SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
(AMENDMENT NO.1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 29, 1999
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THCG, INC.
(Exact name of registrant as specified in its charter)
Utah 0-26072 87-0415597
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification No.)
650 Madison Avenue, 21st Floor, New York, NY 10022
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 223-0440
<PAGE>
This Form 8-K/A amends the Form 8-K filed on January 6, 2000. The following
items have been amended:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statement of Business Acquired.
Report of independent auditors
Consolidated Balance Sheet - December 28, 1999
Consolidated Statement of Income and Retained
Earnings for the period March 11, 1999 (inception) to
December 28, 1999
Consolidated Statement of Cash Flows for the period
March 11, 1999 (inception) to December 28, 1999
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information
Unaudited Pro Forma Condensed Combined Balance Sheet
as of September 30, 1999
Unaudited Pro Forma Condensed Combined Income
Statement - Nine-month period ended September 30,
1999
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements
-2-
<PAGE>
Independent Auditors' Report
To the Directors of
Mercury Coast, Inc.
New York, New York
We have audited the accompanying balance sheet of Mercury Coast, Inc. and
Subsidiary as of December 28, 1999, and the related statements of income and
retained earnings, and cash flows for the period March 11, 1999 (inception) to
December 28, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mercury Coast, Inc. and
Subsidiary, as of December 28, 1999, and the results of their operations and
their cash flows for the period March 11, 1999 (inception) to December 28, 1999,
in conformity with generally accepted accounting principles.
COHEN & SCHAEFFER, P.C.
February 21, 2000
<PAGE>
MERCURY COAST, INC. & SUBSIDIARY
Consolidated Balance Sheet
December 28, 1999
Assets
Current Assets
Cash $ 3,480
Fees receivable 120,000
Investment 160,748
Other current assets 1,000
-------
Total current assets 285,228
Fixed Assets
Computer equipment, furniture and fixtures, less
accumulated depreciation of $3,902 15,974
Other Assets 61,602
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$362,804
-------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 72,049
Due to shareholders 76,273
Income taxes payable 22,900
-------
Total current liabilities 171,222
-------
Shareholders' Equity
Common stock, no par - share authorized, issued and
outstanding 1,500 shares 1,000
Retained earnings 190,582
-------
Total shareholders' equity 191,582
-------
$362,804
-------
See accompanying notes to consolidated financial statements
<PAGE>
MERCURY COAST, INC. & SUBSIDIARY
Consolidated Statement of Income and Retained Earnings
For the period March 11, 1999 (inception) to December 28, 1999
Revenue
Fee income $312,948
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Expenses
Rent 26,692
Consulting 19,270
Professional fees 15,028
General and administrative 34,249
Depreciation 3,902
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99,141
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Income from operations before provision for income taxes 213,807
Provision for income tax 23,225
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Net Income 190,582
Retained earnings - March 11, 1999 (inception) --
--------
Retained earnings - December 28, 1999 $190,582
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See accompanying notes to consolidated financial statements
<PAGE>
MERCURY COAST, INC. & SUBSIDIARY
Consolidated Statement of Cash Flows
For the period March 11, 1999 (inception) to December 28, 1999
Cash flows from operating activities
Net Income $ 190,582
Adjustments to reconcile net loss to net cash (used) in
operating activities
Depreciation 3,902
Changes in assets and liabilities
Fee receivable (120,000)
Investment (160,748)
Other current assets (1,000)
Other assets (61,602)
Accounts payable 72,049
Due to shareholders 76,273
Income taxes payable 22,900
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Net cash provided by operating activities 22,356
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Cash flows from investing activities
Purchase of equipment and furniture and fixtures (19,876)
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Cash flows for financing activities
Issuance of common stock 1,000
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Net increase in cash 3,480
Cash, March 11, 1999 --
Cash, December 28, 1999 $ 3,480
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See accompanying notes to consolidated financial statements
<PAGE>
MERCURY COAST, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 28, 1999
Note 1 - Nature of Business
Mercury Coast, Inc. and Subsidiary (the "Company') develops business strategies
and financial models that enable its clients to achieve their business
objectives.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Mercury Coast,
Inc. and its wholly owned subsidiary, Mercury Coast, LLC. All material
intercompany transactions have been eliminated.
Income Taxes
Mercury Coast, Inc. was formed March 11, 1999 under the laws of the State of
Delaware. The Company has elected to be taxed according to Subchapter S of the
Internal Revenue Code whereby net income is taxed to the shareholders.
Therefore, no provision of federal income tax is recognized on the financial
statements.
Mercury Coast, LLC was organized on August 9, 1999 under the laws of the State
of New York. The Company is treated as a partnership for income tax purposes and
as such is not taxed. Under Subchapter K of the Internal Revenue Code, each
member is taxed separately on their distributive share of the Partnership's
income whether or not that income is actually distributed.
Computer equipment, Furniture and Fixtures
Computer equipment, furniture and fixtures are recorded at cost. Depreciation is
calculated on a straight-line basis over the estimated useful lives of the
respective assets.
Revenue Recognition
Consulting fee income is recognized as earned, taking into consideration the
terms of contractual arrangements and the period in which services are rendered.
Corporate finance fees are generally recognized upon closing of the transaction.
Both are included in fee income.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.
Note 3 - Investment
In consideration for services provided by the Company to IT Utility, Inc., the
Company received 67,941 shares of IT Utility, Inc. common stock on November 30,
1999. These shares have been valued based on the purchase agreement between IT
Utility, Inc. and Tower Hill Securities, Inc. IT Utility, Inc. is not a publicly
traded company.
Note 4 - Due to shareholders
At December 28, 1999 the Due to shareholders of $76,273 represents expenses
paid by the shareholders on behalf of the Company which they had not been
reimbursed.
Note 5 - Subsequent Event
On December 29, 1999, the Company entered into an agreement and plan of merger
with THCG, Inc. in exchange for 700,005 shares of THCG, Inc. common stock. In
connection with the merger the Company incurred $61,602 in professional fees.
These fees have been capitalized and are included in Other Assets.
<PAGE>
THCG, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 1999
<TABLE>
<CAPTION>
Pro Forma THCG, Inc.
Historical
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Pro Forma
As Adjusted
THCG, Inc. Mercury Coast Inc. Adjustments Combined
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(Note 1)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,560,000 $ 3,000 $ (100,000) $ 3,463,000
Accounts receivable, net of allowance 3,622,000 120,000 3,742,000
Interest receivable 368,000 368,000
Loans receivable 480,000 480,000
Other current assets 1,000 1,000
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Total current assets 8,030,000 124,000 (100,000) 8,054,000
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Fixed assets, net 177,000 16,000 193,000
Investments in marketable and
not readily marketable securities 6,096,000 161,000 6,257,000
Notes receivable 1,221,000 1,221,000
Shareholders loans receivable 221,000 221,000
Goodwill 14,103,000 21,046,000 35,149,000
Other assets 342,000 62,000 404,000
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Total assets $ 30,190,000 $ 363,000 $ 20,946,000 $ 51,499,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks $ 1,130,000 $ 1,130,000
Notes payable to related parties 170,000 $ 76,000 246,000
Notes payable to others 205,000 205,000
Accounts payable, accrued expenses
and other current liabilities 778,000 95,000 873,000
Customer retention payable 1,236,000 1,236,000
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Total current liabilities 3,519,000 171,000 - 3,690,000
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Long term notes, net of current portion 455,000 455,000
Participation loans payable 2,079,000 2,079,000
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Total liabilities 6,053,000 171,000 - 6,224,000
Stockholders' equity 24,137,000 192,000 $ 21,138,000 45,275,000
(192,000)
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Total liabilities and stockholders' equity $ 30,190,000 $ 363,000 $ 20,946,000 $ 51,499,000
===================================================================
</TABLE>
<PAGE>
THCG, Inc.
Unaudited Pro Forma Condensed Combined Income Statement
Nine-month period ended September 30, 1999
<TABLE>
<CAPTION>
Pro Forma THCG, Inc.
Historical
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Pro Forma
As Adjusted
THCG, Inc. Mercury Coast Inc. Adjustments Combined
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(Note 1)
<S> <C> <C> <C> <C>
Revenue
Consulting income $ 2,285,000 $ 313,000 $ 2,598,000
Factoring income 914,000 914,000
Investment and other income 2,829,000 2,829,000
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Total revenue 6,028,000 313,000 -- 6,341,000
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Costs and expenses
Cost of services 205,000 205,000
$ 450,000
General and administrative expenses 5,381,000 99,000 4,447,000 13,534,000
3,157,000
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5,586,000 99,000 8,054,000 13,739,000
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Operating income (loss) 442,000 214,000 (8,054,000) (7,398,000)
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Interest and other financial costs 91,000 91,000
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Income (loss) before income taxes 351,000 214,000 (8,054,000) (7,489,000)
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Income taxes (benefit) -- 23,000 (23,000) --
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Net income (loss) $ 351,000 $ 191,000 $ (8,031,000) $(7,489,000)
==================================================================
Income (loss) per share - basic and diluted $ (0.03) $ (0.64)
Weighted average share outstanding -
basic and diluted 11,078,000 700,000 11,778,000
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Condensed THCG, Inc Combined Financial Statemants
Unaudited Pro Forma Condensed Combined Financial Information
On December 29, 1999, Coast Acquisition Corp., a newly formed
wholly-owned subsidiary of THCG, Inc. (THCG) merged with Mercury Coast Inc.
(Mercury Coast), a privately held company. As a result of this merger (the
"Merger" ), Mercury Coast became a wholly-owned subsidiary of THCG. The Merger
is being accounted for as a purchase. In connection with the Merger, THCG issued
700,005 shares of its common stock in exchange for all of the outstanding shares
of common stock of Mercury Coast.
The unaudited condensed combined financial statements of THCG after
giving effect to the Merger, are referred to as "pro forma" information. In
presenting these unaudited pro forma condensed combined financial statements,
THCG and Mercury Coast were treated as if they always had been combined for
accounting and financial reporting purposes. These unaudited pro forma condensed
combined financial statements are presented for illustrative purposes only and
may not be indicative of the operating results or financial position that would
have occurred or that will occur after the consummation of the Merger.
THCG's historical results represent pro forma as adjusted information
to reflect the recent acquisition of Walnut Financial Services, Inc. (Walnut),
which was acquired on November 1, 1999 in a merger that was accounted for as a
reverse acquisition. Unaudited condensed combined pro forma financial
information for the Walnut acquisition was presented in a Form 8-K/A filed by
THCG on January 14, 2000. The unaudited condensed combined financial information
presented herein should be read in conjuction with such Form 8-K/A.
The unaudited pro forma condensed combined balance sheet as of
September 30, 1999 combines the pro forma as adjusted THCG historical balance
sheet and the historical balance sheet of Mercury Coast and includes the impact
of transaction costs and various material transactions contractually associated
with the Merger. The unaudited condensed combined statement of operations for
the nine months ended September 30, 1999 combines the pro forma as adjusted
historical THCG results of operations for the nine months ended September 30,
1999 and the results of operations of Mercury Coast from March 11, 1999
(inception) through December 28, 1999 (the date of acquisition) and assumes that
the Merger had occurred at the date of inception for Mercury Coast. The
unaudited pro forma statement of operations for the nine months ended September
30, 1999 is adjusted for contractual material transactions to reflect the
ongoing business.
<PAGE>
1. Basis of Presentation
The unaudited pro forma condensed combined financial statements assume
a business combination between THCG, Inc. (THCG) and Mercury Coast Inc. (Mercury
Coast) which is accounted for using the purchase method of accounting, and are
based upon the respective pro forma as adjusted historical THCG financial
statements and the historical financial statements of Mercury Coast. THCG's pro
forma historical results represent pro forma as adjusted information to reflect
the recent acquisition of Walnut Financial Services, Inc. (Walnut), which was
acquired on November 1, 1999 in a merger that was accounted for as a reverse
acquisition. Unaudited condensed combined pro forma financial information for
the Walnut acquisition was presented in a Form 8-K/A filed by THCG on January
14, 2000. The unaudited condensed combined financial information presented
herein should be read in conjuction with such Form 8-K/A.
The closing expenses have been estimated to be $100,000 and have been
accounted for as additional goodwill on the pro forma condensed combined balance
sheet. The unaudited condensed combined statement of operations presented
includes the effects on the costs of the combined companies.
The unaudited condensed combined balance sheet as of September 30, 1999
includes the impact of all transactions, whether of a recurring or non-recurring
nature, that can be reasonably estimated and should be reflected as of that
date.
2. Pro Forma Adjustments
Intercompany Transactions. All material intercompany transactions are eliminated
from the unaudited pro forma condensed combined statements of operations or
balance sheet.
Balance Sheet.
Current Assets. Cash has been adjusted to reflect the assumed payment of closing
costs of $100,000.
Other Non-current Assets. Goodwill has been increased by $21,046,000 as of
September 30, 1999. This was a result of the addition due to closing costs of
$100,000, finders fees of $356,000 and goodwill associated with the acquisition
based on a preliminary allocation of cost of $20,590,000.
<PAGE>
Stockholders' Equity. Stockholders' equity has been increased to reflect the
issuance of 700,005 shares of common stock and the issuance of 12,000 shares of
common stock as a finders fee in connection with the Merger.
Statement of Operations.
General and administrative costs. Personnel costs were increased by $4,897,000
in the pro forma condensed combined statement of operations for the nine months
ended September 30, 1999 to reflect wages of $450,000 based on new employment
agreements and to reflect $4,447,000 of amortization of unearned compensation
recorded in connection with the issuance of compensatory stock options. Unearned
compensation is being amortized over the four-year vesting period in the option
agreements. In addition, costs were increased by $3,157,000 for the amortization
of goodwill recorded in connection with the Merger. Goodwill is being amortized
over five years.
Income Taxes. Income tax expense has been reduced by $23,000 to reflect the
effect on income taxes of the pro forma adjustments to general and
administrative expenses.
Income (Loss) per Common Share. Unaudited historical pro forma as adjusted per
share data for THCG includes the effects of the Walnut acquisition and the
unaudited pro forma per share data includes the issuance of 700,005 shares of
common stock in connection with the Merger.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Amendment No. 1 to Current Report on Form
8-K to be signed on its behalf by the undersigned thereunto duly authorized.
THCG, INC.
By: /s/ Shai Novik
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Name: Shai Novik
Title: Chief Operating Officer
Date: March 10, 2000
