UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-27971
THE FINANCIAL COMMERCE NETWORK, INC.
(Exact name of registrant as specified in its charter)
NEVADA 22-2582276
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
421 Broad Street
Utica, New York 13501
(Address of principal executive offices and zip code)
(315) 738-8232
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ].
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: 4,828,056 shares of
common stock, $.01 par value, as of November 30, 2001.
THE FINANCIAL COMMERCE NETWORK, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Page
Part I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheets
September 30, 2001 and December 31, 2000 4
Condensed Consolidated Statements of Operations
Three months and nine months ended September 30, 2001 and 2000 5
Condensed Consolidated Statements of Cash Flows
Three months and nine months ended September 30, 2001 and 2000 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-9
PART II. OTHER INFORMATION
Item 2. Changes in Securities 10
Signatures 11
2
Part I - Condensed Consolidated Financial Statements
Item 1
Condensed Consolidated Financial Statements
The consolidated financial statements of the Financial Commerce Network, Inc.
and subsidiaries (collectively, the "Company"), included herein were prepared,
without audit, pursuant to rules and regulations of the Securities and Exchange
Commission. Because certain information and notes normally included in financial
statements prepared in accordance with accounting principles generally acccepted
in the United States of America were condensed or omitted pursuant to such rules
and regulations, these financial statements should be read in conjunction with
the financial statements of the Company as included in the Company's Form 10-KSB
for the year ended December 31, 2000.
3
THE FINANCIAL COMMERCE NETWORK, INC.
Consolidated Balance Sheets
September 30, December 31,
2001 2000
ASSETS (unaudited)
Current Assets
Cash and equivalents $ 1,179 $ 572
Due from broker 153,066 159,649
Marketable securities owned, at market 152,825 7,614
Other securities owned, at fair value 13,327 13,327
Due from affiliates 346,152 133,983
Due from stockholders, officers and directors 27,991 --
Other current assets 72,503 155,882
------------ ------------
Total Current Assets 767,043 471,027
Office equipment, net 7,216 9,258
Other assets 174,689 331,321
------------ ------------
TOTAL ASSETS $ 948,948 $ 811,606
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank loan payable $ 35,939 $ 38,879
Convertible notes payable 467,000 100,000
Accounts payable and accrued expenses 1,472,056 1,267,229
Commissions payable 20,290 12,380
Deferred compensation -- 435,000
Due to stockholders, officers and directors 206,543 199,873
------------ ------------
Total Current Liabilities 2,201,828 2,053,361
Commitments and contingencies
Long-term liabilities
Bank loan payable, less current portion -- 7,232
Deferred compensation 1,091,000 656,000
Stockholders' (Deficit)
Common stock, 5,000,000 shares authorized at $.01 par value; issued
and outstanding 4,828,056 at September 30, 2001
and 2,764,912 at December 31, 2000 48,281 27,650
Convertible preferred stock 10,000,000 shares authorized
at $.001 par value; issued and outstanding
67,500 at September 30, 2001 and December 31, 2000 67 67
Additional paid-in capital 34,680,419 33,925,841
Deficit (36,916,061) (35,667,942)
Treasury stock - preferred stock, 5,000 and 5,000 shares (50,000) (50,000)
Treasury stock - common stock, 544,436 and 79,436 shares (81,586) (115,603)
Subscription receivable (25,000) (25,000)
------------ ------------
Total Stockholders' (Deficit) (2,343,880) (1,904,987)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 948,948 $ 811,606
============ ============
See Notes to Condensed Consolidated Financial Statements.
4
THE FINANCIAL COMMERCE NETWORK, INC.
Consolidated Statements of Operations
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
---- ---- ---- ----
Revenues
Trading and commissions $ 46,976 $ 192,485 $ 320,706 $ 1,006,666
Investment banking 69,885 25,000 78,405 62,969
Interest 16,355 5,394 20,586 15,087
Other 18,927 -- 45,362 13,125
----------- ----------- ----------- -----------
152,143 222,879 465,059 1,097,847
Selling, General and Administrative Expenses
Employee compensation and benefits 328,892 484,798 538,913 1,743,425
Clearance fees 108,343 84,978 152,610 180,609
Occupancy 79,021 49,359 212,563 188,457
Communications 44,320 30,074 176,241 81,352
Insurance -- 7,540 3,729 29,679
Stock option and warrant compensation -- 337,500 -- 1,026,236
Other 132,919 288,019 482,929 870,626
----------- ----------- ----------- -----------
693,495 1,282,268 1,566,985 4,120,384
(Loss) from operations (541,352) (1,059,389) (1,101,926) (3,022,537)
Other Income and Expenses
Interest income 385 -- 389
Interest expense (38,384) -- (48,970) --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
(37,999) -- (48,581) --
----------- ----------- ----------- -----------
(Loss) before income tax (benefit) and preferred
stock dividends (579,351) (1,059,389) (1,150,507) (3,022,537)
Income tax (benefit) -- -- -- --
----------- ----------- ----------- -----------
(Loss) before preferred stock dividends (579,351) (1,059,389) (1,150,507) (3,022,537)
Preferred Stock dividends 27,900 27,900 83,700 83,700
----------- ----------- ----------- -----------
Net (loss) applicable to common shares $ (607,251) $(1,087,289) $(1,234,207) $(3,106,237)
=========== =========== =========== ===========
Basic and diluted (loss) per share $ (0.13) $ (0.46) $ (0.33) $ (1.41)
=========== =========== =========== ===========
Basic and diluted average shares outstanding 4,828,056 2,371,474 3,717,716 2,204,540
=========== =========== =========== ===========
See Notes to Condensed Consolidated Financial Statements.
5
THE FINANCIAL COMMERCE NETWORK, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
---- ---- ---- ----
Operating Activities
Net Income or (loss) $(579,351) $(1,059,389) $(1,150,507) $(3,022,537)
Adjustments to reconcile net income or (loss)
to net cash used by operating activities:
Stock options and warrants compensation - 337,500 - 1,026,236
Common stock issued for compensation - 124,999 - 421,875
Common stock to be issued for services - (37,500) - -
Common stock issued for services - 155,141 4,200 385,455
Depreciation 709 15,000 2,128 20,000
Deferred income taxes - - -
Imparement of assets 197,294 - 197,294
Changes in operating assets and liabilities: - - -
Marketable securities owned, at cost 47,066 130,230 (145,211) 231,296
Other securities owned, at cost - - - 28,918
Other current assets 123,857 (56,711) 83,379 146,289
Other assets (25,038) (4,600) - (319,600)
Equity securities soldm not yet purchase 156,632 - 156,632 -
Accounts payable and accrued expenses 92,403 196,329 204,827 26,980
Commissions payable (16,015) (13,753) 7,910 (26,317)
Due clearing broker (76,227) (69,250) 6,583 -
Deferred compensation (61,250) 162,500 - 484,500
--------- ----------- ----------- -----------
Net cash used in operating activities (139,920) (119,504) (632,765) (596,905)
Financing Activities
Sale of common stock - 310,468 325,000 1,030,468
Sale (Acquisition) of treasury stock - (173,312) - (163,247)
Repayments by affiliates (64,274) (1) (212,169) 10,752
Payments on bank loan - (5,136) (10,172) (13,538)
Loans payable - - 206,542
Convertible loans payable 195,000 - 467,000
(Repayments) advances from stockholders (45,709) (51,658) (142,829) (271,283)
--------- ----------- ----------- -----------
Net cash provided by financing activities 85,017 80,361 633,372 593,152
--------- ----------- ----------- -----------
Net Increase (decrease) in cash (54,903) (39,143) 607 (3,753)
Cash, beginning of period 56,082 58,394 572 23,004
--------- ----------- ----------- -----------
Cash, end of period $ 1,179 $ 19,251 $ 1,179 $ 19,251
========= =========== =========== ===========
See Notes to Condensed Consolidated Financial Statements.
6
THE FINANCIAL COMMERCE NETWORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
Note 1- The consolidated financial statements include the accounts of The
Financial Commerce Network, Inc. and its wholly-owned subsidiaries,
Alexander, Wescott, & Co., Inc. and Alexander, Wescott Securities, Inc.
since inception and Stockchicken.com since May 18, 2000 (collectively
the "Company"). All significant intercompany transactions and balances
have been eliminated in consolidation.
The accompanying consolidated financial statements contain all
adjustments necessary to present fairly the financial position of The
Financial Commerce Network, Inc. and subsidiaries as of September 30,
2001 and their results of operations and their cash flows for the three
and nine month periods ended September 30, 2001 and 2000. Results of
operations for the three and nine month periods ended September 30,
2001 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2001.
Note 2- Basic earnings (loss) per common share ("EPS") is computed as net
earnings (loss) divided by the weighted-average number of common shares
outstanding for the period. Diluted EPS representing the potential
dilution that could occur from common stock issuable through
stock-based compensation including stock options, restricted stock
awards, warrants and other convertible securities is not presented for
the three and nine month periods ended September 30, 2001 and 2000.
since there was no dilutive effect of potential common shares.
Note 3- On August 28, 2001, the Board of Directors authorized a 1 for 10
reverse stock split, thereby decreasing the number of issued and
outstanding shares to 4,828,056 and increasing the par value of each
share to $0.01. All references in the accompanying financial statements
to the number of common shares and per share amounts for all periods
presented have been restated to reflect the reverse stock split.
Note 4- During the quarter, the Company issued an additional $195,000 of
convertible notes to certain shareholders which bear interest at 8% per
annum and are payable on demand. The purchaser has the right to convert
the notes at $0.20 per share of common stock. The Company does not have
sufficient authorized common shares at this time to convert these
notes.
Note 5- As a result of the September 11, 2001 terrorist attack, the Company
has moved its headquarters from New York City, New York to Utica, New
York and has signed a five year lease ending on October 1, 2006 for
office space from an unrelated third party.
7
Part I - Condensed Consolidated Financial Statements
Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
NET LOSSES
For the nine months ended September 30, 2001 and 2000, the Company incurred a
net loss of $1,234,207 and $3,106,237, respectively. For the three months ended
September 30, 2001 and 2000 the Company incurred a net loss of $607,251 and
$1,087,289, respectively. Explanations of these results are set forth below.
REVENUE
For the nine months ended September 30, 2001, the Company recorded revenue of
$465,059 as compared to $1,097,847 for the nine months ended September 30, 2000.
For the three months ended September 30, 2001, the Company recorded revenue of
$152,143 as compared to $222,879 for the three months ended September 30, 2000.
During the nine months ended September 30, 2001, ALWC's trading and commission
revenue was $320,706 and revenue from investment banking was $78,405. During the
nine months ended September 30, 2000, ALWC's trading and commission revenue was
$1,006,666 and revenue from investment banking was $62,969. During the three
months ended September 30, 2001, ALWC's trading and commission revenue was
$46,976 and revenue from investment banking was $69,885. During the three
months ended September 30, 2000, ALWC's trading and commission revenue was
$192,485 and the revenue from investment banking was $25,000.
GENERAL AND ADMINISTRATIVE
General and administrative costs consist primarily of employee compensation and
benefits, stock option and warrant compensation, professional fees and
consulting services. Significant costs are attributed to the Company becoming a
reporting public company. This status will increase audit and legal costs
significantly. In relation to the Company becoming a public company, the cost of
corporate relations will also increase as quarterly reports and other investor
information is required. The Company anticipates that its General and
Administrative costs (as a percentage of costs) will decline as the Company's
operations expand.
General and administrative expenses decreased to $1,566,985 for the nine months
ended September 30, 2001 compared to $4,120,384 for the nine months ended
September 30, 2000, a decrease which was attributable to the reduction of
employees. General and administrative expenses decreased to $693,495 for the
three months ended September 30, 2001 compared to $1,282,368 for the three
months ended September 30, 2000, the decrease was attributable to the reduction
of employees.
8
Liquidity and Capital Resources
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
During the nine months ended September 30, 2001, the company used cash for
operating activities of approximately $633,000 compared to the nine months ended
September 30, 2000 of approximately $597,000. Cash used for operations for the
nine months ended September 30, 2001 resulted from the Company's net loss of
approximately $1,234,000 compared to approximately $3,106,000 for the nine
months ended September 30, 2000.
During the nine months ended September 30, 2001 the Company generated cash from
financing activities of approximately $633,000 compared to approximately
$593,000 for the nine months ended September 30, 2000. The cash generated during
the nine months ended September 30, 2001 was attributable to the sales of common
stock and new loans net of repayments to stockholders. The cash provided during
the nine months ended September 30, 2000 was attributable to the sale of common
stock net of repayment to stockholders.
At September 30, 2001, the Company had current assets of $767,043 and current
liabilities of $2,201,828 which resulted in a working capital deficit of
$1,434,785. Current liabilities include accounts payable and accrued expenses of
approximately $1,472,000. At June 30, 2001, the Company had available cash of
approximately $1,000. The Company has been unable to pay its obligations as they
become due.
During the nine months ended September 30, 2001, the Company began a private
placement to its shareholders and foreign investors to sell 8% convertible
demand note payable. As of September 30, the Company has issued $467,000 of
convertible demand notes payable with an conversion price of $0.20 per share.
The Company intends to issue additional shares of common stock to raise funds
and the Board of Directors will take appropriate actions to accomplish this
goal.
In addition, implementation of the Company's business plan requires capital
resources substantially greater than those currently available to the Company.
The Company may determine, depending on the opportunities available to it, to
seek additional debt or equity financing to fund the cost of continuing
expansion. There can be no assurance that additional financing will be
available. If neither additional debt nor equity financing is available, the
Company may seek loans. In addition, the Company may seek a strategic alliance
with another company that would provide capital to the Company. The Company
believes that with its cash and marketable securities, combined with its ability
to raise additional equity financing, the Company will have the funds available
to sustain its operations throughout the next year.
To the extent that the Company finances expansion through the issuance of
additional equity securities, any such issuance will result in dilution of the
interests of the Company's stockholders. Additionally, to the extent that the
Company incurs indebtedness or issues debt securities to finance expansion
activities, it will be subject to all of the risks associated with incurring
substantial indebtedness, including the risks that interest rates may flucuate
and cash flow may be insufficient to pay the principal of, and interest on, any
such indebtedness.
9
Part II - Other Information
Item 2. Changes in Securities.
During the third quarter, the Company has issued $195,000 of 8%
convertible demand notes payable with a conversion price of $0.02 per
share in a private placement. This sale was made in reliance on
Section 4(2) of the Act.
On August 28, 2001 the Board of Directors authorized a 1 for 10
reverse stock split, decreasing the number of outstanding shares and
increasing the par value of each share to $0.01 from $0.001.
10
Signatures
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The Financial Commerce Network, Inc.
Dated: December 26, 2001 By: /s/ Richard H. Bach
-------------------------
Name: Richard H. Bach
Title: Chairman/CEO
11