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As filed with the Securities and Exchange Commission on March 31, 2000
Registration No. 333-83385
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GLOBAL CAPITAL PARTNERS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 52-1807562
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
6000 FAIRVIEW ROAD, SUITE 1410
CHARLOTTE, NORTH CAROLINA 28210
(704) 643-8220
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
MARTIN A. SUMICHRAST
Chairman, President and Chief Executive Officer
6000 Fairview Road, Suite 1410
Charlotte, North Carolina 28210
(704) 643-8220
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
PAUL F. McCURDY, ESQ.
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
(203) 324-1400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 31, 2000
GLOBAL CAPITAL PARTNERS, INC.
This prospectus relates to 2,679,622 shares of common stock,
1,490,900 Class C Common Stock Purchase Warrants and 1,161,222 Placement Agent
Warrants of Global Capital Partners, Inc. (formerly Eastbrokers International
Incorporated) that may be offered for sale by certain of our security holders
and will not be underwritten.
The selling security holders anticipate that, if and when offered
and sold, the common stock will be offered and sold in transactions (which may
include block transactions) effected on the Nasdaq SmallCap Market at the then
prevailing market prices. The selling security holders reserve the right,
however, to offer and sell the common stock on any other national securities
exchange on which the common stock is or may become listed or in the
over-the-counter market, in each case at then prevailing market prices, or in
privately negotiated transactions each at a price then to be negotiated. The
Class C Common Stock Purchase Warrants and the Placement Agent Warrants will not
be listed on any exchange or in the over-the-counter market and therefore, the
selling security holders may offer and sell the Class C Common Stock Purchase
Warrants and the Placement Agent Warrants in privately negotiated transactions
at a price then to be negotiated. All offers and sales made on the Nasdaq
SmallCap Market or any other national securities exchange or in the
over-the-counter market will be made through or to licensed brokers and dealers.
Our common stock is currently traded on the Nasdaq SmallCap Market
under the trading symbol "GCAP." (Under Global Capital's former name,
Eastbrokers International Incorporated, the common stock was traded on the
Nasdaq SmallCap Market under the symbol "EAST.") Global Capital's common stock
also trades on the Berlin and Frankfurt Stock Exchanges under the symbol "ETB".
The Class C Common Stock Purchase Warrants and the Placement Agent
Warrants do not trade on any exchange.
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SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT YOU SHOULD CONSIDER BEFORE BUYING THESE SECURITIES.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ________, 2000.
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TABLE OF CONTENTS
PAGE
WHERE YOU CAN FIND MORE INFORMATION....................................3
INFORMATION INCORPORATED BY REFERENCE..................................3
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES........................................................4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS..............5
BUSINESS SUMMARY.......................................................6
RISK FACTORS..........................................................11
USE OF PROCEEDS.......................................................21
SELLING SECURITY HOLDERS..............................................22
PLAN OF DISTRIBUTION..................................................27
EXPERTS...............................................................28
LEGAL MATTERS.........................................................28
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YOU SHOULD RELY ONLY UPON THE INFORMATION IN THIS PROSPECTUS. WE HAVE NOT,
AND THE SELLING SECURITY HOLDERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO
PROVIDE YOU WITH DIFFERENT INFORMATION FROM THAT CONTAINED IN THIS PROSPECTUS.
IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD
NOT RELY ON IT. WE ARE NOT, AND THE SELLING SECURITY HOLDERS ARE NOT, MAKING AN
OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS
PROSPECTUS IS ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS
ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY
HAVE CHANGED SINCE THAT DATE. IN THIS PROSPECTUS,"GLOBAL CAPITAL" MEANS GLOBAL
CAPITAL PARTNERS, INC. ONLY. GLOBAL CAPITAL IS THE ISSUER OF THE PUBLICLY TRADED
COMMON STOCK COVERED HEREBY. "GLOBAL CAPITAL GROUP," "WE," "US" AND "OUR" EACH
MEANS GLOBAL CAPITAL AND ITS SUBSIDIARIES COLLECTIVELY.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith file reports, proxy statements
and other information with the SEC. This filed material can be read and copied
at the public reference facilities maintained by the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549; at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and at Seven World
Trade Center, 13th Floor, New York, New York 10048. The SEC also maintains a
World Wide Web site at http://www.sec.gov that contains our reports, proxy and
information statements and other information about us and other companies that
file electronically with the SEC. Copies of these materials may also be obtained
at prescribed rates from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549. The common
stock is quoted on the Nasdaq SmallCap Market. Information regarding the trading
of GCAP on the Nasdaq SmallCap Market can be obtained from the Nasdaq SmallCap
Market, 9801 Washingtonian Boulevard, Gaithersburg, Maryland 20878 ((202)
496-2500).
This prospectus contains part of a registration statement on Form SB-2, as
amended and as further amended by this Post-Effective Amendment No. 1 on Form
S-3, filed by Global Capital with the SEC under the Securities Act. As permitted
by the rules and regulations of the SEC, this prospectus does not contain all
the information set forth in the registration statement, as amended, and the
exhibits thereto. For further information with respect to Global Capital and the
securities offered by this prospectus, reference is made to the registration
statement, as amended, and the exhibits thereto. Statements contained in this
prospectus concerning the provisions of documents filed with the registration
statement, as amended, as exhibits thereto are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the SEC. The Registration
Statement, as amended, may be inspected without charge at the Public Reference
Section of the Securities and Exchange Commission at 450 Fifth Street, Room
1024, N.W., Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from the SEC at prescribed rates.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information filed with the SEC will
update and supersede that information. We incorporate by reference the documents
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listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until our offering is completed.
o Our Annual Report on Form 10-KSB for the year ended March 31, 1999.1
o Our Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999.
o Our Quarterly Report on Form 10-QSB for the quarter ended September 30,
1999.
o Our Quarterly Report on Form 10-QSB for the quarter ended December 31,
1999.
o Our Current Report on Form 8-K filed on December 7, 1999.
o Our Current Report on Form 8-K/A filed on February 7, 2000. 1
o Our Proxy Statement relating to the Annual Meeting of Stockholders held on
November 9, 1999, filed on October 4, 1999.
o Our Proxy Statement relating to the Special Meeting of Stockholders on
January 31, 2000, filed on January 10, 2000.
o The description of our common stock set forth in our Registration Statement
on Form S-1 No. 33-89544 filed with the SEC on February 15, 1995 including
any amendment thereto or report filed for the purpose of updating such
description.
We will provide to you upon written or oral request at no cost to you a
copy of any or all of the documents incorporated by reference by writing or
telephoning us at the following address and telephone number: 6000 Fairview
Road, Suite 1410, Charlotte, North Carolina 28210; telephone: (704) 643-8220;
attention Christine Smith.
You may also learn more about us by visiting our website on the World Wide
Web having the following URL: HTTP://WWW.GCAPITALPARTNERS.COM.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, enforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
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1 Pro forma financial statements for the year ended March 31, 1999 have been
prepared, as required, to reflect the November 23, 1999, acquisitions of The JB
Sutton Group, LLC, which was accounted for under the purchase method of
accounting. Such pro forma financial statements are included in our amended
Current Report on Form 8-K filed on February 7, 2000.
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the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These include
statements about anticipated financial performance, future revenues or earnings,
business prospectus, projected ventures, new products, anticipated market
performance and similar matters. The words "budgeted," "anticipate," "project,"
"estimate," "expect," "may," "believe," "potential" and similar statements are
intended to be among the statements that are forward looking statements. Because
such statements reflect the reality of risk and uncertainty that is inherent in
our business, actual results may differ materially from those expressed or
implied by such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which are made as of the
date of this prospectus.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, we caution our readers that a variety of factors could cause our
actual results to differ materially from the anticipated results or other
expectations expressed in our forward-looking statements. These risks and
uncertainties, many of which are beyond our control, include, but are not
limited to:
o transaction volume in the securities markets;
o the volatility of the securities markets, fluctuations in interest rates;
o changes in regulatory requirements which could affect the cost of doing
business, fluctuations in currency rates;
o general economic conditions, both domestic and international;
o changes in the rate of inflation and related impact on securities markets;
o competition from existing financial institutions and other new participants
in the securities markets;
o significant and rapid changes in technology which could negatively affect
our internet related projects;
o legal developments affecting the litigation experience of the securities
industry;
o changes in federal and state tax laws which could affect the popularity of
products sold by us; and
o those risks and uncertainties set forth under the caption "Risk Factors" on
page 11 and in our filing with the SEC.
We undertake no obligation to release publicly any revisions to
the forward-looking statements to reflect events or circumstances after the date
hereof or to reflect unanticipated events or developments.
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BUSINESS SUMMARY
Prior to August, 1996, we were engaged in the purchase and sale of newly
privatized businesses in the Czech Republic. In August, 1996, we entered the
Central and Eastern European investment banking and securities business through
our acquisition of Eastbrokers Beteiligungs AG, an Austrian holding company
providing financial services in Eastern and Central Europe through its network
of subsidiaries. Our acquisition of Eastbrokers AG was intended to not only
provide an earnings stream from brokerage activities, but also position us to
provide investment banking and corporate finance services throughout Central and
Eastern Europe.
In March 1997, we expanded our brokerage operations in the United States
through the acquisition of an existing New York-based broker dealer. In May
1998, we continued the expansion of our US operations through the acquisition
of EBI Securities Corporation (formerly known as Cohig & Associates), a Denver,
Colorado based investment banking and brokerage firm. In November, 1999, we
expanded our US investment banking and brokerage operations further with the
acquisition of The JB Sutton Group, LLC, a New York based brokerage and
investment banking firm. The JB Sutton Group LLC, which recently changed its
name to Global Capital Markets, LLC, has one main office with over 80 registered
representatives.
In addition to our growing US investment banking and brokerage presence,
we have recently positioned ourselves to compete on the internet. In April 1999,
we launched a new internet subsidiary, MoneyZone.com (formerly, EBonlineinc.com)
and in November 1999 we purchased a majority interest in Sutton Online, LLC
(http://www.suttononline.com), an online trading firm.
In January 2000, we changed our name to Global Capital Partners, Inc.,
which we feel better reflects our business identity, given our ownership and
operation of a highly diversified investment banking and securities network,
with 22 US offices and 8 international branches and affiliates located in
Austria, Czech Republic, Poland, Kazakhstan, Croatia, Slovenia, Switzerland and
Azerbaijan.
Overall, our fiscal year ended March 31, 1999, was a challenging year.
First, we had to contend with the global financial crisis, which resulted in
collapses in the Asian and Russian markets and caused turmoil throughout the
emerging markets of Central and Eastern Europe. Second, we had to contend with
the correction in the US equities market, which adversely affected small and
micro-cap markets. These two factors directly accounted for 77 percent of our
loss for the year ended March 31, 1999.
Despite these market conditions, we have continued to grow our assets
under management, commission revenue, underwriting fees and distribution
capabilities. We have streamlined our operations in Europe and under-performing
assets have been sold or liquidated.
We remain committed to our mission of building, through acquisitions and
strategic alliances, a highly successful, global, middle-market, investment
banking and securities firm.
EUROPEAN OPERATIONS
Since our acquisition of Eastbrokers AG, in August, 1996, the business
strategy for our European operations was to utilize our emerging market
expertise in the areas of merchant banking, corporate finance, privatization and
trading in order to expand throughout Central and Eastern Europe. However,
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during 1998, we modified our business strategy in Europe. This was in response
to an overall economic downturn that covered much of Central and Eastern Europe.
This market downturn, which peaked during the summer of 1998, led to sharp
decreases in stock markets worldwide, particularly in Central and Eastern
Europe. In addition to falling prices, the overall liquidity in the financial
markets throughout much of the region was significantly reduced. In order to
minimize the negative effects on our financial operations, we reduced our work
force in Austria and closed our operations in Slovakia, Romania, Turkey, Russia
and Bulgaria. In Austria, Poland, and Croatia, we made significant changes in
our management and cost structures. In the Czech Republic and Hungary, we sold
our operations. However, we continue to maintain an affiliate relationship with
the management in Hungary. We have re-entered the Czech Republic through the
purchase of a minority interest in Stratego Invest a.s. Prague. Due to increased
interest in the region, we also organized an office in Baku, Azerbaijan.
Despite the negative sentiment in emerging markets during 1998, we believe
that Central and Eastern Europe's ultimate unification into the European
Economic and Monetary Union will lead to a significant increase in investor
interest in the region. This potential increase in the emerging market interest
will benefit those firms that have had existing operations in the region. We
intend to maintain solid long-term involvement in the region and to continue to
provide our clients with quality brokerage and investment banking services. We
also intend to expand our operations into other markets of Western Europe
through possible acquisitions, mergers, joint ventures and/or strategic
relationships.
With the acquisition of EBI Securities Corporation in May 1998, our
European subsidiaries now have direct access to the US securities marketplace.
During 1999, our two main subsidiaries, EBI Securities Corporation and WMP Bank
AG, began the process of cross-marketing their respective retail and
institutional clientele, their research, corporate finance and trading products.
We believe that it is possible to significantly increase our overall revenue if
we are successful in marketing US securities to Western European institutional
clientele, and in marketing Western European securities to US clientele.
The addition of Global Capital Markets, LLC and Sutton Online, LLC has
further enhanced our strategic and operational capabilities. In addition to
facilitating sales of US and Western European securities in their respective
reciprocal markets, we also believe that Sutton Online, LLC will be able to
utilize our existing European infrastructure and contacts and will expand online
capabilities into Europe. Sutton Online, LLC has announced several contracts and
alliances since our acquisition in November 1999. We expect continued expansion
of Sutton Online, LLC during the next two fiscal years. In addition, our
acquisition of 43% of Unitrust Holdings SA, of Geneva, Switzerland, gives us
access to the lucrative Swiss market. We also expect to further expand our
activities in Western Europe, particularly in Germany.
While investing in the emerging markets of Central and Eastern Europe
involves risk considerations not typically associated with investing in
securities of US issuers, we believe that such considerations are outweighed by
the benefits of diversification and potentially superior returns. Among the
considerations involved in investing in these emerging markets is that less
information may be available regarding foreign companies than is available for
US companies. Foreign companies are also not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to US companies. In
addition, securities of non-US companies are generally denominated in foreign
currencies, thereby subjecting each such foreign currency-dominated security to
value fluctuations due to increases and decreases of the relative strength of
each such security's underlying foreign currency against the US dollar. Currency
exchange rates can also be
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affected unpredictably by intervention of US or foreign governments or central
banks or by currency controls or political developments in the US and abroad.
The value of international fixed income products also responds to interest
rate changes in the US and abroad. In general, the value of such products will
rise when interest rates fall, and fall when interest rates rise. However,
interest rates in each foreign country and the US may change independently of
each other. Debt and equity securities in emerging markets such as Central and
Eastern Europe may also not be as liquid as US securities. Securities of some
foreign companies may involve greater risk than securities of US companies.
Investing in Central and Eastern European securities may further result in
higher expenses than investing in domestic securities because of costs
associated with converting foreign currencies to US dollars and expenses
related to foreign custody procedures. Investment in Central and Eastern
European securities may also be subject to local economic or political risks,
including instability of some foreign governments, inadequate market controls,
the possibility of currency blockage or the imposition of withholding taxes on
dividend or interest payments and the potential for expropriation,
re-nationalization or confiscatory taxation and limitations on the use or
repatriation of funds or other assets.
UNITED STATES OPERATIONS
EBI SECURITIES CORPORATION. Subsequent to the acquisition of Eastbrokers
AG, we commenced expansion of our brokerage operations in the United States. Our
goal was to build a strong US brokerage presence that would enable us to
distribute European middle-market, corporate finance products in the US and
also to provide our European operations access to US corporate finance
product, trading and research capabilities. In the Spring of 1997, we purchased
our first US based broker-dealer, Eastbrokers North America, Inc. Since
establishing this broker-dealer, we have been approached by numerous US based
broker-dealers interested in becoming an acquisition target. We believe that
continued consolidation within the securities industry, particularly in the
United States, is inevitable. We believe that this consolidation can be
attributed to the current volatility prevailing in the world financial markets,
the higher degree of capitalization necessary to maintain sound brokerage
operations and the increased regulatory environment. We believe that our
structure as a well-capitalized, entrepreneurially managed, international,
publicly-traded, investment banking firm gives us the potential to be
particularly appealing to sellers of medium-sized brokerage firms. In addition,
we believe that the purchase and roll-up of complementary securities businesses
both in the United States and in Europe, can be financed by the issuance of our
common stock.
In May 1998, we made a significant step in our roll-up strategy in the
United States. Following the acquisition of EBI Securities Corporation, the
office space previously occupied by Eastbrokers North America, has been
converted into a branch office of EBI Securities Corporation. EBI Securities
Corporation was our first acquisition targeting other successful medium size
investment banking and brokerage firms.
EBI Securities Corporation operates 20 retail brokerage offices in 16
cities across the United States. These offices include 10 company-owned
branches, and 10 franchise branches employing over 250 people, of which
approximately 200 are registered representatives. EBI Securities Corporation is
registered as a broker-dealer with the SEC and is licensed in 50 states and the
District of Columbia. It is also a member of the NASD and the SIPC. Customer
accounts are insured to $25 million under the SIPC excess insurance program. EBI
Securities Corporation operates pursuant to the exemptive provisions of SEC Rule
15c3-3 (k)(2)(ii) and clears all transactions with and for customers on a fully
disclosed basis. Since its inception EBI Securities Corporation has participated
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in the underwriting and/or co-underwriting of over $400 million in initial and
secondary equity and debt offerings for over 30 public US companies.
EBI Securities Corporation maintains its clearing arrangement with Fiserv
Correspondent Services, Inc., a subsidiary of Fiserv, Inc. (NASDAQ: FISV).
Fiserv Correspondent Services, Inc. provides EBI Securities Corporation with
back office support, transaction processing services on all the principal
national securities exchanges and access to many other financial services and
products. This arrangement enables EBI Securities Corporation to offer its
clients a broad range of products and services that is typically only offered by
firms that are larger and/or have a larger capital base.
EBI Securities Corporation has primarily operated as a retail brokerage
firm focusing on individual investors with a focus on a full service approach
which has been augmented through its corporate finance, proprietary research and
trading activities. EBI Securities Corporation provides our retail clients with
a broad range of traditional investment products and services. EBI Securities
Corporation also strives to distinguish itself with investors and corporate
finance clients through a commitment to professional but personalized service.
The trading department makes markets in approximately 100 securities which
include its investment banking clients and those securities that its research
department has identified as promising, small to middle-market, potentially
high-growth companies. The investment banking departments' mission is to enhance
and develop the capital structures of small to middle-market emerging-growth
companies through private placements, bridge financing, and public offerings in
order to enable the firm's corporate finance clients to capitalize on promising
business opportunities, favorable market conditions, and/or late stage product
development.
EBI Securities Corporation is actively realigning itself to not only
generate additional revenues through the leverage of our existing resources, but
also to create a more stable and consistent revenue base. The potential result
is increased internal growth, which compliments external growth through
acquisitions. Several initiatives that EBI Securities Corporation has undertaken
in this regard are as follows:
1. FIXED INCOME. In December 1998, EBI Securities Corporation added a
fixed income department. This department is responsible for the generation of
new fixed income products and underwriting, trading, retail distribution and
research of government, municipal and corporate bonds. This department also
provides additional revenue generating opportunities and synergies to three of
our other departments, retail, corporate finance and equity trading. As EBI
Securities Corporation continues to expand the products and services available
to our retail brokers and their customers, this department provides additional
investment opportunities through new products, underwritings and/or independent
research ideas. Additionally, this department allows us to capture new business
opportunities that previously were outside the scope of our available services.
2. ASSET ALLOCATION. EBI Securities Corporation has developed an in-house
asset allocation program to augment the breadth of our sales force's efforts.
This program was developed utilizing industry software which, along with
additional marketing materials, has been customized for our use. This approach
utilized by this program represents an investment strategy based on the Noble
Prize winning study called "Modem Portfolio Theory" (MPT). MPT's premise is that
a personalized strategy can be created for each client whereby "optimal" risk
vs. return portfolios are generated by mixing varying amounts of different asset
classes according to their correlation to one another. Many market studies
suggest that asset allocation rather than individual investment selection
accounts for over 90 percent of a typical portfolio's returns. EBI Securities
Corporation concurs with this notion, and as a result, is educating our sales
force to effectively utilize this program. The results to date have been very
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favorable and this process is also seen as an effective tool for gathering
assets. With the new communication systems we are implementing, we expect this
service will be available at the desk top level to all brokers and will also
enhance the sales forces ability to effectively utilize this asset allocation
program.
3. MANAGED MONEY. Recognizing the ongoing changes in the retail brokerage
business, EBI Securities Corporation is actively entering the field of managed
money and wrap fee compensation arrangements in place of the more traditional
fee-per-transaction approaches. In short, the managed money approach charges the
client a flat annual percentage of the money managed rather than a fee for each
transaction. Many people believe that this approach better aligns the investment
advisor's goals with that of the client. This approach requires some additional
accounting and registration procedures, both of which have been set in motion by
the firm and its applicable business partners. EBI Securities Corporation
intends to hire additional salespeople with managed money experience in addition
to actively re-educating the existing sales force. In August 1999, EBI
Securities Corporation received its license as a Registered Investment Advisor
in Colorado. We are current licensed as a Registered Investment Advisor in three
states, including New York.
4. PREMIER CUSTOMER ACCOUNTS. The formation of an account for the firm's
biggest customers may allow better utilization of several of the initiatives
mentioned above. In addition, this account type may also present customers with
a good introduction to several other aspects of the business, including online
trading, joint ventures and cross selling opportunities with local community
banks, mortgage companies, investment sites and others.
5. RETAIL EXPANSION. Currently, EBI Securities Corporation is focusing on
filling its existing retail space in order to improve efficiencies. EBI
Securities Corporation also believes that retail expansion through additional
offices will be most effective if it occurs in and around the corporate
headquarters in Denver, Colorado and that creating a more visible sales force
around the corporate headquarters will create efficiencies on several fronts
resultant from simpler and less expensive corporate management requirements. In
addition, economies of scale are created in terms of advertising and community
development, which can help us enhance the EBI Securities Corporation name and
make it a more recognizable entity among retail clients, corporate finance
clients and additional salespeople.
GLOBAL CAPITAL MARKETS, LLC (FORMERLY, THE JB SUTTON GROUP, LLC). In
November 1999, we expanded our US investment banking and brokerage operations
further with the acquisition of Global Capital Markets, LLC, a New York based
brokerage and investment banking firm. Similar to EBI Securities Corporation,
Global Capital Markets, LLC primarily operates as a retail brokerage firm
focusing on individual investors with a focus on a full service approach,
augmented through its corporate finance and trading activities. Global Capital
Markets, LLC provides its retail clients with a broad range of traditional
investment products and services.
Global Capital Markets, LLC is registered as a broker-dealer with the SEC
and a member of the NASD and the SIPC. Global Capital Markets, LLC operates
pursuant to the exemptive provisions of SEC Rule 15c3-3 (k)(2)(ii) and clears
all transactions with and for customers on a fully disclosed basis.
Global Capital Markets, LLC maintains dual clearing arrangements with CIBC
Oppenheimer, a division of CIBC World Markets Corp., and Pension Financial
Services Inc., a division of Service Asset Management Company. CIBC Oppenheimer
provides Global Capital Markets, LLC with back office support, transaction
processing services on all the principal national securities exchanges and
access to many other financial services and products. This arrangement enables
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Global Capital Markets, LLC to offer its clients a broad range of products and
services that is typically only offered by firms that are larger and/or have a
larger capital base. Pension Financial Services Inc. provides similar services
as CIBC Oppenheimer, but it utilized by Global Capital Markets, LLC for the
online customer accounts using the Sutton Online, LLC trading system.
SUTTON ONLINE LLC. In addition to our growing US investment banking a
brokerage presence, the Company purchased a majority interest in Sutton Online,
LLC (http://www.suttononline.com) an online trading firm that offers trade
executions, level II software & data, internet service and training for online
investors to individual investors, money managers and hedge funds. Sutton
Online, LLC also provides brokerage firms the necessary tools to offer financial
products via the internet.
MONEYZONE.COM (FORMERLY, EBONLINEINC.COM). In July 1999, our newly
launched subsidiary, MoneyZone.com, merged into a publicly traded company.
MoneyZone.com common shares trade in the over-the-counter market under the
symbol "MNZN". As of the date of this filing, we own 2,000,000 shares of
MoneyZone.com common stock. MoneyZone.com closed at $8.00 on the OTC on
March 22, 2000.
MoneyZone.com is a Web-based business consisting of a website, globally
accessible via the Internet, designed to facilitate merger, acquisition and
corporate finance activity. The site attracts businesses looking to sell, make
an acquisition, seek a merger or joint venture partner, obtain debt or equity
capital or simply gain exposure within the international investment banking
community. In addition, the site attracts accredited investors looking for
investment opportunities. It is anticipated that MoneyZone.com may provide
additional ancillary business for our broker-dealer operations. As of the date
of this filing, MoneyZone.com has over 4,000 business listings in its database.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. WE FACE A VARIETY OF RISKS IN THE CONDUCT OF OUR BUSINESS,
ANY OF WHICH COULD MATERIALLY AND ADVERSELY AFFECT US, OUR BUSINESS AND OUR
FINANCIAL PERFORMANCE. SOME OF THESE RISKS ARE SUMMARIZED BELOW. THIS SUMMARY IS
NOT INTENDED TO BE A COMPLETE LIST OF ALL MATTERS THAT COULD ADVERSELY AFFECT
US, AND THERE ARE MANY FACTORS BEYOND OUR CONTROL THAT AFFECT US, OUR BUSINESS
AND OUR FINANCIAL PERFORMANCE.
THE VOLATILE NATURE OF THE SECURITIES BUSINESS COULD ADVERSELY AFFECT OUR
FINANCIAL PERFORMANCE AS WELL AS OUR STOCK PRICE. The securities business is
naturally subject to various risks, particularly in volatile or illiquid
markets. Among the risks are potential losses resulting from the following
activities:
o underwriting or owning securities,
o trading, arbitrage and merchant banking activities,
o failure by the other party to meet commitments,
o customer fraud and employee fraud,
o misconduct and errors,
o failures in connection with processing securities transactions, and
o litigation.
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Various factors affect a securities firm's business and profitability.
These factors include the firm's credit capacity or perceived creditworthiness
and competitive factors, including the ability to attract and retain highly
skilled employees. These and other factors may contribute to reduced levels of
new issuances of securities or merger, acquisition, restructuring and leveraged
capital activities, including leveraged buyouts and high-yield financing. Such
factors may also help reduce the level of participation in financing and
investment related to these activities. This generally results in lower revenues
from investment and merchant banking fees and from underwriting and corporate
development investments. Reduced volume of securities transactions and reduced
market liquidity generally result in lower revenues from dealer and trading
activities and commissions.
Lower price levels of securities may result in a reduced volume of
transactions and in losses from declines in the market value of securities held
in trading, investment and underwriting positions. Sudden sharp declines in
market values of securities and the failure of companies issuing securities and
parties on the other side of a transaction to perform their obligations can
result in illiquid markets. In such markets, we may not be able to sell
securities and may have difficulty covering our securities positions. Such
markets, if prolonged, may also lower our revenues from investment banking,
merchant banking and other investments, and could have a material adverse effect
on our results of operations, financial condition and cash flows.
Our principal business activities (investment banking, securities sales
and trading and correspondent brokerage services) are naturally highly
competitive and subject to various risks, volatile trading markets and
fluctuations in the volume of market activity. Consequently, our net income and
revenues, as well as our stock price, have been, and may continue to be, subject
to wide fluctuations. This, of course, reflects the impact of many factors that
are beyond our control. These factors include:
o securities market conditions,
o the level and volatility of interest rates,
o competitive conditions, and
o the size and timing of transactions.
Numerous other national and international factors affect the securities
business, securities firms and our profitability, including:
o economic and political conditions,
o broad trends in business and finance,
o legislation and regulation affecting the national and international
business and financial communities,
o currency values,
o inflation,
o market conditions,
o the availability of short-term or long-term funding and capital,
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o the credit capacity or perceived creditworthiness of the securities
industry in the marketplace, and
o the level and volatility of interest rates.
WE COULD BE ADVERSELY AFFECTED BY THE SIGNIFICANT COMPETITION WITHIN THE
SECURITIES INDUSTRY. We encounter significant competition in all aspects of the
securities business and compete worldwide directly with other domestic and
foreign securities firms. Many of these competitors have greater capital,
financial and other resources than we have. In addition to competition from
firms currently in the securities business, there has been increasing
competition from other sources, such as commercial banks and investment
boutiques.
We anticipate legislative and regulatory initiatives in the US to
continue to remove or relieve certain restrictions on commercial banks. Thus, it
is possible that competition in some markets currently dominated by investment
banks may increase in the near future.
Such competition could also affect our ability to attract and retain
highly skilled individuals to conduct our various businesses, which may have an
adverse effect on our business. The principal competitive factors influencing
our business are:
o our professional staff,
o our reputation in the marketplace,
o our existing client relationships,
o the ability to commit capital to client transactions, and
o our mix of market capabilities.
The adequacy of our capital levels will also influence our ability to
compete effectively in securities brokerage and investment banking activities.
In addition, our ability to expand our business may depend on our ability to
raise additional capital.
OUR FAILURE TO COMPLY WITH THE EXTENSIVE FEDERAL, STATE AND FOREIGN
REGULATION OF OUR BUSINESS COULD HAVE POSSIBLE MATERIAL ADVERSE EFFECTS UPON US.
Our business (and the securities industry generally) is subject to extensive
regulation. First, we are subject to regulation in the United States, Austria
and the Central and Eastern European states where our subsidiaries operate.
Second, we are subject to regulation by various foreign financial regulatory
authorities in the jurisdictions outside of the United States, Austria and
Central and Eastern Europe where we do business, including regulation by the
Securities and Futures Authority of the United Kingdom. Finally, we are subject
to regulation by the self regulatory organizations governing our industry.
Self regulatory organizations, such as the NASD, require strict compliance
with their rules and regulations. Our failure to comply with any of these laws,
rules or regulations could result in fines, suspension or expulsion, with which
could have possible material adverse effects upon us and may affect our stock
price accordingly. In particular, the scope of broker-dealer operations of our
wholly-owned subsidiaries, EBI Securities Corporation and Global Capital
Markets, LLC, is subject to the terms of its Restriction Agreements with the
NASD. In the event that EBI Securities Corporation or Global Capital Markets,
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LLC violates the terms of its Restriction Agreements, the NASD can suspend or
revoke its membership and may impose fines upon or censure EBI Securities
Corporation or Global Capital Markets, LLC.
Compliance with many of the regulations that apply to us involves a number
of risks, particularly in areas where applicable regulations may be unclear. The
SEC, the Austrian Ministry of Finance, other governmental regulatory
authorities, including state securities regulators, and self regulatory
organizations, including the Vienna Stock Exchange Chamber, may institute
administrative or judicial proceedings or arbitrations. These proceedings or
arbitrations may result in censure, fine, civil penalties (including treble
damages in the case of insider trading violations), issuance of cease-and-desist
orders, de-registration of or suspension of a broker-dealer, investment adviser
or futures commission merchant, statutory disqualification of our officers or
employees or other adverse consequences. Moreover, even if no such actions are
taken, there could be a material adverse effect on our perceived
creditworthiness, reputation and competitiveness. Customers of ours or others
who allege that our violation of applicable regulations have damaged them also
may seek to obtain compensation from us, including unwinding any transactions
with us. Such unwinding could have an adverse impact on our business.
Other changes may adversely affect our manner of operation and
profitability. These include:
o additional legislation and regulations, including those relating to
the activities of affiliates of broker-dealers,
o changes in rules promulgated by the SEC, the Austrian Ministry of
Finance or other Austrian or foreign governmental regulatory
authorities and self regulatory organizations, and
o changes in the interpretation or enforcement of existing laws and
rules.
Regulations may materially affect our business in two ways. First,
regulations may directly apply to us in the conduct of our business. Second,
laws, rules and regulations that apply generally to the industry or the market
as a whole may materially affect the market for our products and services. Some
examples of factors that could affect the volume of our underwriting, merger and
acquisition and merchant banking business in any year are:
o existing and proposed tax legislation,
o antitrust policy and other governmental regulations and policies
(including interest rate policies), and
o changes in interpretation or enforcement of existing laws and rules
that affect the business and financial communities.
From time to time, various forms of anti-takeover legislation and
legislation that could affect the benefits associated with financing leveraged
transactions with high-yield securities have been proposed that, if enacted,
could adversely affect the volume of merger and acquisition and investment
banking business, which in turn could adversely affect our related underwriting,
advisory and trading revenues.
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THERE ARE MARKET, CREDIT AND LIQUIDITY RISKS ASSOCIATED WITH OUR
UNDERWRITING AND TRADING ACTIVITIES WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS. We conduct our underwriting, securities trading, market-making
and arbitrage activities as principal and in doing so subject our capital to
significant risks, including market, credit (including counterparty) and
liquidity risks.
Our underwriting, securities trading, market-making and arbitrage
activities often involve the purchase, sale or short-sale of securities as
principal in markets that may be characterized by relative illiquidity or that
may be particularly susceptible to rapid fluctuations in liquidity. From time to
time we have large position concentrations in certain types of securities or
commitments and in the securities of or commitments to a single issuer. The
issuers could include sovereign governments and other entities, issuers located
in a particular country or geographic area, or issuers engaged in a particular
industry. Through our subsidiaries and affiliate offices, we engage in
proprietary trading of United States and Central and Eastern European securities
with an emphasis on government and corporate bonds, local debt instruments and
equity securities. These transactions involve risks associated with the
political instability and relative currency values of the nations in which the
issuer principally engages in business, including the risk of nationalization.
Additionally, from time to time we have substantial position concentrations in
high-yield issuers or commitments to high-yield issuers.
These securities generally involve greater risk than investment-grade debt
securities due to credit considerations, liquidity of secondary trading markets
and vulnerability to general economic conditions. The level of our high-yield
securities inventories and the impact of such activities upon our results of
operations can fluctuate from period to period as a result of customer demands
and economic and market considerations.
For competitive and other reasons, the trend in all major capital markets
toward larger commitments on the part of lead underwriters means that, from time
to time, an underwriter may retain significant position concentrations in
individual securities. Such concentrations increase our exposure to specific
credit, market and political risks. Also, material fluctuations in foreign
currencies against the US Dollar, in the absence of countervailing covering or
other procedures, may result in losses or gains in the carrying value of certain
assets located or denominated in non-US jurisdictions or currencies.
We derive much of our revenue from commissions generated by our
broker-dealers from retail brokerage transactions in equity and debt securities,
underwriting activities and private placements. We believe that as the business
of the broker-dealers develops, the broker-dealers will engage in securities
trading for their own accounts. These activities may involve the purchase, sale
or short-sale of securities as principal and may involve certain risks which may
limit our ability to resell securities we purchased or to repurchase securities
sold in such transactions. These risks include change in the market price of
such securities and a decrease in the liquidity of markets. Principal and
underwriting transactions also involve economic, political, credit, currency,
interest rate and other related risks, any of which could result in an adverse
change in the market price of the relevant securities.
OUR MERCHANT BANKING ACTIVITIES ARE VERY CAPITAL INTENSIVE AND HAVE A
POTENTIAL FOR LOSS WHICH COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
Securities firms, such as us, increasingly promote major client transactions and
transactions sponsored by the clients' own pools of capital by using their
capital in a variety of investment activities that have been broadly described
as "merchant banking." Such activities include, among other things, purchasing
equity or debt securities or making commitments to purchase such securities in
various transactions. These include mergers, acquisitions, and restructuring and
leveraged capital transactions, including leveraged buyouts and high-yield
financing.
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Such positions and commitments may involve substantial amounts of capital
and significant exposure to any one issuer or business, as well as market,
credit and liquidity risks. Purchasers of equity securities in these
transactions generally hold them for appreciation, and the securities are not
readily marketable and typically do not provide dividend income. Debt securities
purchased in such transactions typically rank subordinate to bank debt of the
issuer and may rank subordinate to other debt of the issuer.
We also provide and arrange bridge financing. Bridge financing assures
funding for major transactions, with the expectation that refinancing will be
obtained through the placement of high-yield debt or other securities. Such
activities may also involve substantial amounts of capital and significant
exposure to any one issuer as well as various risks associated with credit
conditions and vulnerability to general economic conditions.
There can be no assurance that we will not experience significant losses
as a result of such activities. Such losses may have an adverse effect on our
business.
ALTHOUGH WE DO NOT CURRENTLY USE DERIVATIVE FINANCIAL INSTRUMENTS, OUR
INABILITY TO ENGAGE IN CURRENCY HEDGING ACTIVITIES MAY SUBJECT OUR EARNINGS TO
GREATER VOLATILITY DUE TO EXCHANGE RATE FLUCTUATIONS. At the present time, we do
not engage in the use of derivative financial instruments. In some of the
countries where we have operations (E.G., Austria, Switzerland, Kazakhstan,
Czech Republic, Slovenia, Croatia, Poland and Azerbaijan), the local currencies
are referred to as "soft" or "exotic". Soft currency is the currency of a nation
where a person can exchange the currency only with difficulty. Soft currency
countries typically have minimal amounts of currency reserved for exchange
purposes. As such, there are very few, if any, cost effective hedging strategies
available to us or potential investors. Our inability engage in currency hedging
activities may result in our earnings being subject to greater volatility due to
exchange rate fluctuations.
OUR INABILITY TO RAISE ADDITIONAL REQUIRED CAPITAL COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS. We may need to raise additional funds to provide
working capital or to respond to unforeseen needs or to take advantage of
unanticipated opportunities. Over the longer term, it is likely that we will
require substantial additional monies to continue to fund our working capital
needs. There can be no assurance that any such funds will be available at the
time or times needed, or available on terms acceptable to us. If adequate funds
are not available on acceptable terms, we may not be able to take advantage of
market opportunities, to develop new services or products or otherwise respond
to competitive pressures. Such inability could have a material adverse effect on
our business, financial condition, results of operations and cash flows.
THERE MAY BE INADEQUATE FINANCING TO SUPPORT OUR BUSINESS THAT COULD HAVE
A MATERIAL ADVERSE EFFECT ON US. A substantial portion of our total assets
consists of highly liquid, marketable securities and short-term receivables
arising from securities transactions. The highly liquid nature of these assets
provides us with flexibility in financing and managing our business. However,
certain of our activities, such as merchant banking, frequently involve
substantial capital commitments in securities which are often illiquid. Such
funds and capital include equity, long-term debt and short-term borrowings which
consist of securities sold under agreements to repurchase, master notes and
committed and uncommitted lines of credit.
All repurchase transactions and a portion of our bank borrowings are made
on a collateralized basis. This means that we have to pledge assets of ours in
order to secure the funds involved in the repurchase transactions or borrowings.
Liquidity management includes monitoring assets available to pledge against
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short-term borrowing. We maintain borrowing relationships with a broad range of
banks, financial institutions, counterparties and others. The volume of our
borrowings generally fluctuates in response to changes in the amount of resale
transactions outstanding, the level of our securities inventories and overall
market conditions. Availability of financing can vary depending upon market
conditions, the volume of certain trading activities, credit ratings, credit
capacity and the overall availability of credit to the securities industry.
There can be no assurance that adequate financing to support our businesses will
continue to be available in the future.
NET CAPITAL REQUIREMENTS COULD RESULT IN RESTRICTIONS THAT ADVERSELY
AFFECT OUR ABILITY TO PAY DIVIDENDS, REPAY DEBT AND REDEEM OR REPURCHASE SHARES
OF OUR OUTSTANDING CAPITAL STOCK. As a registered broker-dealer and member of
numerous stock exchanges throughout the United States and Central and Eastern
Europe, we are required to comply with each of the countries' regulatory
authorities and net capital rules of the stock exchanges. These rules specify
minimum net capital requirements for registered broker-dealers and stock
exchange members. They attempt to ensure that broker-dealers maintain adequate
regulatory capital in relation to their liabilities and the size of their
customer business. Accordingly, the rules require that at least a substantial
portion of assets be kept in cash or highly liquid investments. Compliance with
such net capital requirements could limit operations that require the intensive
use of capital, such as underwriting and trading activities. These rules also
could restrict our ability to withdraw capital from restricted accounts governed
by regulatory restrictions, even in circumstances where these accounts hold more
than the minimum amount of required capital. This, in turn, could prevent or
limit our ability to pay dividends, repay debt and redeem or repurchase shares
of our outstanding capital stock.
WE HAVE POTENTIAL SECURITIES LAWS LIABILITY EXPOSURE IN CONNECTION WITH
OUR BUSINESS. Many aspects of our business involve substantial risks of
liability. In recent years litigation involving the securities industry has
increased, including class actions that generally seek substantial damages.
Companies engaged in the underwriting and distribution of securities are exposed
to substantial liability under applicable securities laws.
WE DEPEND ON CERTAIN KEY MEMBERS OF MANAGEMENT AND THE LOSS OF ANY ONE OF
THEM COULD HAVE A SIGNIFICANT ADVERSE EFFECT ON OUR PERFORMANCE AS A WHOLE. Most
aspects of our business depend on highly-skilled individuals. We devote
considerable resources to recruiting, training and compensating such individuals
and have taken further steps to encourage such individuals to remain in our
employ. Individuals employed by us may, however, choose to leave at any time to
pursue other opportunities. Moreover, operating our business depends principally
on certain key management personnel. In particular, Martin A. Sumichrast, Kevin
D. McNeil and Wolfgang Kossner have played significant roles in promoting,
developing and managing Global Capital. Wolfgang Kossner serves as a consultant
to Global Capital. If Mr. Kossner's affiliation with us were to cease, or if he
were unable to continue to serve in this role, there may be a significant
adverse effect on our performance as a whole. Martin A. Sumichrast and Kevin D.
McNeil are each an officer and employee of Global Capital, and Mr. Sumichrast is
a director and Chairman of Global Capital. If we terminate the employment of
either of them, or if either is unable to perform his duties, there may be a
significant adverse effect on our performance as a whole. We expect that our
potential growth and any expansion into new areas and activities requiring
additional expertise (such as new markets or the development of new products)
will place additional demands on our human resources. We anticipate such demands
will require us to add new management personnel and to develop additional
expertise in our existing management personnel. The failure to acquire such
services or to develop such expertise could have a material adverse effect on
our prospects for success. Competition for such personnel is intense and we can
give no assurance that we will be able to hire and/or retain adequate personnel.
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At the present time, we have a key-man life insurance policy in effect on each
of Mr. Sumichrast and Mr. McNeil. However, we cannot be certain that the
proceeds from such policy will be adequate to offset the loss of his services.
We do not have key-man life insurance policies in effect with respect to Mr.
Kossner.
WE HAVE SUFFERED OPERATING LOSSES AND WE CANNOT PREDICT WHETHER OUR FUTURE
OPERATIONS WILL BE PROFITABLE OR THAT WE WILL HAVE AVAILABLE FUNDS ADEQUATE TO
FUND OUR OPERATIONS. Since the Company's formation, we have suffered substantial
cash flow deficits and operating losses. The net loss for the fiscal year ended
March 31, 1999, was $5,911,847 and net income for the three months ended
December 31, 1999, was $1,702,245 and the net income for the three months ended
December 31, 1998 was $53,639. Cash and cash equivalents were about $2,215,000
as of March 31, 1999 and about $7,157,000 as of March 31, 1998 and about
$2,763,950 for the three months ended December 31, 1999. There can be no
assurance that our future operations will be profitable or that we will have
available funds adequate to fund our operations. Should our operations be
profitable, it is likely that we would retain much or all of our earnings to
finance future growth and expansion.
IF REGULATORS WERE TO DELIST OUR COMMON STOCK, OUR SECURITIES MAY BECOME
LESS LIQUID AND TRANSACTIONS IN THEM MAY BECOME SUBJECT TO THE MORE RESTRICTIVE
PENNY STOCK RULES. In the event that the common stock were no longer to meet
applicable SmallCap requirements including timely reporting and were delisted
from SmallCap, we would attempt to have our securities traded in the
over-the-counter market via the Electronic Bulletin Board or the "pink sheets."
In such event, holders of our securities would likely encounter greater
difficulty in disposing of these securities and/or obtaining accurate quotations
as to the prices of our securities.
The SEC has adopted regulations which define "penny stock" to include any
equity security other than a security that is registered on a national
securities exchange, authorized for quotation on Nasdaq or has a price of $5.00
or more per share subject to certain exceptions. Since our common stock is
currently listed on the Nasdaq SmallCap Market we are exempt from the definition
of penny stock at this time. If at any time regulators delist the common stock
from the Nasdaq SmallCap Market, transactions involving the securities may
become subject to penny stock rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors. (Accredited investors include,
among others, individuals with assets in excess of $1,000,000 or annual income
exceeding $200,000 individually or $300,000 together with his or her spouse.)
For transactions subject to penny stock rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, the SEC mandates a risk disclosure document relating to
the penny stock market which the broker-dealer must deliver prior to any
transaction involving a penny stock, unless an exemption applies. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and disclose current quotations
for the securities. If the broker-dealer is the sole market-maker, the
broker-dealer must also disclose this fact as well as its presumed control over
the market. Finally, broker-dealers must send monthly statements disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks. Consequently, the penny stock rules may
restrict the ability of broker-dealers to sell our securities in the secondary
market.
EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS COULD HAVE DILUTIVE AND OTHER
ADVERSE EFFECTS AND COULD AFFECT OUR ABILITY TO RAISE ADDITIONAL CAPITAL. Under
the terms of our outstanding Class A, Class B and Class C Common Stock Purchase
Warrants and options issued under our 1996 Stock Option Plan, and other
outstanding options and warrants, the holders of such warrants and options are
given an opportunity to profit from a rise in the market price of the common
stock with a resulting dilution in the interests of the other shareholders. The
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existence of such options and warrants may adversely affect terms on which we
may obtain additional financing. For example, the holders of the warrants might
exercise them at a time when we are attempting to obtain additional capital
through a new offering of securities on terms more favorable than such warrants
and options.
There are currently outstanding 1,101,000 Class A Common Stock Purchase
Warrants, 250,000 Class B Common Stock Purchase Warrants and 1,490,900 Class C
Common Stock Purchase Warrants and 1,161,222 Placement Agent Warrants. Each
Class A Common Stock Purchase Warrant entitles the registered holder to purchase
one share of common stock, $.05 par value, of the Company at an exercise price
of $18.00 per share, exercisable until June 8, 2000.
Each Class B Common Stock Purchase Warrant entitles the registered holder
to purchase one share of common stock $.05 par value, of the Company at an
exercise price of $19.00 per share, exercisable until June 8, 2000.
Each Class C Warrant entitles the registered holder to purchase one share
of our common stock at an exercise price of $7.00 per share, exercisable from
February 20, 1999 until February 20, 2002. The shares underlying these warrants
are subject to a "demand registration" right under certain circumstances and
under certain circumstances each Class C Warrant is subject to redemption at our
option at a redemption price equal to $0.10 per warrant.
The Placement Agent Warrants are identical in all respects to the Class C
Common Stock Purchase Warrants, except that the Placement Agent Warrants are not
redeemable by Global Capital.
THE ISSUANCE OF PREFERRED STOCK COULD MAKE A TAKEOVER OF US OR THE REMOVAL
OF OUR MANAGEMENT MORE DIFFICULT. In December 1997, our Board of Directors
authorized the issuance of up to 10,000,000 shares of preferred stock. The Board
of Directors has the power to establish the dividend rates, liquidation
preferences, voting rights, redemption and conversion terms and all other
rights, preferences and privileges with respect to this and any other series of
preferred stock that may be issued. The issuance of any series of preferred
stock having rights superior to those of the common stock may result in a
decrease in the value or market price of the common stock. The Board of
Directors could use this as a means to prevent a change in control of the Global
Capital Group. Future additional issuances of preferred stock may provide for
dividends, certain preferences in liquidation and conversion rights. Such
preferred stock issuance could make the possible takeover of the Global Capital
Group, or the removal of management of the Global Capital Group, more difficult.
The issuance of such preferred stock could discourage hostile bids for control
of the Global Capital Group in which shareholders could receive premiums for
their common stock or warrants, could adversely affect the voting and other
rights of the holders of the common stock, or could depress the market price of
the common stock or warrants.
THERE ARE RISKS SPECIFIC TO GEOGRAPHIC AREAS OUTSIDE THE UNITED STATES IN
WHICH WE CONDUCT BUSINESS WHICH COULD, IF REALIZED, RESULT IN A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS. Our investments will include securities of issuers
resident in areas currently in a state of flux - Central and Eastern Europe and
Central Asia. These regions' political institutions and economic policies now
face the challenges of rapid change. Their populations are ethnically diverse
and cultural and religious tensions abound. Memories of conflicts, past
injustices and the legacy of the denial of justice and the expropriation of
property will continue to create tension for years to come. These problems will
compound the difficulties of the change from a centrally planned economy to a
market economy. For these reasons our investments will be subject to risks of a
nature and degree not normally encountered in more developed economies and
additional to those inherent in any equity investment. Specific examples of some
of these risks are described below:
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o LIQUIDITY OF OUR INVESTMENTS: The nature of our investments in these
geographic areas limits their potential secondary market. Accordingly,
we may not be able to achieve the full value of our investments on
disposal. Although we anticipate that liquidity will improve once
local stock markets are operational, there is no guarantee that the
markets will be as liquid as those of developed countries.
o POLITICAL AND ECONOMIC FACTORS: The countries in which some of our
operations are concentrated had centrally-planned, socialist economies
for many years. Attempts at political and economic reform have been
made with limited success and it is impossible to foresee whether such
reforms will achieve their intended aims. Countries may impose
restrictions on investing in specific companies or industries which
they consider to be important or sensitive to national interests, but
which also may be the best investment opportunities available there.
Additionally, changes in government policy may result in countries
expropriating investments.
o VALUATION RISK: Accounting and financial reporting standards in
selected countries are not equivalent to International Accounting
Standards or US Generally Accepted Accounting Standards.
Consequently, less information is available to investors in the
selected countries than in more developed capital markets.
Nevertheless, we will use valuations and financial reports of
international auditing firms and will apply all other means to monitor
unlisted investments.
o PROBLEMS OF TRANSITION AND BUSINESS FAILURE: Until very recently,
virtually all industrial output within the Comecon and Warsaw Pact
countries was generated from state-owned industry. As a result, few
individuals understand basic capitalistic management skills and
techniques. Privatization of much of the region's industry and the
transition to a more market-orientated economy will be difficult.
Industry in the region is considerably less developed and less
efficient than industry in Western Europe and the United States. In
addition to doubts as to the continuing viability of much of the
region's industry, those businesses which survive are likely to
require considerable capital investment and restructuring. The failure
of one or more businesses in which we have invested may have a
significant adverse effect on our performance as a whole.
o CHANGES IN LAW AND ENFORCEMENT OF RIGHTS: In cases where competing
claims arise or in cases of re-nationalization, it may be difficult to
enforce our rights in several of the countries where we operate. There
are several reasons for this. First, legislation relating to
securities, stock markets and property rights may not exist. Second,
these countries may only very recently have introduced such
legislation, and may introduce significant new legislation at any
time. Finally, existing legislation is likely to be subject to
extensive amendment.
o INVESTMENT AND REPATRIATION RESTRICTIONS: We may require governmental
registration and/or approval in order to repatriate investment income,
capital and the proceeds of sales by foreign investors. A number of
countries in which we may invest do not have freely convertible
currencies or their currencies may only be convertible at rates
determined by their governments. Countries may also impose
repatriation restrictions at any time. Changes in the value of
currencies in which our investments are denominated will result in a
corresponding change in the value of our assets which are generally
denominated in the local functional currencies. Investors should note
20
<PAGE>
that the local currencies involved may be subject to rapid devaluation
against the major "hard" currencies, with the corresponding result
that delays in currency conversion may cause significant losses.
o TAXATION: Taxation of dividends and capital gains received by
non-residents varies among the selected countries. In addition, the
selected countries generally have less well defined tax laws and
procedures, and such laws may permit retroactive taxation. As a
result, we could, in the future, become subject to local tax
liabilities that had not been anticipated in conducting our investment
activities or valuing our assets.
A SUBSTANTIAL PORTION OF OUR ASSETS IS LOCATED OUTSIDE THE UNITED STATES
WHICH COULD MAKE IT DIFFICULT TO ENFORCE CIVIL JUDGMENTS OBTAINED AGAINST US IN
THE UNITED STATES. A substantial portion of our assets are located outside the
United States. It may be difficult for investors to enforce outside of the
United States judgments against us obtained in the United States in any actions,
including actions based on the civil liability provisions of the securities laws
of the United States. In addition, certain of our officers and directors are not
citizens or residents of the United States and all or a substantial portion of
their assets are or may be located outside the United States. As a result, it
may be difficult for investors to affect service of process within the United
States against them or to enforce judgments obtained in the United States,
including judgments based on the civil liability provisions of the securities
laws of the United States.
SIGNIFICANT AND RAPID CHANGES IN TECHNOLOGY COULD NEGATIVELY AFFECT OUR
INTERNET-RELATED PROJECTS. The market for internet products and services has
only recently begun to develop and is rapidly evolving. Significant
technological changes could render our existing internet-related products and
services obsolete. To be successful, we must adapt to this rapidly changing
market by continually improving the responsiveness, functionality and features
of our products and services to meet our customers' needs. If we are unable to
respond to technological advances and conform to emerging industry standards in
a cost-effective and timely basis, certain portions of our business could be
materially adversely affected.
USE OF PROCEEDS
The following securities, if sold, will be sold by the holders of the
securities registered under the registration statement that includes this
prospectus, and we will therefore not receive any proceeds from their sale:
o 27,500 common stock shares,
o 1,490,900 shares of common stock underlying the Class C Common Stock
Purchase Warrants,
o 1,161,222 shares of common stock underlying the Placement Agent
Warrants.
The term "Shares" means the common stock shares, the shares of common stock
underlying the Class C Common Stock Purchase Warrants and the shares of common
stock underlying the Placement Agent Warrants, collectively.
We will receive proceeds, however, if any holder of the securities
registered under the registration statement that includes this prospectus
exercises any of the Class C Common Stock Purchase Warrants or Placement Agent
Warrants. Although the holders of such securities are not obligated to exercise
them, if they exercise all of these securities, then the net proceeds we will
receive is estimated to be $18,564,854.
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<PAGE>
The closing bid price of the common stock on the Nasdaq SmallCap Market on
March 22, 2000 was $9.4062. The Class C Common Stock Purchase Warrants and the
Placement Agent Warrants are exercisable at $7.00. There is no assurance that
any of the Class C Common Stock Purchase Warrants or the Placement Agent
Warrants shall or shall not be exercised.
Global Capital currently anticipates that it will use its net proceeds of
this offering, if any, to fund general corporate and working capital
requirements.
SELLING SECURITY HOLDERS
The following table sets forth information with respect to the resale by
the holders of the securities registered under the registration statement that
includes this prospectus of their respective Shares, Class C Common Stock
Purchase Warrants and Placement Agent Warrants. In particular, the following
table sets forth as of March 22, 2000, to the knowledge of Global Capital:
o the number of shares of common stock (including shares of common
stock, shares of common stock underlying the Class C Common Stock
Purchase Warrants and shares of common stock underlying the
Placement Agent Warrants) beneficially owned by each Selling
Security Holder;
o the number of shares of common stock, Class C Common Stock Purchase
Warrants and Placement Agent Warrants to be offered and sold by each
Selling Security Holder; and
o the number of shares of common stock and percentage of outstanding
shares of common stock to be beneficially owned by each Selling
Security Holder after such offering and sale, assuming that all the
shares offered by the Selling Security Holders are in fact sold.
Unless otherwise indicated, to our knowledge, each Selling Security Holder
has sole investment and voting power (or shares such powers with his or her
spouse), if applicable, with respect to the securities set forth in the
following table. As of March 22, 2000 Global Capital had 8,334,355 shares of
common stock issued and outstanding.
<TABLE>
<CAPTION>
-------------------- -----------------------
Beneficial Ownership Beneficial Ownership
Prior to the Offering After the Offering (1)
-------------------- -----------------------
NUMBER OF
NUMBER SHARES TO NUMBER OF
OF SHARES BE SOLD SHARES PERCENTAGE
--------- ------- ------ ----------
<S> <C> <C> <C>
COMMON STOCK: (2)
Allied International Fund Inc. 10,000 10,000 0 *
Robert Alloway 10,000 10,000 0 *
Don Asher 5,000 5,000 0 *
Ellis Belodoff 5,000 5,000 0 *
Ted Burns 66,203 66,203 0 *
Steve Caruso 145,315 145,315 0 *
Barry Cassese 2,000 2,000 0 *
Corporate Financial Enterprises 50,000 50,000 0 *
Cherry Creek Investments,
Ltd. (3) 445,000 25,000 420,000 5.04
Bud Clarke 145,314 145,314 0 *
Peter Cohen 115,367 115,367 0 *
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<PAGE>
-------------------- -----------------------
Beneficial Ownership Beneficial Ownership
Prior to the Offering After the Offering (1)
-------------------- -----------------------
NUMBER OF
NUMBER SHARES TO NUMBER OF
OF SHARES BE SOLD SHARES PERCENTAGE
--------- ------- ------ ----------
Michael P. Curtis 10,000 10,000 0 *
James E. Duncan 2,820 2,820 0 *
Susan M. Duncan -
The Kingdom Enlightenment
Scholarship Foundation 9,400 9,400 0 *
Susan M. Duncan 17,390 17,390 0 *
Susan M. Duncan -
Irrevocable Gift Trust 7,050 7,050 0 *
de Castro Trust, Fred & Barbara
de Castro Trustees 2,350 2,350 0 *
Daleford Way 100,000 100,000 0 *
Michael Finnan 2,000 2,000 0 *
Greg Fulton -
Fiserv IRA Rollover 24,420 24,420 0 *
General Partners Beteiligungs,
AG (4) 1,587,920 200,000 (5) 1,387,920 16.65 (5)
Michael Gottlieb 5,000 5,000 0 *
Craig Gross 26,482 26,482 0 *
Warren Hardy 100,000 100,000 0 *
Colin Harvey 10,000 10,000 0 *
Jim Heckman, & Lee
Schlessman - FBO Schlessman
Family Foundation 36,660 36,660 0 *
Nelse Hendricks - Pension
Trust Account' FBO
Comet Press, Limited 15,040 15,040 0 *
Nelse Hendricks -
Profic Sharing Plan
FBO Comet Press, Limited 2,820 2,820 0 *
Interpacific Capital Corp. 40,000 40,000 0 *
Katie Johnson 5,400 5,400 0 *
Gary and Linda Kircher 5,000 5,000 0 *
Limerick Associates, LLC 10,000 10,000 0 *
Kevin Loomis 5,516 5,516 0 *
Maccabee Investors II LLC 125,000 125,000 0 *
Kevin McNeil (6) 110,078 57,583 52,495 *
New Technologies
Marketing, Inc. 60,000 60,000 0 *
Ralph Olson 58,000 2,500 55,500 *
William Orzolek 10,000 10,000 0 *
OTA Limited Partnership 150,000 150,000 0 *
Punta Investors LLC 40,000 40,000 0 *
Cal J. Rickel &
Amanda Mae Rickel
JTWROS 4,700 4,700 0 *
Francis Santangelo 150,000 75,000 75,000 *
Paul Savage 4,414 4,414 0 *
Gary L. Schlessman 7,050 7,050 0 *
Lee Schlessman
c /o Dolo Investment
Company 18,800 18,800 0 *
23
<PAGE>
-------------------- -----------------------
Beneficial Ownership Beneficial Ownership
Prior to the Offering After the Offering (1)
-------------------- -----------------------
NUMBER OF
NUMBER SHARES TO NUMBER OF
OF SHARES BE SOLD SHARES PERCENTAGE
--------- ------- ------ ----------
Stephen Schoffman 285,773 285,773 0 *
Robert J. Sforza 10,000 10,000 0 *
Jonathan Siegel 345,773 345,773 0 *
Frank Skelley 26,482 26,482 0 *
Dale Sobek 20,000 20,000 0 *
Martin S. Sumichrast (7) 990,000 150,000 840,000 10.08%
Vincent Trugilio 10,000 10,000 0 *
Hugo Tsai 60,000 60,000 0 *
NUMBER OF
NUMBER SHARES TO NUMBER OF
CLASS C COMMON STOCK OF SHARES BE SOLD SHARES PERCENTAGE
PURCHASE WARRANTS: (8) --------- ------- ------ ----------
Allied International Fund
Inc. 10,000 10,000 0 *
Robert Alloway 10,000 10,000 0 *
Don Asher 5,000 5,000 0 *
Ellis Belodoff 5,000 5,000 0 *
Steve Caruso 39,497 39,497 0 *
Bud Clarke 39,497 39,497 0 *
Peter Cohen 39,496 39,496 0 *
Corporate Financial
Enterprises 50,000 50,000 0 *
Michael P. Curtis 10,000 10,000 0 *
Daleford Way 100,000 100,000 0 *
de Castro Trust, Fred &
Barbara de Castro
Trustees 2,350 2,350 0 *
James E. Duncan 2,820 2,820 0 *
Susan M. Duncan -
The Kingdom Enlightenment
Scholarship Foundation 9,400 9,400 0 *
Susan M. Duncan 17,390 17,390 0 *
Susan M. Duncan -
Irrevocable Gift Trust 7,050 7,050 0 *
Greg Fulton -
Fiserv IRA Rollover 24,420 24,420 0 *
General Partners
Beteiligungs, AG (4) 200,000 200,000 0 *
Michael Gottlieb 5,000 5,000 0 *
Warren Hardy 100,000 100,000 0 *
Colin Harvey 10,000 10,000 0 *
Jim Heckman & Lee
Schlessman - FBO
Schlessman Family
Foundation 36,660 36,660 0 *
Nelse Hendricks -
Pension Trust Account
FBO Comet Press,
Limited 15,040 15,040 0 *
Nelse Hendricks -
Profit Sharing Plan
FBO Comet Press,
Limited 2,820 2,820 0 *
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<PAGE>
NUMBER OF
NUMBER SHARES TO NUMBER OF
CLASS C COMMON STOCK OF SHARES BE SOLD SHARES PERCENTAGE
PURCHASE WARRANTS: (8) --------- ------- ------ ----------
Interpacific Capital Corp. 40,000 40,000 0 *
Katie Johnson 5,400 5,400 0 *
Gary and Linda Kircher 5,000 5,000 0 *
Limerick Associates, LLC 10,000 10,000 0 *
Maccabee Investors II LLC 125,000 125,000 0 *
William Orzolek 10,000 10,000 0 *
Punta Investors LLC 40,000 40,000 0 *
OTA Limited Partnership 150,000 150,000 0 *
Cal J. Rickel &
Amanda Mae Rickel
JTWROS 4,700 4,700 0 *
Francis Santangelo 75,000 75,000 0 *
Lee Schlessman 18,800 18,800 0 *
Gary L. Schlessman 7,050 7,050 0 *
Stephen Schoffman 79,255 79,255 0 *
Robert J. Sforza 10,000 10,000 0 *
Jonathan Siegel 79,255 79,255 0 *
Dale Sobek 20,000 20,000 0 *
Vincent Trugilio 10,000 10,000 0 *
Hugo Tsai 60,000 60,000 0 *
NUMBER OF
NUMBER SHARES TO NUMBER OF
PLACEMENT AGENT OF SHARES BE SOLD SHARES PERCENTAGE
WARRANTS: (8) --------- ------- ------ ----------
Ted Burns 66,203 66,203 0 *
Steve Caruso 105,818 105,818 0 *
Barry Cassese 2,000 2,000 0 *
Bud Clarke 105,817 105,817 0 *
Peter Cohen 75,871 75,871 0 *
Michael Finnan 2,000 2,000 0 *
Craig Gross 26,482 26,482 0 *
Kevin Loomis 5,516 5,516 0 *
Kevin McNeil (6) 57,583 57,583 0 *
New Technologies
Marketing, Inc. 60,000 60,000 0 *
Paul Savage 4,414 4,414 0 *
Stephen Schoffman 206,518 206,518 0 *
Jonathan Siegel 266,518 266,518 0 *
Frank Skelley 26,482 26,482 0 *
Martin A. Sumichrast (7) 150,000 150,000 0 *
</TABLE>
- -----------------------
* Less than 1 percent
(1) Assumes the sale of all securities registered hereby.
(2) Unless otherwise indicated, the number of shares included under the section
entitled "Common Stock" of this table includes common stock shares, shares
of common stock underlying the Class C Common Stock Purchase Warrants and
shares of common stock underlying the Placement Agent Warrants.
25
<PAGE>
(3) Cherry Creek Investments, Ltd. was a party with Global Capital to an
agreement, dated as of May 14, 1998, by which Cherry Creek Investments,
Ltd. sold EBI Securities Corporation to Global Capital.
(4) Beneficial ownership prior to the offering includes 200,000 shares issuable
upon exercise of warrants to acquire common stock at $7.00 per share. As of
March 22, 2000, General Partners beneficially owns 18.61% of Global Capital
Partners, Inc. common stock (including the 200,000 shares issuable upon
exercise of warrants). Wolfgang Kossner, a Director of Global Capital, is a
principal stockholder of General Partners.
(5) The securities to be sold include the 200,000 Class C Common Stock Purchase
Warrants and the 200,000 shares of common stock underlying the Class C
Common Stock Purchase Warrants, each of which are included under this
registration statement. If all such shares are sold, after the offering
General Partners will beneficially own 16.65% of the common stock.
(6) Beneficial ownership prior to the offering includes 57,583 shares of common
stock issuable upon exercise of Placement Agent Warrants to acquire common
stock at $7.00 per share and which are included, together with the 57,583
Placement Agent Warrants, under this registration statement. As of March
22, 2000, Mr. McNeil owns 1.31% of Global Capital Partner, Inc. common
stock. Mr. McNeil is not registering shares of common stock other than
those underlying the Placement Agent Warrants; if all such shares are sold,
his beneficial ownership of Global Capital's common stock will be 0.63%.
Kevin McNeil is Secretary, Treasurer and Chief Financial Officer of Global
Capital.
(7) Beneficial ownership prior to the offering includes 600,000 shares of
common stock owned by Belle Holdings, Inc., a corporation of which Mr.
Sumichrast is officer, director and Sole Stockholder, 190,000 shares of
common stock owned directly by Mr. Sumichrast, 50,000 shares of common
stock owned by Sumichrast Enterprises, Inc., a corporation of which Mr.
Sumichrast is an officer and director and the owner, and 150,000 shares of
common stock issuable upon exercise of Placement Agent Warrants to acquire
common stock at $7.00 per share. Such shares of common stock issuable upon
exercise of the Placement Agent Warrants are included, together with the
Placement Agent Warrants, under this registration statement. As of March
22, 2000, Mr. Sumichrast owns 11.67% of the Global Capital Partners, Inc.
common stock. Mr. Sumichrast is not registering shares of common stock
other than those underlying the Placement Agent Warrants; if all such
included shares are sold, his beneficial ownership of Global Capital's
common stock will be 10.08%. Martin A. Sumichrast is Chairman of the Board,
Chief Executive Officer, President, and Director of Global Capital.
(8) Assuming each selling security holder sells all of the Class C Common Stock
Purchase Warrants and Placement Agent Warrants indicated, no holder will
beneficially own any Class C Common Stock Purchase Warrants or Placement
Agent Warrants.
26
<PAGE>
PLAN OF DISTRIBUTION
Any of the Shares, Class C Common Stock Purchase Warrants and Placement
Agent Warrants may be offered and sold from time to time by one or more of the
holders of the securities to which this prospectus relates, or by their
pledgees, donees, transferees or other successors in interest. No such holder is
required to offer or sell any of his or its Shares, Class C Common Stock
Purchase Warrants, and Placement Agent Warrants.
The holders of the securities to which this prospectus relates anticipate
that, if and when offered and sold, the Shares will be offered and sold in
transactions (which may include block transactions) effected on the Nasdaq
SmallCap Market at then prevailing market prices. Each such holder reserves the
right, however, to offer and sell the Shares on any other national securities
exchange on which the common stock is or may become listed or in the
over-the-counter market, in each case at then prevailing market prices, or in
privately negotiated transactions each at a price then to be negotiated. All
offers and sales made on the Nasdaq SmallCap Market or any other national
securities exchange or in the over-the-counter market will be made through or to
licensed brokers and dealers.
The Class C Common Stock Purchase Warrants and the Placement Agent
Warrants will not be listed on any exchange or in the over-the-counter market
and therefore they may be offered and sold in privately negotiated transactions
at a price then to be negotiated.
No agreements, arrangements or understandings have been entered into with
any broker or dealer and no brokers or dealers have been selected in connection
with the offer and sale of the Shares, Class C Common Stock Purchase Warrants
and the Placement Agent Warrants. All proceeds from the sale of the Shares will
be paid directly to the holders selling them and will not be deposited in an
escrow, trust or other similar arrangement. Global Capital will not receive any
of the proceeds from the sales of the Shares by the holders selling them.
However, Global Capital will receive proceeds from the exercise of the Class C
Common Stock Purchase Warrants and the Placement Agent Warrants if the holders
of such warrants exercise them. No discounts, commissions or other compensation
will be allowed or paid by the selling security holders or us in connection with
the offer and sale of the Shares, Class C Common Stock Purchase Warrants and
Placement Agent Warrants, except that usual and customary brokers' commissions
may be paid by the holders selling them.
The selling broker may act as agent or may acquire the Shares or interests
therein as principal or pledgee and may, from time to time, effect distributions
of the Shares or interests. If a dealer is utilized in the sale of the Shares in
respect of which the prospectus is delivered, the selling security holders will
sell the Shares to the dealer, as principal. The dealer may then resell the
Shares to the public at varying prices to be determined by such dealer at the
time of resale.
We have agreed to indemnify the holders of the securities registered
under the registration statement that includes this prospectus and such security
holders have agreed to indemnify us and our officers, directors, employees,
agents and controlling persons from certain damages or liabilities arising out
of or based upon any untrue statement or alleged untrue statement of any
material fact contained in, or material omission or alleged omission from, the
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto, to the extent such untrue
statement or omission was made in the registration statement or other document
in reliance upon information furnished by the indemnifying party.
27
<PAGE>
The legal, accounting and other fees and expenses related to the offer and
sale of the Shares, Class C Common Stock Purchase Warrants and Placement Agent
Warrants contemplated hereby are estimated to be $40,000 and will be paid by
Global Capital. Global Capital will pay all expenses incurred in connection with
this offering, excluding commissions charged by any broker or dealer acting on
behalf of a selling security holder.
EXPERTS
The consolidated statements of our financial condition as of March 31,
1998, and March 31, 1999, and the related consolidated statements of operations,
comprehensive income, changes in shareholders' equity and cash flows for the
years then ended and the financial statements of Global Capital Markets, LLC
incorporated by reference in this prospectus have been audited by Spicer,
Jeffries & Co., independent auditors, as stated in their reports appearing,
respectively, in our Annual Report on Form 10-KSB for the year ended March 31,
1999 and in our Current Report on Form 8-K/A filed on February 7, 2000, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing. The financial statements of
Global Capital Markets, LLC incorporated by reference in this prospectus have
also been audited by BDO Seidman, LLP, independent auditors, as stated in their
report appearing in our Current Report on Form 8-K/A filed on February 7, 2000,
and have been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the legality of the securities
offered hereby have been passed upon for Global Capital by Kelley Drye & Warren
LLP, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901. Jay
R. Schifferli, a Director of Global Capital, is a Partner of Kelley Drye &
Warren LLP. Mr. Schifferli owns 7,500 shares of restricted common stock and
5,000 options to acquire shares of Global Capital's common stock as non-employee
director compensation.
28
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. The
expenses shall be paid by the registrant.
AMOUNT TO
TYPE OR NATURE OF EXPENSE BE PAID
SEC registration fee........................ $ 7,388.04
Accounting fees and expenses................ 10,000.00
Legal fees and expenses..................... 20,000.00
Miscellaneous............................... 2,611.96
----------
Total....................................... $40,000.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Global Capital's Articles of Incorporation, as amended, permit Global
Capital to indemnify its directors, officers, employees and agents to the extent
permitted by Section 145 of the Delaware General Corporation Law, as amended.
With respect to actions other than those by or in the right of Global
Capital, Section 145(a) of the Delaware General Corporation Law permits Global
Capital to indemnify any person who was, is or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that the
person is or was (i) a director, officer, employee or agent of Global Capital,
or (ii) serving at Global Capital's request as director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise. Global Capital may indemnify the person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement that are
actually and reasonably incurred in connection with such an action, suit or
proceeding if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation. With respect to any criminal action or proceeding, the person must
also have had no reasonable cause to believe his or her conduct was unlawful.
With respect to actions by or in the right of Global Capital, Section
145(b) permits Global Capital to indemnify any person who was, is or is
threatened to be made a party (by reason of the same facts as in the preceding
paragraph) to any threatened, pending or completed action or suit to procure
judgment in Global Capital's favor. Global Capital may indemnify the person
against expenses (including attorneys' fees) that are actually and reasonably
incurred in connection with the defense or settlement of the action or suit.
However, if the person is adjudged liable, Global Capital may not indemnify the
person unless a court of competent jurisdiction determines that even though the
person was adjudged liable, the circumstances fairly and reasonably entitle the
person to indemnity, but then only to the extent that the court deems proper.
Pursuant to Section 145(c), Global Capital must indemnify any present or
former director or officer who was successful on the merits or otherwise in
defense of any of the above described proceedings or in defense of any claim,
issue or matter in any such proceeding against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection therewith.
Pursuant to Section 145(e), Global Capital may pay advance of a final
disposition the expenses (including attorneys' fees) of an officer or director
to defend a proceeding if the person (or some other person on his or her behalf)
II-1
<PAGE>
undertakes to repay the advanced expenses in the event that it is ultimately
determined that the person is not entitled to indemnification Global Capital.
The Articles also provide that, to the fullest extent permitted by the
Delaware General Corporation Law, Global Capital's directors shall not be liable
to Global Capital or its stockholders for monetary damages for the breach of
fiduciary duty as a director.
Section 102(b)(7) of the Delaware General Corporation Law permits Global
Capital to provide in its Articles that a director shall not be personally
liable to the corporation or its stockholders for monetary damages for a breach
of fiduciary duty as a director, except for (i) any breach of the duty of
loyalty, (ii) any acts or omissions either not in good faith or involving either
intentional misconduct or a knowing violation of law, (iii) certain unlawful
dividend payments or stock redemptions or repurchases as provided in Section 174
of the Delaware General Corporation Law or (iv) any transaction from which the
director derived an improper personal benefit.
Section 145(g) permits Global Capital to purchase insurance on behalf of
its directors and officers against any liability asserted against and incurred
by them in such capacity, or arising out of their status as such, whether or not
Global Capital would have the power to indemnify directors and officers against
the liability for which the insurance is purchased. Global Capital has acquired
officers' and directors' liability insurance of $2 million for members of its
Board of Directors and executive officers.
At present, there is no pending litigation or other proceeding involving a
director or officer of Global Capital as to which indemnification is being
sought, nor is Global Capital aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
ITEM 16. EXHIBITS.
(a) The exhibits listed below have been filed as part of this Registration
Statement.
EXHIBIT NO. DESCRIPTION
(5.1)* Opinion of Kelley Drye & Warren LLP.
(23.1)** Consent of Spicer, Jeffries & Co.
(23.2)** Consent of BDO Seidman, LLP.
(23.3)* Consent of Kelley Drye & Warren LLP (contained in Exhibit 5).
(24.1)** Power of Attorney (included within signature page).
-----------------------
*Filed previously.
**Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
A. To file, during any period in which offers or sales are being made, a
post-effective amendment of this registration statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933.
(ii) To include in the prospectus any facts or events arising after the
effective date of the registration statement (or most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement:.
B. That, for the purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. To remove from registration by means of post-effective amendment any of
the securities registered which remain unsold at the termination of the
offering.
D. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to any charter provisions, by-laws, contract,
arrangements, statute or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
E. Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant hereby undertakes to file with
the SEC such supplementary and periodic information, documents and reports as
may be prescribed by any rule or regulation of the SEC heretofore or hereafter
duly adopted pursuant to authority conferred in that Section.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and authorizes this
post-effective amendment to the registration statement to be signed on its
behalf by the undersigned, in the City of Charlotte, State of North Carolina, on
March 31, 2000.
GLOBAL CAPITAL PARTNERS, INC.
By: /s/ Martin A. Sumichrast
------------------------------------------
Name: Martin A. Sumichrast
Title: Chairman, Chief Executive Officer,
President and Director
In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Martin A. Sumichrast Chairman, Chief Executive
- ------------------------------ Officer, President and
Martin A. Sumichrast Director March 31, 2000
(Principal Executive
Officer)
/s/ Kevin D. McNeil Vice President, Secretary,
- ------------------------------ Treasurer and Chief
Kevin D. McNeil Financial Officer March 31, 2000
(Principal Financial and
Accounting Officer)
*
- ------------------------------ Director March 31, 2000
Michael Sumichrast, Ph.D.
* Director March 31, 2000
- ------------------------------
Wolfgang Kossner
* Director March 31, 2000
- ------------------------------
Dr. Lawrence Chimerine
* Director March 31, 2000
- ------------------------------
Jay R. Schifferli, Esq.
/s/ Kevin D. McNeil
- ------------------------------
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(23.1) Consent of Spicer, Jeffries & Co.
(23.2) Consent of BDO Seidman, LLP.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the prospectus constituting a
part of this Amendment on Form S-3 to Registration Statement on Form SB-2 (No.
333-83385) of Global Capital Partners, Inc. of our report dated June 29, 1999
relating to the consolidated financial statements of Global Capital Partners,
Inc. and Subsidiaries, which report appears on page 40 of the Global Capital
Partners, Inc. Annual Report on Form 10-KSB for the year ended March 31, 1999
and of our report dated December 3, 1999 relating to the financial statements of
the JB Sutton Group, LLC, which report appears on page 6 of Amendment No. 1 to
the Global Capital Partners, Inc. Current Report on Form 8-K filed as of
February 7, 2000.
We also consent to the reference to us under the heading "Experts" in the
prospectus.
/s/ SPICER, JEFFRIES & CO.
Denver, Colorado
March 31, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the prospectus
constituting a part of this Amendment on Form S-3 to Registration Statement on
Form SB-2 (No. 333-83385) of Global Capital Partners, Inc. of our reports dated
December 17, 1998 and December 15, 1997 relating to the financial statements of
The JB Sutton Group, LLC, which reports appears on pages 16 and 28,
respectively, of Amendment No. 1 to the Global Capital Partners, Inc. Current
Report on form 8-K, filed as of February 7, 2000.
We also consent to the reference to us under the heading "Experts" in the
prospectus.
/s/ BDO Seidman, LLP
- -------------------------------
BDO Seidman, LLP
New York, New York
March 30, 2000
