<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) NOVEMBER 8, 1999
--------------------------------
PEACHTREE FIBEROPTICS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-11454 58-1924423
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
3300 PGA BOULEVARD, SUITE 810, PALM BEACH GARDENS, FL 33410
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (305) 374-0282
-----------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
The undersigned Registrant hereby amends its Current Report on Form 8-K by the
additions as follows:
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
On November 8, 1999, Peachtree FiberOptics, Inc., a Delaware corporation
("Peachtree"), acquired VFinance Holdings, Inc., a Florida corporation, and
Union Atlantic LC, a Florida limited liability company, through a Share Exchange
Agreement. Peachtree received all of the capital stock of VFinance and Union
Atlantic in exchange for a total of 6,955,000 shares (2,800,000 shares related
to VFinance Holdings, Inc. and 4,155,000 related to Union Atlantic LC) of its
common stock. Peachtree filed its Form 8-K on November 24, 1999, describing the
transaction. The following items are included herein:
(a) Audited Consolidated Financial Statements of Union Atlantic LC for the years
ended December 31, 1997 and 1998; Audited Financial Statements of VFinance
Holdings, Inc. as of December 31, 1998 and for the period from inception
(February 5, 1998) through December 31, 1998 are filed as a part of this Current
Report on Form 8-K/A.
(b) Unaudited proforma condensed consolidated balance sheet of Peachtree
FiberOptics, Inc. as of September 30, 1999 and the unaudited pro forma condensed
consolidated statements of operations of Peachtree FiberOptics, Inc. for the
nine month period ended September 30, 1999 and for the year ended December 31,
1998 are filed as a part of this Current Report on Form 8-K/A.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned herein
duly authorized.
PEACHTREE FIBEROPTICS, INC.
By: /s/ Leonard J. Sokolow
--------------------------------
Name: Leonard J. Sokolow
Title: President
Dated: January 24, 2000
<PAGE> 4
PEACHTREE FIBEROPTICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On November 8, 1999, Peachtree FiberOptics, Inc. (the "Company") entered into a
Share Exchange Agreement providing for the acquisition of VFinance Holdings,
Inc. ("VFIN") and Union Atlantic LC ("UAL"). The Company 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 of the outstanding partnership
interests in UAL. For accounting purposes, the acquisitions have been treated
as a recapitalization with VFin and UAL as the acquirors, as VFin and UAL are
considered entities under common control (reverse acquisition).
The following unaudited pro forma condensed consolidated financial statements of
the Company, VFIN and UAL are derived from and should be read in conjunction
with the audited financial statements of the Company as previously filed on Form
10-KSB for the year ended December 31, 1998 filed with the Securities and
Exchange Commission, the unaudited condensed financial statements of the Company
as previously filed on Form 10-Q for the quarter ended September 30, 1999, and
the audited and unaudited financial statements of VFIN and UAL as of December
31, 1998 and September 30, 1999, respectively, included in Item 7(a) herein.
These unaudited pro forma condensed consolidated financial statements do not
purport to be indicative of the consolidated results of operations or financial
position which actually would have taken place if the transaction had been
consummated on the date indicated or which may be reported in the future.
The unaudited pro forma condensed consolidated statements of operations reflect
adjustments as if the acquisitions had been consummated on January 1, 1999 for
the nine month period ended September 30, 1999 and on January 1, 1998 for the
year ended December 31, 1998.
The unaudited pro forma condensed consolidated balance sheet reflects the
adjustments as if the acquisition had been consummated on September 30, 1999.
The condensed balance sheets of VFIN and UAL used in the unaudited pro forma
condensed consolidated balance sheet are as of September 30, 1999.
The pro forma information is based on the historical financial statements of the
acquired businesses giving effect to the transactions as a reverse acquisition
and the assumptions and adjustments described in the accompanying notes to the
unaudited pro forma condensed consolidated financial statements.
<PAGE> 5
PEACHTREE FIBEROPTICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PEACHTREE
PEACHTREE PRO FORMA FIBEROPTICS, INC.
FIBEROPTICS, INC. UAL VFIN ADJUSTMENTS PRO FORMA
----------------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Consulting fees $ -- $ 738,516 $ -- $ -- $ 738,516
Subscriber fees -- -- 5,826 -- 5,826
Vendor fees -- -- 8,274 -- 8,274
---------- ---------- ---------- ---------- ----------
Net revenues -- 738,516 14,100 -- 752,616
Cost of revenues -- 153,474 -- -- 153,474
---------- ---------- ---------- ---------- ----------
Gross profit -- 585,042 14,100 -- 599,142
Non-cash stock compensation 797,119 -- -- -- 797,119
General and administrative expenses 24,947 168,696 87,001 225,000 [a] 505,644
Managing agent fee 112,500 -- -- (112,500)[b] --
---------- ---------- ---------- ---------- ----------
Operating (loss) income (934,566) 416,346 (72,901) (112,500) (703,621)
Interest expense 4,650 -- 661 -- 5,311
---------- ---------- ---------- ---------- ----------
Net (loss) income $ (939,216) $ 416,346 $ (73,562) $ (112,500) $ (708,932)
========== ========== ========== ========== ==========
Pro forma basic and diluted net loss
per share $ (2.97)[d] $ (0.09)[d]
========== ==========
Weighted average shares used in
computing pro forma basic and diluted
net loss per share 316,655 8,210,000
========== ==========
</TABLE>
<PAGE> 6
PEACHTREE FIBEROPTICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PEACHTREE
PEACHTREE PRO FORMA FIBEROPTICS, INC.
FIBEROPTICS, INC. UAL VFIN ADJUSTMENTS PRO FORMA
----------------- --- ---- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Consulting fees $ -- $ 1,375,440 $ -- $ -- $ 1,375,440
Success fees -- 333,500 -- -- 333,500
Subscriber fees -- -- 3,567 -- 3,567
Vendor fees -- -- 4,303 -- 4,303
Other fees -- -- 187 -- 187
----------- ----------- ----------- ----------- -----------
Net revenues -- 1,708,940 8,057 -- 1,716,997
Cost revenues -- 536,669 -- -- 536,669
----------- ----------- ----------- ----------- -----------
Gross profit -- 1,172,271 8,057 -- 1,180,328
General and administrative expenses 15,304 292,826 86,832 300,000 [a] 694,962
Managing agent fee 150,000 -- -- (150,000)[b] --
----------- ----------- ----------- ----------- -----------
Operating (loss) income (165,304) 879,445 (78,775) (150,000) 485,366
Other income (expense):
Interest expense (5,300) -- (2,000) -- (7,300)
Other 194,474 -- -- -- 194,474
----------- ----------- ----------- ----------- -----------
Income before income taxes 23,870 879,445 (80,775) (150,000) 672,540
Provision for income taxes -- 1,925 -- 235,389 [c] 237,314
----------- ----------- ----------- ----------- -----------
Net (loss) income $ 23,870 $ 877,520 $ (80,775) $ (385,389) $ 435,226
=========== =========== =========== =========== ===========
Pro forma basic and diluted net income
per share $ 1.32 [d] $ 0.05 [d]
=========== ===========
Weighted average shares used in
computing pro forma basic and
diluted net income per share 18,149 8,210,000
=========== ===========
</TABLE>
<PAGE> 7
PEACHTREE FIBEROPTICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PEACHTREE
PEACHTREE AND MERGER FIBEROPTICS, INC.
FIBEROPTICS, INC. UAL VFIN ADJUSTMENTS PRO FORMA
----------------- ------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 250,184 $ 11,238 $ 2,384 $ -- $ 263,806
Accounts receivable, net -- 174,589 -- -- 174,589
Income tax receivable -- 7,312 -- -- 7,312
Loans receivable, shareholders -- 2,150 -- -- 2,150
----------- ----------- ----------- ----------- -----------
Total current assets 250,184 195,289 2,384 -- 447,857
Equipment, at cost:
Equipment -- 6,576 104,164 -- 110,740
Less accumulated depreciation -- (1,626) (73,783) -- (75,409)
----------- ----------- ----------- ----------- -----------
Net property, plant and equipment -- 4,950 30,381 -- 35,331
----------- ----------- ----------- ----------- -----------
Total assets $ 250,184 $ 200,239 $ 32,765 $ -- $ 483,188
=========== =========== =========== =========== ===========
Liabilities and stockholders' equity
Current liabilities:
Advanced client costs $ -- $ 54,956 $ -- $ -- $ 54,956
Accrued expenses 37,221 5,546 1,733 -- 44,500
Notes payable 61,333 -- 3,992 -- 65,325
Note payable to managing agent 11,332 -- -- -- 11,332
Unearned revenue -- -- 6,743 -- 6,743
Note payable to Union Atlantic
Partners -- -- 25,000 -- 25,000
----------- ----------- ----------- ----------- -----------
Total current liabilities 109,886 60,502 37,468 -- 207,856
Managing agent fee 112,500 -- -- (112,500)[b] --
Stockholders' equity:
Common stock 12,350 -- 15,000 13,000 [e] 82,100
41,550 [f]
200 [k]
Additional paid-in capital 5,420,093 -- 134,634 190,298 [h] 296,498
(54,750)[g]
(5,411,777)[l]
18,000 [i]
Unearned compensation (70,666) -- -- -- (70,666)
Retained earnings (accumulated
deficit) (5,333,979) -- (154,337) 112,500 [b] (32,600)
5,221,479 [l]
121,737 [j]
Partners' equity -- 139,737 -- (18,000)[i] --
(121,737)[j]
----------- ----------- ----------- ----------- -----------
Total stockholders' equity (deficit) 27,798 139,737 (4,703) 112,500 275,332
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity $ 250,184 $ 200,239 $ 32,765 $ -- $ 483,188
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 8
PEACHTREE FIBEROPTICS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
a. To reflect compensation agreements entered into in connection with the
merger by two of the Company's shareholders, providing for annual
compensation aggregating $150,000 per shareholder.
b. To reflect the elimination of the managing agent fee by the Company in
connection with the merger and the compensation agreements entered into
with two of the Company's shareholders. The Managing Agent would not
have received a fee if such agreements had been in place.
c. The adjustment for the period ended December 31, 1998 reflects a
provision for income taxes at the federal statutory rate. The
Company has net operating loss carryforwards; however, they are
subjected to certain limitations. Thus, no benefit has been taken
related to these net operating loss carryforwards. As the Company has
a net loss for the nine month period ended September 30, 1999, no
provision has been recorded.
d. Basic and diluted net income (loss) per share was computed using the
weighted average number of common shares outstanding during the period
in accordance with Statement of Financial Accounting Standards No. 128.
Stock options were antidilutive and therefore were not considered in
such computations.
e. Records the net exchange of 1,500,000 common shares in VFIN, par value
$0.01 ($15,000) for 2,800,000 common shares in the Company, par value
$0.01 ($28,000).
f. Records the exchange of the membership interests in UAL for 4,155,000
common shares in the Company, par value $0.01.
g. To reflect the offsetting adjustment to additional paid-in-capital for
the exchange of common shares to VFIN and UAL in connection with the
reverse acquisition.
h. Records the adjustment to additional paid-in-capital for the tangible
net assets of the Company to reflect the reverse acquisition of a
shell company as follows:
Cash $ 250,184
Accrued expenses (37,221)
Notes payable (22,665)
------------
Net assets of Peachtree FiberOptics, Inc. 190,298
i. To reflect the elimination of UAL partners' initial equity
contribution in connection with the reverse acquisition.
j. To reclassify the net earnings of UAL to the retained
earnings of the combined Company.
k. To reflect the exchange of 100,000 options in VFIN for 20,000 common
shares of the Company, par value $0.01.
l. To adjust the combined companies retained earnings and additional
paid-in-capital for a reverse acquisition.
<PAGE> 9
Financial Statements
VFinance Holdings, Inc.
(Development Stage Enterprise)
AS OF DECEMBER 31, 1998 AND FOR
THE PERIOD FROM INCEPTION (FEBRUARY 5, 1998)
THROUGH DECEMBER 31, 1998
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 10
VFinance Holdings, Inc.
(Development Stage Enterprise)
Financial Statements
As of December 31, 1998 and for the Period from Inception (February 5, 1998)
through December 31, 1998
CONTENTS
Report of Independent Auditors...............................................1
Audited Financial Statements
Balance Sheets...............................................................2
Statements of Operations.....................................................3
Statement of Shareholders' Equity (Deficit)..................................4
Statements of Cash Flows.....................................................5
Notes to Financial Statements................................................6
<PAGE> 11
Report of Independent Auditors
Board of Directors
VFinance Holdings, Inc.
We have audited the accompanying balance sheet of VFinance Holdings, Inc.
(Development Stage Enterprise) as of December 31, 1998 and the related
statements of operations, shareholders' equity (deficit), and cash flows for the
period from inception (February 5, 1998) through December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VFinance Holdings, Inc., at
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (February 5, 1998) through December 31, 1998, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Atlanta, Georgia
December 15, 1999
1
<PAGE> 12
VFinance Holdings, Inc.
(Development Stage Enterprise)
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
--------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,924 $ 2,384
Accounts receivable 1,480 --
Stock subscriptions 49,634 --
-----------------------
Total current assets 55,038 2,384
Equipment, at cost:
Internal use software 104,164 104,164
Less accumulated amortization (34,721) (73,783)
-----------------------
Net equipment 69,443 30,381
-----------------------
Total assets $ 124,481 $ 32,765
=======================
LIABILITIES
Current liabilities:
Notes payable $ 25,000 $ 3,992
Unearned revenue 3,795 6,743
Note payable to Union Atlantic Partners 25,000 25,000
Accrued expenses 1,827 1,733
-----------------------
Total current liabilities 55,622 37,468
Shareholders' equity:
Convertible Preferred Stock, $.01 par value, 20,000,000
shares authorized; no shares issued and outstanding -- --
Common stock, $.01 par value, 40,000,000 shares authorized;
1,500,000 shares issued and outstanding 15,000 15,000
Additional paid-in capital 134,634 134,634
Deficit accumulated during the development stage (80,775) (154,337)
-----------------------
Total shareholders' equity (deficit) 68,859 (4,703)
-----------------------
Total liabilities and shareholders' equity $ 124,481 $ 32,765
=======================
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE> 13
VFinance Holdings, Inc.
(Development Stage Enterprise)
Statements of Operations
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(FEBRUARY 5, 1998) (FEBRUARY 5 1998) NINE MONTH PERIOD
THROUGH THROUGH ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1999
------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Vendor fees $ 4,303 $ 2,704 $ 8,274
Subscriber fees 3,567 1,433 5,826
Other fees 187 57 --
------------------------------------------------------
Total revenues 8,057 4,194 14,100
General and administrative expenses 86,832 56,846 87,001
------------------------------------------------------
Operating loss (78,775) (52,652) (72,901)
Interest expense (2,000) (2,000) (661)
------------------------------------------------------
Net loss $(80,775) $(54,652) $(73,562)
======================================================
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE> 14
VFinance Holdings, Inc.
(Development Stage Enterprise)
Statement of Shareholders' Equity (Deficit)
<TABLE>
<CAPTION>
DEFICIT
CONVERTIBLE ACCUMULATED TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE SHAREHOLDERS'
------------------ -------------------- PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE (DEFICIT)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at February 5, 1998
(inception) -- $ -- -- $ -- $ -- $ -- $ --
Issuance of 1,500,000 shares of common
stock -- -- -- 15,000 59,634 -- 74,634
Capital contribution -- -- -- -- 75,000 -- 75,000
Net loss -- -- -- -- -- (80,775) (80,775)
-------------------------------------------------------------------------------------
Balances at December 31, 1998 -- -- -- 15,000 134,634 (80,775) 68,859
Net loss -- -- -- -- -- (73,562) (73,562)
-------------------------------------------------------------------------------------
Balances at September 30, 1999
(unaudited) -- $ -- -- $ 15,000 $ 134,634 $(154,337) $ (4,703)
===================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE> 15
VFinance Holdings, Inc.
(Development Stage Enterprise)
Statements of Cash Flows
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(FEBRUARY 5, 1998) (FEBRUARY 5, 1998) NINE MONTH PERIOD
THROUGH THROUGH ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1999
--------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (80,775) $ (54,652) $ (73,562)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation 34,721 21,700 39,062
Changes in assets and liabilities:
Accounts receivable (1,480) -- 1,480
Deferred revenue 3,795 2,678 2,948
Accrued expenses 1,827 1,720 (94)
-----------------------------------------------
Net cash used in operating activities (41,912) (28,554) (30,166)
INVESTING ACTIVITIES
Acquisition of internal use software (79,164) (79,164) (21,008)
-----------------------------------------------
Net cash used in investing activities (79,164) (79,164) (21,008)
FINANCING ACTIVITIES
Issuance of notes payable 25,000 25,000 --
Proceeds from issuance of common stock 25,000 25,000 49,634
Capital contribution 75,000 75,000 --
-----------------------------------------------
Net cash provided by financing activities 125,000 125,000 49,634
Net increase (decrease) in cash and cash
equivalents 3,924 17,282 (1,540)
Cash at beginning of period -- -- 3,924
-----------------------------------------------
Cash at end of period $ 3,924 $ 17,282 $ 2,384
===============================================
Supplemental cash flow information:
Interest paid $ 2,000 $ 2,000 $ 661
===============================================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE> 16
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements
As of December 31, 1998 and for the Period from Inception (February 5, 1998)
through December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
VFinance Holdings, Inc. (the "Company") was incorporated on February 5, 1998. On
February 5, 1998, the Company purchased a developed website for $104,164,
including acquisition costs from MD Information Systems. The website is
classified as internal use software and is being amortized on a straight line
basis over a period of two years. The purchase was funded through the sale of
common stock subscriptions to three individuals, totaling $74,634 and through a
note payable with MD Information Systems (see Note 3). All stock subscriptions
have been received as of September 30, 1999 and accordingly, the Company has
classified the receivable as an asset.
The Company is in the process of developing 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.
The Company's activities since incorporation have primarily consisted of
recruiting personnel, developing business, financial planning and raising
capital. Accordingly, the Company is considered to be in the development stage.
REVENUE RECOGNITION
The Company sells two types of memberships, one year memberships to venture
capital vendors, who are interested in providing services to other companies or
individuals and three-month memberships to venture capital customers, 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. The Company's
revenues are not concentrated in any particular region of the country or with
any individual or group.
6
<PAGE> 17
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
Primarily all membership sales are consummated using an on-line credit card
processing service, which performs routine credit verification. The Company does
not require collateral and receives payment directly from the credit card
company. Thus, there is potential for credit losses. Credit losses aggregated
$4,465 for the period from inception (February 5, 1998) through December 31,
1998.
HTM Logic is the original designer of the website and maintains a legend on the
website indicating as such. The terms of the purchase agreement provide that the
Company shall 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 revenue has
been earned for the period from inception (February 5, 1998) through December
31, 1998.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates, and such
differences may be material to the financial statements.
INCOME TAXES
The Company uses the liability method of 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.
7
<PAGE> 18
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs are expensed in the period incurred. Total advertising expense
amounted to $720 for the period from inception (February 5, 1998) through
December 31, 1998.
EQUIPMENT
Equipment consists of internal use software. Depreciation is computed using the
straight line method over the estimated useful life of the asset, 2 years.
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 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, because 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 has been recognized from
inception (February 5, 1998) through December 31, 1998.
ORGANIZATIONAL COST
The Accounting Standards Executive Committee recently issued Statement of
Position ("SOP") No. 98-5, REPORTING ON THE COST OF START-UP ACTIVITIES. The SOP
requires the costs of start-up activities to be expensed as incurred. The
Company adopted the SOP effective February 5, 1998 and incurred expenses related
to such activities of $409 from inception (February 5, 1998) through December
31, 1998.
8
<PAGE> 19
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, which includes cash,
accounts receivable, accounts payable and notes payable approximates their
carrying values.
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and accounts receivable. The Company places its
cash with high quality financial institutions.
INTERIM STATEMENTS
The interim financial data for the period from inception (February 5, 1998)
through September 30, 1998 and the nine month period ended September 30, 1999 is
unaudited; however, in the opinion of management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results of operations for the interim periods, on a
consistent basis.
2. RELATED PARTIES
NOTE PAYABLE TO UNION ATLANTIC PARTNERS
Union Atlantic LC ("UAL") is owned by the same shareholders that hold all of the
outstanding common stock of the Company. UAL manages, through a subsidiary, an
offshore venture capital fund (the "Fund"). The Fund's investors include the
shareholders of the Company. In April 1998, the Fund loaned the Company $25,000
through a verbal agreement. The note does not bear interest and does not have a
specified due date. The Company intends to repay the note once sufficient
capital is available.
9
<PAGE> 20
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements (continued)
2. RELATED PARTIES (CONTINUED)
MANAGEMENT AGREEMENT
In conjunction with the acquisition, on February 5, 1998, the Company executed a
management agreement (the "Agreement") with a former shareholder of MD
Information Systems (the "Managing Agent"). Under the terms of the Agreement,
the Managing Agent was appointed President and Chief Executive Officer of the
Company with the authority to manage the operations of the Company. The Managing
Agent is to receive a management fee of $3,000 per month, for a period of three
years, which includes being required to provide the facilities and computer
equipment necessary to operate the website. The Agreement may be terminated by
the Company with or without cause, as defined.
3. NOTE PAYABLE
In connection with the asset acquisition, the Company issued a $50,000 note
payable to MD Information Systems. The note bears interest at a rate of 8% and
is due in two equal installments on August 5, 1998 and February 5, 1999,
respectively.
4. STOCKHOLDERS' EQUITY
COMMON STOCK
On February 5, 1998, the Company issued 1,500,000 shares of common stock to
individuals in exchange for subscriptions receivable of $74,634.
10
<PAGE> 21
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY (CONTINUED)
CONVERTIBLE PREFERRED STOCK
Each share of the Company's convertible preferred stock ("Preferred Stock") is
convertible into one share of common stock, at the election of the stockholder.
If issued, the holder of each share of Preferred Stock shall have voting rights
equal to the holder of each share of common stock. In the event of a liquidation
of the Company, Preferred Stock stockholders would be entitled to receive all
accrued and unpaid dividends prior to and in preference to the holders of common
stock. As of December 31, 1998, no Preferred Stock has been issued.
STOCK OPTIONS
The Company granted key personnel options to purchase 100,000 shares of common
stock for a price of $0.10 per share. The options vest ratably over a three year
period and must be exercised within five years of the vesting date. No
compensation expense has been recognized, as the exercise price of the options
was more than the fair value of the common stock at the date of grant, as
determined by management in the absence of a readily tradable market for such
securities. As of December 31, 1998, no options are exercisable.
Pro forma information regarding net income or loss is required by SFAS 123,
which also requires that the information be determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value for options granted in 1998 was estimated at the date of grant using the
minimum value option pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.07%, no dividend yields; and a
weighted-average expected life of the option of three years. The expected stock
price volatility is not applicable as the minimum valuation model (or acceptable
model for privately held companies) was used.
11
<PAGE> 22
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (CONTINUED)
At December 31, 1998, the weighted average remaining contractual life of the
options outstanding was 7.08 years. The weighted average fair value of the
options granted during 1998 was zero. The weighted average exercise price is
equal to the actual exercise price of $0.10. The Company's pro forma net loss
for the period from inception (February 5, 1998) through December 31, 1998 did
not differ from the actual net loss.
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. The Company's deferred
income tax assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1998 1999
----------------------------------------
(UNAUDITED)
<S> <C> <C>
Deferred revenue $ 1,328 $ 2,360
Other assets 4,179 8,811
Net operating loss carryforward 22,764 42,846
Deferred income tax asset valuation allowance (28,271) (54,017)
----------------------------------------
Net deferred income tax asset $ -- $ --
========================================
</TABLE>
Net operating loss carryforwards totaled $65,040 at December 31, 1998. The net
operating loss carryforwards will begin to expire in the year 2018 if not
utilized. A valuation allowance has been recorded at December 31, 1998 due to
the uncertainty of realizing the deferred income tax asset.
12
<PAGE> 23
VFinance Holdings, Inc.
(Development Stage Enterprise)
Notes to Financial Statements (continued)
6. YEAR 2000 (UNAUDITED)
The year 2000 problem, which is common in most businesses, concerns the
inability of computer systems and devices to properly recognize and process
date-sensitive information when the year changes to 2000. The Company is
dependent on purchased software and hardware from third parties and believes
these to be Year 2000 compliant. However, the Company has not performed any
specific reviews or incurred any costs and does not anticipate doing so in order
to evaluate compliance either internally or externally with its vendors or
customers. Further, the Company has not established a contingency plan in case
it is impacted. Thus, the Year 2000 problem could have a material adverse impact
on the Company.
7. SUBSEQUENT EVENTS
On January 27, 1999, the Company entered into an agreement with MD Information
Systems to provide for amended repayment terms on the outstanding note payable.
The note is now due and payable in accordance with the following terms: (1)
$10,000 on February 5, 1999 and (2) the remaining $15,000 in equal monthly
installments of $1,667 beginning March 5, 1999.
On November 8, 1999, Peachtree FiberOptics, Inc. ("Peachtree"), a public
company, entered into a share exchange agreement with the Company and UAL, a
company wholly-owned by the stockholders of the Company. As a result, Peachtree
received all common stock outstanding of the Company and UAL in exchange for
approximately 84.4% of the total outstanding common stock of Peachtree. The
managing agent for Peachtree is an executive officer and principal shareholder
of the Company. Further, Peachtree and the Company also have in common certain
members of management and ownership.
As indicated in the Year 2000 footnote above, the Company believed the Year 2000
problem could have a material adverse impact on the Company. While it appears
the information systems the Company is reliant upon correctly accommodated the
Year 2000 date change, further problems may linger.
13
<PAGE> 24
Consolidated Financial Statements
Union Atlantic LC
YEARS ENDED DECEMBER 31, 1997 AND 1998
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 25
Union Atlantic LC
Consolidated Financial Statements
Years ended December 31, 1997 and 1998
CONTENTS
Report of Independent Auditors.............................................1
Audited Financial Statements
Consolidated Balance Sheets................................................2
Consolidated Statements of Income .........................................3
Consolidated Statements of Partners' Equity................................4
Consolidated Statements of Cash Flows......................................5
Notes to Consolidated Financial Statements.................................6
<PAGE> 26
Report of Independent Auditors
The Partners
Union Atlantic LC
We have audited the accompanying consolidated balance sheets of Union Atlantic
LC as of December 31, 1997 and 1998, and the related consolidated statements of
income, partners' equity, and cash flows for each of the two years in the period
ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Union Atlantic LC at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Atlanta, Georgia
December 15, 1999
1
<PAGE> 27
Union Atlantic LC
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30,
1997 1998 1999
---------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40,933 $ 5,561 $ 11,238
Accounts receivable 148,506 242,697 174,589
State income taxes receivable 4,987 7,312 7,312
Loan receivable, shareholders -- -- 2,150
Deferred income tax asset 1,925 -- --
---------------------------------------------------------------
Total current assets 196,351 255,570 195,289
Equipment, at cost -- 4,190 6,576
Less accumulated depreciation -- (582) (1,626)
---------------------------------------------------------------
-- 3,608 4,950
---------------------------------------------------------------
Total assets $196,351 $259,178 $200,239
===============================================================
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accrued expenses $ 26,450 $ 31,548 $ 5,546
Advance client costs 36,020 49,161 54,956
Deferred revenue 35,000 -- --
---------------------------------------------------------------
Total current liabilities 97,470 80,709 60,502
Partners' equity 98,881 178,469 139,737
---------------------------------------------------------------
Total liabilities and partners' equity $196,351 $259,178 $200,239
===============================================================
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE> 28
Union Atlantic LC
Consolidated Statements of Income
<TABLE>
<CAPTION>
NINE MONTH
YEARS ENDED PERIOD ENDED
DECEMBER 31 SEPTEMBER 30
1997 1998 1998 1999
----------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Success fees $ 122,085 $ 333,500 $ 333,500 $ --
Consulting fees 1,109,975 1,375,440 1,051,092 738,516
Management fees 66,576 -- -- --
----------------------------------------------------------------------
Total revenues 1,298,636 1,708,940 1,384,592 738,516
Cost and expenses:
General and administrative expenses 304,946 829,495 617,963 322,170
----------------------------------------------------------------------
Income before income taxes 993,690 879,445 766,629 416,346
Provision for state income taxes 8,198 1,925 1,925 --
----------------------------------------------------------------------
Net income $ 985,492 $ 877,520 $ 764,704 $ 416,346
======================================================================
Pro forma provision for federal income taxes $ 344,922 $ 307,132 $ 267,646 $ 145,721
----------------------------------------------------------------------
Pro forma net income $ 640,570 $ 570,338 $ 497,058 $ 270,625
======================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE> 29
Union Atlantic LC
Consolidated Statements of Partners' Equity
<TABLE>
<CAPTION>
BAYARD
GENESIS HIGHLANDS MANAGEMENT TOTAL PARTNERS'
PARTNERS GROUP SERVICES EQUITY
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at January 1, 1997 $ 17,487 $ 17,486 $ (3,555) $ 31,418
Net income 464,220 464,220 57,052 985,492
Distributions (385,043) (453,405) (41,412) (879,860)
Forgiveness of loan to partner -- (38,169) -- (38,169)
Adjustments (53,440) 53,440 -- --
----------------------------------------------------------------------------------------
Balances at December 31, 1997 43,224 43,572 12,085 98,881
Net income 416,510 416,510 44,500 877,520
Distributions (320,232) (432,500) (45,200) (797,932)
Adjustments (55,960) 55,960 -- --
----------------------------------------------------------------------------------------
Balances at December 31, 1998 83,542 83,542 11,385 178,469
Net income 208,173 208,173 -- 416,346
Distributions (227,539) (227,539) -- (455,078)
----------------------------------------------------------------------------------------
Balances at September 30, 1999 (unaudited) $ 64,176 $ 64,176 $ 11,385 $ 139,737
========================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE> 30
Union Atlantic LC
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31 SEPTEMBER 30
1997 1998 1998 1999
----------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 985,492 $ 877,520 $764,704 $ 416,346
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation -- 582 232 1,044
Changes in assets and liabilities:
Accounts receivable (88,533) (94,191) (166,195) 68,108
Loan receivable, shareholder -- -- -- (2,150)
Accrued expenses 15,034 5,098 30,145 (26,002)
Advance client costs 29,544 13,141 13,506 5,795
Deferred income tax asset (1,925) 1,925 1,925 --
Deferred revenue 35,000 (35,000) (35,000) --
Income taxes (19,202) (2,325) (2,325) --
----------------------------------------------------------------------
Net cash provided by operating activities 955,410 766,750 606,992 463,141
INVESTING ACTIVITIES
Purchases of equipment -- (4,190) (4,190) (2,386)
----------------------------------------------------------------------
Net cash used in investing activities -- (4,190) (4,190) (2,386)
FINANCING ACTIVITIES
Distributions to partners (1,016,311) (797,932) (622,632) (455,078)
----------------------------------------------------------------------
Net cash used in financing activities (1,016,311) (797,932) (622,632) (455,078)
Increase (Decrease) in cash and cash equivalents (60,901) (35,372) (19,830) 5,677
Cash at beginning of period 101,834 40,933 40,933 5,561
----------------------------------------------------------------------
Cash and cash equivalents at end of period $ 40,933 $ 5,561 $ 21,103 $ 11,238
======================================================================
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE> 31
Union Atlantic LC
Notes to Consolidated Financial Statements
December 31, 1997 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
DESCRIPTION OF BUSINESS
Union Atlantic LC (the "Company") was incorporated on August 1, 1996 as a
Florida limited liability company. The Company is owned equally by three
parties, Genesis Partners, the Highland Group, and Bayard Management Services,
all of whom have equal rights, preferences and privileges. In accordance with
the terms of the agreement, each member's liability shall be limited as set
forth in the Florida Limited Liability Company Act of Chapter 608 of the
Florida Statute. The Company specializes in the technology industry and has a
term which expires 100 years from the date of inception (August 1, 1996).
The Company 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. The shareholders of Genesis
Partners' and Highlands Group provide the services to the Company's clients. The
individuals are not employees of the Company and the Company's Operating
Agreement does not provide for compensation for such individuals. Accordingly,
all cash paid to the Company's shareholders has been reflected as distributions
in the Company's financial statements.
As described in the Company's Operating Agreement, all fees and related expenses
associated with the Company's performance of consulting services are split
evenly between Genesis Partners and the Highland Group and all fees and related
expenses associated with the Company's receipt of success fees is split evenly
between all three partners. The Company frequently makes distributions to its
partners based on cash flow availability. These distributions are 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 Operating Agreement, the Company periodically makes non-cash
adjustments to the equity accounts, upon the consent of the partners.
The Company's subsidiary, Union Atlantic Management Ltd., manages an offshore
venture capital fund, which is owned partially by the shareholders of the
Company. Union Atlantic Management Ltd. has earned $66,576 in management fees
from the fund, which is reflected as management fee revenue on the Company's
statement of income.
6
<PAGE> 32
Union Atlantic LC
Notes to Consolidated Financial Statements (continued)
December 31, 1997 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
REVENUE RECOGNITION
The Company 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 an agreement. Success fees are agreed upon percentages based on
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. The Company does not require collateral from its customers.
The Company 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, 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 years ended December 31, 1997 and
1998, the Company received equity investments from five and three companies,
respectively. Due to the factors indicated above, no revenue was recognized in
connection with the receipt of equity instruments in the years ended December
31, 1997 and 1998. Upon receipt of such equity instruments all such instruments
are immediately distributed to the partners, in accordance with the distribution
terms of the Operating Agreement
For equity instruments and warrants received in public companies, the Company
recognizes revenue equal to the market price on the date of receipt, discounted
for any defined restrictions on the equity instruments or warrants. No revenue
has been recognized during the years ended December 31, 1997 and 1998.
7
<PAGE> 33
Union Atlantic LC
Notes to Consolidated Financial Statements (continued)
December 31, 1997 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
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 a maturity
of three months or less when purchased.
ADVERTISING COSTS
Advertising costs are expensed in the period incurred. Total advertising expense
amounted to $11,016 and $3,602 for the years ended December 31, 1997 and 1998,
respectively.
FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, which includes cash and
accounts receivable, approximates their carrying values.
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and accounts receivable. The Company places its
cash with high quality financial institutions.
8
<PAGE> 34
Union Atlantic LC
Notes to Consolidated Financial Statements (continued)
December 31, 1997 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)
EQUIPMENT
Equipment is stated on the basis of cost less accumulated depreciation and
consists primarily of computer equipment. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, 3 years, for
financial reporting purposes.
INTERIM STATEMENTS
The interim financial data for the nine months ended September 30, 1998 and 1999
is unaudited; however, in the opinion of management, the interim data includes
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair statement of the results of operations for the interim periods, on a
consistent basis.
INCOME TAXES
The Company is a Florida limited liability company and reports income for
federal income tax purposes as a partnership under the Internal Revenue Code. As
a result, the individual partners are 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 basis and the financial reporting basis of certain
assets and liabilities. During 1998, the state of Florida changed its laws to
recognize limited liability company status. Thus, the Company eliminated its
deferred income taxes and recognized them in the statements of income. The
partners are now individually responsible for state income taxes.
The accompanying financial statements reflects an additional provision for
federal taxes on a pro forma basis as if the Company were liable for federal
taxes as a taxable entity for the years ended December 31, 1997 and 1998.
9
<PAGE> 35
Union Atlantic LC
Notes to Consolidated Financial Statements (continued)
December 31, 1997 and 1998
2. PARTNER'S EQUITY
During fiscal 1996, the Company loaned a shareholder $38,169. During 1997, the
Company forgave the outstanding loan and treated it as a distribution of
capital.
3. ADVANCED CLIENT COSTS
As part of its operations, the Company'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.
4. INCOME TAXES
Deferred income taxes reflect the net state tax effect of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and amounts used for income taxes through December 31, 1997.
The Company's deferred income taxes consist of deferred revenue and totals
$1,925 for the year ended December 31, 1997. As discussed in Note 1, the Florida
law changed regarding limited liability companies and all state income taxes
became the responsibility of the partners, individually. Thus, the Company did
not report deferred income taxes for the year ended December 31, 1998.
The provision for income taxes consisted of the following:
YEARS ENDED DECEMBER 31,
1997 1998
-------------------------------------------
State
Current $ 10,123 $ --
Deferred (1,925) 1,925
-------------------------------------------
Total $ 8,198 $1,925
===========================================
10
<PAGE> 36
Union Atlantic LC
Notes to Consolidated Financial Statements (continued)
December 31, 1997 and 1998
5. YEAR 2000 (UNAUDITED)
The year 2000 problem, which is common in most businesses, concerns the
inability of computer systems and devices to properly recognize and process
date-sensitive information when the year changes to 2000. The Company is a
management consulting group that is not dependent on computer software and
hardware. However, the Company is dependent on the ability of the customers to
address the Year 2000 problem. Although the partners believe their clients to be
Year 2000 compliant, they have not performed any specific reviews or incurred
any costs and do not anticipate doing so in order to evaluate the compliance of
customers. Further, the Company has not established a contingency plan in case
it is impacted. Thus, the Year 2000 problem could have a material adverse impact
on the Company.
6. SUBSEQUENT EVENT
In February 1999, the Company received 30,000 unregistered common shares in a
public company to satisfy a receivable outstanding as of December 31, 1998. The
shares received had a value in excess of the outstanding receivable. As such,
the Company recognized additional revenue of approximately $17,000 for the nine
month period ended September 30, 1999. All shares received were immediately
distributed to the partners, in accordance with the Operating Agreement.
On November 8, 1999, Peachtree FiberOptics, Inc. ("Peachtree"), a public
company, entered into a share exchange agreement with the Company and VFinance
Holdings, Inc., a company under common control. As a result, Peachtree received
all capital stock outstanding for the Company and VFinance Holdings, Inc. in
exchange for approximately 84.4% of the total outstanding common stock of
Peachtree. The managing agent for Peachtree is an executive officer and
principal shareholder of the Company. Further, Peachtree and the Company also
have in common certain members of management and ownership.
As indicated in the Year 2000 footnote above, the Company believed the Year 2000
problem could have a material adverse impact on the Company. While it appears
the
11
<PAGE> 37
Union Atlantic LC
Notes to Consolidated Financial Statements (continued)
December 31, 1997 and 1998
6. SUBSEQUENT EVENT (CONTINUED)
information systems the Company is reliant upon correctly accommodated the Year
2000 date change, further problems may linger.
12
