U.S. Securities and Exchange Commission
Washington, D.C. 20549
----------
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
----------
Commission file number 0-27681
LAIDLAW GLOBAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 13-4093923
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Park Avenue,
New York, NY 10017
(Address of principal executive offices)
(212) 376-8800
(Issuer's telephone number, including area code)
Fi-Tek V, Inc.
5330 East 17th Avenue Parkway
Denver, Colorado 80220
Former Fiscal Year: August 31
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 26,960,430 shares of common
stock as of May 1, 2000.
Transitional Small Business Disclosure Format (check one)
Yes [_] No [X]
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) Consolidated Balance Sheet as of March 31, 2000 ... 3
b) Consolidated Statements of Operations for the
three months ended March 31, 2000 and 1999 ........ 4
c) Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 ........ 5
d) Notes to Consolidated Financial Statements ........ 6 to 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS ............................................. 17 to 22
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ...................................... 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ....................... 23
a) EXHIBITS .......................................... 23
b) REPORTS ON FORM 8-K ............................... 23
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Laidlaw Global Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of March 31
2000
------------
ASSETS (Unaudited)
<S> <C>
Cash and Cash Equivalents $ 7,044,849
Due from Clearing Broker & Other Receivables 8,351,445
Marketable Securities owned 2,449,165
Goodwill in H&R Acquisition Corp and Westminster Securities Corp., net 7,264,880
Property, Equipment and Leasehold Improvements (net of accumulated 4,342,141
depreciation and amortization)
Other Assets 4,231,717
------------
TOTAL ASSETS $ 33,684,197
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes Payable $ 929,000
Marketable Securities Sold but not yet Purchased 1,824,177
Accounts Payable, Accrued Expenses & Other Liabilities 5,845,673
------------
TOTAL LIABILITIES 8,598,850
------------
COMMITMENTS AND CONTINGENCIES
Subordinated borrowings 600,000
Minority Interest 5,760,858
STOCKHOLDERS' EQUITY
Common Stock; $.00001 par value; 50,000,000 shares authorized of
the company at March 31, 2000 and December 31, 1999; 26,957,429
and 26,617,929 shares issued and outstanding by the Company
on March 31, 2000 and December 31, 1999, respectively 270
Additional Paid - In - Capital 34,746,301
Accumulated Deficit (16,022,082)
------------
TOTAL STOCKHOLDERS' EQUITY 18,724,489
------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 33,684,197
============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
Laidlaw Global Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months
Ended March 31
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES
Commissions $ 8,716,249 $ 2,135,326
Asset Management Fees 1,385,727 1,481,841
Investment Income, Trading Profit & Corporate
Finance Fees 394,069 1,335,282
Other Revenue 370,951 225,972
------------ ------------
Total revenues 10,866,996 5,178,421
------------ ------------
EXPENSES
Salaries and Other employee costs 2,462,464 1,610,265
Commissions 3,438,299 1,171,582
Clearing and Occupancy 1,286,732 706,701
Other Expenses 2,301,596 936,305
------------ ------------
Total expenses 9,489,091 4,424,853
------------ ------------
Income before minority interest 1,377,905 753,568
Minority Interest (180,649) 40,382
------------ ------------
Income before taxes: 1,558,554 713,186
Income Taxes -- --
------------ ------------
NET INCOME 1,558,554 713,186
Accumulated deficit, beginning of period (17,580,636) (22,611,916)
------------ ------------
Accumulated deficit, end of period $(16,022,082) $(21,898,730)
============ ============
NET INCOME PER SHARE
Basic $ .06 $ .06
============ ============
Diluted $ .05 $ .05
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Basic 26,690,512 11,743,567
============ ============
Diluted 30,486,813 14,939,271
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
Laidlaw Global Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period ended March 31,
2000 1999
----------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,558,554 $ 713,186
Adjustments to reconcile net income to net
Cash used by operating activities:
Amortization 97,150 40,092
Depreciation 287,810 78,109
Minority interest in earnings (181,408) (73,619)
(Increase) decrease in:
Due from clearing brokers and other receivables (3,812,125) (988,052)
Marketable securities (157,751) 706,625
Other assets (542,396) 45,107
Accounts payable 231,835 (1,240,080)
------------ ------------
Net cash used in operating activities (2,518,331) (718,632)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property, Equipment and Leasehold Improvements (1,218,844) (189,953)
------------ ------------
Net cash used in investing activities (1,218,844) (189,953)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes -- 385,000
Repayment of notes payable -- (475,000)
Issuance of common stock 650,782 --
------------ ------------
Net cash provided by financing activities 650,782 (90,000)
------------ ------------
NET (DECREASE) IN CASH (3,086,393) (998,585)
CASH - BEGINNING OF PERIOD 10,131,242 1,939,429
------------ ------------
CASH - END OF PERIOD $ 7,044,849 $ 940,844
============ ============
Supplemental disclosure for cash flow information:
Cash paid during the period for interest $ 104,405 $ 171,817
Supplemental schedule of non cash investing
and financing activities:
During the periods ended March 31, 2000 and
1999 the following transactions occurred:
Issuance of common stock upon purchase of
Laidlaw Pacific ("Asia") Ltd. 348,313
Management fee receivable applied to loan from H&R 455,150
The Company acquired substantially all of the common stock
of Laidlaw Pacific ("Asia") Ltd. for common stock of the
Company. The net assets purchased consisted of the following:
Receivable from Laidlaw Pacific Financial Services
("Holdings") Ltd. $ 326,444
Other assets 21,869
------------
Net assets purchased 348,313
Less common stock issued (882,844)
------------
Net cash received from acquisitions $ (534,531)
============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
Laidlaw Global Corporation (the "Company") (formerly Laidlaw Holdings,
Inc.) ("Laidlaw Holdings") is a holding company whose wholly- or
majority-owned operating subsidiaries include Laidlaw Global Securities,
Inc. ("Laidlaw Global Securities"), Westminster Securities Corporation,
("Westminster"), H&R Acquisition Corporation ("HRAC"), an 81%-owned
subsidiary which maintains a 100% interest in Howe & Rusling, Inc., a
registered investment advisory firm, Global Electronic Exchange Inc.,
("GEE"), a 59%-owned development-stage, internet-based investment services
company established on June 14, 1999, Lead Capital, S.A. ("Lead"), a 99%
owned broker-dealer located in Greece, and Laidlaw Pacific ("Asia") Ltd
(LPA), an investment advisory firm incorporated under the laws of Hong
Kong. The Company's business activities include securities brokerage,
investment banking, asset management and investment advisory services to
individual investors, corporations, pension plans and institutions
worldwide.
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
On June 8, 1999, Fi-Tek V, Inc. ("Fi-Tek"), a nonoperating public company
with 1,500,000 common shares outstanding and immaterial net assets,
acquired more than 99% of the outstanding common stock of Laidlaw Holdings
in exchange for 13,109,137 shares of Fi-Tek (the "Acquisition").
Simultaneously with the closing of the Acquisition, Fi-Tek changed its name
to Laidlaw Global Corporation. In accordance with the acquisition,
immediately prior to the acquisition Fi-Tek caused a 1-for-32.4778 reverse
stock split reducing the issued and outstanding stock to 1,500,000 shares.
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 Holdings for the net monetary assets of Fi-Tek,
accompanied by a recapitalization, and is accounted for as a change in
capital structure. Accordingly, the accounting for the Acquisition is
identical to that resulting from a reverse acquisition, except that no
goodwill is recorded. Under reverse takeover accounting, the post-reverse
acquisition comparative historical financial statements of the "legal
acquirer," Fi-Tek, are those of the "legal acquiree," Laidlaw Holdings
(i.e., the accounting acquirer). The Company and Laidlaw Holdings are
collectively considered the Company.
The Company was a majority-owned subsidiary of Pacific USA Holdings
Corporation ("PUSA"), a wholly-owned subsidiary of Pacific Electric Wire &
Cable Co., Ltd., a Taiwanese industrial
6
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE A (continued)
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 as of December 31, 1998.
As a result 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 acquistion of Westminster, Lead and LPA, the
majority ownership of the Company by PUSA and EC decreased to approximately
39% as of March 31, 2000 and December 31, 1999.
These financial statements that have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (the "SEC") and,
in the opinion of management, reflect all adjustments necessary for a fair
presentation of the results for the periods presented in conformity with
generally accepted accounting principles. These financial statements should
be read in
7
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE A (continued)
conjunction with the Company's audited financial statements included in the
Company's annual report on Form 10-KSB filed with the SEC on April 17,
2000. Results of the interim periods are not necessarily indicative of the
results to be obtained for a full fiscal year.
NOTE B - SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED
Securities owned and securities sold, but not yet purchased consist of
trading and investment securities at market values, as follows:
March 31, 2000
Sold But
Not Yet
Owned Purchased
---------- ----------
(Unaudited)
Equity Securities $1,327,003 $1,824,177
Money Market Investments 1,122,162 --
Corporate Bonds -- --
---------- ----------
2,449,165 1,824,177
========== ==========
NOTE C - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of:
March
31, 2000
----------
(Unaudited)
Furniture and equipment $5,310,211
Leasehold improvements 275,186
----------
5,585,397
Accumulated depreciation and amortization 1,243,256
----------
Property and equipment, net $4,342,141
==========
8
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE D - ACQUISITION OF LAIDLAW PACIFIC ("ASIA") LTD.
On March 29, 2000, the Company acquired Laidlaw Pacific ("Asia") Ltd.
(LPA), an investment advisory company incorporated under the laws of Hong
Kong. The amount paid was 200,000 shares of common stock of the Company and
HK$4M. The purchase price was allocated to the net assets acquired based on
their estimated fair values. On March 31, 2000, LPA's assets were
approximately HK$6,874,000 (US$882,844). The purchase price approximated
the fair value of net assets; therefore, no goodwill was recorded.
The acquisitions of LPA described above were accounted for by the purchase
method. Accordingly, the accompanying consolidated statements of operations
do not include any revenues or expenses related to these acquisitions prior
to the respective closing dates.
Following are the Company's pro forma results of operations, which are
presented for the three months ended March 31, 2000 and 1999. The pro forma
adjustments are based upon historical results of the combining entities as
follows: Global and its accounting predecessor, Holdings, for the three
months ended March 31, 2000 and 1999 and LPA for the three months ended
March 31, 2000 and 1999.
2000 1999
------------ ------------
(Unaudited)
Net income (loss) $ 1,558,554 $ 713,186
Pro forma adjustments:
Net income from LPA (19,091) 20,226
------------ ------------
Pro forma net income (loss) $ 1,539,463 $ 733,412
Pro forma net earnings (loss) per
common share:
Basic $ .06 $ .06
Diluted $ .05 $ .05
Pro forma weighted average outstanding
common shares:
Basic 26,890,512 11,943,567
Diluted 30,686,813 15,139,271
These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations which would have actually resulted had the combinations been in
effect on January 1, 1999, or of future results of operations.
NOTE E - STOCKHOLDERS' EQUITY.
As discussed in Note D, the Company issued 200,000 shares of common stock
in connection with the acquisition of Laidlaw Pacific ("Asia") Ltd. on
March 29, 2000 for $882,844.
9
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE F - 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 March 31, 2000, Laidlaw Global Securities had net capital of
$4,265,602, which was $4,104,364 in excess of its required net capital of
$161,238 and Westminster Securities Corporation had net capital of
$1,229,987, which was $1,129,987 in excess of its required net capital of
$100,000.
The Company's subsidiary Global Electronic Exchange, Inc. has a 100% owned
broker-dealer subsidiary Globeshare, Inc. which was accepted as a member of
the NASD on February 8, 2000. During the first year of its operation,
Globeshare must accordingly meet the minimum net capital requirement and
maintain an 8 to 1 ratio of aggregate indebtedness to net capital. As of
March 31, 2000, Globeshare had net capital of $1,112,528, which was
$1,107,528 in excess of its required net capital of $5,000.
NOTE G - COMMITMENTS AND CONTINGENCIES
1. Litigation
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 addition, Laidlaw Global Securities is a defendant in a legal matter
involving the underwriting and initial public offering of Galacticomm
Technologies, Inc. ("Galacticomm") shares. Laidlaw Global Securities acted
as a member of a selling group, pursuant to which Laidlaw Global Securities
agreed to purchase 200,000 shares of Galacticomm at $5.40 per share and
200,000 warrants of Galacticomm at $0.09 per warrant. Additionally, Laidlaw
Global Securities agreed to guarantee the purchase of an additional 20,000
shares and warrants if deemed necessary. Prior to the settlement of the
IPO, Laidlaw Global Securities had satisfied all their commitments as part
of their agreement with the Lead Underwriters. Prior to the settlement of
the IPO, the Lead Underwriters aborted the IPO based upon what they in
their sole discretion believed was a declining market in the U.S. and
abroad. Pursuant to the underwriting agreement between Galacticomm and the
Lead Underwriters, the Lead Underwriters had the right, in their sole
discretion, to abort the IPO in the event of adverse conditions.
Galacticomm commenced suit against the underwriting group in the State
Court of Florida seeking damages for breach of the underwriting agreement.
10
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE G (continued)
In the opinion of management of the Company, amounts accrued for awards or
assessments in connection with these matters are adequate and the ultimate
resolution of these matters will not have a material effect on the
Company's financial position and results of operations.
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. On May 15,
1999, this agreement was modified, allowing the Company to provide the
payment by the issuance of a convertible note for $393,750. In August 1999,
this note was converted to 22,702 shares of common stock.
3. Employment Agreements
The Company maintains agreements with a key employee who also acts as
Chairman of the Board and Chief Executive Officer (the "Executive"),
subject to the following terms and conditions:
The Company will pay to the Executive an annual salary of $185,000.
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. If the Company's
net income for the year ending December 31, 2000 equals or exceeds
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.
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. Commission-sharing Arrangements
In conjunction with the formation of GEE in January 1999, the Company
entered into commission-sharing arrangements with a number of foreign-based
broker-dealers from whom GEE receives a portion of commission revenue
pursuant to the agreements with these affiliates. There were no significant
funding commitments made by GEE or the Company at March 31, 2000 and
December 31, 1999.
11
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE H - INDUSTRY SEGMENTS
The Company operates 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
United States 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.
Foreign Operations and Major Customers: Although the Company has begun to
initiate its plans to expand its international operations in Europe and
Asia, the Company had no significant assets or revenues (either external or
intercompany) from operations in foreign countries for each of the two
periods ended March 31, 2000 and March 31, 1999 other than commission and
Investment Banking revenues from the activities of Laidlaw Global
Securities on behalf of foreign and U.S. customers in foreign markets,
amounting to $2,265,832 and $126,766, respectively, which approximate 21%
and 2%, respectively, of external revenue. Additionally, the Company had no
significant individual customers (domestic or foreign) as of March 31,
2000, or for each of the two periods ended March 31, 2000 and March 31,
1999.
12
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE H (continued)
The following table sets forth the net revenues of these industry segments
of the Company's business.
Three months ended March 31
----------------------------
2000 1999
------------ ------------
(Unaudited)
Revenue from external customers
Asset management $ 1,142,132 $ 1,292,320
Broker-dealer 9,486,456 3,886,181
Corporate and other 238,408 (80)
------------ ------------
Total external revenue $ 10,866,996 $ 5,178,421
============ ============
Inter-segment revenue
Asset management $ --
Broker-dealer $ 50,001 233,850
Corporate and other -- --
------------ ------------
Total inter-segment revenue $ 50,001 $ 233,850
============ ============
Net income (loss)
Asset management $ 228,937 $ 172,156
Broker-dealer 2,210,136 805,600
Corporate and other (880,519) (264,570)
------------ ------------
Total net income (loss) $ 1,558,554 $ 713,186
============ ============
Total assets
Asset management $ 3,463,336 $ 3,401,030
Broker-dealer 17,301,201 3,138,426
Corporate and other 12,919,660 2,358,906
------------ ------------
Total assets $ 33,684,197 $ 8,898,362
============ ============
13
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE I - STOCK OPTIONS
During 1999, the Company established a stock option plan accounted for
under APB Opinion No. 25 and related interpretations. The current plan
incorporates all outstanding options previously granted under the prior
Laidlaw Holdings and Westminster stock option plans. 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 three months ended March 31, 2000
and 1999. 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 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," the Company's net income would
have decreased from $1,558,554 and $713,186 to ($817,046) and $84,592, for
the three months ended March 31, 2000 and 1999, respectively. During the
period from January 1 to March 31, 2000, the Company granted options to
purchase 22,500 shares to employees with a range of exercise prices between
$.83 and $7.00 per share.
14
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE J - 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
reflect all potentially dilutive securities, as well as the related effect
on net income. Set forth below is the reconciliation of net income (loss)
applicable to common shares and weighted-average common and common
equivalent shares of the basic and diluted earnings per common share
computations:
<TABLE>
<CAPTION>
Three Months ended March 31,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Numerator
Net (loss) income $ 1,558,554 $ 713,186
----------- -----------
Net (loss) income applicable to common shares
for basic earnings per share 1,558,554 713,186
Effect of dilutive securities
Interest expense on Euro-notes 12,870 --
----------- -----------
Net (loss) income applicable to common shares
for diluted earnings per share $ 1,571,424 $ 713,186
=========== ===========
Denominator
Weighted-average common shares for basic
earnings per share 26,690,512 11,743,567
Weighted-average effect of dilutive securities
Employee stock options 2,904,455 3,101,250
Warrants 891,846 94,454
----------- -----------
Weighted-average common and common equivalent
shares for diluted earnings per share 30,486,813 14,939,271
=========== ===========
Earnings per common share
Basic $ 0.06 $ .06
=========== ===========
Diluted $ 0.05 $ .05
=========== ===========
</TABLE>
15
<PAGE>
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2000 and December 31, 1999
And for the three Months Ended March 31, 2000 and 1999
NOTE J (continued)
Included in diluted weighted shares outstanding are 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.
Also included in March 31, 2000 are 398,696 Class A Common Stock Purchase
Warrants and 398,696 Class B Common Stock Purchase Warrants.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Laidlaw Global Corporation is a global financial services firm that
operates in three business segments: investment banking, sales and trading and
asset management. It has two subsidiaries that operate in all three segments:
Laidlaw Holdings, Inc., a holding company which owns 100% of Laidlaw Global
Securities, Inc., and 81% of Howe & Rusling, Inc., and Westminster Securities
Corporation, a NYSE member firm which was acquired by Laidlaw on July 1, 1999.
Laidlaw has a third subsidiary Global Electronic Exchange Inc. which is a
development stage company that is in the process of creating a global on-line
trading network through its broker-dealer subsidiary Globeshare, Inc. Globeshare
commenced its U.S. operation in October 1999 and is operated as a division of
Laidlaw Global Securities. Globeshare, a wholly owned subsidiary of Global
Electronic Exchange received approval for NASD membership as a broker-dealer on
February 8, 2000. Operations of the on-line broker will transfer from Globeshare
as a division of Laidlaw Global Securities to Globeshare as a broker-dealer on
or prior to May 31, 2000.
Market fluctuations and economic factors may materially affect Laidlaw's
results of operations. In addition, results of operations in the past have been
and in the future may continue to be materially affected by many factors of a
global nature. These factors include economic and market conditions; the
availability of capital; the availability of credit; the level and volatility of
equity prices and interest rates; currency values and other market indices; and
technological changes and events. The increased use of the Internet for
securities trading and investment services are important factors which may
affect Laidlaw's operations. Inflation and the fear of inflation as well as
investor sentiment and legislative and regulatory developments will continue to
affect the business conditions in which our industry operates. Such factors may
also have an impact on Laidlaw's ability to achieve its strategic objectives on
a global basis, including growth in assets under management, global investment
banking and brokerage services activities as well as the development and
expansion of Global Electronic Exchange which will continue to require
substantial resources.
Laidlaw's securities business, particularly its involvement in primary and
secondary markets in domestic and overseas markets, is subject to substantial
positive and negative fluctuations caused by a variety of factors that cannot be
predicted with great certainty. These factors include variations in the fair
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, affects the flow of investment
dollars into bonds and equity, and the size, number and timing of transactions
or client assignments.
Laidlaw's 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 even though Laidlaw's
strategy has been to situate itself in markets where it believes it has an
advantage over competition due to strong local connections and access to foreign
brokerage firms and investors. Laidlaw though global in its intervention wants
to see itself as the "local player" throughout the world. 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. Laidlaw intends to
manage its businesses for the long term and help mitigate the potential effects
of market downturns by strengthening its competitive position in the global
financial services industry through diversification of its revenue sources and
enhancement of its global franchise. Laidlaw's overall financial results will
continue to be affected by its ability and success in maintaining high levels of
profitable business activities, emphasizing technological updates and
innovation, and carefully managing risks in all the securities markets it gets
involved in. 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 Laidlaw to remain profitable
and competitive.
17
<PAGE>
Laidlaw believes that technological advancements in the Internet and the
growth of electronic commerce will continue to present both challenges and
opportunities to Laidlaw and could lead to significant changes and innovations
in the financial markets and financial services industry as a whole. Laidlaw's
initiatives in this area have included the participation in the development of
Global Electronic Exchange which proposes both an intended financial portal
under the name GEE Link and the on-line broker, Globeshare, currently enabling
investors to purchase securities in 22 different equity markets around the
world. Laidlaw expects to continue to augment these initiatives in the future
with the stated goal of making the Globeshare system operational for 50
different equity markets worldwide.
Global market and economic conditions were generally favorable during much
of the first quarter of 2000. However, financial markets within many regions
exhibited a higher degree of volatility enhanced by a succession of rate
increases in the U.S.
Nevertheless in the U.S., market conditions benefited from robust corporate
earnings and the strong performance of the domestic economy, which continued to
exhibit positive fundamentals and a high rate of growth. During much of the
first quarter of 2000, the U.S. economy was characterized by several favorable
trends, such as historically low levels of unemployment, high levels of consumer
confidence and spending, and a high demand for imports. There were indications
that U.S. economic growth was proceeding at a brisk pace and at a higher rate
than anticipated. Such indications, coupled with the tight domestic labor
market, increasing wage pressures and the renewed vigor in international
markets, led to fears of accelerating inflation. That fear was reinforced by a
boost in energy prices brought about by the OPEC cartel policies.
In an effort to slow the U.S. economy and to mitigate inflationary
pressures, during the first quarter of 2000, the Federal Reserve Board (the
"Fed") raised the overnight lending rate by 0.25%. There still remained much
uncertainty as to whether additional interest rate actions might be taken in the
event that the Fed's perceptions of inflationary pressures continue to persist
in the future.
Laidlaw's subsidiaries have seen reduced investment banking prospects and
activities in the first quarter of 2000 due to the traditionally slower month of
January and the uncertainties brought by the market increased volatility after a
peak in technology stock market values that seems to have occurred on or about
March 16, 2000.
The market dichotomy between the "old economy" and the "new economy" showed
signs of abating when toward the end of the quarter the "new economy stocks"
corrected and the so-called "old economy" stocks saw a reversal of fortune.
Laidlaw, through its investment banking and advisory services, was able to
have its clients participate in a secondary offering in the Greek Stock Market
that brought a fee in excess of $1 million thus contributing in a large part to
the good performance of the first quarter of 2000. The comparison of the first
quarter of 2000 with the first quarter of 1999 shows a good progression of the
firm's business activities since market conditions were more difficult this
quarter than during the comparable quarter last year.
18
<PAGE>
It continues to be Laidlaw's current objective to have the Global
Electronic Exchange project functional and operating prior to year-end with
respect to accessing, through local securities firms, the foreign markets
already signed on. Plural (formerly known as Micro-Modeling Associates) a
software solution provider has continued to be associated closely in providing
Laidlaw with software solutions and technological assistance for the Global
Electronic Exchange venture. In order to assure that the Global Electronic
Exchange project in its current building phase does not drain the resources of
Laidlaw, Global Electronic Exchange has accessed financing through private
sources of equity financing. In doing so, the dilution effect to Laidlaw's stake
in Global Electronic Exchange was kept to a minimum.
Currently all the strategic partnership agreements signed by Global
Electronic Exchange provide for revenue sharing based on the source of the
customer and the location of the trade. Other than maintenance of the trading
systems and web sites, Laidlaw and its subsidiary have no financial obligations
to any of the strategic partners that are participating in the trading
Globeshare network.
The new Board of Directors has continued its efforts to position Laidlaw in
new markets and ventures. Management has continued to focus its activities in
areas that take into consideration the cost structure of Laidlaw 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.
Results of Operations For the Quarters Ended March 31, 2000 and 1999
Laidlaw's total revenues for the three months ended March 31, 2000 were
$10.9 million compared to $5.2 million for the three months ended March 1999.
The increase in revenue resulted from the commissions generated from the
emerging and foreign markets in which the Laidlaw Global Securities subsidiary
had started to establish its niche in 1999. The Westminster subsidiary, which
was acquired in the summer of 1999, started a service that will allow direct
access to the floor of the NYSE for large institutional and private customers, a
service for which there is limited competition and a large demand from first
rate investment outfits. The Westminster subsidiary contributed approximately
$2.6 million in revenues in the first quarter of 2000.
The acquisition of Lead Capital is currently not material with respect to
the impact of the consolidation of Lead Capital's operating results into
Laidlaw. However, Lead Capital's acquisition has resulted in intangible and
tangible advantages to Laidlaw by providing strong local contacts for the
Corporate Finance Department of Laidlaw Global Securities and investors for
Laidlaw Global Securities products. As a result of the close relationship with
Lead Capital, Laidlaw business opportunities in Greece have been enhanced.
The Laidlaw Pacific acquisition does not have any material impact at the
level of the consolidation of the results of that operation since the
acquisition only involved the acquiring of the licenses for corporate finance
and money management, cash and two employees. The benefits of that acquisition
are in the process of materializing through increased contacts and the access to
new transactions. Any business developed in that region of the world does not
give rise to foreign currency risks since any contract entered into is generally
denominated in U.S. dollars and relate to functions and services provided in the
U.S. for the entities introduced to Laidlaw.
19
<PAGE>
Following the purchase of Laidlaw Pacific, the Company underwent a
reorganization of its investment banking team. It is expected that Laidlaw
Pacific will start contributing to operations on revenues prior to year-end in
light of the long gestation process required for corporate finance activities in
that market.
During the first quarter of 2000, Laidlaw continued to operate in two
principal segments of the financial services industry, namely 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 United
States and overseas. Through this group, Laidlaw 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.
The commission revenues which represent 80% of total revenues are
geographically categorized as follows:
Revenues of $4.0 million were generated from the activities of Laidlaw
Global Securities on behalf of foreign and U.S. institutional customers in
foreign markets and revenues of $4.7 million were generated from the activities
of Laidlaw Global Securities and Westminster in the U.S. markets. 75% of such
revenues were generated from the accounts of institutional customers and 25%
were generated from the accounts of high net-worth investors. The investors
transacting in the U.S. markets are both U.S. and non-U.S. entities and
individuals.
Asset Management fees from Howe & Rusling and partly from Laidlaw Global
Securities amounted to $1,385,727 which is 13% of the firm's revenue. Corporate
finance fees of Laidlaw Global Securities and Westminster amounted to $394,069
comprising 4% of the firm's revenues for the first quarter of 2000.
Salaries and other employee expenses for the three months ended March 31,
2000 increased to $2.5 million from $1.6 million for the three months ended
March 31, 1999. The increase in this expense primarily relates to the addition
of the Westminster compensation costs and the hiring of personnel for the Global
Electronic Exchange subsidiary and additional key professional staff.
Commissions expense for the three months ended March 31, 2000 increased to
$3.4 million from $1.2 million for the three months ended March 31, 1999. The
increase is attributable to the increase in commission revenue.
20
<PAGE>
Clearing and occupancy expenses for the three months ended March 31, 2000
increased to $1.3 million from $.7 million for the three months ended March 31,
1999. Clearing expenses, which primarily consists of amounts paid to Laidlaw's
clearing agent for processing and clearing customers' trades, reflect the
increased volume and growth of Laidlaw's brokerage operations. Occupancy
expenses, which include cost of leasing office space and space with our internet
service provider and of depreciating equipment and amortizing software
development costs, increased primarily due to the technology infrastructure
developed for Global Electronic Exchange. Management expects the costs related
to technology development will continue to grow as Laidlaw continues to invest
in Global Electronic Exchange and enhances the other subsidiaries'
infrastructure to enable Laidlaw as a whole to compete better in the industry.
Other expenses for the three months ended March 31, 2000 increased to $2.3
million from $.9 million for the three months ended March 31, 1999. Other
expenses consists, among other things, of legal, accounting and other
professional fees, travel and promotional costs, quotes and information system
costs, office supplies, dues and registration fees with the NASD and the various
states, amortization of goodwill, telephone costs, and interest. With the advent
of the reverse merger and the acquisitions, professional fees and goodwill
amortization increased. The addition of the Westminster and Global Electronic
Exchange subsidiaries to the group necessarily increased operational costs of
communications, supplies and membership dues. The increase in travel and
promotional costs are relative to the efforts of management in developing
strategic alliances with foreign partners and in promoting brand name
recognition for Laidlaw and Globeshare, the on-line broker-dealer subsidiary of
Global Electronic Exchange.
Liquidity and Capital Reserves
The credit worthiness of Laidlaw has improved substantially as a result of
the conversion of $8 million of its 8% Convertible Notes into equity. An offer
to exchange the 12% Senior Secured Euro Note into shares of common stock of
Laidlaw in the summer of 1999 yielded a strong response from the note holders
who have agreed to exchange $1.9 million in principal indebtedness of the total
$2.305 million for Laidlaw common stock. The change in debt structure has begun
to have a material impact on Laidlaw's cash flow due to material interest
expense savings and the availability of funds for operations instead of debt
repayments.
Laidlaw 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,
Laidlaw may need to raise additional funds. Funds will initially be raised
through the issuance of private equity securities in the Global Electronic
Exchange subsidiary. Though Laidlaw'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 should result in an
overall reduced dilution effect on Laidlaw. Laidlaw 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.
21
<PAGE>
The Balance Sheet
The following table sets forth our total assets, adjusted assets, leverage
ratios and book value per share. The purpose of illustrating these ratios is to
indicate the improved liquidity and financial position of Laidlaw for the three
months ended March 31, 2000. The substantial increase in total assets as of
March 31, 2000 compared to those as of March 31, 1999 resulted from Laidlaw's
increased profitability, the corporate acquisitions and the establishment of
Global Electronic Exchange, Inc. The improvement in the leverage ratio and book
value per share resulted from the increase in equity capital due to the
augmented consolidated net income generated by Laidlaw for the first quarter of
2000 and the conversion of the 8% Convertible Notes, and the 12% Senior Secured
Euro Notes in Laidlaw Common Stock during the third quarter of 1999.
As of As of
March, 2000 March, 1999
(in $ except for ratios)
Adjusted Assets (1) 33,684,197 8,898,362
Leverage Ratio (2) 1.80 (5.72)
Adjusted Leverage Ratio (3) 1.80 (5.72)
Book value per share (4) 0.69 (.20)
(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 March was based on common shares outstanding.
22
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Galacticomm Technologies, Inc. v. Laidlaw Global Securities, Inc.
The Registrant's wholly owned subsidiary Laidlaw Global Securities, Inc. is
currently a defendant in a legal matter involving the underwriting and initial
public offering ("IPO") of Galacticomm Technologies, Inc. securities. The lead
underwriters for the Galacticomm IPO were First Equity Corporation of Florida
and Security Capital Trading, Inc. ("Lead Underwriters"). The Lead Underwriters
entered into a sub-underwriting agreement with various sub-underwriters,
including Laidlaw Global Securities. Pursuant to said Agreement, Laidlaw Global
Securities agreed to purchase 200,000 shares of Galacticomm at $5.40 per share
($1,080,000), and 200,000 warrants of Galacticomm at $.09 per warrant ($18,000).
Additionally, Laidlaw Global Securities agreed to guarantee the purchase of up
to an additional 20,000 shares and warrants if deemed necessary.
On the eve of the IPO, the Lead Underwriters aborted the IPO based upon
what they, in their sole discretion, believed was a declining market in the U.S.
and abroad. Pursuant to the terms of the underwriting agreement between
Galacticomm and the Lead Underwriters, the Lead Underwriters had the right, in
their sole discretion, to abort the IPO in the event of adverse conditions
("Market Out" theory). Galacticomm commenced suit against the entire
underwriting group in the State Court of Florida seeking damages for breach of
the underwriting agreement. The Sub-Underwriters jointly engaged Florida counsel
to defend them in this proceeding. All of the underwriters are vigorously
defending this matter under the theory that the Lead Underwriters were justified
in aborting the IPO based upon a dramatic downturn in the world financial
community which jeopardized all of the underwriters' abilities to sell
Galacticomm's shares to its investors at the time of the IPO. Registrant
believes that it has a meritorious defense to the claims against it.
The sub-underwriters, including Laidlaw Global Securities, have filed
cross-claims against the Lead Underwriters seeking indemnification in the event
all of the underwriters are found to be liable. Additionally, counsel for
Laidlaw Global Securities has had conversations with Galacticomm's counsel about
the possibility of settling out of the litigation. These negotiations are
on-going. In the event a settlement cannot be reached, and in the further event
of an adverse decision after trial, based upon the Underwriting Agreement,
Laidlaw Global Securities' liability cannot exceed its underwriting commitment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the three
month period ended March 31, 2000
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
LAIDLAW GLOBAL CORPORATION
May 15, 2000 By: /s/ Roger Bendelac
-----------------------
Roger Bendelac,
President
24
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,044,849
<SECURITIES> 2,449,165
<RECEIVABLES> 8,351,445
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,845,459
<PP&E> 4,342,141
<DEPRECIATION> 1,243,256
<TOTAL-ASSETS> 33,684,197
<CURRENT-LIABILITIES> 6,214,243
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0
0
<COMMON> 270
<OTHER-SE> 18,724,219
<TOTAL-LIABILITY-AND-EQUITY> 33,684,197
<SALES> 0
<TOTAL-REVENUES> 10,866,996
<CGS> 0
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<OTHER-EXPENSES> 9,384,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,405
<INCOME-PRETAX> 1,558,554
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