<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 MARCH 31, 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.
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(Exact name of small business issuer as specified in its charter)
Delaware 58-1974423
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 Pga Boulevard, Suite 810, Palm Beach Gardens, Florida 33410
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(Address of principal executive offices)
(305) 374-0282
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(Issuer's telephone number)
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(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 March 31, 2000: 10,447,300
Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X]
<PAGE> 2
INDEX
vFINANCE.COM, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - December 31, 1999 and March 31, 2000. (Unaudited) 3
Consolidated Statements of Income for the three months ended March 31, 1999
and 2000. (Unaudited) 4
Consolidated Statements of Cash Flows for the three months ended March 31, 1999
and 2000. (Unaudited) 5
Notes to Consolidated Financial Statements. (Unaudited) 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. 25
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 28
Item 2. CHANGES IN SECURITIES 28
Item 3. DEFAULTS UPON SENIOR SECURITIES 28
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 29
Item 5. OTHER INFORMATION 29
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 29
Signatures 30
</TABLE>
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vFINANCE.COM, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 228,484 $ 298,921
Accounts receivable 233,306 292,839
Stock subscriptions receivable -- 3,270,500
Other assets 2,150 14,066
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Total current assets 463,940 3,876,326
Furniture and equipment, at cost:
Furniture and equipment 6,576 26,713
Internal use software 104,164 113,081
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110,740 139,794
Less accumulated depreciation (89,061) (95,539)
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Net furniture and equipment 21,679 44,255
Goodwill, net of accumulated amortization 35,000 28,567
------------ ------------
Total assets $ 520,619 $ 3,949,148
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 103,445 $ 331,915
Accrued expenses 75,061 330,736
Deferred revenue 7,063 --
Distributions payable to Primary Shareholders 172,586 12,586
Advanced client costs 35,362 50,863
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Total current liabilities 393,517 726,100
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 10,447,300 shares issued
and outstanding as of December 31, 1999 and March
31, 2000, respectively 90,994 104,473
Additional paid in capital 3,921,690 10,539,164
Deferred compensation (3,584,732) (5,524,955)
Accumulated deficit (300,850) (1,895,634)
Total shareholders' equity 127,102 3,223,048
------------ ------------
Total liabilities and shareholders' equity $ 520,619 $ 3,949,148
============ ============
</TABLE>
See accompanying notes.
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vFINANCE.COM, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1999 2000
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<S> <C> <C>
Revenues:
Success fees $ -- $ 211,200
Consulting fees 217,709 344,766
Other fees 9,219 69,453
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Total revenues 226,928 625,419
Cost of revenues:
Success -- 185,943
Consulting 39,703 86,811
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Income from operations 187,225 352,665
General and administrative expenses 19,599 114,183
Payroll and related benefits -- 112,460
Professional fees 1,850 125,614
Provision for bad debts 77,076 --
Amortization of non-cash deferred compensation -- 1,596,344
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Operating income (loss) 88,700 (1,595,936)
Interest income -- 1,152
------------ ------------
Net income (loss) $ 88,700 $ (1,594,784)
============ ============
Pro forma provision for federal income taxes 31,045 --
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Pro forma net income (loss) $ 57,655 $ (1,594,784)
============ ============
Pro forma earnings per share:
Basic $ 0.01 $ (0.19)
============ ============
Weighted average number of common shares used
in computing basic earnings per share 6,955,000 8,414,627
============ ============
Diluted $ 0.01 $ (0.16)
============ ============
Weighted average number of common shares used
in computing diluted earnings per share 6,955,000 10,189,626
============ ============
</TABLE>
See the accompanying notes.
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vFINANCE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 2000
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 88,700 $(1,594,784)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 1,895 10,507
Amortization of deferred compensation -- 1,596,344
Changes in assets and liabilities:
Accounts receivable 90,081 (59,533)
Other assets (150) (11,916)
Accounts payable -- 47,356
Accrued expenses (33,375) 255,675
Advanced client costs (3,661) 15,501
Deferred revenues (3,795) (7,063)
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Net cash provided by operating activities 139,695 252,087
INVESTING ACTIVITIES
Purchase of equipment -- (21,650)
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Net cash used in investing activities -- (21,650)
FINANCING ACTIVITIES
Repayment of note payable (11,667) --
Proceeds from issuance of common stock 49,634 --
Distributions to former partners (130,000) (160,000)
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Net cash used in financing activities (92,033) (160,000)
Increase in cash and cash equivalents 47,662 70,437
Cash and cash equivalents at beginning of year 9,485 228,484
----------- -----------
Cash and cash equivalents at end of period $ 57,147 $ 298,921
=========== ===========
</TABLE>
See accompanying notes.
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vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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. 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.
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vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
DESCRIPTION OF BUSINESS (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.
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<PAGE> 8
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
UAL periodically receives equity instruments and warrants from companies for
which it performs services, in addition to the cash paid for such services.
Primarily all of the equity instruments are in private companies with no readily
available market value. Equity interests and warrants for which there is not a
public market 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. During the quarters ended March 31, 1999 and
2000, the Company received equity investments from one company and two
companies, respectively. Due to the factors indicated above, no revenue was
recognized in connection with the receipt of equity instruments in the quarters
ended March 31, 1999 and 2000. 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, the Company
recognizes 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.
At March 31, 2000, certain transactions in process may result in UAL receiving
equity instruments as discussed above. In such event, the Company will record
revenue related to the receipt of such equity instruments at fair value. In
addition, the Company would also record compensation expense for the fair value
related to the distribution of some or all of such equity instruments to
employees or independent contractors involved with the related transaction.
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<PAGE> 9
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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
financial statements of income for the three months ended March 31, 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 March 31, 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 March 31, 1999 and 2000.
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<PAGE> 10
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
BASIS OF PRESENTATION
The consolidated balance sheets 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 $2,586 and $2,150 for the three months ended March 31, 1999 and 2000,
respectively.
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<PAGE> 11
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
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 value of the Company's financial instruments, which includes cash and
cash equivalents, accounts receivable, accounts payable, accrued expenses, notes
payable and advanced client costs approximates its carrying value.
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.
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.
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<PAGE> 12
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
FURNITURE AND EQUIPMENT AND INTANGIBLE ASSETS (CONTINUED)
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 ended March 31, 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 March 31, 2000, distributions payable aggregating
$12,586 were owed to the former UAL partners.
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<PAGE> 13
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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>
March 31, 1999 March 31, 2000
-------------- --------------
<S> <C> <C>
Purchase of equipment with stock options -- $ 5,000
Change in fair market value of stock issued in
connection with restricted stock performance plan -- 2,221,879
Issuance of stock options and stock purchase warrants -- 850,938
</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.
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<PAGE> 14
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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. UAC holds a broker/dealer license and is located in Miami,
Florida. 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. This approval is currently pending. 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 the employment agreements.
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 note 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. Under the terms of the Management
Agreement, the Managing Agent received $9,000 of fees for the three months ended
March 31, 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.
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<PAGE> 15
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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 30% of the total outstanding common shares of the
Company and the Company's Chief Operating Officer and Chairman, who is the
beneficial owner of 30% 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; (iii)
incentive compensation paid monthly equal to Available Cash, as defined,
primarily based on performance of the UAL and the Company; and (iv) in the event
the Company does not put into place by June 1, 2000 the Class B Voting Common
Stock, each individual will receive 500,000 stock options with grant prices
equal to 120% of fair value with vesting provisions as defined in the
Agreements. 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 recorded when incurred and submitted for
reimbursement by the employees, as an account receivable from the client and a
liability to the employee. At such point payment is received, the employee is
reimbursed for the expenses. The amounts expected to be collected from the
client are recorded as a reduction of accounts receivable. Amounts deemed
uncollectible by management are recorded as liabilities.
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<PAGE> 16
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
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 $72,536 at March 31, 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 March 31, 2000 due to the
uncertainty of realizing the deferred income tax assets.
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<PAGE> 17
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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 recorded
deferred compensation aggregating $3,828,825, based on the fair market value of
the Company's common stock at December 17, 1999. At March 31, 2000, the Company
recorded an additional $1,634,019 of deferred compensation based on the fair
market value of the Company's common stock at March 31, 2000. Compensation
expense for the restricted stock performance plan of $686,587 was recognized for
the three months ended March 31, 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.
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<PAGE> 18
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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 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 $ 6.11 480,000 $5.00-$7.50
---------
Outstanding options at
March 31, 2000 1,545,000
=========
</TABLE>
-18-
<PAGE> 19
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
A summary of the stock warrants issued during the quarter ended March 31, 2000
is as follows:
Weighted
Average Number Exercise
Exercise of Price Per
Price Shares Warrant
--------- ---------- ---------
Outstanding warrants at
December 31, 1999 $2.50 10,000 -- --
Granted $5.81 1,119,999 $2.50-$7.20
----------
Outstanding warrants at
March 31, 2000 1,129,999
==========
The following table summarizes information concerning stock options outstanding
at March 31, 2000:
Weighted
Average Remaining
Exercise Number Contractual
Price Outstanding Life (in years)
-------- ------------ ------------------
$ 2.50 75,000 4.8
3.00 210,000 5.0
4.00 220,000 5.0
4.13 30,000 5.0
4.95 300,000 5.0
5.00 450,000 5.0
5.63 50,000 5.0
6.00 10,000 5.0
7.50 200,000 5.0
-----------
1,545,000
===========
-19-
<PAGE> 20
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
The following table summarizes information concerning stock warrants outstanding
at March 31, 2000:
Weighted
Average Remaining
Exercise Number Contractual
Price Outstanding Life (in years)
--------- ------------ ------------------
$ 2.50 300,000 4.0-5.0
6.00 129,999 4.0-5.0
7.20 700,000 4.0
-----------
1,129,999
===========
Options granted to employees are exercisable according to the terms of each
agreement, ranging from one month to four years. At March 31, 2000, 43,000
options outstanding were exercisable. At March 31, 2000, 200,000 warrants
outstanding were exercisable. At March 31, 2000, 2,674,999 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 6.18%; 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 for options and warrants issued subsequent to the Merger and an
expected life of the options and warrants of 5 years.
At March 31, 2000, the weighted average exercise price of the options granted
and warrants issued during the quarter equaled $6.11 per share and $5.81 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.
-20-
<PAGE> 21
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
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 first quarter ended March
31, 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, $64,850 of
compensation expense was amortized in the first quarter ended March 31, 2000
relative to these options.
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, $22,737 of compensation expense was amortized in the first quarter
ended March 31, 2000 relating to these warrants.
On March 31, 1999 the Company closed on a $7 million round of private financing
(the "Private Placement"). In association with the Private Placement, the
Company issued or will issue a total of 929,999 warrants, of which 700,000
warrants were issued to investors in the Private Placement, and 71,666 warrants
will be issued and 58,333 warrants were issued to agents and employees for
placing the financing
-21-
<PAGE> 22
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
7. STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
and 100,000 warrants will be 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
to be 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.
-22-
<PAGE> 23
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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 quarters
ended March 31, 1999 and 2000:
<TABLE>
<CAPTION>
Three Months Ended,
------------------------------------
1999 2000
------------ ------------
<S> <C> <C>
Numerator:
Pro forma net income $ 57,655 $ (1,594,784)
============ ============
Denominator:
Denominator for basic earnings per share- 6,955,000 8,414,627
weighted average shares
Effect of dilutive securities:
Options -- 1,345,000
Warrants -- 429,999
------------ ------------
Dilutive potential common shares (1) -- 1,774,999
------------ ------------
Denominator for diluted earnings per share-
adjusted weighted average shares 6,955,000 10,189,626
============ ============
Pro forma basic earnings per share $ .01 $ (.19)
============ ============
Pro forma diluted earnings per share $ .01 $ (.16)
============ ============
</TABLE>
(1) Stock options aggregating 200,000 shares of common stock and stock purchase
warrants aggregating 700,000 shares of common stock were outstanding at March
31, 2000 but were not included in the computation of pro forma diluted earnings
per share, because the exercise price was greater than the average market price
of the common shares, and therefore, the effect would be antidilutive.
-23-
<PAGE> 24
vFINANCE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 2000
(UNAUDITED)
9. SUBSEQUENT EVENTS
None
-24-
<PAGE> 25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2000 COMPARED TO THE QUARTER ENDED MARCH 31, 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 aggregated $38,346 and
$9,219 for the quarters ended March 31, 2000 and 1999, respectively, and are
included in other fees on the consolidated statements of income.
Operating revenues were $625,419 for the quarter ended March 31, 2000, as
compared to $226,928 for the quarter ended March 31, 1999, an increase of
$398,491, or 176%. The increase was primarily a result of success fee revenue
generated by the Company of $211,200 and an increase in consulting fee revenue
of $127,057. The Company did not generate success fees in the first quarter of
1999. Consulting fees were higher than the prior quarter due to a greater number
of consulting contracts and a larger monthly billing per contract.
Cost of revenues was $272,754 for the quarter ended March 31, 2000, as compared
to $39,703 for the quarter ended March 31, 1999, an increase of $233,051. The
increase in cost of revenues is attributable to allocating payroll and incentive
based pay associated with consulting and success fee revenue to cost of revenues
during the quarter ended March 31, 2000.
General and administrative expenses were $114,183 for the quarter ended March
31, 2000, as compared to $19,599 for the quarter ended March 31, 1999, an
increase of $94,584. The increase was primarily due to an increase in telephone
expenses of $16,956, an increase in rent expense of $12,493, an increase in
advertising and promotions of $11,564 and an increase in filing fees of $11,313.
Payroll and related benefits were $112,460 for the quarter ended March 31, 2000,
as compared to none for the quarter ended March 31, 1999. The increase was
primarily a result of salaries paid to employees for consulting and web
development services. For the quarter ended March 31, 1999, the Company did not
pay salaries or bonuses to its employees, because of its limited liability
company status.
-25-
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Professional fees were $125,614 for the quarter ended March 31, 2000, as
compared to $1,850 for the quarter ended March 31, 1999, an increase of
$123,764. The increase was primarily due to an increase in legal and accounting
fees in association with the preparation of various regulatory filings.
The provision for bad debts was none for the quarter ended March 31, 2000, as
compared to a provision for bad debts of $77,076 for the quarter ended March 31,
1999. 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 $1,596,344 for the
quarter ended March 31, 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 a contracted consultant 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) common stock grants.
Compensation expense is recognized over the vesting periods of the related stock
options or the terms of the applicable agreements.
Interest income aggregating $1,152 for the quarter ended March 31, 2000 relates
to amounts earned with respect to the Company's cash and cash equivalents.
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.
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 quarter ended March 31,
1999 and for the period from January 1, 1999 through November 8, 1999 (date of
merger of Union Atlantic LC with Peachtree Fiberoptics, Inc.).
-26-
<PAGE> 27
LIQUIDITY AND CAPITAL RESOURCES
The Company had $298,921 of cash and cash equivalents at March 31, 2000. For the
quarter ended March 31, 2000, net cash provided by operating activities was
$252,087 as compared to net cash provided by operating activities of $139,695
for the quarter ended March 31, 1999. Net cash provided by operating activities
for the quarter ended March 31, 2000 primarily resulted from an increase in
accrued expenses of $255,675, most of which related to an increase in accrued
payroll, whereas net cash provided by operating activities for the quarter ended
March 31, 1999 related primarily to net income.
Net cash used in investing activities was $21,650 for the quarter ended
March 31, 2000, and primarily 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
within 90 days of the closing. 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.
Net cash used in financing activities was $160,000 for the quarter ended March
31, 2000, as compared to $92,033 for the quarter ended March 31, 1999. Such uses
primarily related to cash distributions aggregating $160,000 and $130,000 during
the quarters ended March 31, 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.
-27-
<PAGE> 28
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
Effective March 13, 2000, the Company's Certificate of Incorporation was amended
to increase the number of shares of common stock the Company is authorized to
issue from 20,000,000 to 25,000,000. In addition, effective March 13, 2000 the
Company further amended its Certificate of Incorporation designating a "blank
check" class of preferred stock with a limitation of 2,500,000 shares as set
forth in the Certificate.
On March 31, 2000 (the "Closing Date"), the Company consummated the sale of
1,166,667 shares of its 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 Company and the same institutional investors have
committed to close a second round of financing ("Second Closing") in the amount
of $3,500,000. 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. Within 60 days after the Closing Date, the
Company has agreed to file a registration statement with the Securities and
Exchange Commission (the "SEC") covering the securities issued and to be issued
to the investors and the placement agent. After the registration statement is
declared effective by the SEC, the Company and the investors will consummate the
Second Closing. 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.
Pursuant to a Consulting Agreement between the Company and Stock Exposure, Inc.,
dated January 29, 2000, on March 1, 2000, the Company issued 10,000 shares of
Common Stock to Stock Exposure, Inc. in consideration for certain consulting
services to be provided by Stock Exposure, Inc. to the Company. The shares
issued to Stock Exposure, Inc. were exempt from registration pursuant to Section
4(2) of the Securities Act.
On January 3, 2000, the Company acquired certain fixed and intangible assets
from Steve Jacobs and Mauricio Borgonovo used in connection with the business
operations of two former principals of Union Atlantic Capital, LC. The
consideration consisted of the issuance of stock purchase warrants giving the
holders the right to purchase 190,000 shares of Common Stock at an exercise
price of $2.50 per share. The warrants issued to Messrs. Jacobs and Borgonovo
were exempt from registration pursuant to Section 4(2) of the Securities Act.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
-28-
<PAGE> 29
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Written consent of the holders of a majority interest of the voting capital
stock of the Company dated as of March 13, 2000 approving the amendments to the
Certification of Incorporation to increase the number of shares of common stock
the Company is authorized to issue from 20,000,000 to 25,000,000 and designating
a "blank check" class of preferred stock with a limitation of 2,500,000 shares
as set forth in the Certificate.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Data Schedule
(b) Reports on Form 8-K
On January 24, 2000 the Company filed Form 8-K/A with respect to the
report dated November 8, 1999.
-29-
<PAGE> 30
SIGNATURES
In accordance with section 13 or 15(d) 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: Leonard J. Sokolow
------------------------ Chief Executive Officer May 15, 2000
Leonard J. Sokolow and Vice Chairman of
the Board of Directors
</TABLE>
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
By: Leonard J. Sokolow
----------------------- Chief Executive Officer May 15, 2000
Leonard J. Sokolow and Vice Chairman of
the Board of Directors
By: Timothy Mahoney
------------------------ Chief Operating Officer May 15, 2000
Timothy Mahoney and Chairman of the
Board of Directors
By: D. Carr Moody
----------------------- Chief Financial Officer May 15, 2000
D. Carr Moody
</TABLE>
-30-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 298,921
<SECURITIES> 0
<RECEIVABLES> 3,563,339
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,876,326
<PP&E> 139,794
<DEPRECIATION> (95,539)
<TOTAL-ASSETS> 3,949,148
<CURRENT-LIABILITIES> 726,100
<BONDS> 0
0
0
<COMMON> 104,473
<OTHER-SE> 3,118,575
<TOTAL-LIABILITY-AND-EQUITY> 3,949,148
<SALES> 0
<TOTAL-REVENUES> 625,419
<CGS> 272,754
<TOTAL-COSTS> 2,221,355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,595,936)
<INTEREST-EXPENSE> 1,152
<INCOME-PRETAX> (1,594,784)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,594,784)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,594,784)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.16)
</TABLE>
