<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD _____________ TO _________________
Commission File Number 1-11454-03
vFINANCE.COM, INC.
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 58-1974423
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 PGA Boulevard, Suite 810, Palm Beach Gardens, Florida 33410
--------------------------------------------------------------------------------
(Address of principal executive offices)
(305) 374-0282
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(Issuer's telephone number)
--------------------------------------------------------------------------------
(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 Exchange Act during the past 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 June 30, 2000:
10,866,900
Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X]
<PAGE> 2
INDEX
vFINANCE.COM, INC.
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - December 31, 1999 and June 30, 2000 (Unaudited)
Consolidated Statements of Operations for the three months and six months ended
June 30, 1999 and 2000 (Unaudited)
Consolidated Statements of Cash Flows for the six months ended June 30, 1999
and 2000 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Signatures
</TABLE>
<PAGE> 3
vFINANCE.COM, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 228,484 $ 2,960,537
Accounts receivable 233,306 200,207
Other assets 2,150 7,962
----------- -----------
Total current assets 463,940 3,168,706
Investments, securities -- 180,000
Furniture and equipment, at cost:
Furniture and equipment 6,576 54,964
Internal use software 104,164 113,081
----------- -----------
110,740 168,045
Less accumulated depreciation (89,061) (104,417)
----------- -----------
Net furniture and equipment 21,679 63,628
Goodwill, net of accumulated amortization 35,000 25,786
----------- -----------
Total assets $ 520,619 $ 3,438,120
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 103,445 $ 105,217
Accrued expenses 75,061 230,611
Deferred revenue 7,063 --
Distributions payable to Primary Shareholders 172,586 --
Advanced client costs 35,362 20,711
----------- -----------
Total current liabilities 393,517 356,539
Shareholders' equity:
Preferred stock, $.01 par value, 2,500,000
shares authorized, no shares issued and outstanding -- --
Common stock, $0.01 par value, 20,000,000
and 25,000,000 shares authorized, 9,099,400 and
10,866,900 shares issued and outstanding as of
December 31, 1999 and June 30, 2000, respectively 90,994 108,669
Additional paid-in-capital on common stock 3,921,690 8,941,239
Deferred compensation (3,584,732) (2,241,437)
Accumulated deficit (300,850) (3,726,890)
----------- -----------
Total shareholders' equity 127,102 3,081,581
----------- -----------
Total liabilities and shareholders' equity $ 520,619 $ 3,438,120
=========== ===========
</TABLE>
See accompanying notes
<PAGE> 4
vFINANCE.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Success fees $ -- $ 757,800 $ -- $ 969,000
Consulting fees 243,251 520,600 460,960 865,366
Other fees 5,874 64,326 15,093 133,779
----------- ----------- ----------- -----------
Total revenues 249,125 1,342,726 476,053 1,968,145
Cost of revenues:
Success -- 779,281 -- 965,224
Consulting 26,921 150,962 62,724 237,773
----------- ----------- ----------- -----------
Gross profit 222,204 412,483 413,329 765,148
General and administrative expenses 24,812 154,355 48,309 268,537
Payroll and related benefits -- 154,139 -- 266,598
Professional fees 8,500 96,188 10,350 221,802
Provision for bad debts -- 15,000 77,076 15,000
Amortization of non-cash deferred compensation -- 1,863,622 -- 3,459,966
----------- ----------- ----------- -----------
Operating income (loss) 188,892 (1,870,821) 277,594 (3,466,755)
Interest income -- 27,458 -- 28,611
----------- ----------- ----------- -----------
Net income (loss) $ 188,892 $(1,843,363) $ 277,594 $(3,438,144)
=========== =========== =========== ===========
Pro forma provision for federal income taxes 66,112 -- 97,158 --
----------- ----------- ----------- -----------
Pro forma net income (loss) $ 122,780 $(1,843,363) $ 180,436 $(3,438,144)
=========== =========== =========== ===========
Pro forma earnings (loss) per share:
Basic $ 0.02 $ (0.19) $ 0.03 $ (0.38)
=========== =========== =========== ===========
Weighted average number of common shares used
in computing basic earnings per share 6,955,000 9,630,181 6,955,000 9,022,404
=========== =========== =========== ===========
Diluted $ 0.02 $ (0.19) $ 0.03 $ (0.38)
=========== =========== =========== ===========
Weighted average number of common shares used
in computing diluted earnings per share 6,955,000 9,630,181 6,955,000 9,022,404
=========== =========== =========== ===========
</TABLE>
See accompanying notes
<PAGE> 5
vFINANCE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------
1999 2000
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 277,594 $(3,438,144)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,791 25,818
Bad debts 77,076 15,000
Marketable securities received in lieu of cash
payment for services -- (180,000)
Amortization of deferred compensation -- 3,459,966
Changes in assets and liabilities:
Accounts receivable (82,555) 18,099
Other assets (2,148) (5,812)
Accounts payable (33,375) 1,772
Accrued expenses (3,795) 180,385
Advanced client costs (2,989) (14,651)
Deferred revenues -- (7,063)
----------- -----------
Net cash provided by operating activities 233,599 55,370
INVESTING ACTIVITIES
Purchase of equipment -- (53,553)
----------- -----------
Net cash used in investing activities -- (53,553)
FINANCING ACTIVITIES
Repayment of note payable (16,668) --
Proceeds from issuance of common
stock, net of registration costs 49,634 2,902,822
Distributions to former partners (240,000) (172,586)
----------- -----------
Net cash provided by (used in) financing activities (207,034) 2,730,236
Increase in cash and cash equivalents 26,565 2,732,053
Cash and cash equivalents at beginning of period 9,485 228,484
----------- -----------
Cash and cash equivalents at end of period $ 36,050 $ 2,960,537
=========== ===========
</TABLE>
See accompanying notes
<PAGE> 6
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
DESCRIPTION OF BUSINESS
vFinance.com, Inc. ("the Company") through its wholly owned subsidiaries
vFinance Holdings, Inc., Union Atlantic LC and Union Atlantic Capital, L.C., is
a "new-media" enterprise focused on providing business development tools and
information, primarily to companies throughout the United States.
vFinance Holdings, Inc. ("VFin") consists of a venture capital vertical portal
website focused on providing business development tools, information, products
and services to assist entrepreneurs and executives of small and medium sized
enterprises to organize and grow their businesses.
Union Atlantic, LC ("Union Atlantic" or "UAL") is a management consulting firm
which provides corporations and high net worth individuals with management and
access to capital resources for the purpose of expediting corporate development.
UAL specializes in the technology industry. UAL had managed an offshore venture
capital fund, which was partially owned by certain members of the Company's
senior management team. Such fund is inactive.
Union Atlantic Capital, L.C. ("UAC") is a broker-dealer registered with the
Securities and Exchange Commission and is a member of the National Association
of Security Dealers (NASD). UAC provides the placement of both debt and equity
securities with institutional investors. The completion of this acquisition
transferring the broker/dealer license is subject to approval of the change of
ownership by the National Association of Securities Dealers, Inc. ("NASD"). This
approval is currently pending (see Note 2--Acquisitions).
On November 8, 1999, Peachtree FiberOptics entered into a Share Exchange
Agreement providing for the acquisition of VFin and UAL (the "Merger").
Peachtree FiberOptics, Inc. exchanged 2,800,000 shares of its common stock for
all of the outstanding shares of VFin and 4,155,000 shares of its common stock
for all outstanding membership interests in UAL. For accounting purposes, the
acquisitions have been treated as a recapitalization (reverse acquisition) with
VFin and UAL as the acquirers. VFin and UAL were considered entities under
common control prior to the Merger. The Merger qualified as a tax-free exchange
under section 351 of the Internal Revenue Code of 1986.
-1-
<PAGE> 7
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
REVENUE RECOGNITION
UAL earns revenue from consulting fees and success fees. Consulting fees are
deferred when received and recognized when services are rendered, generally over
the life of the agreement. Success fees are agreed upon amounts based on the
percentage of the total value of a transaction and are contingent on the
successful completion of a specified transaction. These fees are recognized when
earned, per the terms of the contracts. UAL does not require collateral from its
customers. UAL's revenues are not concentrated in any particular region of the
county or with any individual or group.
UAL and UAC periodically receive equity instruments and warrants from companies
for which they performs services, in addition to the cash paid for such
services. Primarily all of the equity instruments, which have no readily
available market value, are in private companies or small public companies.
Equity interests and warrants for which there is not sufficient demand are
valued based on factors such as significant equity financing by sophisticated,
unrelated new investors, a history of positive cash flow from operations, the
market value of comparable publicly traded companies (discounted for
illiquidity) and other pertinent factors. Management also considers recent
offers to purchase a portfolio company's securities and the filings of
registration statements in connection with a portfolio company's initial public
offering when valuing warrants. Prior to the merger, upon receipt of such equity
instruments all such instruments were immediately distributed to the UAL
partners, in accordance with the distribution terms of the UAL Operating
Agreement.
For equity instruments and warrants received in public companies, UAL and UAC
recognize revenue equal to the fair value on the date of receipt, discounted for
any defined restrictions on the equity instruments or warrants. During 1999, but
prior to the Merger, $17,312 of revenue was recognized by UAL in connection with
equity instruments received from public companies. Such instruments were
distributed to UAL's members upon receipt.
During the three months ended June 30, 1999 and 2000, UAL and UAC received
equity investments from no companies and five companies, respectively. Due to
the factors indicated above, no revenue was recognized in connection with the
receipt of equity instruments in the quarter ended June 30, 1999. However, in
the quarter ended June 30, 2000, UAL and UAC recorded a total of $180,000 in
revenue in association with the receipt of certain preferred shares that were
issued by a public entity to UAL and UAC for services performed. UAL and UAC
have recorded accrued commissions related to the distribution of some or all of
such equity instruments to employees involved with the related transaction.
At June 30, 2000, certain transactions in process may result in UAL and UAC
receiving equity instruments as discussed above.
-2-
<PAGE> 8
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
VFin sells two types of memberships to its website: (i) one year memberships to
venture capital vendors, who are interested in providing services to other
companies or individuals; and (ii) three-month memberships to entrepreneurs who
have new business ideas to sell. The sale of each type of membership is recorded
as deferred revenue and amortized over the life of the membership. VFin's
revenues are concentrated primarily in the United States but are not
concentrated in any particular region of the country or with any individual or
group. Fees related to such memberships are included in "other fees" in the
statements of operations for the three months ended June 30, 1999 and 2000.
Primarily all membership sales are consummated using an on-line credit card
processing service, which performs routine credit verification. VFin does not
require collateral and receives payment directly from the credit card company.
While there is potential for credit losses, there were no credit losses for the
three months ended June 30, 1999 and 2000.
HTM Logic was the original owner and designer of the vFinance.com website prior
to VFin's acquisition of such website and maintains a legend on the website
indicating as such. The terms of the purchase agreement related to VFin's
acquisition of the website provided that VFin would receive a referral fee equal
to 25% of all income earned by HTM Logic from business generated as a result of
the website legend. No such revenue was earned by VFin for the three months
ended June 30, 1999 and 2000.
-3-
<PAGE> 9
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All intercompany accounts have been eliminated in
consolidation.
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 accompanying financial statements. Actual
results may differ from those estimates, and such differences may be material to
the financial statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with maturity of
three months or less when purchased.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Total advertising expense amounted
to none and $1,058 for the three months ended June 30, 1999 and 2000,
respectively.
STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related interpretations
in accounting for its employee stock options and stock purchase warrants because
the alternative fair value accounting provided for under Statement of Financial
Accounting Standards No. 123, accounting for stock based compensation ("SFAS
123") requires the use of option valuation models that were not developed for
use in valuing employee stock options. Under APB 25, if the exercise price of
the Company's employee stock options equals or exceeds the market price of the
underlying stock on the date of grant no compensation expense is recognized.
FINANCIAL INSTRUMENTS
The fair values of the Company's financial instruments, which includes cash and
cash equivalents, accounts receivable, securities, accounts payable, accrued
expenses, notes payable and advanced client costs approximate their carrying
values.
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents and accounts receivable. The
Company places its cash with high quality financial institutions.
-4-
<PAGE> 10
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
FURNITURE AND EQUIPMENT AND INTANGIBLE ASSETS
Furniture and Equipment is stated on the basis of cost less accumulated
depreciation and consists primarily of computer equipment and internal use
software. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, 2-10 years, for financial reporting
purposes.
The carrying values of intangible assets as well as other long-lived assets are
reviewed if the facts and circumstances suggest that they may be impaired. If
this review indicates that the assets will not be recoverable, as determined
based on the undiscounted estimated cash flows of the Company over the remaining
amortization period, the Company's carrying values of the assets would be
reduced to their estimated fair values.
INCOME TAXES
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "ACCOUNTING FOR INCOME
TAXES". Under this method, deferred income tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
The accompanying financial statements reflect an additional provision for
federal income taxes on a pro forma basis as if UAL were liable for federal
income taxes as a taxable entity for the three months and six months ended
June 30, 1999.
DISTRIBUTIONS TO UAL PARTNERS
Prior to the Merger, UAL made frequent cash distributions to its partners based
on cash flow availability. These distributions were occasionally in the form of
accounts receivable collected by the partners. In order to maintain equity
balances approximately equal to the original percentages set forth in the UAL
Operating Agreement, UAL periodically made non-cash adjustments to the equity
accounts upon the consent of the partners. Prior to the Merger, UAL declared
distributions payable to two of its three partners equal to substantially all of
UAL's retained earnings. At June 30, 2000, no distributions were owed to the
former UAL partners.
-5-
<PAGE> 11
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
STATEMENT OF CASH FLOWS
Non-cash items affecting the Consolidated Statements of Cash Flows are as
follows:
<TABLE>
<CAPTION>
June 30, 1999 June 30, 2000
------------- -------------
<S> <C> <C>
Purchase of equipment with stock purchase warrants -- $ 5,000
Change in fair market value of restricted stock issued
to employees and shareholders -- 2,116,671
Conversion of payable to equity -- 12,731
Conversion of client advances to equity -- 12,104
---------- ----------
-- $2,146,506
========== ==========
</TABLE>
EARNINGS PER SHARE
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128"). In
accordance with SFAS 128, basic earnings per share is computed using the
weighted average number of shares of common stock outstanding and diluted
earnings per share is computed using the weighted average number of shares of
common stock and the dilutive effect of options and warrants outstanding, using
the "treasury stock" method.
-6-
<PAGE> 12
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
2. ACQUISITIONS
On December 24, 1999, the Company acquired the membership interests of Pinnacle
Capital Group, L.C., which has changed its name to Union Atlantic Capital, L.C.,
for $40,000. The acquisition was accounted for under the purchase method of
accounting. The consideration consisted of the issuance of stock purchase
warrants giving the holders the rights to purchase 10,000 shares of the
Company's common stock at an exercise price of $2.50 per warrant. The warrants
had a fair value, based on the Black-Scholes model, of $4.00 per warrant. The
warrants vest immediately and are exercisable for a period of five years, at the
discretion of the holders. The Company allocated the purchase price based on the
fair value of the assets acquired (cash aggregating $5,000) with the remainder
of such purchase price allocated to goodwill. Goodwill related to this
acquisition is being amortized over two years concurrent with the terms of
certain employment agreements entered into with the former partners. The
completion of this acquisition transferring the broker/dealer license is subject
to approval of the change of ownership by the NASD. This approval is currently
pending. UAC holds a broker/dealer license and is located in Miami, Florida.
3. RELATED PARTY TRANSACTIONS
UAL had managed, through a subsidiary, an offshore venture capital fund (the
"Fund"). The Fund is no longer active. The Fund's investors include the Primary
Shareholders of the Company, as defined herein below. In April 1998, the Fund
loaned the Company $25,000 through a verbal agreement. The loan did not bear
interest and did not have a specified due date. On December 31, 1999, the
Company converted the outstanding balance of $25,000 into 8,400 shares of the
Company's common stock at an effective per share price of $2.98, in accordance
with the terms of the conversion agreement. The fair market value of the stock
on the date of issuance was $4.19 per share. Accordingly, the Company recognized
$10,164 as non-cash compensation expense in 1999, equal to the difference
between the contractually agreed upon price per share and the market price per
share at the date of conversion.
VFin executed a management agreement (the "Management Agreement") with a former
shareholder of MD Information Systems (the "Managing Agent"), the previous owner
of the vFinance.com website. Under the terms of the Management Agreement, the
Managing Agent was appointed President and Chief Executive Officer of VFin with
the authority to manage its operations. The Managing Agent received $9,000 of
fees for the three months ended June 30, 1999. On December 31, 1999, the
Management Agreement and the Managing Agent were terminated.
The former shareholder of MD Information System was granted 100,000 stock
options in VFin. In connection with the Merger such stock options were converted
into 20,000 shares of the Company's common stock at fair value, accordingly, no
compensation expense was recorded in connection with such conversion.
-7-
<PAGE> 13
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
On November 8, 1999, the Company entered into three year employment agreements
(the "Agreements") with the Company's Chief Executive Officer and Vice Chairman,
who is the beneficial owner of 29% of the total outstanding common shares of the
Company and the Company's Chief Operating Officer and Chairman, who is the
beneficial owner of 29% of the total outstanding common shares of the Company
(collectively the "Primary Shareholders"). Under the terms of the Agreements,
which are renewable as directed by a majority vote of the board of directors,
each individual shall receive (i) an initial base salary of $150,000 per annum
for the first year with a 5% increase per annum beginning one year from the date
of the Agreements (the Company's board of directors may increase such salaries
at their discretion); (ii) discretionary bonuses as determined by the Company's
board of directors primarily based on each individuals' performance; and (iii)
incentive compensation paid monthly equal to Available Cash, as defined,
primarily based on performance of the UAL and the Company. The Agreements also
contain provisions related to severance and change of control upon the
occurrence of certain events.
4. ADVANCED CLIENT COSTS
As part of its operations, UAL's employees incur expenses that are reimbursable
by its clients. These expenses are submitted for reimbursement by the employees
and are recorded as an account receivable from the client and a liability to the
employee. The employee is paid within 30 days of submitting the expenses for
reimbursement. Prior to May 5, 2000, employees were not paid for their expenses
until the respective receivables were received from the client. Advance client
costs aggregating $20,711 were recorded at June 30, 2000.
5. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and amounts used for income taxes.
Net operating loss carryforwards totaled $11,697 at June 30, 2000. The net
operating loss carryforwards will begin to expire in the year 2019 if not
utilized. After consideration of all the evidence, both positive and negative,
management has recorded a valuation allowance at June 30, 2000 due to the
uncertainty of realizing the deferred income tax assets.
-8-
<PAGE> 14
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
6. EMPLOYMENT AGREEMENTS
On December 17, 1999, the Company entered into employment agreements with three
individuals. In connection with the employment agreements, the Company issued
773,500 shares of its common stock. However, the shares are subject to
divestment and return to the Company in the event and to the extent that certain
performance criteria and/or other employment conditions are not met. The shares
issued to the employees are being held in escrow and will be held in escrow
until (i) cessation of the employee's employment with the Company prior to
December 31, 2000, in which event all of the shares would be immediately
returnable to the Company or (ii) the employee fails to meet certain cash
revenue goals by February 15, 2001, as defined by the employment agreements, in
which event the shares, or a percentage of such shares, would be immediately
returnable to the Company, based on a formula contained in each employment
agreement.
The employment agreements have been accounted for as restricted stock
performance plans. In a restricted stock performance plan, the nature of the
restriction results in the compensation cost being measured at the date when the
number of shares to be awarded is known. Consequently, the measurement of
compensation at the date the performance criteria are met, measures the ultimate
compensation to be recognized by the Company. These employment agreements are
variable plans, therefore, interim estimates of compensation are required based
on the fair market value of the common stock as of the end of the reporting
period and the extent or degree of compliance with the performance criteria.
Accordingly, in connection with the employment agreements, the Company initially
recorded deferred compensation aggregating $3,828,825, based on the fair market
value of the Company's common stock at December 17, 1999. At June 30, 2000, the
Company reduced the deferred compensation balance to $2,562,219 based on the
fair market value of the Company's common stock at June 30, 2000. Compensation
expense for the restricted stock performance plan of $272,495 was recognized for
the three months ended June 30, 2000.
On January 3, 2000, the Company entered into employment agreements with two
individuals, who were former partners in UAC, for the term of three years. In
addition, the Company granted each individual 100,000 stock options at $5.00 per
share and 100,000 stock options at $7.50 per share. Such options vest according
to the terms of the employment agreements. As the grant price of the options
equaled fair value no compensation expense was recorded.
On January 6, 2000, the Company entered into an employment agreement, granting
the employee options to purchase 30,000 shares of its common stock, after a
three month probationary period at a per share exercise price of $5.00. The
options vest at a rate of 7,500 shares per year beginning after the first
anniversary of the employee's employment. As the grant price of the options
equaled fair value, no compensation expense was recorded.
-9-
<PAGE> 15
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS
The Company has elected to follow Accounting Principle Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25"), and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided under FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, ("SFAS 123") requires the use of option valuation models that were
not developed for use in valuing employee stock options. As permitted by the
Standard, the Company adopted the disclosure alternative of SFAS 123. Under APB
25, when the exercise price of the Company's stock options equals or exceeds the
fair value of the underlying stock on the date of grant, no compensation expense
is recorded.
A summary of the stock option activity for the six months ended June 30, 2000 is
as follows:
<TABLE>
<CAPTION>
Weighted
Average Number Exercise
Exercise of Price Per
Price Shares Option
--------- ---------- -----------
<S> <C> <C> <C>
Outstanding options at
December 31, 1999 $ 4.19 1,065,000 $2.50-$6.00
Granted $ 5.81 1,615,000 $3.75-$7.50
---------
Outstanding options at
June 30, 2000 2,680,000
=========
</TABLE>
A summary of the warrant activity for the six months ended June 30, 2000 is as
follows:
<TABLE>
<CAPTION>
Weighted
Average Number Exercise
Exercise of Price Per
Price Shares Option
--------- ---------- -----------
<S> <C> <C> <C>
Outstanding warrants at
December 31, 1999 $ 2.50 100,000 -- --
Granted $ 5.84 1,119,999 $2.50-$7.20
---------
Outstanding warrants at
June 30, 2000 1,129,999
=========
</TABLE>
-10-
<PAGE> 16
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
The following table summarizes information concerning stock options outstanding
at June 30, 2000:
Weighted
Average
Exercise Number
Price Outstanding
-------- -----------
2.50 75,000
3.00 210,000
3.75 20,000
4.00 220,000
4.13 30,000
4.25 75,000
4.95 300,000
5.00 490,000
5.63 50,000
5.85 1,000,000
6.00 10,000
7.50 200,000
---------
2,680,000
=========
The following table summarizes information concerning stock warrants outstanding
at June 30, 2000:
Weighted
Average
Exercise Number
Price Outstanding
-------- -----------
2.50 300,000
6.00 129,999
7.20 700,000
---------
1,129,999
=========
-11-
<PAGE> 17
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
Options granted to employees are exercisable according to the terms of each
agreement, ranging from one month to four years. At June 30, 2000, 962,500
options outstanding were exercisable. At June 30, 2000, 200,000 warrants
outstanding were exercisable. At June 30, 2000, 3,809,999 shares of the
Company's common shares outstanding are reserved for issuance related to stock
options and stock purchase warrants.
Pro forma information regarding net income is required by SFAS 123, which also
requires that the information be determined as if the Company has accounted for
its employee stock options and stock purchase warrants under the fair value
method. The fair value for options and warrants granted was estimated at the
date of grant or issuance using the Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest rates ranging from
5.72% to 6.52%; no dividend yields; volatility factor of the expected market
price of the Company's common stock of 6.552 for options issued prior to the
Merger and 1.194 to 1.904 for options and warrants issued subsequent to the
Merger and an expected life of the options and warrants of 5 years.
At June 30, 2000, the weighted average exercise price of options granted during
the quarter was $5.68 per share. No warrants were issued during the quarter. For
purposes of pro forma disclosures, the estimated fair value of the options and
warrants is amortized to expense over their respective vesting periods.
At June 30, 2000, the weighted average exercise price of options granted and
warrants issued during the six months ended June 30, 2000 was $5.81 per share
and $5.84 per share, respectively. For purposes of pro forma disclosures, the
estimated fair value of the options and warrants is amortized to expense over
their respective vesting periods.
The Company recorded deferred compensation of $187,500 during 1999 in connection
with grants of employee stock options with exercise prices lower than the deemed
fair value per share of the Company's common stock on the date of the grant.
Such amounts are being amortized over the vesting period, and accordingly,
$22,500 of compensation expense was amortized in the quarter ended June 30, 2000
relative to employee options.
On September 27, 1999, the Company entered into a Stock Purchase Agreement with
River Rapids LTD which was amended on December 22, 1999, whereby the Company
sold to River Rapids LTD 100,000 shares of the Company's common stock at $2.50
per share and granted River Rapids an option to acquire 210,000 shares of common
stock at $3.00 per share, 210,000 shares of common stock at $4.00 per share, and
210,000 shares of common stock at $5.00 per share. The options expire on
September 27, 2002.
On December 1, 1999, the Company entered into an agreement with a company
providing financial consulting services, (the "Financial Services Agreement").
The Financial Services Agreement is for a term of six months with six-month
renewals based upon mutual consent. The Financial Services Agreement provides
for a monthly retainer and a grant of 30,000 stock options, which vest at a rate
of 5,000 shares per month beginning one month from the date of grant. The
options have exercise prices ranging from $4.00 to $6.00 and are exercisable for
a period of five years. The Company recorded deferred compensation of $129,300
during 1999 in connection with this grant, and accordingly, $64,650 of
compensation expense was amortized in the second quarter ended June 30, 2000
relative to these options.
-12-
<PAGE> 18
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
On December 24, 1999, the Company entered into an agreement to acquire all of
the outstanding membership interests of UAC. In conjunction with this
acquisition, the Company purchased certain assets on January 3, 2000 and in
consideration therefore issued warrants to two employees to purchase 190,000
shares of the Company's common stock at an exercise price of $2.50 per warrant.
The warrants are exercisable for a period of five years, at the discretion of
the holders. During the first quarter ended March 31, 2000, the Company recorded
deferred compensation of $280,000 in connection with the issuance of these
warrants at an exercise price that was lower than the deemed fair value per
share of the Company's common stock on the date of the issuance. This amount is
being amortized over the term of the respective employment agreements, and
accordingly, $23,248 of compensation expense was amortized in the quarter ended
June 30, 2000 relating to these warrants.
On March 31, 2000 the Company closed on the first tranche of a $7 million round
of private financing (the "Private Placement"). In association with the Private
Placement, the Company issued a total of 929,999 warrants, of which 700,000
warrants were issued to investors in the Private Placement, 71,666 warrants were
issued to agents, 58,333 warrants were issued to employees for placing the
financing and 100,000 warrants were issued to a company for a finder's fee. The
warrants have exercise prices ranging from $2.50 to $7.20 and are exercisable on
the earlier of a) one year from the effective date of the registration statement
filed by the Company covering the securities issued and to be issued to the
investors or b) three or four years, as the case may be, as defined in the
agreements from the closing date. These warrants were issued to the
aforementioned for services related to the Private Placement, and have been
accounted for as offering costs net of proceeds received.
-13-
<PAGE> 19
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
8. EARNINGS PER SHARE
The following table sets forth the computation of pro forma basic and diluted
earnings per share (in thousands except per share amounts) for the three month
periods ended June 30, 1999 and 2000 and the six month periods ended June 30,
1999 and 2000:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Pro forma net income (loss) $ 122,780 $(1,843,363) $ 180,436 $(3,438,144)
=========== =========== =========== ===========
Denominator:
Denominator for basic earnings per share- 6,955,000 9,630,181 6,955,000 9,022,404
weighted average shares
Effect of dilutive securities:
Options -- -- -- --
Warrants -- -- -- --
----------- ----------- ----------- -----------
Dilutive potential common shares (1) -- -- -- --
----------- ----------- ----------- -----------
Denominator for diluted earnings per share-
adjusted weighted average shares 6,955,000 9,630,181 6,955,000 9,022,404
=========== =========== =========== ===========
Pro forma basic earnings per share $ .02 $ (.19) $ .03 $ (.38)
=========== =========== =========== ===========
Pro forma diluted earnings per share $ .02 $ (.19) $ .03 $ (.38)
=========== =========== =========== ===========
</TABLE>
-14-
<PAGE> 20
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999 AND 2000
(UNAUDITED)
9. SUBSEQUENT EVENTS
On July 27, 2000, the National Association of Securities Dealers, Inc. approved
the change in ownership and addition of a branch office of Union Atlantic
Capital, L.C. This approval completes the acquisition of the broker-dealer and
the transfer of the broker/dealer license, accordingly.
-15-
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 1999
AND
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1999
STATEMENTS OF OPERATIONS
vFinance.com, Inc. (the "Company") derives revenue from consulting fees and
success fees related to providing corporations and high net worth individuals
with management and access to capital resources for the purpose of expediting
corporate development. Consulting fees are billed to clients based primarily on
agreed-upon monthly fees. Success fees are agreed-upon amounts based on the
percentage of the total value of a transaction and are contingent upon the
successful completion of a specified transaction. Consulting fees are deferred
when received and recognized when services are rendered, generally over the life
of an agreement. Success fees are recognized when earned, in accordance with the
contracts.
The Company also sells two types of memberships to its web site, vFinance.com:
(i) one-year memberships to venture capital vendors who are interested in
providing services to other companies or individuals; and (ii) three-month
memberships to entrepreneurs who have new business ideas to sell. The sale of
each type of membership is recorded as deferred revenue and amortized over the
life of the membership. Fees related to such memberships were $48,793 and
$87,139 for the three and six months ended June 30, 2000. Fees related to such
memberships were $5,874 and $15,093 for the three and six months ended June 30,
1999. Such fees are included in "other fees" in the consolidated statements of
income.
Total revenues were $1,342,726 for the three months ended June 30, 2000, as
compared to $249,125 for the comparable period in 1999, an increase of
$1,093,601, or 439%. Total revenues were $1,968,145 for the six months ended
June 30, 2000, as compared to $476,053 for the comparable period in 1999, an
increase of $1,492,092, or 313%. The increases noted above were primarily a
result of success fee revenue generated by the Company of $757,800 and $969,000
for the three and six months ended June 30, 2000, and an increase in consulting
fee revenue of $277,349 and $404,406 for the three and six months ended June 30,
2000, versus the comparable periods in 1999. The Company did not generate
success fees in the first and second quarters of 1999. Consulting fees were
higher than the prior quarters due to a greater number of consulting contracts
and a larger monthly billing per contract.
Cost of revenues was $930,243 for the three months ended June 30, 2000, as
compared to $26,921 for the comparable period in 1999, an increase of $903,322.
Cost of revenues was $1,202,997 for the six months ended June 30, 2000, as
compared to $62,724 for the comparable period in 1999, an increase of
$1,140,273. The increase in cost of revenues for the three and six months ended
June 30, 2000 is attributable to an overall increase in success fee revenue and
consulting revenue, with an allocation of certain payroll and incentive based
pay to cost of revenues.
-16-
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
STATEMENTS OF OPERATIONS (continued)
General and administrative expenses were $154,355 and $268,537 for the three and
six months ended June 30, 2000, versus $24,812 and $48,309 for the comparable
1999 periods, reflecting increases of $129,543 and $220,228, respectively. The
increases were primarily due to increases in telephone expenses, rent expense,
office supplies, advertising and promotions and filing fees.
Payroll and related benefits were $154,139 and $266,598 for the three and six
months ended June 30, 2000, versus none for the comparable 1999 periods. The
increases were primarily a result of salaries paid to employees who generated
consulting, investment banking and web development revenues. For the three and
six months ended June 30, 1999, the Company did not pay salaries or bonuses to
its employees, because of its limited liability company status.
Professional fees were $96,188 and $221,802 for the three and six months ended
June 30, 2000, as compared to $8,500 and $10,350 for the comparable 1999
periods, reflecting increases of $87,688 and $211,452, respectively. The
increases were primarily due to increases in legal and accounting fees in
association with the preparation of various regulatory filings.
The provision for bad debts was $15,000 for the three and six months ended June
30, 2000, versus a provision for bad debts of none and $77,076 for the
comparable 1999 periods. The Company provides for credit losses at the time it
believes accounts receivable may not be collectible. Such evaluation is made and
recorded on a monthly basis. Credit losses have not exceeded management's
expectations.
Amortization of non-cash deferred compensation aggregating $1,863,622 and
$3,459,966 for the three and six months ended June 30, 2000 relates to deferred
compensation recorded in connection with 1) shares of stock issued to employees
as part of a restricted stock performance plan, 2) shares of stock issued to
contracted consultants for acquisition and advisory services, 3) stock options
granted to employees at prices less than fair value, 4) warrants issued at
prices less than fair value for the asset purchase in connection with the
acquisition of Union Atlantic Capital, L.C. (formerly Pinnacle Capital Group LC)
and 5) other common stock issuances. Compensation expense is recognized over the
vesting periods of the related stock options or the terms of the applicable
agreements.
Interest income equaling $27,458 and $28,611 for the three and six months ended
June 30, 2000 relates to amounts earned on the Company's cash balances, which
primarily relate to funds received from the Private Placement, with various
banks and institutions.
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "ACCOUNTING FOR INCOME
TAXES." Under this method, deferred income tax assets and liabilities are
determined based on differences between the financial reporting and tax basis of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
-17-
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
STATEMENTS OF OPERATIONS (continued)
Prior to the Merger, Union Atlantic LC was a Florida limited liability company
and reported income for federal income tax purposes as a partnership under the
Internal Revenue Code. As a result, the individual partners were taxed on the
income of the Company for federal and state income tax purposes. Prior to 1998,
the State of Florida did not recognize limited liability company status, and the
Company recorded a state income tax provision, including providing for deferred
income taxes based on the differences between the tax bases and the financial
reporting basis of certain assets and liabilities. During 1998, the State of
Florida retroactively changed its laws to recognize limited liability company
status. Thus, the Company eliminated its deferred income taxes and recognized
such amounts in the statements of income.
The accompanying financial statements reflect an additional provision for
federal income taxes on a pro forma basis as if Union Atlantic LC were liable
for federal income taxes as a taxable entity for the three and six months ended
June 30, 1999 and for the period from January 1, 1999 through November 8, 1999
(date of merger of Union Atlantic LC with Peachtree Fiberoptics, Inc.).
-18-
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company had $2,960,537 and $228,484 of cash and cash equivalents at June 30,
2000 and 1999, respectively. Cash and cash equivalents increased by $2,732,053
and $26,565 during the six months ended June 30, 2000 and 1999, respectively.
The major components of these changes are discussed below.
For the six months ended June 30, 2000, net cash provided by operating
activities was $55,370, versus $233,599 for the comparable period in 1999. Net
cash provided by operating activities for the six months ended June 30, 2000
primarily resulted from pro forma net income (excluding the amortization of
deferred compensation) and a decrease in accounts receivable of $21,822 and
$18,099, respectively, whereas net cash provided by operating activities for the
six months ended June 30, 1999 related primarily to pro forma net income of
$277,594.
For the six months ended June 30, 2000, net cash used in investing activities
was $53,553, versus none for the comparable period in 1999. Net cash used in
investing activities for the six months ended June 30, 2000 related to the
purchase of equipment.
On March 31, 2000 the Company closed on a $7 million round of private financing
(the "Private Placement"). The Private Placement provides for two tranches of
funding; the first tranche of approximately $3.5 million was received in escrow
at closing and the second tranche of a similar amount is scheduled for infusion
in August of 2000. The proceeds from the Private Placement primarily will be
used by the Company to acquire or partner with companies that provide business
development products and services to the same target market. In addition, the
funding will be used to develop fully integrated business units in the areas of
research services, multimedia, education, marketplaces for goods, management and
"e-commerce" consulting and financial services.
For the six months ended June 30, 2000, net cash provided by financing
activities was $2,730,236, versus net cash used in financing activities of
$207,034 for the comparable period in 1999. Net cash provided by financing
activities for the six months ended June 30, 2000 primarily related to proceeds
from the issuance of common stock with respect to the Private Placement, net of
distributions to former partners of UAL. Net cash used in financing activities
for the six months ended June 30, 1999 primarily related to cash distributions
to former partners of UAL. Cash distributions to former partners of UAL were
$172,586 and $240,000 for the six months ended June 30, 2000 and 1999,
respectively.
The Company anticipates that it will need additional debt or equity financing in
order to carry out its long-term business strategy. Such strategy may be
financed by bank borrowings, public offerings, or private placements of equity
or debt securities, or a combination of the foregoing.
The Company does not have any material commitments for capital expenditures.
The Company's operations are not affected by seasonal fluctuations; however,
they are to some extent reliant on the continuation of mergers and acquisitions
and related financings in the entrepreneurial marketplace.
The Company does not believe its operations have been materially affected by
inflation or the recent volatility of the stock markets.
-19-
<PAGE> 25
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
(1) On March 31, 2000 (the "Closing Date"), the Company consummated the
sale of 1,166,667 shares of its $.01 par value common stock ("Common Stock"),
warrants to purchase up to 700,000 shares of Common Stock at an exercise price
of $7.20 per share and rights to acquire up to 1,166,667 shares of its Common
Stock at a purchase price of $3.00 per share to certain institutional investors.
The total gross proceeds to the Company from this transaction were $3,500,000.
The warrants are exercisable for a period commencing on the Closing Date and
expiring on the earlier to occur of: (i) one year from the effective date of the
registration statement to be filed by the Company covering the securities issued
and to be issued to the investors, or (ii) four years from the Closing Date. The
rights to acquire the Common Stock are exercisable for a period commencing six
months from, and expiring one year after, the Closing Date.
The Securities and Exchange Commission (the "SEC") declared effective a
registration statement covering the securities issued and to be issued to the
investors and the placement agent for this transaction on July 31, 2000. The
Company and the same institutional investors will close a second round of
financing ("Second Closing") in the amount of $3,500,000 in August of 2000. At
the Second Closing, the investors will receive an additional 1,166,667 shares of
Common Stock and rights to purchase an additional 1,166,667 shares Common Stock
at a purchase price of $3.00 per share. Such rights will be exercisable for a
period commencing six months from, and expiring one year after, the date of
grant. The placement agent for the transaction received a placement agent fee
and warrants to purchase up to 58,333 shares of Common Stock at an exercise
price of $6.00 per share. The warrants are exercisable until three years after
the Closing Date. For a period of six months from the Closing Date, the
investors have a right to purchase on a pro-rata basis any future equity or
equity-linked securities offered by the Company in any subsequent private
offerings. The securities issued to the investors were exempt from registration
pursuant to Rule 506 and Section 4(2) of the Securities Act of 1933, as amended
("Securities Act").
(2) Effective April 1, 2000, the Company entered into a Consulting
Agreement with The Del Mar Consulting Group, Inc. ("Del Mar") in which the
Company agreed to issue to Del Mar 333,333 shares of its Common Stock in
exchange for services rendered by Del Mar from April 1, 2000 to June 20, 2000.
The shares issued to Del Mar were exempt from registration pursuant to Section
4(2) of the Securities Act.
(3) On May 5, 2000, the Company entered into a Consulting Agreement
with Phillip W. Johnston effective as of January 3, 2000 in which the Company
agreed to issue to Mr. Johnston 145,000 shares of Common Stock in consideration
for services rendered by Mr. Johnston for the period January 3, 2000 to April
30, 2000. The shares issued to Mr. Johnston were exempt from registration
pursuant to Section 4(2) of the Securities Act.
(4) On June 12, 2000, the Company entered into a Consulting Agreement
with Steven Krause in which the Company agreed to issue to Mr. Krause 50,000
shares of its Common Stock in exchange for services rendered by Mr. Krause from
April 1, 2000 to the date of the Consulting Agreement. The shares issued to Mr.
Krause were exempt from registration pursuant to Section 4(2) of the Securities
Act.
-20-
<PAGE> 26
PART II. OTHER INFORMATION (Continued)
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10.1 Consulting Agreement between the Company and The
Del Mar Consulting Group, Inc. dated as of
April 1, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K
On April 13, 2000, the Company filed a Form 8-K with respect to the
Company's March 31, 2000 private placement.
-21-
<PAGE> 27
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
By: /s/ Leonard J. Sokolow
----------------------- Chief Executive Officer August 14, 2000
Leonard J. Sokolow and Vice Chairman of
the Board of Directors
By: /s/ Timothy Mahoney
------------------------ Chief Operating Officer August 14, 2000
Timothy Mahoney and Chairman of the
Board of Directors
By: /s/ D. Carr Moody
----------------------- Chief Financial Officer August 14, 2000
D. Carr Moody
</TABLE>
-21-
