United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of earliest event reported
VFINANCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OF ORGANIZATION)
1-11454-03 58-1974423
------------------------ -----------
(COMMISSION FILE NUMBER) (I.R.S. ID)
3010 North Military Trail, Suite 300 Boca Raton, FL 33431
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 981-1000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
GENERAL EXPLANATION
The purpose of this report is to amend the Registrant's Current Report on Form
8-K dated November 2, 2004 that was filed with the Securities and Exchange
Commission on November 8, 2004 (the "Initial Report") which reported on its
acquisition of certain assets of Global Partners Securities, Inc. ("Global") and
100% of the issued and outstanding equity securities of EquityStation, Inc.
("EquityStation"), all of which were owned by Level2.com, Inc. ("Level2"), a
subsidiary of Global. This report amends the Initial Report so as to provide the
information required under Items 9.01(a) and 9.01(b) of Form 8-K.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a.1) Financial Statements of Business Acquired.
Financial Statements of Global Partners Securities, Inc.
Independent Auditors' Report
Balance Sheets Dated as of December 31, 2003, and September 30, 2004
(Unaudited).
Statements of Operations for the Years ended December 31, 2002 and December 31,
2003, and the Nine Month Period ended September 30, 2004 (Unaudited).
Statement of Stockholders' Equity for the Years ended December 31, 2002 and
December 31, 2003, and the Nine Month Period ended September 30, 2004
(Unaudited).
Statements of Cash Flows for the Years ended December 31, 2002 and December 31,
2003, and the Nine Month Period ended September 30, 2004 (Unaudited).
Notes to Financial Statements for the Years ended December 31, 2002 and December
31, 2003, and the Nine Month Period ended September 30, 2004 (Unaudited).
(a.2) Financial Statements of Business Acquired
Financial Statements of EquityStation, Inc.
Independent Auditors' Report
Balance Sheets Dated as of December 31, 2003, and September 30, 2004
(Unaudited).
Statements of Operations for the Years ended December 31, 2002 and December 31,
2003, and the Nine Month Period ended September 30, 2004 (Unaudited).
Statement of Stockholders' Equity for the Years ended December 31, 2002 and
December 31, 2003, and the Nine Month Period ended September 30, 2004
(Unaudited).
Statements of Cash Flows for the Years ended December 31, 2002 and December 31,
2003, and the Nine Month Period ended September 30, 2004 (Unaudited).
Notes to Financial Statements for the Years ended December 31, 2002 and December
31, 2003, and the Nine Month Period ended September 30, 2004 (Unaudited).
(b) Pro Forma Financial Information.
Unaudited Pro Forma Combined Financial Statements of vFinance, Inc.
Unaudited Pro Forma Combined Balance Sheet as of September 30, 2004.
Unaudited Pro Forma Statements of Operations for the Year ended December 31,
2003.
Unaudited Pro Forma Statements of Operations for the Nine Month Period ended
September 30, 2004.
-2-
FINANCIAL STATEMENTS OF GLOBAL PARTNERS SECURITIES, INC.
INDEX TO FINANCIAL STATEMENTS
Independent auditors' report ........................... 4
Balance sheets .......................................... 6
Statements of operations ............................... 7
Statement of changes in stockholders' equity ............ 8
Statements of cash flows ................................ 9
Notes to financial statements ....................... 10-14
-3-
SHAVELL & COMPANY, P.A.
Certified Public Accountants and Consultants
7700 Congress Avenue, Suite 3105, Boca Raton, FL 33487
Ph (561) 997-7242 Fax (561) 997-7262
info@shavell.net
INDEPENDENT AUDITORS' REPORT
To the Stockholder
Global Partners Securities, Inc.
Fort Lauderdale, Florida 33309
We have audited the accompanying statement of financial condition of Global
Partners Securities, Inc. as of December 31, 2003, and the related statements of
operations, changes in stockholder's equity, and cash flows for the year then
ended, that you are filing pursuant to Rule 17a-5 under the Securities Exchange
Act of 1934. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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
statement. 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 Global Partners Securities,
Inc. as of December 31, 2003, and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
SHAVELL & COMPANY, P.A.
/s/ Shavell & Company, P.A.
Boca Raton, Florida
February 20, 2004
-4-
SHAVELL & COMPANY, P.A.
Certified Public Accountants and Consultants
7700 Congress Avenue, Suite 3105, Boca Raton, FL 33487
Ph (561) 997-7242 Fax (561) 997-7262
Ph (954) 969-5151 Fax (954) 969-2545
info@shavell.net
INDEPENDENT AUDITORS' REPORT
To the Stockholder
Global Partners Securities, Inc.
Fort Lauderdale, Florida 33309
We have audited the accompanying statement of financial condition of Global
Partners Securities, Inc. as of December 31, 2002, and the related statements of
operations, changes in stockholder's equity, and cash flows for the year then
ended, that you are filing pursuant to Rule 17a-5 under the Securities Exchange
Act of 1934. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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
statement. 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 Global Partners Securities,
Inc. as of December 31, 2002, and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Shavell & Company, P.A.
Boca Raton, Florida
February 24, 2003
-5-
Global Partners Securities, Inc.
BALANCE SHEETS
December 31, September 30, 2004
2003 (unaudited)
ASSETS
Cash $ 306,518 $ 413,465
Receivable from Clearing Organizations 923,426 358,801
Due from Related Parties 671,951 715,381
Bonds - 273,100
Securities Owned:
Marketable Securities, at Market Value 114,244 38,119
Not Readily Marketable, at Estimated Fair Value 24,400 24,400
Deposits 17,262 17,500
Prepaid Expenses 1,165 1,381
Advances to Employees 19,716 20,191
Property and Equipment, net 31,963 14,981
------------------ ---------------
$ 2,110,645 $ 1,877,319
================== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Accounts Payable $ 368,658 $ 324,021
Accrued Liabilities 29,405 6,120
Commissions Payable 197,358 119,935
Securities Sold, Not Yet Purchased, At Market 25,439 3,358
Loan Payable 291,889 219,770
------------------ ---------------
912,749 673,204
------------------ ---------------
COMMITMENTS AND CONTINGENCIES
Subordinated Loans 600,000 550,000
------------------ ---------------
STOCKHOLDER'S EQUITY
Common Stock, No Par Value; Authorized
10,000 Shares; Issued and Outstanding 269 Shares 134,500 134,500
Additional Paid-in Capital 6,500,155 7,203,155
Accumulated Deficit (6,036,759) (6,683,540)
------------------ ---------------
597,896 654,115
------------------ ---------------
$ 2,110,645 $ 1,877,319
================== ===============
See accompanying notes to financial statements
-6-
Global Partners Securities, Inc.
STATEMENTS OF OPERATIONS
For the nine month period
Years ended December 31, ended Sep 30, 2004
2002 2003 (unaudited)
REVENUE
Commissions $ 227,663 $ 239,523 $ 159,762
Principal Transactions 2,648,220 2,973,115 2,772,633
Interest and Dividends 58,141 18,568 2,774
Other Income 336,731 60,454 353,714
------------------ ----------------- ----------------------
3,270,755 3,291,660 3,288,883
------------------ ----------------- ----------------------
EXPENSES
Employee Compensation and Benefits 2,410,604 2,889,413 2,461,181
Clearance Fees 530,139 306,186 333,464
Communications and Data Processing 1,036,968 656,179 408,154
Interest 99,386 89,963 59,585
Occupancy 344,117 385,019 296,201
Other Expenses 675,557 779,292 377,079
------------------ ----------------- ----------------------
5,096,771 5,106,052 3,935,664
------------------ ----------------- ----------------------
NET LOSS $ (1,826,016) $ (1,814,392) $ (646,781)
================== ================= ======================
See accompanying notes to financial statements
-7-
Global Partners Securities, Inc.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Paid -in Accumulated
Stock Capital Deficit Total
Balance, December 31, 2001 $ 100,000 $ 4,026,436 $ (2,071,510) $ 2,054,926
Net Loss (1,826,016) (1,826,016)
Capital Contributed - Merger 39,000 995,678 (324,841) 709,837
Capital Contributed 305,000 305,000
Conversion of Subordinated Loans 350,000 350,000
Repurchase of Outstanding Shares (4,500) (495,500) (500,000)
---------------- -------------------- ---------------------- -------------------
Balance, December 31, 2002 134,500 5,181,614 (4,222,367) 1,093,747
Net Loss (1,814,392) (1,814,392)
Capital Contributed 1,318,541 1,318,541
---------------- -------------------- ---------------------- -------------------
Balance, December 31, 2003 134,500 6,500,155 (6,036,759) 597,896
Net Loss (unaudited) (646,781) (646,781)
Capital Contributed (unaudited) 703,000 703,000
---------------- -------------------- ---------------------- -------------------
Balance, September 30, 2004 (unaudited) $ 134,500 $ 7,203,155 $ (6,683,540) $ 654,115
================ ==================== ====================== ====================
See accompanying notes to financial statements
-8-
Global Partners Securities, Inc.
STATEMENTS OF CASH FLOWS
For the nine month period
Years ended December 31, ended Sep 30, 2004
2002 2003 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,826,016) $ (1,814,392) $ (646,781)
Adjustments to Reconcile Net Loss
Provided By Operating Activities:
Depreciation 38,074 22,646 16,982
Change in Assets and Liabilities:
Increase (Decrease) In:
Receivable from Clearing Organizations 12,376,388 (15,283) 564,625
Bonds - - (273,100)
Marketable Securities, at market value 174,520 (23,751) 76,125
Prepaid Expenses 74,660 16,521 (216)
Advances to Employees 137,492 34,559 (475)
Increase (Decrease) In:
Accounts Payable 14,104 211,444 (44,636)
Accrued Liabilities 3,657 16,248 (23,286)
Payable to Clearing Organizations (10,743,354) (5,000) -
Commission Payable 11,401 96,094 (77,423)
Securities Sold, Not yet Purchased, at market (328,888) 18,625 (22,081)
---------------- ---------------- ------------------
Net Cash Used in Operating Activities (67,962) (1,442,289) (430,266)
---------------- ---------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Not Readily Marketable Securities (4,300) - -
Increase (Decrease) in Deposits and Other 4,527 (464) (238)
---------------- ---------------- ------------------
Net Cash Provided by (Used in) Investing
Activities 227 (464) (238)
---------------- ---------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital Contributed from Merger 65,803 - -
Capital Contributed from Parent 305,000 1,318,541 653,000
Repurchase of Common Stock (500,000) - -
Advances on related Party Loans (178,764) (346,629) (439,755)
Repayments on Related Party Loans 507,587 620,826 396,325
Advances on Long Term Debt 23,512 - -
Repayments on Loan Payable (13,741) (11,782) (72,119)
---------------- ---------------- ------------------
Net Cash Provided by Financing Activities 209,397 1,580,956 537,451
---------------- ---------------- ------------------
Increase in Cash 141,662 138,203 106,947
Cash:
Beginning of Period 26,653 168,315 306,518
---------------- ---------------- ------------------
End of Period $ 168,315 306,518 413,465
================ ================ ==================
SUPPLEMENTARY DISCLOSURES OF CASH FLOW
INFORMATION
Cash Payments for Taxes $ - $ - $ -
================ ================ ==================
Cash Payments for Interest $ 99,386 $ 79,486 $ 59,295
================ ================ ==================
NON CASH FINANCING ACTIVITY
Conversions Of Subordinated Loans to Equity $ 350,000 $ - $ 50,000
================ ================ ==================
See accompanying notes to financial statements
-9-
Global Partners Securities, Inc.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, December 31, 2003, and for the Nine Months ended
September 30, 2004 (unaudited)
NOTE 1: Summary of Significant Accounting Policies
Nature of Business
Global Partners Securities, Inc. (the "Company") is a broker-dealer in
securities registered with the Securities and Exchange Commission (SEC) and a
member of the National Association of Securities Dealers (NASD). The Company
operates one main office in Fort Lauderdale, Florida and a smaller office in New
York. The Company is a wholly owned subsidiary of Global Partners Group, Inc.
(the "Parent").
In connection with its activities as a broker-dealer, the Company does not hold
customer funds or securities, and promptly transmits all customer funds received
to its clearing firms. Although the Company's clearing firms maintain all of the
accounts of such customers and preserve all required and customary records, the
Company remains contingently liable for losses incurred on these accounts.
Interim Financial Information
The accompanying unaudited financial statements for the nine months ended
September 30, 2004, have been prepared in accordance with generally accepted
accounting principles for interim financial statements. The accompanying
financial statements for the interim periods are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the periods presented.
Securities Transactions
Proprietary securities transactions in regular-way trades are recorded on the
trade date, as if they had settled. Profit and loss arising from all securities
transactions entered into for the account and risk of the Company are recorded
on a trade date basis. Customers' securities transactions are reported on a
settlement date basis with related commission income and expenses reported on a
trade date basis.
Amounts receivable and payable for securities transactions that have not reached
their contractual settlement date are recorded net on the statement of financial
condition.
Marketable securities are valued at market value. Securities not readily
marketable are valued by management based on their experience in the industry.
Clearing Expenses
Clearing expenses are recorded on a trade-date basis as securities transactions
occur.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and Equipment is stated at cost. Depreciation is computed primarily
using accelerated methods over the estimated useful life of the respective
assets, generally five to seven years.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and the carrying value of the asset.
Use of Estimates
The presentation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
-10-
NOTE 1: Summary of Significant Accounting Policies (CONTINUED)
Concentration of Credit Risk
The Company at times has cash in excess of Federal Deposit Insurance Corporation
("FDIC") insurance limits. The Company places its temporary cash investments
with high credit quality financial institutions. Cash held by these financial
institutions in excess of FDIC limits amounted to approximately $134,254 at
December 31, 2003 and $210,898 at September 30, 2004.
Securities Owned and Sold, Not Yet Purchased
Securities owned and securities sold, not yet purchased are carried at quoted
market value. The increase or decrease in net unrealized appreciation or
depreciation of securities owned and sold, not yet purchased is credited or
charged to operations and is included in trading gains and (losses) in the
statement of operations.
Advertising
Costs of advertising are expensed as incurred and amounted to $20,714 for the
year ended December 31, 2002, $57,278 for the year ended December 31, 2003 and
$34,031 for the nine month period ended September 30, 2004.
Receivable from Clearing Organization
Broker Receivables represent amounts due from the clearing organizations related
to monies earning interest at the clearing broker from settled and unsettled
transactions.
Income Taxes
The Company files federal and state corporate income tax returns. The Company
has not accrued any federal or state income tax liability for the year ended
December 31, 2003 and the nine month period ended September 30, 2004.
The Company accounts for deferred income taxes using Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS 109). The
statement requires that deferred income taxes reflect the tax consequences on
future years of differences between the tax basis of assets and liabilities and
their basis for financial reporting purposes. In addition, SFAS 109 requires the
recognition of future tax benefits, such as net operating loss carry forwards,
to the extent that realization of such benefits are more likely than not.
Note 2: Securities owned and Sold, not yet purchased
Marketable securities owned and sold, not yet purchased, consist of trading
securities at market values as follows:
December 31, September 30, 2004
2003 (unaudited)
---------------------------------------------------------------
Corporate Stocks
Owned $ 114,244 $ 38,119
Sold, not yet purchased $ 25,439 $ 3,358
Securities not readily marketable include investment securities that cannot be
offered or sold because of restrictions or conditions applicable to the
securities and consist of:
December 31, September 30, 2004
2003 (unaudited)
---------------------------------------------------------------
Corporate Stocks $ 1,000 $ -
Warrants 23,400 24,400
---------------------------------------
$ 24,400 $ 24,400
=======================================
-11-
GLOBAL PARTNERS SECURITIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3: PROPERTY AND EQUIPMENT
Property and Equipment, net consists of the following:
December 31, September 30, 2004
2003 (unaudited)
------------------------------------------- ------------------
Furniture and Fixtures $ 70,148 $ 70,148
Computer and Office
Equipment 381,424 381,424
--------------- ------------------
451,572 451,572
Less: Accumulated
Depreciation 419,609 436,591
--------------- ------------------
$ 31,963 $ 14,981
=============== ===================
Note 4: contractual commitments
The Company is obligated under non-cancelable operating leases for approximately
11,500 square feet of office space in Fort Lauderdale, Florida that expires on
May 31, 2005 and for approximately 2,400 square feet of office space in New
York, New York that expires on September 30, 2005. The leases provide for
monthly rentals of approximately $22,000 and $9,700, respectively.
In addition, the Company is obligated under various automobile and equipment
leases with monthly rentals totaling $2,018 expiring from February 2004 to May
2005.
The future minimum annual rental payments for non-cancelable leases are
approximately as follows:
2004 $ 269,391
2005 146,960
-------------
$ 416,351
=============
Rental expense for the year ended December 31, 2002 was $344,117, for the year
ended December 31, 2003 was $385,019 and for the nine month period ended
September 30, 2004 was $296,201.
NOTE 5: NOTE PAYABLE
Note Payable consists of an SBA guaranteed loan due in monthly installments of
$13,741 including interest at 8% per annum, which matured December 2004. This
loan was in default as of December 31, 2003 due to nonpayment. The Note Payable
balance as of September 30, 2004 was $219,770.
Note 6: Subordinated Borrowings
Borrowings under subordination agreements at December 31, 2003 and September 30,
2004, are as follows:
December 31, September 30,
2004
2003 (unaudited)
--------------------------------------------------------- -------------
Subordinated Loan, interest at 10%
annually, due September, 2005 $ 300,000 $ 250,000
Subordinated Loan, interest at 10%
annually, due July, 2005 300,000 300,000
--------------- -------------
$ 600,000 $ 550,000
=============== =============
-12-
NOTE 6: Subordinated Borrowings (CONTINUED)
The subordinated borrowings are available in computing net capital under the
SEC's uniform net capital rule. To the extent that such borrowings are required
for the Company's continued compliance with minimum net capital requirements,
they may not be repaid.
NOTE 7: INCOME TAXES
The Company has available at December 31, 2003, approximately $5,535,000 of
unused operating loss carry forwards that may be applied against future taxable
income and that expire between 2021 and 2023. Based upon these carry forwards,
there is no current income tax liability at December 31, 2003 and September 30,
2004.
The deferred portion of the income tax benefit included in the statement of
operations net of a valuation allowance is $0 at December 31, 2003.
Note 8: RELATED PARTY TRANSACTIONS
The Company has various receivables due from related companies totaling $671,951
as of December 31, 2003 and $715,381 as of September 30, 2004. These receivables
are non interest bearing and are due on demand. In addition, the Company paid
consulting fees to a company owned by one of the shareholders of its parent
company. These fees amounted to $27,600 for the years 2002 and 2003 and $20,700
for the nine month period ended September 30, 2004.
NOTE 9: NET CAPITAL REQUIREMENTS
The Company is subject to the Securities and Exchange Commission Uniform Net
Capital Rule (SEC rule 15c3-1), which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital,
both as defined, shall not exceed 15 to 1. At December 31, 2003, the Company had
net capital of $404,384 which was $5,384 in excess of its required net capital
of $399,000. At September 30, 2004, the Company had net capital of $404,563
which was $94,063 in excess of its net capital requirement of $310,500. The
Company's net capital ratio was 2.19 to 1was and 1.65 to 1 as of December 31,
2003 and September 30, 2004, respectively.
Note 10: OFF-BALANCE-SHEET RISK
The Company's customers' securities transactions are introduced on a
fully-disclosed basis with its clearing broker/dealers. The clearing
broker/dealer is responsible for collection of and payment of funds, and receipt
and delivery of securities relative to customer transactions. Off-balance-sheet
risk exists with respect to these transactions due to the possibility that
customers may be unable to fulfill their contractual commitments wherein the
clearing broker/dealer may charge any losses it incurs to the Company. The
Company seeks to minimize this risk through procedures designed to monitor the
creditworthiness of its customers and proper executions of customer transactions
by the clearing broker/dealer.
NOTE 11: CLOSELY HELD CORPORATIONS
The Company owns 99.75% of a company which owns 100% of another broker-dealer.
Pursuant to Rule 17a-5 of the Securities Exchange Act of 1934, consolidation of
these entities into the financial statements of the Company is not required. The
assets, liabilities and equity of the entities which would otherwise be
consolidated are as follows:
September 30,
December 31, 2004
2003 (unaudited)
------------------------------------------------- -------------------
Assets $ 215,607 $ 197,323
Liabilites 687,113 680,348
------------- -------------------
Stockholder's Deficit $ 471,506 $ 483,025
============= ===================
As part of the consolidation, $607,000 of the assets of the Company would be
eliminated along with $607,000 of liabilities of the entities to be consolidated
for both periods.
-13-
NOTE 12: LITIGATION
A former employee of the Company filed a statement of claim with the NASD
against the Company for commissions owed, wrongful termination and defamation
related to a Form U-5 filed with the NASD. In October 2003, after a final
hearing, the panel entered an award against the Company for breach of implied
contract in the sum of $218,833. In December 2003, the Company filed a Petition
to Vacate Arbitration Award. The attorney is unable to opine on the likely
outcome of the Petition to Vacate. As a result, the Company has included
$248,704 to cover the award and accrued interest in its accounts payable at
December 31, 2003 and in other expenses for the year ended December 31, 2003. As
of September 30, 2004, the Company had accrued $258,973 as a reserve for this
claim.
The Company is a co-defendant in a statement of claim filed with the NASD by one
of its former customers for breach of fiduciary duty, negligence and respondent
superior related to investment losses suffered seven years ago by the customer.
Claimant seeks an unspecified amount of damages. The Company has filed an answer
to the claim and is vigorously defending itself against the claim. A final
arbitration hearing has yet to be scheduled and the attorney is unable to opine
on the likely outcome of the claim.
The Company is a defendant in an action filed in New York State Court claiming
breach of contract. The complaint seeks approximately $50,000 in damages and
other relief. This matter is being vigorously defended by the Company and a
counterclaim has been interposed. The attorney has stated that based upon the
facts and circumstances currently known, the underlying claim against the
Company appears to be lacking in factual merit and otherwise overvalued.
The Company is a co-defendant in a number of state law causes of action alleging
that the market price of the plaintiff's stock was "fraudulently manipulated" as
the result of purported "Naked Short Sales" of the plaintiff's securities. The
Company has not been served in the lawsuit but denies the plaintiff's
allegations of wrongdoing and plans to vigorously defend itself. The lawsuit has
not been set for trial and the attorney is unable to opine on the likely outcome
of the lawsuit.
NOTE 13: GOING CONCERN
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of the Company as a going concern. However, the
Company has sustained operating losses in recent years and has had negative cash
flows from operating activities which has required the Company's shareholders to
contribute substantial amounts of capital to fund the operating losses. In
addition, as of December 31, 2003, the Company is in default on a SBA guaranteed
loan.
In accordance with its 2003 business plan, the operating losses over the last
six months of 2003 were reduced and in January of 2004 almost reached the
breakeven point. In addition, the Company has prepared financial forecasts based
upon current increased production and an improving environment for its emerging
market bond trading division and is continuing to closely monitor productivity
and expenditures. The Company is also currently negotiating with the SBA for an
extension of the term (3 years) and a reduction of the interest rate (8%) of the
loan payable because they are not consistent with more favorable terms being
offered at other lending institutions. Management is committed to providing
operating capital as needed for the upcoming year in anticipation of a
turnaround in profitability. Management believes that the above actions
presently being taken to revise the Company's operations provide the opportunity
for the Company to continue as a going concern.
NOTE 14: SUBSEQUENT EVENT (Unaudited)
On November 2, 2004, vFinance, Inc.'s ("vFinance") wholly-owned subsidiary,
vFinance Investments Holdings, Inc. ("vFinance Investments"), completed its
acquisition of certain assets of Global The assets acquired from Global included
certain intellectual property, customer accounts, computer equipment, and
certain clearance and trading agreements relating to emerging market debt
trading, wholesale market-making in selected equities for institutional clients,
and direct-access equity trading. vFinance Investments assumed no liabilities in
connection with the acquisition of Global's assets.
-14-
FINANCIAL STATEMENTS OF EQUITYSTATION, INC.
INDEX TO FINANCIAL STATEMENTS
Independent auditors' report .......................... 16
Balance sheets .......................................... 18
Statements of operations ............................... 19
Statement of changes in stockholders' equity ............ 20
Statements of cash flows ................................ 21
Notes to financial statements ........................ 22-23
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
SHAVELL & COMPANY, P.A.
Certified Public Accountants and Consultants
7700 Congress Avenue, Suite 3105, Boca Raton, FL 33487
Ph (561) 997-7242 Fax (561) 997-7262
info@shavell.net
INDEPENDENT AUDITORS' REPORT
To the Stockholder
EquityStation, Inc.
Fort Lauderdale, Florida 33309
We have audited the accompanying statement of financial condition of
EquityStation, Inc.as of December 31, 2003, and the related statements of
operations, changes in stockholder's equity, and cash flows for the year then
ended, that you are filing pursuant to Rule 17a-5 under the Securities Exchange
Act of 1934. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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
statement. 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 EquityStation, Inc. as of
December 31, 2003, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
SHAVELL & COMPANY, P.A.
/s/ Shavell & Company, P.A.
Boca Raton, Florida
February 20, 2004
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SHAVELL & COMPANY, P.A.
Certified Public Accountants and Consultants
7700 Congress Avenue, Suite 3105, Boca Raton, FL 33487
Ph (561) 997-7242 Fax (561) 997-7262
info@shavell.net
INDEPENDENT AUDITORS' REPORT
To the Stockholder
EquityStation, Inc.
Fort Lauderdale, Florida 33309
We have audited the accompanying statement of financial condition of
EquityStation, Inc.as of December 31, 2002, and the related statements of
operations, changes in stockholder's equity, and cash flows for the year then
ended, that you are filing pursuant to Rule 17a-5 under the Securities Exchange
Act of 1934. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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
statement. 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 EquityStation, Inc. as of
December 31, 2002, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
SHAVELL & COMPANY, P.A.
/s/ Shavell & Company, P.A.
Boca Raton, Florida
February 12, 2003
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EquityStation, Inc.
BALANCE SHEETS
December 31, September 30, 2004
2003 (unaudited)
ASSETS
Cash $ 13,982 $ 1,888
Receivable from Clearing Organizations 189,970 188,164
Due from Related Parties 6,542 -
Due from Non-Related Parties - 6,409
Deposits and other 5,113 862
----------------- ---------------
$ 215,607 $ 197,323
================= ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Accounts Payable $ 23,235 $ 18,731
Accrued Liabilities 44,299 54,567
Payable to Broker-Dealers and Clearing Organizations 307 50
----------------- ---------------
67,841 73,348
----------------- ---------------
STOCKHOLDER'S EQUITY
Common Stock, No Par Value; Authorized
10,000,000 Shares; Issued 1000Shares 10 10
Additional Paid-in Capital 1,081,490 1,181,490
Accumulated Deficit (933,734) (1,057,525)
----------------- ---------------
147,766 123,975
----------------- ---------------
$ 215,607 $ 197,323
================= ===============
See accompanying notes to financial statements
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EquityStation, Inc.
STATEMENTS OF OPERATIONS
For the nine
month period
Years ended December 31, ended September
30, 2004
2002 2003 (unaudited)
REVENUE
Commissions $ 673,673 $ 880,274 $ 1,663,784
Interest and Dividends 55,533 9,144 7,589
Other Income 28,920 1,490 -
----------------------- ----------------------- --------------------
758,126 890,908 1,671,373
----------------------- ----------------------- --------------------
EXPENSES
Employee Compensation and Benefits 752,987 664,626 247,943
Clearance Fees 216,970 287,905 609,535
Communications and Data Processing 9,071 21,615 31,025
Interest 26,866 3,664 -
Occupancy 24,000 24,000 18,000
Other Expenses 123,675 147,913 888,661
----------------------- ----------------------- --------------------
1,153,569 1,149,723 1,795,164
----------------------- ----------------------- --------------------
NET LOSS $ (395,443) $ (258,815) $ (123,791)
======================= ======================= ====================
See accompanying notes to financial statements
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EquityStation, Inc.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Paid -in Accumulated
Stock Capital Deficit Total
Balance, December 31, 2001 $ 10 $ 414,990 $ (279,476) $ 135,524
Net Loss (395,443) (395,443)
Capital Contributed 446,500 446,500
-------------- ----------------- -------------------- ---------------
Balance, December 31, 2002 10 861,490 (674,919) 186,581
Net Loss (258,815) (258,815)
Capital Contributed 220,000 220,000
-------------- ----------------- -------------------- ---------------
Balance, December 31, 2003 10 1,081,490 (933,734) 147,766
Net Loss (unaudited) (123,791) (123,791)
Capital Contributed (unaudited) 100,000 100,000
-------------- ----------------- -------------------- ---------------
Balance, September 30, 2004 (unaudited) $ 10 $ 1,181,490 $ (1,057,525) $ 123,975
============== ================= ==================== ===============
See accompanying notes to financial statements
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EquityStation, Inc.
STATEMENTS OF CASH FLOWS
For the nine
month period
ended
Years ended December 31, September 30, 2004
2002 2003 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (395,443) $ (258,815) $ (123,791)
Adjustments to Reconcile Net Loss
Provided By Operating Activities:
Change in Assets and Liabilities:
Increase (Decrease) In:
Receivable from Clearing Organizations (197,635) 256,604 1,806
Increase (Decrease) In:
Accounts Payable 4,820 14,660 (4,504)
Accrued Liabilities 5,616 17,999 10,268
Payable to Broker-Dealers and Clearing Organizations 152,538 (259,381) (257)
-------------- ---------------- ----------------
Net Cash Used in Operating Activities (430,104) (228,933) (116,478)
-------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Collections from Related Parties 6,542
Increase (Decrease) in Deposits and Other (559) (2,429) 4,251
-------------- ---------------- ----------------
Net Cash (Used in) Provided by Investing Activities (559) (2,429) 10,793
-------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital Contributed by Shareholder 446,500 220,000 100,000
Advances from Related Parties and Non-Related Parties (21,998) (13,728) (31,619)
Repayments to Related Parties and Non-Related Parties 7,704 21,480 25,210
-------------- ---------------- ----------------
Net Cash Provided by Financing Activities 432,206 227,752 93,591
-------------- ---------------- ----------------
Increase (Decrease) in Cash 1,543 (3,610) (12,094)
Cash:
Beginning of Year 16,049 17,592 13,982
-------------- ---------------- ----------------
End of Period $ 17,592 $ 13,982 $ 1,888
============== ================ ================
SUPPLEMENTARY DISCLOSURES OF CASH FLOW
INFORMATION
Cash Payments for Taxes $ - $ - $ -
============== ================ ================
Cash Payments for Interest $ 26,866 $ 3,664 $ -
============== ================ ================
See accompanying notes to financial statements
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EquityStation, Inc.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, December 31, 2003, and for the Nine Months Ended
September 30, 2004 unaudited
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
EquityStation, Inc. (the "Company") is a broker-dealer registered with the
Securities and Exchange Commission (SEC) and is a member of the National
Association of Securities Dealers (NASD). The Company is a Florida corporation
incorporated July 22, 1999.
In connection with its activities as a broker-dealer, the Company does not hold
customer funds or securities, and promptly transmits all customer funds received
to its clearing firm, ABN AMRO, Incorporated. Although the Company's clearing
firm maintains all of the accounts of such customers and preserves all required
and customary records, the Company remains contingently liable for losses
incurred on these accounts.
Interim Financial Statements
The accompanying unaudited financial statements for the nine months ended
September 30, 2004, have been prepared in accordance with generally accepted
accounting principles for interim financial statements. The accompanying
financial statements for the interim periods are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the periods presented.
Commissions
Commissions and related clearing expenses are recorded on a trade-date basis as
securities transactions occur.
Advertising
Costs of advertising are expensed as incurred and amounted to $45,610 for the
year ended December 31, 2002, $59,129 for the year ended December 31, 2003 and
$57,016 for the nine month period ended September 30, 2004.
Income Taxes
The Company files federal and state corporate income tax returns. The Company
has not accrued any federal and state income tax liability for the year ended
December 31, 2003 and the nine month period ended September 30, 2004.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.
Cash Equivalents
For purposes of the statement of cash flows, the Company has defined cash
equivalents as highly liquid investments, with original maturation of less than
ninety days that are not held for sale in the ordinary course of business.
NOTE 2: RECEIVABLE FROM AND PAYABLE TO BROKER-DEALERS AND CLEARING ORGANIZATIONS
Amounts receivable from and payable to broker-dealers and clearing organizations
at December 31, 2003, consist of broker receivables of $189,970 and brokers
payable of $307. As of September 30, 2004, the Company had a broker receivable
of $188,164 and a payable of $50.
The Company clears all of its commissioned transactions through another
broker-dealer on a fully disclosed basis. The amount receivable from the
clearing broker relates to the aforementioned transactions. Any payables to the
broker-dealers are normally collateralized by amounts receivable and by deposits
held by the clearing organization.
-22-
NOTE 3: RELATED PARTY TRANSACTIONS
As of December 31, 2003, the Company was due non-interest bearing advances made
to a related entity of $6,542. The Company was not due any of these advances as
of September 30, 2004. The Company also paid an entity owned by a shareholder of
its parent company consulting fees of $27,600 for the years 2002 and 2003 and
$32,250 for the nine month period ended September 30, 2004.
NOTE 4: NET CAPITAL REQUIREMENTS
The Company is subject to the Securities and Exchange Commission Uniform Net
Capital Rule (SEC rule 15c3-1), which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital,
both as defined, shall not exceed 15 to 1. At December 31, 2003, the Company had
net capital of $125,594 that was $25,594 in excess of its required net capital
of $100,000. At September 30, 2004, the Company had net capital of $116,704
which was $16,704 in excess of its net capital requirement of $100,000. The
Company's net capital ratio was 1.85 to 1and 0.62 to 1 as of December 31, 2003
and September 30, 2004, respectively.
NOTE 5: INCOME TAXES
The Company has available at December 31, 2003, $932,000 of unused operating
loss carry forwards that may be applied against future taxable income and that
expire in various years from 2020 to 2023. Based upon these carry forwards,
there is no current income tax liability at December 31, 2003 or September 30,
2004.
The deferred portion of the income tax benefit included in the statement of
operations net of a valuation allowance is $0 at December 31, 2003 and September
30, 2004.
NOTE 6: OFF-BALANCE-SHEET RISK
The Company's customers' securities transactions are introduced on a
fully-disclosed basis with its clearing broker/dealer, ABN AMRO, Incorporated.
The clearing broker/dealer is responsible for collection of and payment of
funds, and receipt and delivery of securities relative to customer transactions.
Off-balance-sheet risk exists with respect to these transactions due to the
possibility that customers may be unable to fulfill their contractual
commitments wherein the clearing broker/dealer may charge any losses it incurs
to the Company. The Company seeks to minimize this risk through procedures
designed to monitor the creditworthiness of its customers and proper executions
of customer transactions by the clearing broker/dealer.
NOTE 7: SUBSEQUENT EVENT (Unaudited)
On November 2, 2004, vFinance's wholly-owned subsidiary, vFinance Investments,
completed its acquisition of 100% of the issued and outstanding equity
securities of EquityStation, all of which were owned by Level2, a subsidiary of
Global.
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(b) Pro Forma Financial Statements of Business Acquired
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On November 2, 2004, vFinance's wholly-owned subsidiary, vFinance
Investments completed its acquisition of certain assets of Global and 100% of
the issued and outstanding equity securities of EquityStation, all of which were
owned by Level2, a subsidiary of Global. These transactions are subject to the
approval of the National Association of Securities Dealers, Inc.
In accordance with the terms of the acquisition agreements, the Company
delivered into escrow 8,324,690 restricted shares (the "Shares") of the
Company's common stock (the "Common Stock"), and warrants (the "Warrants") to
purchase 3,299,728 shares of the Common Stock at a price of $0.11 per share. All
of the shares of EquityStation were also delivered into escrow. Subject to (a)
any indemnification claims under the acquisition agreements and (b) the
financial performance of EquityStation and the business of Global acquired by
vFinance Investments over the periods specified in the escrow agreement, all or
a portion of the Shares and the Warrants will be distributed to Global and
Level2. When the escrow agreement is terminated, all of the shares of
EquityStation will be distributed to vFinance Investments, and the holders of
the Shares and Warrants will be entitled to certain piggyback registration
rights. The Company also entered into a standstill agreement with each of Marcos
Konig, Harry Konig and Salomon Konig, to provide restrictions on certain actions
for a defined time period.
In connection with the acquisitions, Scott J. Saunders ("Saunders") received
150,000 restricted shares of the Common Stock. The shares received by Saunders
are not subject to the escrow agreement, registration rights agreement or
standstill agreement.
The following Unaudited Pro Forma Combined Financial Statements of Global,
EquityStation and vFinance gives effect to the acquisition of certain assets of
Global and 100% of the issued and outstanding equity securities of
EquityStation, under the purchase method of accounting prescribed by Accounting
Principles Board Opinion No. 16, Business Combinations. These pro forma
statements are presented for illustrative purposes only. The pro forma
adjustments are based upon available information and assumptions that management
believes are reasonable.
The Unaudited Pro Forma Combined Financial Statements do not purport to
represent what the results of operations or financial position of vFinance would
actually have been if the acquisition had in fact occurred on such dates nor do
they purport to project the results of operations or financial position of
vFinance for any future period or as of any date, respectively.
These Unaudited Pro Forma Combined Financial Statements do not give effect to
any restructuring costs or to any potential cost savings or other operating
efficiencies that could result from the merger between the companies.
You should read the financial information in this section along with Global and
EquityStation historical financial statements and accompanying notes in this
amended Current Report on Form 8-K.
-24-
VFINANCE, INC
Unaudited Pro Forma Combined Balance Sheet
September 30, 2004
Pro Forma
vFinance Global Partners EquityStation Adjustments Pro Forma
ASSETS
Cash $ 4,237,980 $ 413,465 $ 1,888 $ (413,465) $ 4,239,868
Receivable from Clearing
Organizations 216,092 358,801 188,164 (358,801) 404,256
Due from Related Parties - 715,381 - (715,381) -
Due from Non Related Parties 172,604 - 6,409 - 179,013
Bond - 273,100 - (273,100) -
Securities Owned: - -
Marketable Securities, at
Market Value 532,929 38,119 - (38,119) 532,929
Not Readily Marketable, at
Estimated Fair Value 119,752 24,400 - (24,400) 119,752
Deposits 123,937 17,500 862 (17,500) 124,799
Prepaid Expenses 41,446 1,381 - (1,381) 41,446
Advances to Employees 42,822 20,191 - (20,191) 42,822
Property and Equipment, net 270,160 14,981 - (14,981) 270,160
Goodwill 420,000 - - 2,014,172 2,434,172
Other Assets 484,511 - - - 484,511
---------------- --------------- ------------- ----------- --------------
$ 6,662,233 $ 1,877,319 $ 197,323 $ 136,853 $ 8,873,728
================ =============== ============= =========== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Accounts Payable $ 1,087,585 $ 324,021 $ 18,731 $ (324,021) $ 1,106,316
Accrued Liabilities 1,225,327 6,120 54,567 (6,120) 1,279,894
Payable to Broker-Dealers - - 50 - 50
Security Deposits - - - - -
Commissions Payable - 119,935 - (119,935) -
Securities Sold, Not Yet Purchased,
At Market 70,517 3,358 - (3,358) 70,517
Loan Payable - 219,770 - (219,770) -
Capital Lease Obligations 21,834 - - - 21,834
Other 4,011 - - - 4,011
---------------- ---------------- ------------ ----------- --------------
2,409,274 673,204 73,348 (673,204) 2,482,622
---------------- ---------------- ------------ ----------- --------------
COMMITMENTS AND CONTINGENCIES
Subordinated Loans - 550,000 - (550,000) -
---------------- ---------------- ------------ ----------- --------------
STOCKHOLDER'S EQUITY
Common Stock 332,959 134,500 10 (49,763) 417,706
Additional Paid-in Capital 25,195,546 7,203,155 1,181,490 (6,331,245) 27,248,946
Deferred Compensation (20,735) - (20,735)
Accumulated Deficit (21,254,811) (6,683,540) (1,057,525) 7,741,065 (21,254,811)
---------------- ---------------- ------------ ----------- --------------
4,252,959 654,115 123,975 1,360,057 6,391,106
---------------- ---------------- ------------ ----------- --------------
$ 6,662,233 $ 1,877,319 $ 197,323 $ 136,853 $ 8,873,728
================ ================ ============ =========== ==============
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VFINANCE, INC
Unaudited Pro Forma Combined Statement of Operations
For the year ended December 31, 2003
Pro Forma
vFinance Global Partners EquityStation Adjustments Pro Forma
REVENUE
Commissions $ 13,372,875 $ 239,523 $ 880,274 $ - $ 14,492,672
Principal Transactions 4,533,933 2,973,115 - - 7,507,048
Success Fees 3,549,453 - - - 3,549,453
Consulting and retainers 468,168 - - - 468,168
Interest and Dividends - 18,568 9,144 - 27,712
Web operations 468,724 - - - 468,724
Other Income 2,085,313 60,454 1,490 - 2,147,257
----------------- ---------------- ------------- ----------- ------------
24,478,466 3,291,660 890,908 - 28,661,034
----------------- ---------------- ------------- ----------- -------------
EXPENSES
Employee Compensation and
Benefits 15,262,561 2,889,413 664,626 - 18,816,600
Clearance Fees 934,884 306,186 287,905 - 1,528,975
Communications and Data
Processing 694,511 656,179 21,615 - 1,372,305
Interest 199,111 89,963 3,664 - 292,738
Occupancy 456,558 385,019 24,000 - 865,577
Other Expenses 6,619,426 779,292 147,913 - 7,546,631
----------------- ---------------- ------------- ----------- -------------
24,167,051 5,106,052 1,149,723 - 30,422,826
----------------- ---------------- ------------- ----------- -------------
PRE TAX NET INCOME (LOSS) 311,415 (1,814,392) (258,815) - (1,761,792)
----------------- ---------------- ------------- ----------- -------------
Income tax benefit - - - - -
----------------- ---------------- ------------- ----------- -------------
NET INCOME (LOSS) available
to shareholders $ 311,415 $ (1,814,392) $ (258,815) $ - $ (1,761,792)
================= ================ ============= =========== =============
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VFINANCE, INC
Unaudited Pro Forma Combined Statement of Operations For the nine
month period ended September 30, 2004
Pro Forma
vFinance Global Partners EquityStation Adjustments Pro Forma
REVENUE
Commissions $ 10,700,404 $ 159,762 $ 1,663,784 $ - $ 12,523,950
Principal Transactions 3,229,400 2,772,633 - - 6,002,033
Success Fees 2,263,050 - - - 2,263,050
Consulting and retainers 222,291 - - - 222,291
Interest and Dividends 47,316 2,774 7,589 - 57,679
Web operations 325,736 - - - 325,736
Other Income 1,846,364 353,714 - - 2,200,078
------------- --------------- ------------- ----------- --------------
18,634,561 3,288,883 1,671,373 - 23,594,817
============= =============== ============= =========== ==============
EXPENSES
Employee Compensation and Benefits 14,180,490 2,461,181 247,943 - 16,889,614
Clearance Fees 592,782 333,464 609,535 - 1,535,781
Communications and Data Processing 497,966 408,154 31,025 - 937,145
Interest 290,957 59,585 - 350,542
Occupancy 294,460 296,201 18,000 - 608,661
Other Expenses 2,342,475 377,079 888,661 - 3,608,215
------------- --------------- ------------ ------------ --------------
18,199,130 3,935,664 1,795,164 - 23,929,958
------------- --------------- ------------ ------------ --------------
INCOME (LOSS) 435,431 (646,781) (123,791) - (335,141)
------------- --------------- ------------ ------------ --------------
Gain on forgiveness of debt 1,500,000 - - - 1,500,000
------------- --------------- ------------ ------------ --------------
PRE TAX NET INCOME (LOSS) 1,935,431 (646,781) (123,791) - 1,164,859
Income tax benefit 400,000 - - - 400,000
------------- --------------- ------------ ------------ --------------
NET INCOME (LOSS) available
to shareholders $ 2,335,431 $ (646,781) $ (123,791) $ - $ 1,564,859
============= =============== ============ ============ ==============
Pro Forma Adjustments:
Debit Credit
------------- ------------
Unassumed Liabilities of Global 1,223,204(1)
Common Stock -Global 134,500
Common Stock -EquityStation 10
APIC -Global 7,203,155
APIC -EquityStation 1,181,490
Goodwill 2,014,172(2)
Unassumed Assets of Global 1,877,319(1)
Accumulated Deficit -Global 6,683,540
Accumulated Deficit -EquityStation 1,057,525
Common Stock -vFinance 84,747
APIC -vFinance 2,053,400
-27-
(1) The assets and liabilities for Global were not assumed by vFinance. (2) The
calculation of goodwill is summarized as follows:
Purchase price $ 2,138,147
Fair market value of the assets acquired (197,323)
Liabilities assumed 73,348
----------------
Goodwill $ 2,014,172
================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
vFinance, Inc.
Dated: January 12, 2005 By: /s/ Sheila C. Reinken
---------------- -----------------------
Sheila C. Reinken,
TITLE: CHIEF FINANCIAL OFFICER
End of Filing
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