<PAGE>
- - - - --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K/A No. 1
---------------------
Amending Item Number 7*
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 22, 1999
-----------------------------------
EASTBROKERS INTERNATIONAL
INCORPORATED
(Exact Name Of Registrant As Specified In Its Charter)
-----------------------------------
DELAWARE 0-26202 52-1807562
(State Or Other Jurisdiction Of (Commission File Number) (IRS Employer
Incorporation Or Organization) Identification No.)
6000 Fairview Road, Suite 1410, Charlotte, North Carolina 28210
(Address of principal executive offices) (Zip Code)
(704) 643-8220
(Registrant's telephone number, including area code)
Eastbrokers International Incorporated
(Former Name or Former Address, if Changed Since Last Report)
* The Form 8-K dated November 22, 1999 is being amended to include the
financial statements of the business acquired and pro forma financial
information.
- - - - --------------------------------------------------------------------------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
--------------------------------------------
The JB Sutton Group, LLC:
Financial Statements at and for the years ended October 31,
1999, 1998, and 1997.
(b) PRO FORMA FINANCIAL INFORMATION.
-------------------------------
The JB Sutton Group, LLC:
Pro Forma Statement of Financial Condition and Statement of
Operations as of and for the year ended March 31, 1999
(unaudited).
Pro Forma Statement of Financial Condition and Statement of
Operations as of and for the six month period ended September
30, 1999 (unaudited).
(c) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION.
------------------------------------------------------
GLOBAL CAPITAL PARTNERS, INC.:
-----------------------------
Pro Forma Condensed Consolidated Financial Statements as of
and for the year ended March 31, 1999 (unaudited).
Pro Forma Condensed Consolidated Financial Statements as of
and for the six month period ended September 30, 1999
(unaudited).
(d) EXHIBITS.
--------
The following exhibits are filed with this Form 8-K:
2.1 LLC Interest Purchase Agreement, dated as of
November 22, 1999, by and among Eastbrokers
International Incorporated, The JB Sutton
Group, LLC, Mr. Peter Cohen and each of the
Members and Special Members of The JB Sutton
Group, LLC and Mr. Peter Cohen, incorporated by
reference to the Current Report on Form 8-K
dated November 22, 1999 (File No. 0-26202).
- 2 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GLOBAL CAPITAL PARTNERS, INC.
(Registrant)
By: /s/ Kevin D. McNeil
----------------------------------------------
Kevin D. McNeil
Executive Vice President, Treasurer, Secretary,
and Chief Financial Officer
Dated: February 7, 2000
- 3 -
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 LLC Interest Purchase Agreement, dated as of November 22,
1999, by and among Eastbrokers International Incorporated,
The JB Sutton Group, LLC, Mr. Peter Cohen and each of the
Members and Special Members of The JB Sutton Group, LLC and
Mr. Peter Cohen, incorporated by reference to the Current
Report on Form 8-K dated November 22, 1999 (File No.
0-26202).
- 4 -
<PAGE>
Item 7(a)
THE J.B. SUTTON GROUP, LLC
TABLE OF CONTENTS
Independent Auditors' Report 6
Statement of Financial Condition 7
Statement of Operations 8
Statement of Changes in Members' Equity 9
Statement of Cash Flows 10
Notes to Financial Statements 8-11
- 5 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members
The J. B. Sutton Group, LLC
We have audited the accompanying statement of financial condition of The J.B.
Sutton Group, LLC as of October 31, 1999, and the related statements of
operations, changes in members' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The J.B. Sutton Group, LLC as
of October 31, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
As discussed in Note 5 to the financial statements, a material portion of the
Company's transactions are processed by its clearing broker who is an external
counterparty. The Company has contacted its clearing broker, as well as other
suppliers, to assess their compliance and remediation efforts with respect to
the so-called "Year 2000" problem and the Company's exposure to them. The
ultimate success or failure of the corrective plan and the extent of such
success or failure cannot presently be determined. Accordingly, the financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
SPICER, JEFFRIES & CO.
Denver, Colorado
December 3, 1999
- 6 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF FINANCIAL CONDITION
OCTOBER 31, 1999
----------------
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Cash and cash equivalents $ 34 134
Receivable from clearing broker (Note 3) 101 674
Securities owned, at market value (Notes 1 and 3) 1 438 958
Furniture and equipment, at cost, net of accumulated
depreciation of $153,699 (Note 1) 120 776
Other 326 269
--------------
$ 2 021 811
==============
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
LIABILITIES:
Accounts payable $ 499 968
Accrued expenses 193 289
Notes payable (Note 4) 120 000
Securities sold, but not yet purchased, at market value 18 901
--------------
TOTAL LIABILITIES 832 158
--------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
MEMBERS' EQUITY (NOTE 2) 1 189 653
--------------
$ 2 021 811
==============
</TABLE>
The accompanying notes are an integral part of this statement.
- 7 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
---------------------------
<TABLE>
<CAPTION>
<S> <C>
REVENUE:
Commissions $ 4 730 904
Trading profit, net 4 265 902
Investment banking 489 270
Other 10 258
--------------
TOTAL REVENUE 9 496 334
--------------
EXPENSES:
Commissions, salaries and related costs 5 409 446
Clearing and related costs 1 388 668
Occupancy costs 554 000
Selling expenses 399 816
Office expenses 211 108
General and administrative 266 840
--------------
TOTAL EXPENSES 8 229 878
--------------
NET INCOME $ 1 266 456
==============
</TABLE>
The accompanying notes are an integral part of this statement.
- 8 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
YEAR ENDED OCTOBER 31, 1999
---------------------------
<TABLE>
<CAPTION>
<S> <C>
BALANCE, OCTOBER 31, 1998 $ 975 658
Capital contributions 200 000
Capital withdrawals (1 252 461)
Net income 1 266 456
--------------
BALANCE, OCTOBER 31, 1999 $ 1 189 653
==============
</TABLE>
The accompanying notes are an integral part of this statement.
- 9 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 1999
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1 266 456
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation, amortization and abandonment
of leasehold improvements 66 931
Write off of deposit and deferred rent
relating to termination of office lease 54 088
Decrease in receivable from clearing broker 172 797
Increase in securities owned, at market value (748 412)
Increase in other assets (94 108)
Decrease in securities sold, but not yet purchased (11 959)
Increase in accounts payable and accrued expenses 339 090
--------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1 044 883
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 200 000
Capital withdrawals (1 252 461)
--------------
NET CASH USED IN FINANCING ACTIVITIES (1 052 461)
--------------
DECREASE IN CASH AND CASH EQUIVALENTS (7 578)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 41 712
--------------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 34 134
==============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ 1 981
==============
SUPPLEMENTAL DISCLOSURE OF NON CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of notes payable in connection with
termination of office lease $ 120 000
==============
</TABLE>
The accompanying notes are an integral part of this statement.
- 10 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
The J.B. Sutton Group, LLC ("Company") was formed June 21, 1996 and will
continue until June 30, 2030, unless terminated sooner as provided for in the
Operating Agreement. The Company is a registered broker-dealer in securities
under the provisions of the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. The Company generates
retail commissions and engages in investment banking activities and market
making activities.
The Limited Liability Company consists of six members. The operating agreement
provides that each member share in profits and losses pro rata based on their
percentage interests in the Company on each day of the Company's taxable year.
The Company, under Rule 15c3-3(k)(2)(ii), is exempt from the reserve and
possession or control requirements of Rule 15c3-3 of the Securities and Exchange
Commission. The Company does not carry or clear customer accounts. Accordingly,
all customer transactions are executed and cleared on behalf of the Company by
its clearing broker on a fully disclosed basis. The Company's agreement with its
clearing broker provides that as clearing broker, that firm will make and keep
such records of the transactions effected and cleared in the customer accounts
as are customarily made and kept by a clearing broker pursuant to the
requirements of Rules 17a-3 and 17a-4 of the Securities and Exchange Act of 1934
(the Act). It also performs all services customarily incident thereon, including
the preparation and distribution of customer's confirmations and statements and
maintenance margin requirements under the Act and the rules of the Self
Regulatory Organizations of which the Company is a member.
SECURITIES TRANSACTIONS
The Company records securities transactions and related revenue and expenses on
a settlement date basis, which does not differ materially from trade date.
Securities owned or sold, but not yet purchased by the Company (substantially
common stock) are recorded at market value and related changes in market value
are reflected in income.
CASH EQUIVALENTS
For purposes of cash flows, the Company considers all liquid debt instruments
with a maturity of three months or less to be cash equivalents.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture and equipment are carried at cost and are depreciated using the
straight-line method over their estimated useful lives of five to seven years.
Leasehold improvements were amortized over the lesser of their economic useful
lives or the term of the lease.
- 11 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
INCOME TAXES
The Company is not subject to federal and state income taxes. Each member
reports his/her distributive share of income, gain, loss, deductions or credits
on his/her individual income tax return.
INVESTMENT BANKING
Investment banking income includes fees earned for placement services which are
recognized at the time the placement is completed.
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 reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - NET CAPITAL REQUIREMENTS
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities Exchange
Act of 1934, the Company is required to maintain a minimum net capital, as
defined under such provisions. At October 31, 1999, the Company had net capital
and net capital requirements of $396,673 and $100,000, respectively. The
Company's net capital ratio (aggregate indebtedness to net capital) was 2.05 to
1. According to Rule 15c3-1, the Company's net capital ratio shall not exceed 15
to 1.
NOTE 3 - CLEARING AGREEMENT
The Company has an agreement with its clearing broker with liens upon all of the
Company's property held by it including, but not limited to, securites, monies
and receivables. These liens secure the Company's liabilities and obligations to
the clearing broker.
- 12 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - NOTES PAYABLE
In connection with the termination of its office lease, the Company issued the
following notes payable:
Non-interest bearing note payable, payable in monthly
installments of $15,000, due February 1, 2000 $ 60,000
Non-interest bearing note payable, payable in monthly
installments of $5,000, due February 1, 2001 60,000
----------
$ 120,000
==========
NOTE 5 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK,
COMMITMENTS AND CONTINGENCIES
The Company leases its premises and office equipment from unrelated parties
under non-cancellable operating leases expiring through 2005. Approximate future
minimum rental payments as of October 31, 1999 are as follows:
YEAR ENDED OCTOBER 31, AMOUNT
---------------------- ------------
2000 $ 278,000
2001 368,000
2002 379,000
2003 370,000
2004 368,000
Thereafter 445,000
------------
Total $ 2,208,000
============
Total rental expense for the year ended October 31, 1999 was approximately
$489,000.
In the normal course of business, the Company's client activities ("clients")
through its clearing broker involve the execution, settlement and financing of
various client securities transactions. These activities may expose the Company
to off-balance sheet risk. In the event the client fails to satisfy its
obligations, the Company may be required to purchase or sell financial
instruments at prevailing market prices in order to fulfill the client's
obligations.
In the Company's trading activities, the Company has purchased securities for
its own account and has sold securities that it has not purchased and may incur
losses if the market value of the securities changes subsequent to October 31,
1999.
- 13 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK,
COMMITMENTS AND CONTINGENCIES (CONCLUDED)
The Company's financial instruments, including cash and cash equivalents and
receivables, are carried at amounts which approximate fair value. Securities
owned and securities sold, but not yet purchased, are valued at market value
using quoted market prices. Payables and other liabilities are carried at
amounts which approximate fair value.
In addition, the Company bears the risk of financial failure by its clearing
broker. If the clearing broker should cease doing business, the Company's
receivable from this clearing broker could be subject to forfeiture.
The Company is a defendant, or otherwise has possible exposure, in various legal
actions arising out of its activities as a broker-dealer. Several of these
actions claim damages which are material to the financial statements taken as a
whole. While predicting the outcome of litigation is inherently very difficult,
and the ultimate resolution, range of loss and impact on operating results
cannot be reliably estimated, management believes, based upon its understanding
of the facts and the advice of applicable legal counsel, that is has meritorious
defenses for all such actions and it intends to defend each of these vigorously,
and that resolution of these actions will not have a materially adverse effect
on the Company's financial condition.
A material portion of the Company's transactions are processed by its clearing
broker who is an external counterparty. The Company has contacted its clearing
broker, as well as other suppliers, to assess their compliance and remediation
efforts with respect to the so-called "Year 2000" problem and the Company's
exposure to them. The ultimate success or failure of the corrective plan and the
extent of such success or failure cannot presently be determined.
NOTE 6 - SUBSEQUENT EVENT
On November 22, 1999, the Company was acquired by Eastbrokers International
Incorporated and the Company became a 100% owned subsidiary of such entity.
- 14 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
CONTENTS
================================================================================
INDEPENDENT AUDITORS' REPORT 16
FINANCIAL STATEMENTS:
Statement of financial condition 17
Statement of loss 18
Statement of changes in members' equity 19
Statement of cash flows 20
Summary of business and significant accounting policies 21-22
Notes to financial statements 23-24
SUPPLEMENTAL SCHEDULE:
Computation of net capital pursuant to Rule 15c3-1 and
Statement pursuant to Rule 17a-5(d)(4) 26
- 15 -
<PAGE>
BDO BDO SEIDMAN, LLP 330 Madison Avenue
Accountants and Consultants New York, New York 10017
Telephone: (212) 885-8000
Fax: (212) 697-1299
INDEPENDENT AUDITORS' REPORT
The Members
The J. B. Sutton Group, LLC
Great Neck, New York
We have audited the accompanying statement of financial condition of The J. B.
Sutton Group, LLC as of October 31, 1998, and the related statements of loss,
changes in members' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test bases, evidence supporting
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 The J.B. Sutton Group, LLC as
of October 31,1998, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information contained in the
supplemental schedules listed in the accompanying index is presented for
purposes of additional analysis and is not a required part of the basic
financial statements, but is supplemental information required by Rule 17a-5 of
the Securities and Exchange Commission. Such information has been subjected to
the auditing procedures applied in our audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
BDO SEIDMAN, LLP
December 17, 1998
- 16 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF FINANCIAL CONDITION
================================================================================
<TABLE>
<CAPTION>
<S> <C>
OCTOBER 31, 1998
- - - - --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 41,712
Receivable from clearing broker (Note 1) 274,471
Securities owned, primarily common stock
at market value (Note 1) 690,546
Furniture, equipment and leasehold improvements (net of
accumulated depreciation and amortization of $109,589) 187,707
Other assets 307,063
- - - - --------------------------------------------------------------------------------
$ 1,501,499
================================================================================
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES:
Securities sold, primarily common stock but not yet
purchased, at market value (Note 3) $ 30,860
Accrued expenses and other liabilities 494,981
- - - - --------------------------------------------------------------------------------
Total liabilities 525,841
COMMITMENTS AND CONTINGENCIES (NOTES 2 AND 3)
MEMBERS' EQUITY (NOTE 2) 975,658
- - - - --------------------------------------------------------------------------------
$ 1,501,499
================================================================================
SEE ACCOMPANYING SUMMARY OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 17 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF LOSS
================================================================================
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED OCTOBER 31, 1998
- - - - --------------------------------------------------------------------------------
REVENUES:
Trading gains on principal transactions
(including markups and markdowns) $ 4,926,851
Commissions 674,948
Investment banking 568,833
Interest 8,039
- - - - --------------------------------------------------------------------------------
6,178,671
- - - - --------------------------------------------------------------------------------
EXPENSES:
Employee compensation and benefits 4,908,282
Clearance charges 1,029,040
Occupancy costs 608,062
Selling expenses 518,801
Office expenses 362,440
Other operating and administrative expenses 308,213
- - - - --------------------------------------------------------------------------------
7,734,838
- - - - --------------------------------------------------------------------------------
NET LOSS $ (1,556,167)
================================================================================
SEE ACCOMPANYING SUMMARY OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 18 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED OCTOBER 31, 1998
- - - - --------------------------------------------------------------------------------
BALANCE, OCTOBER 31 1997 $ 4,319,825
Capital withdrawals (1,888,000)
Capital contributions 100,000
Net loss (1,556,167)
- - - - --------------------------------------------------------------------------------
BALANCE, OCTOBER 31 1998 $ 975,658
================================================================================
SEE ACCOMPANYING SUMMARY OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 19 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED OCTOBER 31, 1998
- - - - --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,556,167)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 39,050
Decrease in:
Receivable from clearing broker 2,300,192
Securities owned 3,396,839
Other assets 141,422
Decrease in:
Securities sold, but not yet purchased (2,076,295)
Accrued expenses and other liabilities (545,050)
- - - - --------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,699,991
- - - - --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 100,000
Capital withdrawals (1,888,000)
- - - - --------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (1,788,000)
- - - - --------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (88,009)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 129,721
- - - - --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 41,712
================================================================================
SEE ACCOMPANYING SUMMARY OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 20 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
================================================================================
BUSINESS The J. B. Sutton Group, LLC ("Company") is a registered
broker-dealer in securities under the provisions of
the Securities Exchange Act of 1934 and is a member
of the National Association of Securities Dealers, Inc.
The Company generates retail commissions and engages
in investment banking activities or and market making
activities.
The Company has an agreement ("Agreement") with a
clearing broker ("Broker") to clear securities
transactions, carry customers' accounts on a fully
disclosed basis and perform certain recordkeeping
functions. Accordingly, the Company operates under the
exemptive provisions of Securities and Exchange
Commission (the "SEC") Rule 15c3-3(k)(2)(ii).
SECURITIES TRANSACTIONS Securities transactions and related commission revenues
and expenses are recorded on a settlement date basis,
which does not materially differ from a trade date
basis. Securities listed on a national exchange are
valued at the last sales price on the date of valuation
Securities not listed on a national exchange are valued
at the last sales price on the date of valuation or, if
such price is not available, at the bid price for
securities owned and the ask price for securities
sold but not yet purchased at the close of business.
Securities owned and securities sold but not yet
purchased consist principally of common stock.
INVESTMENT BANKING Investment banking income includes fees earned for
placement services which are recognized at the time the
placement is completed.
FURNITURE, EQUIPMENT Furniture and equipment are carried at cost and are
AND LEASEHOLD depreciated using the straight-line method over their
IMPROVEMENTS estimated useful lives of five to seven years.Leasehold
improvements are amortized over the lesser of their
economic useful lives or the term of the lease.
- 21 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
================================================================================
CASH EQUIVALENTS The Company considers all liquid debt instruments with
an initial maturity of three months or less to be cash
equivalents.
INCOME TAXES There is no provision for Federal, state and local
income taxes required since the members report their
share of Company income or loss on their personal
income tax returns.
CASH EQUIVALENTS The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
- 22 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. CLEARING AGREEMENT The Agreement provides the Broker with liens upon
all of the Company's property held by it including,
but not limited to, securities, monies and
receivables. These liens secure the Company's
liabilities and obligations to the Broker.
2. NET CAPITAL REQUIREMENTS The Company is subject to the SEC's uniform Net
Capital Rule, which requires the maintenance of
minimum regulatory net capital and requires that
the ratio of aggregate indebtedness to regulatory
net capital, both as defined, shall not exceed 15
to 1. As of October 31, 1998, the Company has
regulatory net capital of $303,928 and a minimum
regulatory net capital requirement of $100,000. The
Company's ratio of aggregate indebtedness to
regulatory net capital is 1.6 to 1 at October 31,
1998.
3. COMMITMENTS AND CUSTOMER TRANSACTIONS
CONTINGENCIES
In the normal course of business, the Company
executes, as agent, securities transactions on
behalf of its customers. If the agency transactions
do not settle because of failure to perform by
either the customer or the counterparty, the
Company may be obligated to discharge the
obligation of the nonperforming party and, as a
result, is subject to market risk if the market
value of the securities is different from the
contract amount of the transactions.
The Company does not anticipate nonperformance by
customers or counterparties in the above situations
The Company's policy is to monitor its market
exposure and counterparty risk. In addition, the
Company has a policy of reviewing, as considered
necessary, the credit standing of each counterparty
and customer with which it conducts business.
SECURITIES SOLD, BUT NOT YET PURCHASED
The Company has sold securities that it has not yet
purchased and it will, therefore, be obligated to
purchase such securities at a future date. The
Company has recorded this obligation in the
financial statements at the October 31, 1998 market
value of the securities. The Company is subject to
market risk if the market value of the securities
increases subsequent to October 31, 1998.
- 23 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
================================================================================
OPERATING LEASE
The Company leases its premises under an operating
lease expiring on June 1, 2004. Rent expense for
the year ended October 31, 1998 was $425,994.
Future minimum rental payments are approximately as
follows:
Minimum rental
Fiscal payments
---------------------------------------------------
1999 $ 439,000
2000 452,000
2001 465,000
2002 479,000
2003 494,000
Thereafter 379,000
---------------------------------------------------
Total $2,708,000
===================================================
LITIGATION
The Company is a defendant, or otherwise has
possible exposure, in various legal actions arising
out of its activities as a broker-dealer. Several
of these actions claim damages which are material
to the financial statements taken as a whole. While
predicting the outcome of litigation is inherently
very difficult, and the ultimate resolution, range
of loss and impact on operating results cannot be
reliably estimated, management believes, based upon
its understanding of the facts and the advice of
applicable legal counsel, that it has meritorious
defenses for all such actions and it intends to
defend each of these vigorously, and that
resolution of these actions will not have a
materially adverse effect on the Company's
financial condition.
- 24 -
<PAGE>
SUPPLEMENTAL MATERIAL
- 25 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
COMPUTATION OF NET CAPITAL PURSUANT TO RULE 15c3-1
AND STATEMENT PURSUANT TO RULE 17a-5(d)(4)
================================================================================
OCTOBER 31, 1998
- - - - --------------------------------------------------------------------------------
COMPUTATION OF NET CAPITAL
Total members' equity from statement of financial condition $ 975,658
- - - - --------------------------------------------------------------------------------
Less: Nonallowable assets:
Furniture, equipment and leasehold improvements 187,707
Other assets 307,063
- - - - --------------------------------------------------------------------------------
Total nonallowable assets 494,770
- - - - --------------------------------------------------------------------------------
Net capital before haircuts on securities positions 480,888
Haircuts on securities positions and blockage and
undue concentration charges 176,960
- - - - --------------------------------------------------------------------------------
NET CAPITAL $ 303,928
================================================================================
COMPUTATION OF BASIC NET CAPITAL REQUIREMENT
Minimum net capital required, 6-2/3% of $494,981,
pursuant to Rule 15c3-1 $ 33,000
================================================================================
Minimum dollar net capital requirements of reporting
broker/dealer $ 100,000
================================================================================
Net capital requirement $ 100,000
================================================================================
Excess net capital $ 203,928
================================================================================
COMPUTATION OF AGGREGATE INDEBTEDNESS
Accured expenses and other liabilities $ 494,981
================================================================================
Percentage of aggregate indebtedness to net capital 1.63
================================================================================
STATEMENT PURSUANT TO RULE 17a-5(d)(4)
A reconciliation with the Company's computation of net capital a reported in the
unaudited Part II A of Form X-17A-5 was not prepared as there are no material
differences between the Company's computation of net capital and the computation
contained herein.
- 26 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
CONTENTS
================================================================================
INDEPENDENT AUDITORS' REPORT 28
FINANCIAL STATEMENTS:
Statement of financial condition 29
Statement of operations 30
Statement of changes in members' equity 31
Statement of cash flows 32
Notes to financial statements 33-36
SUPPLEMENTAL SCHEDULE:
Computation of net capital pursuant to Rule 15c3-1 and
Statement pursuant to Rule 17a-5(d)(4) 38
- 27 -
<PAGE>
BDO BDO SEIDMAN, LLP 330 Madison Avenue
Accountants and Consultants New York, New York 10017
Telephone: (212) 885-8000
Fax: (212) 697-1299
INDEPENDENT AUDITORS' REPORT
The Members
The J. B. Sutton Group, LLC
Great Neck, New York
We have audited the accompanying statement of financial condition of The J. B.
Sutton Group, LLC as of October 31, 1997, and the related statements of
operations, changes in members' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test bases, evidence supporting
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 The J.B. Sutton Group, LLC as
of October 31,1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information contained in the
supplemental schedules listed in the accompanying index is presented for
purposes of additional analysis and is not a required part of the basic
financial statements, but is supplemental information required by Rule 17a-5 of
the Securities and Exchange Commission. Such information has been subjected to
the auditing procedures applied in our audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
BDO SEIDMAN, LLP
December 15, 1997
- 28 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF FINANCIAL CONDITION
================================================================================
<TABLE>
<CAPTION>
<S> <C>
OCTOBER 31, 1997
- - - - --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 129,721
Receivable from clearing broker (Note 2) 2,574,663
Securities owned, at market value (Note 2) 4,087,385
Furniture, equipment and leasehold improvements (net of
accumulated depreciation and amortization of $70,539) 226,757
Other assets 448,485
- - - - --------------------------------------------------------------------------------
$ 7,467,011
================================================================================
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES:
Securities sold, but not yet purchased,
at market value (Note 4) $ 2,107,155
Accrued expenses and other liabilities 1,040,031
- - - - --------------------------------------------------------------------------------
TOTAL LIABILITIES 3,147,186
COMMITMENTS AND CONTINGENCIES (NOTES 3 AND 4)
MEMBERS' EQUITY (NOTE 3) 4,319,825
- - - - --------------------------------------------------------------------------------
$ 7,467,011
================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 29 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED OCTOBER 31, 1997
- - - - --------------------------------------------------------------------------------
REVENUES:
Trading gains on principal transactions
(including markups and markdowns) $ 10,115,994
Commissions 509,744
Interest 22,002
- - - - --------------------------------------------------------------------------------
10,647,740
- - - - --------------------------------------------------------------------------------
EXPENSES:
Employee compensation and benefits 4,509,270
Clearance charges 618,955
Selling expenses 566,623
Occupancy costs 479,542
Other operating and administrative expenses 277,845
Office expenses 186,915
- - - - --------------------------------------------------------------------------------
6,639,150
- - - - --------------------------------------------------------------------------------
NET INCOME $ 4,008,590
================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 30 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED OCTOBER 31, 1997
- - - - --------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1996 $ 2,143,922
Capital withdrawals (1,872,687)
Capital contributions 40,000
Net income 4,008,590
- - - - --------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1997 $ 4,319,825
================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 31 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
STATEMENT OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED OCTOBER 31, 1997
- - - - --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,008,590
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 42,600
Loss on write-off of fixed assets 50,392
Increase in:
Receivable from clearing broker (774,479)
Securities owned (3,954,477)
Other assets (231,895)
Increase in:
Securities sold, but not yet purchased 1,931,863
Accrued expenses and other liabilities 515,345
- - - - --------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,587,939
- - - - --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture, equipment and leasehold improvements (58,569)
- - - - --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 40,000
Capital withdrawals (1,872,687)
- - - - --------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (1,832,687)
- - - - --------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (303,317)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 433,038
- - - - --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 129,721
================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
- 32 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. BUSINESS AND BUSINESS
SUMMARY OF
ACCOUNTING POLICIES The J. B. Sutton Group, LLC (the "Company") is a
registered broker-dealer in securities under the
provisions of the Securities Exchange Act of 1934
and is a member of the National Association of
Securities Dealers, Inc. The Company generates
retail commissions and engages in market making
activities.
The Company has an agreement (the "Agreement") with
a clearing broker (the "Broker") to clear
securities transactions, carry customers' accounts
on a fully disclosed basis and perform certain
recordkeeping functions. Accordingly, the Company
operates under the exemptive provisions of
Securities and Exchange Commission (the "SEC") Rule
15c3-3(k)(2)(ii).
SECURITIES TRANSACTIONS
Securities transactions and related commission
revenues and expenses are recorded on a settlement
date basis, which does not materially differ from a
trade date basis. Securities listed on a national
exchange are valued at the last sales price on the
date of valuation. Securities not listed on a
national exchange are valued at the last sales
price on the date of valuation or, if such price is
not available, at the bid price for securities
owned and the ask price for securities sold but not
yet purchased at the close of business. Securities
owned and securities sold but not yet purchased
consist principally of common stock.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture and equipment are carried at cost and are
depreciated using the straight-line method over
their estimated useful lives of five to seven years
Leasehold improvements are amortized over the
lesser of their economic useful lives or the term
of the lease.
CASH EQUIVALENTS
The Company considers all liquid debt instruments
with an initial maturity of three months or less to
be cash equivalents.
- 33 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
================================================================================
INCOME TAXES
There is no provision for Federal, state and local
income taxes required since the members report
their share of Company income or loss on their
personal income tax returns.
USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements
and the reported amounts of revenues and expenses
during the reporting period. Actual results could
differ from those estimates.
2. CLEARING AGREEMENT The Agreement provides the Broker with liens upon
all of the Company's property held by it including,
but not limited to, securities, monies and
receivables. These liens secure the Company's
liabilities and obligations to the Broker.
3. NET CAPITAL The Company is subject to the SEC's uniform Net
REQUIREMENTS Capital Rule, which requires the maintenance of
minimum regulatory net capital and requires that
the ratio of aggregate indebtedness to regulatory
net capital, both as defined, shall not exceed 15
to 1. As of October 31, 1997, the Company has
regulatory net capital of $1,493,722 and a minimum
regulatory net capital requirement of $100,000. The
Company's ratio of aggregate indebtedness to net
capital is .70 to 1.
- 34 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
================================================================================
4. COMMITMENTS AND CUSTOMER TRANSACTIONS
CONTINGENCIES
In the normal course of business, the Company
executes, as agent, securities transactions on
behalf of its customers. If the agency transactions
do not settle because of failure to perform by
either the customer or the counterparty, the
Company may be obligated to discharge the
obligation of the nonperforming party and, as a
result, is subject to market risk if the market
value of the securities is different from the
contract amount of the transactions.
The Company does not anticipate nonperformance by
customers or counterparties in the above situations
The Company's policy is to monitor its market
exposure and counterparty risk. In addition, the
Company has a policy of reviewing, as considered
necessary, the credit standing of each counterparty
and customer with which it conducts business.
SECURITIES SOLD, BUT NOT YET PURCHASED
The Company has sold securities that it has not yet
purchased and it will, therefore, be obligated to
purchase such securities at a future date. The
Company has recorded this obligation in the
financial statements at the October 31, 1997 market
value of the securities. The Company is subject to
market risk if the market value of the securities
increases subsequent to October 31, 1997.
OPERATING LEASE
The Company leases its premises under an operating
lease expiring on June 1, 2004. Rent expense for
the year ended October 31, 1997 was $395,947.
- 35 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
================================================================================
Future minimum rental payments are approximately as
follows:
Minimum rental
FISCAL payments
---------------------------------------------------
1998 $ 425,994
1999 438,750
2000 451,930
2001 465,459
2002 479,445
Thereafter 872,489
---------------------------------------------------
Total $ 3,134,067
===================================================
LITIGATION
The Company is a defendant, or otherwise has
possible exposure, in various legal actions arising
out of its activities as a broker-dealer. Several
of these actions claim damages which are material
to the financial statements taken as a whole. While
predicting the outcome of litigation is inherently
very difficult, and the ultimate resolution, range
of loss and impact on operating results cannot be
reliably estimated, management believes, based upon
its understanding of the facts and the advice of
applicable legal counsel, that it has meritorious
defenses for all such actions and it intends to
defend each of these vigorously, and that
resolution of these actions will not have a
materially adverse effect on the Company's
financial condition.
- 36 -
<PAGE>
SUPPLEMENTAL MATERIAL
- 37 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
COMPUTATION OF NET CAPITAL PURSUANT TO RULE 15c3-1
AND STATEMENT PURSUANT TO RULE 17a-5(d)(4)
================================================================================
OCTOBER 31, 1997
- - - - --------------------------------------------------------------------------------
COMPUTATION OF NET CAPITAL
Total members' equity from statement of financial condition $ 4,319,825
- - - - --------------------------------------------------------------------------------
Less: Nonallowable assets:
Furniture, equipment and leasehold improvements 226,757
Other assets 448,485
- - - - --------------------------------------------------------------------------------
Total nonallowable assets 675,242
- - - - --------------------------------------------------------------------------------
Net capital before haircuts on securities positions 3,644,583
Haircuts on securities positions and blockage and
undue concentration charges 2,150,861
- - - - --------------------------------------------------------------------------------
NET CAPITAL $ 1,493,722
================================================================================
COMPUTATION OF BASIC NET CAPITAL REQUIREMENT
Minimum net capital required, 6-2/3% of $1,040,031,
pursuant to Rule 15c3-1 $ 69,335
================================================================================
Minimum dollar net capital requirements of reporting
broker/dealer $ 100,000
================================================================================
Net capital requirement $ 100,000
================================================================================
Excess net capital $ 1,393,722
================================================================================
COMPUTATION OF AGGREGATE INDEBTEDNESS
Accured expenses and other liabilities $ 1,040,031
================================================================================
Percentage of aggregate indebtedness to net capital 70%
================================================================================
STATEMENT PURSUANT TO RULE 17a-5(d)(4)
A reconciliation with the Company's computation of net capital a reported in the
unaudited Part II A of Form X-17A-5 was not prepared as there are no material
differences between the Company's computation of net capital and the computation
contained herein.
- 38 -
<PAGE>
Item 7(b)
THE J.B. SUTTON GROUP, LLC
PRO FORMA STATEMENT OF FINANCIAL CONDITION
MARCH 31, 1999
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 7,867
Receivable from clearing broker 420,485
Securities owned, at market value 1,015,331
Furniture and equipment, at cost,
net of accumulated depreciation 167,822
Other assets 172,558
--------------
$ 1,784,063
==============
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES:
Accounts payable $ 524,361
Accrued expenses 140,814
Securities sold, but not yet purchased, at market value 23,733
--------------
TOTAL LIABILITIES 688,908
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY 1,095,155
--------------
$ 1,784,063
==============
</TABLE>
- 39 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
REVENUE:
Commissions $ 3,062,177
Trading profit, net 3,760,503
Investment banking 367,450
--------------
TOTAL REVENUE 7,190,130
--------------
EXPENSES:
Commissions, salaries and related costs 4,396,965
Clearing and related costs 1,063,618
Occupancy costs 507,497
Selling expenses 414,031
Office expenses 214,135
General and administrative 111,985
--------------
TOTAL EXPENSES 6,708,231
--------------
NET INCOME $ 481,899
==============
</TABLE>
- 40 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
PRO FORMA STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 293,888
Receivable from clearing broker 1,102,921
Securities owned, at market value 1,019,366
Furniture and equipment, at cost,
net of accumulated depreciation 143,961
Other assets 249,920
--------------
$ 2,810,056
==============
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES:
Accounts payable $ 651,889
Accrued expenses 140,814
Securities sold, but not yet purchased, at market value 429,644
--------------
TOTAL LIABILITIES 1,222,347
--------------
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY 1,587,709
--------------
$ 2,810,056
==============
</TABLE>
- 41 -
<PAGE>
THE J.B. SUTTON GROUP, LLC
PRO FORMA STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
REVENUE:
Commissions $ 2,969,349
Trading profit, net 1,997,547
Investment banking 327,270
--------------
TOTAL REVENUE 5,294,166
--------------
EXPENSES:
Commissions, salaries and related costs 2,987,404
Clearing and related costs 761,814
Occupancy costs 257,787
Selling expenses 195,785
Office expenses 115,653
General and administrative 130,203
--------------
TOTAL EXPENSES 4,448,646
--------------
NET INCOME $ 845,520
==============
</TABLE>
- 42 -
<PAGE>
Item 7(c)
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GLOBAL CAPITAL THE JB SUTTON PRO FORMA PRO FORMA
PARTNERS, INC. GROUP, LLC ADJUSTMENT AS ADJUSTED
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
REVENUE
Commissions $ 14,246,465 $ 3,062,177 $ - $ 17,308,642
Trading profit, net 10,042,716 3,760,503 - 13,803,219
Investment banking 2,165,753 367,450 - 2,533,203
Gain on sale of subsidiary 1,312,057 - - 1,312,057
Other 5,184,489 - - 5,184,489
--------------- --------------- --------------- ---------------
Total revenue $ 32,951,480 7,190,130 $ - $ 40,141,160
--------------- --------------- --------------- ---------------
EXPENSES
Compensation and benefits 15,830,533 4,396,965 - 20,227,498
Brokerage, clearing, exchange fees & other 9,195,493 1,063,618 - 10,259,111
Occupancy and equipment costs 2,389,741 507,497 - 2,897,238
Communications 1,962,495 - - 1,962,495
General and administrative 8,528,139 740,151 - 9,268,290
Loss on disposition of subsidiary 491,886 - - 491,886
Loss on liquidation of subsidiary 934,444 - - 934,444
--------------- --------------- --------------- ---------------
Total expenses 39,332,731 6,708,231 - 6,040,962
--------------- --------------- --------------- ---------------
Income from continuing operations before
provision for income taxes and minority
interest in earnings of subsidiaries (6,381,251) 481,899 - (5,899,352)
Income tax benefit 789,315 - - 789,315
Minority interest in earnings of subsidiaries (319,911) -
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (5,911,847) $ 481,899 $ - $ (5,429,948)
=============== =============== =============== ===============
Pro forma earnings (loss) from common shares
Basic and diluted $ (1.02) $ (0.93)
--------------- --------------- --------------- ---------------
Pro forma weighted average number of common
shares outstanding
Basic and diluted 5,800,551 40,000 5,840,551
--------------- --------------- --------------- ---------------
</TABLE>
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 43 -
<PAGE>
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
(UNAUDITED)
This unaudited Pro forma Condensed Consolidated Statement of Operations is
presented as if Global Capital Partners, Inc. (the "Company") had owned The JB
Sutton Group, LLC ("Sutton") as of April 1, 1998. This unaudited Pro forma
Condensed Consolidated Statement of Operations should be read in conjunction
with the historical financial statements of the Company as presented in Form
10-KSB for the year ended March 31, 1999. In management's opinion, all
significant adjustments necessary to reflect the acquisition transactions have
been made.
This unaudited Pro forma Condensed Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the acquisition transactions had been consummated as of
April 1, 1998, nor does it purport to represent the results of operations
anticipated or attainable in future periods.
Assumptions:
1. Global Capital Partners, Inc. acquired 100 percent of the outstanding
capital stock of The JB Sutton Group, LLC as of April 1, 1998 for
$660,000 and 40,000 shares of the Company. The value assigned to this
transaction by the Board of Directors was $700,000 or $1.00 per share
for the 40,000 shares issued in connection with this transaction.
2. Global Capital Partners, Inc. issued 1,000,000 shares of convertible
preferred stock on April 1, 1998. These shares are convertible into
1,000,000 shares of common stock. The majority of the proceeds were
used to consummate this acquisition and provide additional working
capital to Sutton.
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 44 -
<PAGE>
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL CAPITAL THE JB SUTTON PRO FORMA PRO FORMA
PARTNERS, INC. GROUP, LLC ADJUSTMENT AS ADJUSTED
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,214,705 $ 7,867 $ 1,340,000(a,c) $ 3,562,572
Cash and securities segregated under regulations 50,431 - - 50,431
Securities purchased under agreements to resell 1,653,742 - - 1,653,742
Receivables 18,135,675 420,485 - 18,556,160
Securities owned, at value 15,377,998 1,015,331 (700,000)(b) 15,693,329
Office facilities, furniture and equipment, at cost 2,061,612 167,822 - 2,229,434
Goodwill 2,215,910 - 304,845 (c) 2,520,755
Other assets 7,169,966 172,558 - 7,342,524
--------------- --------------- ---------------- ---------------
Total assets $ 48,880,039 $ 1,784,063 $ 944,845 $ 51,608,947
=============== =============== ================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Short-term borrowings $ 7,108,175 $ - $ - $ 7,108,175
Payables 5,517,371 524,361 - 6,041,732
Other liabilites and accrued amounts 5,784,194 164,547 - 5,948,741
--------------- --------------- ---------------- ---------------
18,409,740 688,908 - 19,098,648
Long-term borrowings 5,204,262 - - 5,204,262
--------------- --------------- ---------------- ---------------
Total liabilities 23,614,002 688,908 - 24,302,910
--------------- --------------- ---------------- ---------------
Minority interest in consolidated subsidiaries 7,619,233 - - 7,619,233
--------------- --------------- ---------------- ----------------
SHAREHOLDERS' EQUITY
Preferred stock - - 10,000 (a) 10,000
Common stock 258,013 - 2,000 (c) 260,013
Paid-in capital 29,650,450 - 2,028,000 (a,c) 31,678,450
Retained earnings/(accumulated deficit) (10,158,283) 1,095,155 (1,095,155)(b,c) (10,158,283)
Note receivable - common stock (893,214) - - (893,214)
Cumulative translation adjustments (1,210,162) - - (1,210,162)
--------------- --------------- --------------- ---------------
Total shareholders' equity 17,646,804 1,095,155 944,845 19,686,804
--------------- --------------- --------------- ---------------
Total Liabilities and Shareholders' Equity $ 48,880,039 $ 1,784,063 $ 944,845 $ 51,608,947
=============== =============== =============== ===============
</TABLE>
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 45 -
<PAGE>
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED MARCH 31, 1999
(UNAUDITED)
This unaudited Pro forma Condensed Consolidated Statement of Operations is
presented as if Global Capital Partners, Inc. (the "Company") had owned The JB
Sutton Group, LLC ("Sutton") as of April 1, 1998. This unaudited Pro forma
Condensed Consolidated Statement of Operations should be read in conjunction
with the historical financial statements of the Company as presented in Form
10-KSB for the year ended March 31, 1999. In management's opinion, all
significant adjustments necessary to reflect the acquisition transactions have
been made.
This unaudited Pro forma Condensed Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the acquisition transactions had been consummated as of
April 1, 1998, nor does it purport to represent the results of operations
anticipated or attainable in future periods.
Assumptions:
1. Global Capital Partners, Inc. issued 1,000,000 shares of convertible
preferred stock on April 1, 1998. These shares are convertible into
1,000,000 shares of common stock. The majority of the proceeds were
used to consummate this acquisition and provide additional working
capital to Sutton.
2. The JB Sutton Group, LLC distributed $700,000 of accumulated earnings
and profits to its members immediately prior to the acquisition by
Global Capital Partners, Inc.
3. Global Capital Partners, Inc. acquired 100 percent of the outstanding
capital stock of The JB Sutton Group, LLC as of April 1, 1998 for
$660,000 and 40,000 shares of the Company. The value assigned to this
transaction by the Board of Directors was $700,000 or $1.00 per share
for the 40,000 shares issued in connection with this transaction.
Adjustments:
(a) Sale of 1,000,000 shares of convertible preferred stock at $2.00 per
share. Purchase of 100 percent of the outstanding capital stock of The
JB Sutton Group, LLC as of April 1, 1998 for $600,000 and 40,000
shares of the Company. The value assigned to this transaction by the
Board of Directors was $700,000 or $1.00 per share for the 40,000
shares issued in connection with this transaction.
(b) $700,000 distribution to members of The JB Sutton Group, LLC
immediately prior to the acquisition by Global Capital Partners, Inc.
(c) Purchase of 100 percent of the outstanding capital stock of The JB
Sutton Group, LLC as of April 1, 1998 for $600,000 and 40,000 shares
of the Company. The value assigned to this transaction by the Board of
Directors was $700,000 or $1.00 per share for the 40,000 shares issued
in connection with this transaction.
Consolidation of The JB Sutton Group, LLC into Global Capital
Partners, Inc. and recording the goodwill related to the purchase
transaction at April 1, 1998. Net assets acquired were $395,155
leaving goodwill acquired of $304,845.
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 46 -
<PAGE>
Item 7(c)
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED MARCH 31, 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GLOBAL CAPITAL THE JB SUTTON PRO FORMA PRO FORMA
PARTNERS, INC. GROUP, LLC ADJUSTMENT AS ADJUSTED
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUE
Commissions $ 10,300,319 $ 2,969,349 $ - $ 13,269,668
Trading profit, net 3,225,841 1,997,547 - 5,223,388
Investment banking 2,389,074 327,270 - 2,716,344
Other 2,151,304 - - 2,151,304
--------------- --------------- --------------- ---------------
Total revenue $ 18,066,538 5,294,166 $ - $ 23,360,704
--------------- --------------- --------------- ---------------
EXPENSES
Compensation and benefits 10,915,163 2,987,404 - 13,902,567
Brokerage, clearing, exchange fees & other 1,168,955 761,814 - 1,930,769
Occupancy and equipment costs 1,160,714 257,787 - 1,418,501
Communications 965,435 - - 965,435
General and administrative 2,853,607 441,641 - 3,295,248
--------------- --------------- --------------- ---------------
Total expenses 17,063,874 4,448,646 - 21,512,520
--------------- --------------- --------------- ---------------
Income from continuing operations before
provision for income taxes and minority
interest in earnings of subsidiaries 1,002,664 845,520 - 1,848,184
Income tax expense (116,150) - - (116,150)
Minority interest in earnings of subsidiaries (94,226) - - (94,226)
--------------- --------------- --------------- ---------------
NET INCOME $ 792,288 $ 845,520 $ - $ 1,637,808
=============== =============== =============== ===============
Pro forma earnings from common shares
Basic and diluted $ 0.128 $ 0.262
--------------- --------------- --------------- ---------------
Pro forma weighted average number of common
shares outstanding
Basic and diluted 6,206,750 40,000 6,246,750
--------------- --------------- --------------- ---------------
</TABLE>
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 47 -
<PAGE>
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999
(UNAUDITED)
This unaudited Pro forma Condensed Consolidated Statement of Operations is
presented as if Global Capital Partners, Inc. (the "Company") had owned The JB
Sutton Group, LLC ("Sutton") as of April 1, 1999. This unaudited Pro forma
Condensed Consolidated Statement of Operations should be read in conjunction
with the historical financial statements of the Company as presented in Form
10-KSB for the year ended March 31, 1999. In management's opinion, all
significant adjustments necessary to reflect the acquisition transactions have
been made.
This unaudited Pro forma Condensed Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the acquisition transactions had been consummated as of
April 1, 1999, nor does it purport to represent the results of operations
anticipated or attainable in future periods.
Assumptions:
1. Global Capital Partners, Inc. acquired 100 percent of the outstanding
capital stock of The JB Sutton Group, LLC as of April 1, 1999 for
$660,000 and 40,000 shares of the Company. The value assigned to this
transaction by the Board of Directors was $700,000 or $1.00 per share
for the 40,000 shares issued in connection with this transaction.
2. Global Capital Partners, Inc. issued 1,000,000 shares of convertible
preferred stock on April 1, 1999. These shares are convertible into
1,000,000 shares of common stock. The majority of the proceeds were
used to consummate this acquisition and provide additional working
capital to Sutton.
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 48 -
<PAGE>
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL CAPITAL THE JB SUTTON PRO FORMA PRO FORMA
PARTNERS, INC. GROUP, LLC ADJUSTMENT AS ADJUSTED
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,162,767 $ 293,888 $ 1,090,000(a,c) $ 3,546,655
Cash and securities segregated under regulations 52,231 - - 52,231
Securities purchased under agreements to resell 2,404,330 - - 2,404,330
Receivables 13,563,458 1,102,921 - 14,666,379
Securities owned, at value 19,847,587 1,019,366 (750,000)(b) 20,116,953
Office facilities, furniture and equipment, at cost 2,343,511 143,961 - 2,487,472
Goodwill 2,167,329 - 112,291 (c) 2,279,620
Other assets 8,697,146 249,920 - 8,947,066
--------------- --------------- ---------------- ---------------
Total assets $ 51,238,359 $ 2,810,056 $ 452,291 $ 54,500,706
=============== =============== ================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Short-term borrowings $ 13,042,428 $ - $ - $ 13,042,428
Payables 3,729,058 651,889 - 4,380,947
Other liabilites and accrued amounts 6,447,057 570,458 - 7,017,515
--------------- --------------- ---------------- ---------------
23,218,543 1,222,347 - 24,440,890
Long-term borrowings 3,845,397 - - 3,845,397
--------------- --------------- ---------------- ---------------
Total liabilities 27,063,940 1,222,347 - 28,286,287
--------------- --------------- ---------------- ---------------
Minority interest in consolidated subsidiaries 7,257,150 - - 7,257,150
--------------- --------------- ---------------- ----------------
SHAREHOLDERS' EQUITY
Preferred stock - - 10,000 (a) 10,000
Common stock 260,338 - 2,000 (c) 262,338
Paid-in capital 29,716,012 - 2,028,000 (a,c) 31,744,012
Retained earnings/(accumulated deficit) ( 9,365,995) 1,587,709 (1,587,709)(b,c) ( 9,365,995)
Note receivable - common stock (922,854) - - (922,854)
Cumulative translation adjustments (2,770,232) - - (2,770,232)
--------------- --------------- --------------- ---------------
Total shareholders' equity 16,917,269 1,587,709 452,291 18,957,269
--------------- --------------- --------------- ---------------
Total Liabilities and Shareholders' Equity $ 51,238,359 $ 2,810,056 $ 452,291 $ 54,500,706
=============== =============== =============== ===============
</TABLE>
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 49 -
<PAGE>
GLOBAL CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED MARCH 31, 1999
(UNAUDITED)
This unaudited Pro forma Condensed Consolidated Statement of Operations is
presented as if Global Capital Partners, Inc. (the "Company") had owned The JB
Sutton Group, LLC ("Sutton") as of April 1, 1999. This unaudited Pro forma
Condensed Consolidated Statement of Operations should be read in conjunction
with the historical financial statements of the Company as presented in Form
10-KSB for the year ended March 31, 1999. In management's opinion, all
significant adjustments necessary to reflect the acquisition transactions have
been made.
This unaudited Pro forma Condensed Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the acquisition transactions had been consummated as of
April 1, 1999, nor does it purport to represent the results of operations
anticipated or attainable in future periods.
Assumptions:
1. Global Capital Partners, Inc. issued 1,000,000 shares of convertible
preferred stock on April 1, 1999. These shares are convertible into
1,000,000 shares of common stock. The majority of the proceeds were
used to consummate this acquisition and provide additional working
capital to Sutton.
2. The JB Sutton Group, LLC distributed $700,000 of accumulated earnings
and profits to its members immediately prior to the acquisition by
Global Capital Partners, Inc.
3. Global Capital Partners, Inc. acquired 100 percent of the outstanding
capital stock of The JB Sutton Group, LLC as of April 1, 1999 for
$660,000 and 40,000 shares of the Company. The value assigned to this
transaction by the Board of Directors was $700,000 or $1.00 per share
for the 40,000 shares issued in connection with this transaction.
Adjustments:
(a) Sale of 1,000,000 shares of convertible preferred stock at $2.00 per
share. Purchase of 100 percent of the outstanding capital stock of The
JB Sutton Group, LLC as of April 1, 1998 for $600,000 and 40,000
shares of the Company. The value assigned to this transaction by the
Board of Directors was $700,000 or $1.00 per share for the 40,000
shares issued in connection with this transaction.
(b) $700,000 distribution to members of The JB Sutton Group, LLC
immediately prior to the acquisition by Global Capital Partners, Inc.
(c) Purchase of 100 percent of the outstanding capital stock of The JB
Sutton Group, LLC as of April 1, 1999 for $600,000 and 40,000 shares
of the Company. The value assigned to this transaction by the Board of
Directors was $700,000 or $1.00 per share for the 40,000 shares issued
in connection with this transaction.
Consolidation of The JB Sutton Group, LLC into Global Capital
Partners, Inc. and recording the goodwill related to the purchase
transaction at April 1, 1999. Net assets acquired were $587,709
leaving goodwill acquired of $112,291.
The accompanying notes and assumptions for the consolidated pro forma
presentation are an integral part of these statements.
- 50 -
<PAGE>
