause or authorize, directly or indirectly,
to be employed or engaged, for or on behalf of himself or any third party,
any executive or agent of the Company or any affiliate thereof.
(b) Executive hereby agrees that he will not, directly or indirectly, for
or on behalf of himself or any third party, at any time during the term of the
Agreement solicit any customers of the Company or any affiliate thereof.
(c) If any of the restrictions contained in this Section 9 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
3
<PAGE>
Section 10. Miscellaneous.
10.1 Injunctive Relief Executive acknowledges that the services to be
rendered under the provisions of this Agreement are of a special,
unique and extraordinary character and that it would be difficult or
impossible to replace such services. Accordingly, Executive agrees
that any breach or threatened breach by him of Sections 8 or 9 of this
Agreement shall entitle the Company, in addition to all other legal
remedies available to it, to apply to any court of competent
jurisdiction to seek to enjoin such breach or threatened breach. The
parties understand and intend that each restriction agreed to by the
Executive herein above shall be construed as separable and divisible
from every other restriction, that the unenforceability of any
restriction shall not limit the enforceability, in whole or in part,
of any other restriction, and that one or more or all of such
restrictions may be enforced in whole or in part as the circumstances
warrant. In the event that any restriction in this Agreement is more
restrictive than permitted by law in the jurisdiction in which the
Company seeks enforcement thereof, such restriction shall be limited
to the extent permitted by law.
10.2 Assignments. Neither Executive nor the Company may assign or delegate
any of their rights or duties under this Agreement without the express
written consent of the other.
10.3 Entire Agreement. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties with respect to
the Executive's employment by the Company, supersedes all prior
understandings and agreements, whether oral or written, between the
Executive and the Company and shall not be amended, modified or
changed except by an instrument in writing executed by the party to be
charged. The invalidity or partial invalidity of one or more
provisions of this Agreement shall not invalidate any other provision
of this Agreement. No waiver by either party of any provision or
condition to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or any prior or
subsequent time.
10.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their
respective successors, heirs, beneficiaries and permitted assigns.
10.5 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
4
<PAGE>
10.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered,
sent by registered or certified mail, return receipt requested,
postage prepaid, or by private overnight mail service (e.g. Federal
Express) to the party at the address set forth above or to such other
address as either party may hereafter give notice of in accordance
with the provisions hereof. Notices shall be deemed given on the
sooner of the date actually received or the third business day after
sending.
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving
effect to such State's conflicts of laws provisions and each of the
parties hereto irrevocably consents to the jurisdiction and venue of
the federal and state courts located in the State of New York, County
of New York.
10.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one of the same instrument.
10.9 Arbitration. Any dispute which the parties hereto are unable amicably
to resolve shall be submitted to binding arbitration in New York in
accordance with the Rules and Constitution of the American Arbitration
Association. Either party hereto may request that any decision of the
arbitrators set forth the findings of fact and conclusions of law upon
which their award is based be entered as a judgement. Judgment upon
any such arbitration award may be entered in any court of competent
jurisdiction, and Executive submits to the jurisdiction of any such
court.
In the event any suit or other action is commenced with respect to the
interpretation or enforcement of any provision of this agreement, the prevailing
party shall be entitled, in addition to any other sums to which such party may
be entitled, to recover from the other party the reasonable fees and
disbursements of counsel retained to investigate and pursue such matter.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
Company: LAIDLAW GLOBAL CORPORATION
By:_____________________________
Name:
Title:
Executive: ________________________________
Anastasio Carayannis
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 2000, by and between LAIDLAW
GLOBAL CORORATION, a Delaware corporation, with its offices at 100 Park Avenue,
New York, New York 10017 (the "Company"), and Roger Bendelac, an individual
residing at ______________________________________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to secure the services of the Executive upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as of the Company, subject to the
terms and conditions set forth in this Agreement.
Section 2. Duties. The Executive shall serve as President, Chief Operating
Officer, Chief Financial Officer and Secretary of the Company and shall properly
perform such duties as may be assigned to him from time to time by the Board of
Directors of the Company. If requested by the Company, the Executive shall serve
on any committee thereof without additional compensation. During the term of
this Agreement, the Executive is not required to devote all of his business time
to the performance of his duties and may pursue other activities which do not
conflict with his obligations to the Company under this Agreement.
Section 3. Term of Employment. The term of the Executive's employment shall
be for a period of one (1) year commencing on the date hereof (the "Term"),
subject to earlier termination by the parties pursuant to Section 6 hereof.
Section 4. Compensation of Executive.
4.1 Salary. The Company shall pay to the Executive an annual salary equal
to one hundred sixty five thousand dollars ($165,000) per annum for the
period from January 1, 2000 through December 31, 2000 (the "Base Salary")
less such deductions as shall be required to be withheld by applicable law
and regulations. All salaries payable to the Executive shall be paid at
such regular weekly, biweekly or semi-monthly time or times as the Company
makes payment of its regular payroll in the regular course of business.
1
<PAGE>
4.2 Bonus. In addition to Base Salary, the Company shall pay an annual
bonus to the executive as the compensation committee of the Board of
Directors may determine based upon the performance and achievement of the
Company (the "Bonus"). If, by March 30, 2000, no bonus plan has been
implemented, and the Company's net income for the year ending December 31,
2000 shall equal or exceed that earned by the Company for the year ended
December 31, 1999, then the Executive will be entitled to a bonus of no
less than 50% of the bonus he will receive for the prior year.
4.3 Other Compensation. In addition to the Base Salary and Bonus, the
Company shall pay to the Executive a commission of 40% of all gross
commissions generated from his customer accounts with any subsidiary of the
Company.
4.4 Expenses. During the employment period, the Company shall reimburse the
Executive for all reasonable and necessary travel expenses and other
disbursements incurred by the Executive on behalf of the Company, in
performance of the Executive's duties hereunder.
Section 5. Disability of the Executive. If the Executive is incapacitated
or disabled by accident, sickness or otherwise so as to render the Executive
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of sixty (60) consecutive days or
longer or for any ninety (90) days in any period of one hundred eighty (180)
consecutive days (a "Disability"), the Company may, at the time or any time
thereafter, at its option, terminate the employment of the Executive under this
Agreement immediately upon giving the Executive notice to that effect.
Section 6. Termination. The Company may terminate the employment of the
Executive and all of the Company's obligations under this Agreement at any time
for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
mean (i) the Executive's misconduct could reasonably be expected to have a
material adverse effect on the business and affairs of the Company, (ii) the
Executive's disregard of lawful instructions of the Company's Board of Directors
consistent with the Executive's position relating to the business of the Company
or neglect of duties or failure to act, which, in each case, could reasonably be
expected to have a material adverse effect on the business and affairs of the
Company, (iii) the commission by the Executive of an act constituting common law
fraud, or a felony, or criminal act against the Company or any affiliate thereof
or any of the assets of any of them, (iv) the Executive's material breach of any
of the agreements contained herein or (v) the Executive's resignation hereunder.
A termination pursuant to Section 6(i), (ii) or (iv) shall take effect 30 days
after the giving of the notice contemplated hereby unless the Executive shall,
during such 30-day period, remedy to the satisfaction of the Board of Directors
of the Company the misconduct, disregard, abuse or breach specified in such
notice; provided, however, that such termination shall take effect immediately
upon the giving of such notice if the Board of Directors of the Company shall
have determined that such misconduct, disregard, abuse or breach is not
remediable (which determination shall be stated in such notice). A termination
pursuant to Section 6(iii) or (v) shall take effect immediately upon the giving
of the notice contemplated hereby.
2
<PAGE>
Section 7. Effect of Termination of Employment. Upon the termination of the
Executive's employment for a Disability neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement.
Section 8. Disclosure of Confidential Information. Executive recognizes
that he has had and will continue to have access to secret and confidential
information regarding the Company, including but not limited to its customer
list, products, know-how, and business plans. Executive acknowledges that such
information is of great value to the Company, is the sole property of the
Company, and has been and will be acquired by him in confidence. In
consideration of the obligations undertaken by the Company herein, Executive
will not, at any time, during or after his employment hereunder, reveal, divulge
or make known to any person, any information acquired by Executive during the
course of his employment, which is treated as confidential by the Company,
including but not limited to its customer list, and not otherwise in the public
domain. The provisions of this Section 8 shall survive Executive's employment
hereunder.
Section 9. Covenant Not To Compete.
(a) Executive recognizes that the services to be performed by him hereunder
are special, unique and extraordinary. The parties confirm that it is reasonably
necessary for the protection of the Company that Executive agrees, and
accordingly, Executive does hereby agree, that he shall not, directly or
indirectly, at any time during the term of the Agreement:
(I) except as provided in Subsection (c) below, engage in the sale,
distribution or manufacture of any products or provide technical
assistance, advice or counseling on any products or services competitive to
the Company's products or services in any state in the United States or in
any foreign country in which the Company or any affiliate thereof is
engaged in business, either on his own behalf or as an officer, director,
stockholder, partner, consultant, associate, executive, owner, agent,
creditor, independent contractor, or coventurer of any third party; or
(ii) employ or engage, or cause or authorize, directly or indirectly,
to be employed or engaged, for or on behalf of himself or any third party,
any executive or agent of the Company or any affiliate thereof.
(b) Executive hereby agrees that he will not, directly or indirectly, for
or on behalf of himself or any third party, at any time during the term of the
Agreement solicit any customers of the Company or any affiliate thereof.
(c) If any of the restrictions contained in this Section 9 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
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Section 10. Miscellaneous.
10.1 Injunctive Relief Executive acknowledges that the services to be
rendered under the provisions of this Agreement are of a special,
unique and extraordinary character and that it would be difficult or
impossible to replace such services. Accordingly, Executive agrees
that any breach or threatened breach by him of Sections 8 or 9 of this
Agreement shall entitle the Company, in addition to all other legal
remedies available to it, to apply to any court of competent
jurisdiction to seek to enjoin such breach or threatened breach. The
parties understand and intend that each restriction agreed to by the
Executive herein above shall be construed as separable and divisible
from every other restriction, that the unenforceability of any
restriction shall not limit the enforceability, in whole or in part,
of any other restriction, and that one or more or all of such
restrictions may be enforced in whole or in part as the circumstances
warrant. In the event that any restriction in this Agreement is more
restrictive than permitted by law in the jurisdiction in which the
Company seeks enforcement thereof, such restriction shall be limited
to the extent permitted by law.
10.2 Assignments. Neither Executive nor the Company may assign or delegate
any of their rights or duties under this Agreement without the express
written consent of the other.
10.3 Entire Agreement. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties with respect to
the Executive's employment by the Company, supersedes all prior
understandings and agreements, whether oral or written, between the
Executive and the Company and shall not be amended, modified or
changed except by an instrument in writing executed by the party to be
charged. The invalidity or partial invalidity of one or more
provisions of this Agreement shall not invalidate any other provision
of this Agreement. No waiver by either party of any provision or
condition to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or any prior or
subsequent time.
10.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their
respective successors, heirs, beneficiaries and permitted assigns.
10.5 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
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10.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered,
sent by registered or certified mail, return receipt requested,
postage prepaid, or by private overnight mail service (e.g. Federal
Express) to the party at the address set forth above or to such other
address as either party may hereafter give notice of in accordance
with the provisions hereof. Notices shall be deemed given on the
sooner of the date actually received or the third business day after
sending.
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving
effect to such State's conflicts of laws provisions and each of the
parties hereto irrevocably consents to the jurisdiction and venue of
the federal and state courts located in the State of New York, County
of New York.
10.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one of the same instrument.
10.9 Arbitration. Any dispute which the parties hereto are unable amicably
to resolve shall be submitted to binding arbitration in New York in
accordance with the Rules and Constitution of the American Arbitration
Association. Either party hereto may request that any decision of the
arbitrators set forth the findings of fact and conclusions of law upon
which their award is based be entered as a judgement. Judgment upon
any such arbitration award may be entered in any court of competent
jurisdiction, and Executive submits to the jurisdiction of any such
court.
In the event any suit or other action is commenced with respect to the
interpretation or enforcement of any provision of this agreement, the prevailing
party shall be entitled, in addition to any other sums to which such party may
be entitled, to recover from the other party the reasonable fees and
disbursements of counsel retained to investigate and pursue such matter.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
Company: LAIDLAW GLOBAL CORPORATION
By:_____________________________
Name:
Title:
Executive: ________________________________
Roger Bendelac
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 2000, by and between LAIDLAW
GLOBAL CORORATION, a Delaware corporation, with its offices at 100 Park Avenue,
New York, New York 10017 (the "Company"), and Daniel Bendelac, an individual
residing at ______________________________________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to secure the services of the Executive upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as of the Company, subject to the
terms and conditions set forth in this Agreement.
Section 2. Duties. The Executive shall serve as Vice Chairman of the Board
of Directors and Executive Director of the Company and , and shall properly
perform such duties as may be assigned to him from time to time by the Board of
Directors of the Company. If requested by the Company, the Executive shall serve
on any committee thereof without additional compensation. During the term of
this Agreement, the Executive is not required to devote all of his business time
to the performance of his duties and may pursue other activities which do not
conflict with his obligations to the Company under this Agreement.
Section 3. Term of Employment. The term of the Executive's employment shall
be for a period of one (1) year commencing on the date hereof (the "Term"),
subject to earlier termination by the parties pursuant to Section 6 hereof.
Section 4. Compensation of Executive.
4.1 Salary. The Company shall pay to the Executive an annual salary equal
to one hundred sixty five thousand dollars ($165,000) per annum for the
period from January 1, 2000 through December 31, 2000 (the "Base Salary")
less such deductions as shall be required to be withheld by applicable law
and regulations. All salaries payable to the Executive shall be paid at
such regular weekly, biweekly or semi-monthly time or times as the Company
makes payment of its regular payroll in the regular course of business.
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4.2 Bonus. In addition to Base Salary, the Company shall pay an annual
bonus to the executive as the compensation committee of the Board of
Directors may determine based upon the performance and achievement of the
Company (the "Bonus"). If, by March 30, 2000, no bonus plan has been
implemented, and the Company's net income for the year ending December 31,
2000 shall equal or exceed that earned by the Company for the year ended
December 31, 1999, then the Executive will be entitled to a bonus of no
less than 50% of the bonus he will receive for the prior year.
4.3 Expenses. During the employment period, the Company shall reimburse the
Executive for all reasonable and necessary travel expenses and other
disbursements incurred by the Executive on behalf of the Company, in
performance of the Executive's duties hereunder.
Section 5. Disability of the Executive. If the Executive is incapacitated
or disabled by accident, sickness or otherwise so as to render the Executive
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of sixty (60) consecutive days or
longer or for any ninety (90) days in any period of one hundred eighty (180)
consecutive days (a "Disability"), the Company may, at the time or any time
thereafter, at its option, terminate the employment of the Executive under this
Agreement immediately upon giving the Executive notice to that effect.
Section 6. Termination. The Company may terminate the employment of the
Executive and all of the Company's obligations under this Agreement at any time
for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
mean (i) the Executive's misconduct could reasonably be expected to have a
material adverse effect on the business and affairs of the Company, (ii) the
Executive's disregard of lawful instructions of the Company's Board of Directors
consistent with the Executive's position relating to the business of the Company
or neglect of duties or failure to act, which, in each case, could reasonably be
expected to have a material adverse effect on the business and affairs of the
Company, (iii) the commission by the Executive of an act constituting common law
fraud, or a felony, or criminal act against the Company or any affiliate thereof
or any of the assets of any of them, (iv) the Executive's material breach of any
of the agreements contained herein or (v) the Executive's resignation hereunder.
A termination pursuant to Section 6(i), (ii) or (iv) shall take effect 30 days
after the giving of the notice contemplated hereby unless the Executive shall,
during such 30-day period, remedy to the satisfaction of the Board of Directors
of the Company the misconduct, disregard, abuse or breach specified in such
notice; provided, however, that such termination shall take effect immediately
upon the giving of such notice if the Board of Directors of the Company shall
have determined that such misconduct, disregard, abuse or breach is not
remediable (which determination shall be stated in such notice). A termination
pursuant to Section 6(iii) or (v) shall take effect immediately upon the giving
of the notice contemplated hereby.
Section 7. Effect of Termination of Employment. Upon the termination of the
Executive's employment for a Disability neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement.
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<PAGE>
Section 8. Disclosure of Confidential Information. Executive recognizes
that he has had and will continue to have access to secret and confidential
information regarding the Company, including but not limited to its customer
list, products, know-how, and business plans. Executive acknowledges that such
information is of great value to the Company, is the sole property of the
Company, and has been and will be acquired by him in confidence. In
consideration of the obligations undertaken by the Company herein, Executive
will not, at any time, during or after his employment hereunder, reveal, divulge
or make known to any person, any information acquired by Executive during the
course of his employment, which is treated as confidential by the Company,
including but not limited to its customer list, and not otherwise in the public
domain. The provisions of this Section 8 shall survive Executive's employment
hereunder.
Section 9. Covenant Not To Compete.
(a) Executive recognizes that the services to be performed by him hereunder
are special, unique and extraordinary. The parties confirm that it is reasonably
necessary for the protection of the Company that Executive agrees, and
accordingly, Executive does hereby agree, that he shall not, directly or
indirectly, at any time during the term of the Agreement:
(I) except as provided in Subsection (c) below, engage in the sale,
distribution or manufacture of any products or provide technical
assistance, advice or counseling on any products or services competitive to
the Company's products or services in any state in the United States or in
any foreign country in which the Company or any affiliate thereof is
engaged in business, either on his own behalf or as an officer, director,
stockholder, partner, consultant, associate, executive, owner, agent,
creditor, independent contractor, or coventurer of any third party; or
(ii) employ or engage, or cause or authorize, directly or indirectly,
to be employed or engaged, for or on behalf of himself or any third party,
any executive or agent of the Company or any affiliate thereof.
(b) Executive hereby agrees that he will not, directly or indirectly, for
or on behalf of himself or any third party, at any time during the term of the
Agreement solicit any customers of the Company or any affiliate thereof.
(c) If any of the restrictions contained in this Section 9 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
Section 10. Miscellaneous.
10.1 Injunctive Relief Executive acknowledges that the services to be
rendered under the provisions of this Agreement are of a special,
unique and extraordinary
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character and that it would be difficult or impossible to replace such
services. Accordingly, Executive agrees that any breach or threatened
breach by him of Sections 8 or 9 of this Agreement shall entitle the
Company, in addition to all other legal remedies available to it, to
apply to any court of competent jurisdiction to seek to enjoin such
breach or threatened breach. The parties understand and intend that
each restriction agreed to by the Executive herein above shall be
construed as separable and divisible from every other restriction,
that the unenforceability of any restriction shall not limit the
enforceability, in whole or in part, of any other restriction, and
that one or more or all of such restrictions may be enforced in whole
or in part as the circumstances warrant. In the event that any
restriction in this Agreement is more restrictive than permitted by
law in the jurisdiction in which the Company seeks enforcement
thereof, such restriction shall be limited to the extent permitted by
law.
10.2 Assignments. Neither Executive nor the Company may assign or delegate
any of their rights or duties under this Agreement without the express
written consent of the other.
10.3 Entire Agreement. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties with respect to
the Executive's employment by the Company, supersedes all prior
understandings and agreements, whether oral or written, between the
Executive and the Company and shall not be amended, modified or
changed except by an instrument in writing executed by the party to be
charged. The invalidity or partial invalidity of one or more
provisions of this Agreement shall not invalidate any other provision
of this Agreement. No waiver by either party of any provision or
condition to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or any prior or
subsequent time.
10.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their
respective successors, heirs, beneficiaries and permitted assigns.
10.5 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered,
sent by registered or certified mail, return receipt requested,
postage prepaid, or by private overnight mail service (e.g. Federal
Express) to the party at the address set forth above or to such other
address as either party may hereafter give notice of in accordance
with the provisions hereof. Notices shall be deemed given on the
sooner of the date actually received or the third business day after
sending.
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<PAGE>
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving
effect to such State's conflicts of laws provisions and each of the
parties hereto irrevocably consents to the jurisdiction and venue of
the federal and state courts located in the State of New York, County
of New York.
10.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one of the same instrument.
10.9 Arbitration. Any dispute which the parties hereto are unable amicably
to resolve shall be submitted to binding arbitration in New York in
accordance with the Rules and Constitution of the American Arbitration
Association. Either party hereto may request that any decision of the
arbitrators set forth the findings of fact and conclusions of law upon
which their award is based be entered as a judgement. Judgment upon
any such arbitration award may be entered in any court of competent
jurisdiction, and Executive submits to the jurisdiction of any such
court.
In the event any suit or other action is commenced with respect to the
interpretation or enforcement of any provision of this agreement, the prevailing
party shall be entitled, in addition to any other sums to which such party may
be entitled, to recover from the other party the reasonable fees and
disbursements of counsel retained to investigate and pursue such matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
Company: LAIDLAW GLOBAL CORPORATION
By:_____________________________
Name:
Title:
Executive: ________________________________
Daniel Bendelac
Grant Thornton LLP Consent
We have issued our report dated March 3, 1999, accompanying the financial
statements of Laidlaw Global Corporation and Subsidiaries contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."
/s/ Grant Thornton LLP
- ----------------------
Grant Thornton LLP
New York, New York
February 14, 2000
The Board of Directors and Stockholders
Laidlaw Global Corporation:
We consent to the inclusion of our reports dated March 6, 1998 and July 24,
1997, with respect to the consolidated balance sheets of Laidlaw Holdings, Inc.
and subsidiaries as of December 31, 1997 and May 31, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the period from June 1, 1997 to December 31, 1997 and for the year ended May 31,
1997, in the Form SB-2 of Laidlaw Global Corporation dated February 14, 2000.
/s/ KPMG LLP
- -------------------
KPMG LLP
New York, New York
February 14, 2000
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Laidlaw Global Corporation
We consent to the inclusion of our report dated March 3, 1999 with respect to
the financial statements of Westminster Securities Corporation for the years
ended January 31, 1999 and 1998 in the Registration Statement (Form SB-2) filed
by Laidlaw Global Corporation on February 14, 2000. .
/s/ Marcum & Kliegman LLP
- --------------------------
Marcum & Kliegman LLP
New York, New York
February 14, 2000
