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 Report (Date of earliest event reported) September 12, 2002
------------------
TGFIN Holdings, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 1-11034 72-0861671
- -------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
39 Broadway, Suite 740, New York, New York 10006
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 363-3900
--------------
n/a
---
(Former name or former address, if changed since last report.)
PLEASE ADDRESS ALL CORRESPONDENCE TO: Mark Gasarch, Esq.
150 East 58th Street
34th Floor
New York, New York 10155
(212) 956-9595
Item 1. Changes In Control of Registrant
As previously reported on Form 8-K filed September 13, 2002, on September 12,
2002 the shareholders of the Registrant approved the merger of the Registrant
and its wholly-owned subsidiary, DSI Acquisition, Inc. ("DSI") into
TradinGear.com Incorporated ("TradinGear"), as had been previously approved by
the shareholders of DSI and TradinGear and the boards of directors of all
three companies. As a result of this merger, those persons who, by virtue of
their shareholdings of and/or position with the Registrant deem them to
"control" the Registrant, and their percentage of voting securities of the
Registrant now beneficially owned directly or indirectly are:
Samuel Gaer, President, Director - 32.7%
Marni Gaer, Secretary, Treasurer, Director - 9.9%
Ronald Comerchero, Director - 9.7%
Bruce Frank, Vice-President - 8.3%
(Marni Gaer is the wife of Samuel Gaer)
Prior to the merger, control of the Registrant was held by the following
persons:
Julie T. Reeves - 18.07%
Evelyn R. Call - 18.07%
Rigel Hulett - 18.07%
Quentin Casperson, President - 1.25%
Scott Lybbert, Secretary - 2.70%
Aaron Etra, Director - 1.13%
Gary Blum, Director - 1.21%
Item 5. Other Events
As previously reported on Form 8-K filed September 13, 2002, the shareholders
of the Registrant approved the following, all previously approved by the
Registrant's Board of Directors:
1. Increase in capitalization of the Registrant's common shares from
25,000,000 shares to 50,000,000 shares
2. A 1 for 21 reverse split of the Registrant's common shares
3. A change in the voting rights of the Registrant's common shares from 1/10
of a vote per share to 1 vote per share
4. The election of Samuel Gaer, Marni Gaer and Ronald Comerchero to the
Registrant's Board of Directors
5. The change of the Registrant's name to TGFIN Holdings, Inc.
6. The appointment of Samuel Klein and Company, CPAs, as the Registrant's
independent auditors
Item 7. Financial Statements and Exhibits
(a) Financial statements and *
(b) Pro forma financial information *
* Filed herewith
(c) Exhibits
2.1 Certificate of Merger Merging DSI Acquisition, Inc Into
TradinGear.com Incorporated**
3.1 Certificate of Amendment to Certificate of Incorporation of
Digitran Systems, Incorporated**
99.1 Certification of Chief Executive Officer and Chief Financial
Officer*
* Filed herewith
** Previously filed
Item 8. Change in Fiscal Year
As previously reported on From 8-K filed September 13, 2002, on September 12,
2002 the Board of Directors of the Registrant resolved to change its fiscal
year from a fiscal year ended April 30 to a fiscal year ended December 31. The
Registrant has filed timely a Report on Form 10-QSB for its fiscal quarter
ended July 31, 2002. The Registrant will file a transition report on Form
10-QSB for the fiscal quarter (two months) ended September 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: November 18, 2002
TGFIN Holdings, Inc.
(Registrant)
By/s/ Samuel Gaer
---------------------------
Samuel Gaer, President
Principal Executive Officer
TRADINGEAR.COM, INCORPORATED
FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
TradinGear.Com, Incorporated
New York, New York
We have audited the accompanying balance sheets of TradinGear.Com,
Incorporated as of December 31, 2001 and 2000 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide 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 TradinGear.Com, Incorporated
as of December 31, 2001 and 2000, and the results of operations and cash flows
for each of the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/Samuel Klein and Company
SAMUEL KLEIN AND COMPANY
Newark, New Jersey
April 10, 2002
TRADINGEAR.COM, INCORPORATED
BALANCE SHEETS
December 31, December 31,
ASSETS 2001 2000
- ------ ------------ -----------
Current Assets:
Cash and cash equivalents $ 230,360 $ 97,257
Accounts receivable, net - 50,300
Investments, available for sale
Securities - 755,847
Prepaid expenses 6,801 -
Deferred costs 59,899 -
----------- -----------
Total Current Assets 297,060 903,404
Property and equipment, net 151,964 137,369
Deposits 101,621 101,621
----------- -----------
Total Assets $ 550,645 $ 1,142,394
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 31,087 $ 326,918
Accrued expenses 38,431 25,000
Income tax payable 4,300 -
Deferred revenue 40,000 130,000
----------- -----------
Total Current Liabilities 113,818 481,918
----------- -----------
Stockholders' Equity:
Common stock ($.0001 par value,
30,000,000 shares authorized,
18,829,309 and 17,788,987 shares
issued and outstanding at December
31, 2001 and 2000, respectively) 1,883 1,779
Additional paid-in-capital 3,051,607 2,733,143
Less: Deferred compensation relating
To stock issued to consultants (381,644) (307,188)
Retained earnings (deficit) (2,235,019) (1,767,258)
----------- -----------
Total Stockholders' Equity 436,827 660,476
----------- -----------
Total Liabilities and
Stockholders' Equity $ 550,645 $ 1,142,394
=========== ===========
These accompanying notes are integral part of these financial statements.
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
2001 2000
Revenues:
Software license fees $ 1,128,836 $ 242,778
Costs and Expense:
General and administrative 601,098 636,242
Website costs 4,508 87,629
Development costs 426,544 418,044
Consulting fees 496,530 286,179
Depreciation expense 36,807 23,003
----------- -----------
Total Costs and Expenses 1,565,487 1,451,097
----------- -----------
Net Loss from Operations (436,651) (1,208,319)
----------- -----------
Other Revenue (Expense)
Realized loss on sale of securities (79,450)
Interest Income 5,445
Miscellaneous revenue 11,737
Finance charges (35,172)
----------- -----------
(23,435) (74,005)
----------- -----------
Net Loss before Provision for
Income Tax (460,086) (1,282,324)
Provision for Income Tax 7,675 378
----------- -----------
Net Loss $ (467,761) $(1,282,702)
=========== ===========
Loss per Share:
Basic and diluted loss per share $ (0.02) $ (0.07)
=========== ===========
Basic and diluted common shares
outstanding 18,829,309 18,829,309
=========== ===========
These accompanying notes are integral part of these financial statements.
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Common Stock
Par Value $.0001
----------------------------------------------------
Common Additional
Number Stock Paid-In Deferred
of Shares Amount Capital Compensation
Balances, January 1, 2000 17,788,987 1,779 2,733,143 $(515,063)
Reclassification of
Unrealized Loss on
Available for Sale
Securities - - - -
Amortization of deferred
compensation - - - 207,875
Net Loss for the Year
Ended December 31, 2000 - - - -
---------- ---------- ----------- ---------
Balances December 31, 2000 17,788,987 1,779 2,733,143 (307,188)
Issuance of Common Stock 785,926 79 281,046 -
Common stock issued in
exchange for accounts
payable 1,378,870 138 483,987 -
Common stock issued for
services 881,373 88 309,202 (291,700)
Cancellation of Common
Stock (2,005,847) (201) (755,771) -
Amortization of deferred
compensation - - - 217,244
Net Loss for the Year
Ended December 31, 2001 - - - -
---------- ---------- ----------- ---------
Balances December 31, 2001 18,829,309 $ 1,883 $ 3,051,607 $(381,644)
========== ========== =========== =========
[CONTINUED]
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Unrealized
Retained Gain/(Loss) Total
Earnings Available Stockholders'
(Deficit) For Sale Equity
Balances, January 1, 2000 (484,556) 667,188 2,402,491
Reclassification of Unrealized
Loss on Available for Sale
Securities - (667,188) (667,188)
Amortization of deferred compensation - - 207,875
Net Loss for the Year Ended
December 31, 2000 (1,282,702) - (1,282,702)
--------------- ----------- ------------
Balances December 31, 2000 (1,767,258) - 660,476
Issuance of Common Stock - - 281,125
Common stock issued in exchange
for accounts payable - - 484,125
Common stock issued for services - - 17,590
Cancellation of Common Stock - - (755,972)
Amortization of deferred compensation - - 217,244
Net Loss for the Year Ended
December 31, 2001 (467,761) - (467,761)
--------------- ----------- -----------
Balances, December 31, 2001 $ (2,235,019) $ - $ 436,827
=============== =========== ===========
These accompanying notes are integral part of financial statements.
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2001 2000
Cash Flows from Operating
Activities:
Net Loss $(467,761) $(1,282,702)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 36,807 23,003
Loss on sale of
investments - 79,450
Amortization of deferred
compensation 217,244 207,875
Compensation costs of common stock
issued to consultant 17,590 -
Changes in assets and
liabilities, net of effect
from:
Decrease (increase) in
accounts receivable 50,300 (50,300)
Increase in prepaid
Expenses (6,801) -
Increase in deferred
Costs (59,899) -
Increase in deposits - (101,621)
Increase in accounts
Payable and accrued
Expenses 205,900 264,378
Increase (decrease) in
deferred revenue (90,000) 130,000
Increase (decrease) in
Accrued tax payable - (654)
---------- -----------
Net cash used in
Operating activities (96,620) (730,571)
---------- -----------
Cash Flows from Investing
Activities:
Purchase of property and
Equipment (51,402) (84,426)
Sale of Investments - 261,800
---------- ----------
Net cash provided by
(Used in) investing
Activities (51,402) 177,374
---------- ----------
Cash Flows from Financing
Activities:
Cash proceeds from officer's loan 28,000 -
Repayment of officer's loan (28,000) -
Issuance of common stock 281,125 -
---------- ----------
Net Cash provided by
Financing Activities 281,125 -
---------- ----------
Net Increase (decrease) in
cash and Cash Equivalents 133,103 (553,197)
Cash and Cash Equivalents,
beginning of period 97,257 650,454
---------- ----------
Cash and Cash Equivalents,
end of period $ 230,360 $ 97,257
========== ==========
These accompanying notes are integral part of these financial statements.
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2001 2000
Cash paid during the period
for:
Income Taxes $ 3,425 $ -
========== ==========
Interest $ 9,200 $ -
========== ==========
Supplemental Disclosures
of Noncash Investing and
Financing Activities:
Common Stock Issued
(Cancelled) in exchange
for marketable securities $ (755,847) $ -
========== ==========
Common Stock issued in
exchange for accounts
payable $ 484,125 $ -
========== ==========
Common Stock issued for
Services $ 309,290 $ -
========== ==========
These accompanying notes are integral part of these financial statements.
TRADINGEAR.COM,INCORPORATED
CONDENSED BALANCE SHEET
(Unaudited)
June 30,
2002
------------
ASSETS
Current Assets:
Cash and cash equivalents $ 21,612
Accounts receivable, net 235,552
Prepaid expenses 24,332
Deferred Costs 59,899
-----------
Total Current Assets 341,395
Property and equipment, net 141,171
Deposits 101,621
-----------
Total Assets $ 584,187
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 146,130
Accrued expenses 65,577
Deferred Revenue -
-----------
Total Current Liabilities 211,707
-----------
Stockholders' Equity:
Common stock ($.0001 par value),
30,000,000 shares authorized,
19,626,809 issued and
outstanding at June 30, 2002 1,963
Additional paid-in-capital 3,349,527
Less: Deferred compensation
Relating to stock issued to
consultants (245,375)
Retained earnings (deficit) (2,733,635)
-----------
Total Stockholders' Equity 372,480
-----------
Total Liabilities and
Stockholders' Equity $ 584,187
===========
These accompanying notes are integral part of these financial statements.
TRADINGEAR.COM, INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30,
2002 2001
REVENUES $ 560,195 $ 371,904
COSTS AND EXPENSES
General & admin. $ 500,254 $ 412,148
Development costs 338,555 220,193
Consulting fees 192,360 71,970
Depreciation expense 21,869 17,363
---------- ---------
Total costs and expense 1,053,038 721,674
Net Income (loss) before
Provision for Income
Taxes $ (492,843)$(349,770)
Provision for
Income taxes $ 5,773 $ -
NET INCOME (LOSS) $(498,616) $(349,770)
BASIC AND DILUTED LOSS
PER SHARES $ (0.03) $ (0.02)
Weighted Average number
of shares outstanding 19,626,809 19,626,809
The accompanying notes are an integral part of these consolidated
financial statements.
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
June 30,
2002 2001
Cash Flows from Operating
Activities:
Net Income (Loss) $ (498,616) $ (349,770)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
Amortization 21,868 17,724
Amortization of deferred
Compensation 136,269 222,925
Compensation costs of common stock
issued to consultant - -
Changes in assets and
liabilities, net of effect
from:
Decrease (increase) in
accounts receivable (235,552) (88,755)
Increase in prepaid
Expenses (17,531) (2,985)
Increase in deferred costs - (35,000)
Increase in deposits - -
Increase in accounts
Payable and accrued
Expenses 137,889 10,509
Increase (decrease) in
deferred revenue (40,000) (3,600)
---------- ----------
Net cash used in
Operating activities (495,673) (228,952)
---------- ----------
Cash Flows from Investing
Activities:
Purchase of property and
Equipment (11,075) (28,571)
---------- ----------
Net cash provided by
(Used in) investing
Activities (11,075) (28,571)
---------- ----------
Cash Flows from Financing
Activities:
Issuance of common stock 298,000 215,001
---------- ----------
Net Cash provided by
Financing Activities 298,000 215,001
---------- ----------
Net Increase (decrease) in
cash and Cash Equivalents (208,748) (42,522)
Cash and Cash Equivalents,
beginning of period 230,360 97,257
---------- ----------
Cash and Cash Equivalents,
end of period $ 21,612 $ 54,735
========== ==========
Supplementary Disclosure of Cash Flow Information:
Cash paid during the period
for:
Income Taxes $ - $ -
========== ==========
Interest $ 172 $ -
========== ==========
Supplemental Disclosures
of Noncash Investing and
Financing Activities:
Common stock cancelled
In exchange for marketable
Securities $ - $ (755,847)
========== ==========
Common Stock issued in
exchange for accounts
payable $ - $ 365,138
========== ==========
Common Stock issued for
Services $ - $ 410,812
========== ==========
These accompanying notes are an integral part of these financial statements.
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
TradinGear.Com, Incorporated ("TG" or the "Company") was incorporated under
the laws of the State of Delaware on July 7, 1999. TradinGear.Com, Inc.
produces trading software designed for the financial services industry.
The Company's software technology is designed to provide stock exchanges and
broker dealers in the securities industry the ability to offer to its
customers an on-line electronic system for securities trading.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments, including
cash and cash equivalents, trade receivable, accounts payable and other
accrued liabilities, approximate fair value because of their short maturities.
Revenue Recognition
The Company's revenues are derived principally from providing its customers
with software applications that enable them to conduct stock transactions
online. Additional revenue may be derived from post contract support services
such as maintenance/service contracts, hosting upgrades and enhancements. The
Company's principle revenues are recognized utilizing the percentage of
completion method of accounting for contract revenues in conformity with
Accounting Research Bulletin 45 (ARB-45) "Long Term Construction - Type
Contracts" and the guidance contained within the American Institute of
Certified Public Accountants' Statements of Position ("SOP") 81-2 "Accounting
for Performance of Construction-Type and Certain Production-Type Contracts"
and SOP 97-2 " Software Revenue Recognition". Accordingly the Company
recognizes its principle revenues from its software arrangements only
upon the completion and acceptance by the customer of contracted milestones.
The Company's post contract support services revenue is recognized over the
period during which the service is expected to be performed. The software
arrangements provide for no right of return or refunds and are fixed or
determinable. Deferred revenue represents amounts received on uncompleted
project milestones.
Use of Management's Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
The Company accounts for its investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115),
which requires that investments in debt securities and marketable equity
securities be designated as trading, held-to-maturity or available-for-sale.
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
(Continued)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments (Continued)
Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determinations at each balance sheet date. Debt securities for which the
Company does not have the intent or ability to hold to maturity are classified
as available for sale, along
with any investments in equity securities. Securities available for sale are
carried at fair value, with unrealized gains and losses, net of income taxes,
reported as a separate component of Stockholders' Equity.
Property and Equipment
Property and equipment are recorded at cost and being depreciated for
financial accounting purposes on the straight-line method over their
respective estimated useful lives ranging from three to thirty-nine years.
Upon retirement or other disposition of these assets, the cost and related
accumulated depreciation are removed from the accounts and the resulting gains
or losses are reflected in the results of operations.
Expenditures for maintenance and repairs are charged to operations. Renewals
and betterments are capitalized. Depreciation of leased equipment under
capital leases is included in depreciation.
Product Development
Costs incurred in conjunction with the development of new products are charged
to expense as incurred. Material software development costs subsequent to the
establishment of technological feasibility will be capitalized. Based upon
the Company's product development process, technological feasibility is
established upon the completion of a working model. To date attainment of
technological feasibility and general release to customers have substantially
coincided.
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS 121 requires that if facts and circumstances
indicate that the cost of fixed assets or other assets may be impaired, an
evaluation of recoverability would be performed by comparing the estimated
future undiscounted pre-tax cash flows associated with the asset to the
asset's carrying value to determine if a write-down to market value or
discounted pre-tax cash flow value would be required.
Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting on Comprehensive Income". This statement establishes
rules for the reporting of comprehensive income and its components which
require that certain items such as foreign currency translation adjustments,
unrealized gains and losses on certain investments in debt and equity
securities, minimum pension liability adjustments and unearned compensation
expense related to stock issuances to employees be presented as separate
components of stockholders' equity. The adoption of SFAS 130 had no impact on
total shareholders' equity.
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
(Continued)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation
The Company will follow Accounting Principles Board Opinion No. 25, (APB 25),
"Accounting for Stock Issued to Employees" in accounting for future employee
stock option plans. Under APB 25, when the exercise price of the Company's
employee stock options equals or is above the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123, (FASB
123), "Accounting for Stock Based Compensation" are applied in accordance with
FASB 123 at the fair value of these options.
Earnings (Loss) Per Share
The Company will calculate earnings (loss) per share in accordance with SFAS
No. 128, "Computation of Earnings Per Share" and SEC Staff Accounting Bulletin
No. 98. Basic earnings per share is computed using the weighted average number
of common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares consist of the incremental common shares issuable
upon the conversion of the Preferred Stock (using the if-converted method) and
shares issuable upon the exercise of stock options (using the treasury stock
method); common equivalent shares are excluded from the calculation if their
effect is anti-dilutive.
Earnings (loss) per share in these financial statements has been computed as
if the outstanding shares as of June 30, 2002 were outstanding for all
periods.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109, (SFAS
109) "Accounting for Income Taxes". SFAS 109 requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Start-Up Activities
The American Institute of Certified Public Accountants issued Statement of
Position 98-5 (SOP 98-5), "Reporting the Costs of Start-Up Activities". SOP
98-5 requires start-up costs, as defined, to be expensed as incurred and is
effective for financial statements for fiscal years beginning after December
15, 1998. The Company expenses all start-up costs as incurred in accordance
with this statement and therefore the issuance of SOP 98-5 will have no
material impact on the Company's financial statements.
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
(Continued)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In July 2001 the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations" (SFAS 141) and Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS
141 requires that all business combinations initiated after June 30, 2001 be
accounted for using the purchase method of accounting and is effective for all
business combinations initiated after June 30, 2001. SFAS 142 requires that
goodwill be tested for impairment under certain circumstances, and written off
when impaired, rather then being amortized as previous standards required.
SFAS 142 is effective for fiscal years beginning after December 15, 2001.
Early application is permitted for entities with fiscal years beginning after
March 15, 2001 provided that the first interim period financial statements
have not been previously issued. The adoption of SFAS 141 had no effect on
the Company's operating results or financial condition. The Company is
currently assessing the impact of SFAS 142 on its operating results and
financial condition.
Reclassifications
Certain reclassifications have been made to the prior year balances to conform
to the current year presentation.
2. INVESTMENTS
As of December 31, 2001 and 2000 the Company classified their investments as
available for sale securities. Unrealized holding gains (losses) on available
for sale securities which are reported at fair value are included as a
separate component of stockholders' equity.
Investments at December 31, 2000 consist of the following:
Unrealized
Cost Market Gain (Loss)
---- ------ -----------
Available for sale securities:
Marketable Equity Securities $1,097,097 $755,847 $ -
========== ======== ===========
The Company had no investments at June 30, 2002 or December 31, 2001.
3. ACCOUNTS RECEIVABLE
The Company provides an allowance for doubtful accounts equal to the estimated
uncollectible amounts. The Company's estimate is based on historical
collection experience and a review of the current status of trade accounts
receivable. It is reasonably possible that the Company's estimate of the
allowance for doubtful accounts will change. Accounts receivable consist of
the following at:
June 30, December 31,
2002 2001 2000
----------- -------- --------
Accounts Receivable Trade $ 235,552 - $ 50,300
=========== ======== ========
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
(Continued)
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, and their respective useful lives consist of
the following at:
Estimated
June 30, December 31, Useful
2002 2001 2000 Lives
----------- ---------- ---------- -----
Computer equipment 206,434 $ 198,208 $ 148,580 5
Office equipment 10,504 7,654 5,880 5
Leasehold improvements 7,350 7,350 7,350 5
----------- ---------- ----------
224,288 213,212 161,810
Less: Accumulated
depreciation 83,117 61,248 24,441
----------- ---------- ----------
$ 141,171 $ 151,964 $ 137,369
=========== ========== ==========
5. RELATED PARTY TRANSACTION
On July 10, 2001 Samuel Gaer, the CEO of TradinGear.Com, Incorporated, agreed
to lend the Company $28,000 at a rate of six percent (6%) and due on demand.
At December 31, 2001 the note had been repaid in full.
6. PROVISION FOR INCOME TAXES
For the periods from inception (July 7, 1999) to June 30, 2002 the Company had
accumulated losses of $2,733,635. No federal tax expense or benefit has been
reported in the financial statements due to the uncertainty of future
operations.
7. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject from time to time to litigation arising from the normal
course of business. In management's opinion, any such contingencies would be
covered under its existing insurance policies or would not materially affect
the Company's financial position or results of operations.
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
(Continued)
7. COMMITMENTS AND CONTENGENCIES (Continued)
Litigation (Continued)
Norman Fuchs ("Fuchs"), a former director of the Company, and ATH Ventures,
Inc. ("ATH"), a company controlled by Fuchs, have commenced an action against
the Company and against Ausinsoft, Inc., an entity of which Samuel Gaer, the
President, Director and principal shareholder of the Company, is also an
officer, director and shareholder. The action seeks monetary damages and
shares of the Company's common stock. Subsequently, Fuchs and ATH commenced
an action seeking to enjoin the merger as discussed in Note 8 and petitioned
the Court for a Temporary Restraining Order ("TRO"). The Company defended
this action and on January 10, 2002 the TRO expired without action and Fuchs,
ATH and the Company engaged in preliminary settlement discussions which
concluded in a February 14, 2002 settlement agreement and no monetary damages
or obligations to the Company.
Leases
The Company leases office equipment and office space under noncancellable
operating leases. Commitments under these leases are as follows:
June 30, December 31,
----------- ------------
2002 $ - $ 139,082
2003 140,946 142,855
2004 144,774 146,741
2005 148,717 150,743
2006 152,778 102,663
2007 26,101 -
----------- ------------
$ 613,316 $ 682,084
=========== ============
Employment Agreements
On December 10, 1999 the Company entered into an employment agreement with
Samuel H. Gaer, the Chief Executive Officer of the Company. The agreement is
for a term of three years commencing January 1, 2000 and provides for a base
annual salary of $120,000 and for bonuses as determined by the Company's Board
of Directors.
401(k) Plan and Profit Sharing Plan
The Company has approved a 401(k) Plan and a Profit Sharing Plan which cover
full-time employees who have attained the age of 21 and have completed at
least one year of service with the Company. Under the 401(k) Plan, an
employee may contribute an amount up to 25% of his compensation to the 401(k)
Plan on a pretax basis not to exceed the current Federal limitation of $10,500
per year (as adjusted for cost of living increase). Amounts contributed to
the 401(k) Plan are nonforfeitable. Under the Profit Sharing Plan, a member
in the plan participates in the Company's contributions to the Plan as of
December 31 in any year, with allocations to individual accounts based on
annual compensation.
An employee does not fully vest in the plan until completion of three years of
employment. The Board of Directors determine the Company's contributions to
the plan on a discretionary basis. The Company has not made any contributions
to date.
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
(Continued)
8. COMMON STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
common stock, par value $.0001 per share. The Company issued 13,280,000
shares of common stock to the founders of the Company for $.0001 per share,
the par value of the Company's common stock.
During July 1999 the Company issued 1,263,000 shares of common stock to two
consultants for services rendered and a two year agreement which provided the
Company with office space and services through June 2001. The total value of
the services and consulting agreement was estimated to be $661,500.
During October 1999 the Company issued 10,000 shares of its common stock to a
consultant for services valued at $5,000. In addition, during October 1999
the Company issued 500,000 shares of its common stock to professionals for
services rendered valued at $150,000 and for future professional services to
be rendered through December 2002 valued at $100,000.
Also, during the fourth quarter of 1999 the Company sold 1,980,140 shares of
its common stock to four investors for cash of $500,000 and the receipts of
marketable equity securities valued at $341,250 or for a total consideration
of $841,250.
In November 1999 the Company issued 755,847 shares of its common stock valued
at $755,847 in conjunction with the Company entering into a license agreement
to provide its proprietary software suite in exchange for marketable equity
securities of the same value. This agreement and exchange of securities
ultimately became the subject of a dispute in late 2000 which was settled in
2001 with the parties agreeing to cancel the outstanding shares exchanged and
with the Company retaining $110,000 for its software suite that it received
and recorded as revenue during 2000.
As part of this settled dispute the Company, in a separate action, terminated
the employment of one of its officers and the Company was returned 1,250,000
shares of its common stock that it originally issued to this individual for
cancellation.
In April 2001 the Company sold 710,585 shares of its common stock for $250,000
to an investor consultant. The Company also issued 500,000 of its common
stock to this individual in exchange for a two year consulting agreement
valued at $175,950 which expired in April 2002.
Also, during April 2001 the Company issued 1,710,584 shares in satisfaction of
amounts owed to a consultant amounting to $262,500 and for future consulting
services valued at $337,500, or a total of $600,000.
During the fourth quarter of 2001 the Company issued 25,000 shares of its
common stock to an investor for $10,000. In addition, the Company issued to a
consultant 100,000 shares of its common stock for services rendered valued at
$17,585 and $20,000. The Company also issued to this consultant for $1,000 an
option to purchase 50,000 shares of its common stock at $0.40 per share
commencing December 21, 2001 and ending on December 21, 2004.
During the first quarter of 2002 the Company sold 797,500 shares of its Common
stock at $ .40 per share of its Common stock to three investors and received
net proceeds of $ 298,000.
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED AS OF JUNE 30,2002
(Continued)
9. PROPOSED MERGER
In September 15, 2001, the Company and Digitran Systems, Inc. (a publicly held
Delaware company together with its subsidiaries herein referred to as "DSI")
entered into an Agreement and Plan of Reorganization ("the Agreement"). The
Agreement describes a merger transaction whereby TG will become a wholly-owned
subsidiary of DSI which public company in turn will change its name to TGFIN
Holdings, Inc. ("TGFIN").
The Agreement is subject to shareholder approval of both companies and is also
subject to certain conditions, including, but not limited to, submission for
approval of proxy material to the Securities and Exchange Commission. The
Agreement calls for the shareholders of TG to receive 19,154,369 shares of the
reorganized TGFIN or one share of TGFIN for each share of TG share held after
giving effect to a reverse stock split of DSI shares and its change in name.
The result will be that the shareholders of TG will own approximately 93% of
the outstanding shares of the reorganized TGFIN.
The merger transaction will be accounted for as a purchase with TG being
deemed the acquiror for accounting and financial reporting purposes. However,
since the stockholders of TG will own approximately 93% of the outstanding
shares of the reorganized TGFIN no step up basis or goodwill will be recorded
by TG. This accounting treatment is in accordance with the view of Securities
and Exchange Commission staff members that the acquisition by a public shell
of the assets of a business from a private company should be accounted for at
historical cost and accounted for as a reverse merger.
10. SUBSEQUENT EVENT (UNAUDITED)
On September 12, 2002, the merger as described in note "9"successfully
consummated and the par value on the company's common stock was recapitalized
from $0.0001 to $0.01.In addition the company issued an additional 1,081,426
shares of common stock, 777,384 for $316,500 of convertible notes payable
which were received and converted during the third quarter and 304,042 in
connection with consulting services agreements.
TGFIN HOLDINGS, INC. PRO FORMA FINANCIAL INFORMATION:
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data for TGFIN
Holdings, Inc.("TGFIN") is based on the historical financial statements of
TradinGear.Com Incorporated ("TradinGear") and Digitran Systems Incorporated
(the "Company") which appear elsewhere in this Proxy Statement and has been
prepared on a pro forma basis to give effect to the merger under the purchase
method of accounting, as if the transaction had occurred at January 1, 2001
for each operating period presented.
The pro forma information was prepared based upon certain assumptions
described below and may not be indicative of results that actually would have
occurred had the merger occurred at the beginning of the last full fiscal year
presented or of results which may occur in the future. The unaudited pro forma
consolidated financial data and accompanying notes should be read in
conjunction with the annual and interim financial statements and notes thereto
of TradinGear and the Company appearing elsewhere herein and incorporated by
reference into this Proxy Statement .
The unaudited pro forma consolidated balance sheet as of June 30, 2002
presents the financial position of TGFIN as if the merger had occurred on that
date and was prepared utilizing the unaudited TradinGear balance sheet as of
June 30, 2002 and the Company's audited balance sheet as of September 12,
2002, the date the merger was consummated . The pro forma consolidated
statements of operations data presented assumes the merger occurred at the
beginning of the periods presented, it should not be assumed that TradinGear
and the Company would have achieved the unaudited pro forma consolidated
results if they had actually been combined during the periods shown.
The merger, which occurred on September 12, 2002, will be accounted for as a
purchase. The stockholders of TradinGear received one share of common stock of
TGFIN for each share of TradinGear common stock held and the stockholders of
the Company received one share of TGFIN for every twenty one shares of common
stock held, resulting in the current stockholders of TradinGear owning
approximately 93% of TGFIN common stock. The proposed plan of merger was
subject to a number of conditions including, but not limited to, regulatory
approvals and the receipt of stockholder approval from both the TradinGear and
the Company.
The unaudited pro forma consolidated results are based on estimates and
assumptions, which are preliminary and have been made solely for the purpose
of developing such pro forma information. The unaudited pro forma consolidated
results are not necessarily an indication of the results that would have been
achieved had such transactions been consummated as of the dates indicated or
that may be achieved in the future.
The unaudited pro forma consolidated results should be read in conjunction
with the historical consolidated financial statements and notes thereto set
forth herein, and other financial information pertaining to the Company and
TradinGear.
TGFIN HOLDINGS, INC
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
TG Digitran Pro Forma Pro Forma
Pro Forma Adjustments Results
June 30, September 12,
2002 2002
ASSETS ----------- ------------- ----------- -----------
Current Assets:
Cash and cash
equivalents $ 21,612 $ 1,180 - $ 22,792
Accounts receivable, net 235,552 - - 235,552
Prepaid expenses 24,332 - - 24,332
Deferred costs 59,899 - (59,899)(1) -
----------- ------------ ----------- -----------
Total Current Assets 341,395 1,180 (59,899) 282,676
Property and equipment,
net 141,171 - - 141,171
Deposits 101,621 - - 101,621
----------- ------------ ----------- -----------
Total Assets $ 584,187 $ 1,180 $ (59,899) $ 525,468
=========== ============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 146,130 $ 25,354 $ - $ 171,484
Accrued expenses 65,577 - - 65,577
Income tax payable - - - -
Deferred revenue - - - -
----------- ------------ ----------- -----------
Total Current
Liabilities $ 211,707 25,354 - 237,061
----------- ------------ ----------- -----------
Stockholders' Equity:
Preferred stock ($.01
par value) - 506 506
Common stock ($.001
par value) 1,963 263,497 (55,118)(2) 210,362
- - 20 (1) -
Additional paid-in
capital 3,349,527 10,553,791 (10,762,144)(2) 3,081,255
- - 79,980 (1)
- - (139,899)(1)
Less: Deferred
compensation relating
to stock issued for
services (245,375) - (245,375)
Retained earnings
(deficit) (2,733,635) (10,841,968) 10,817,262 (2) (2,758,341)
----------- ------------ ---------- ----------
Total Stockholders'
Equity (Deficit) 372,480 (24,174) (59,899) 288,407
----------- ------------ ---------- ----------
Total Liabilities
and Stockholders'
Equity $ 584,187 $ 1,180 $ (59,899) $ 525,468
=========== ============ ========== ==========
See accompanying notes to these pro forma financial statements.
TGFIN HOLDINGS, INC
PRO FORMA CONSOLIDATED STATEMENT OF OPERATION
(UNAUDITED)
For the Six Months Ended For the Year Ended
December 31, 2001
------------------------------ -------------------------------
TG Digitran Pro Forma TG Digitran Pro Forma
Results Results
--- -------- --------- --- -------- ---------
Revenues:
Software
license fees $ 235,655 $ - $ 235,655 $1,128,836 $ - $1,128,836
--------- -------- ---------- ---------- -------- ----------
Costs and Expense:
General and
administrative 267,383 31,429 267,383 601,098 - 601,098
Website costs - - - 4,508 - 4,508
Development cost 114,476 - 114,476 426,544 - 426,544
Consulting fees 60,680 - 60,680 496,530 - 496,530
Depreciation
expense 10,774 - 10,774 36,807 - 36,807
--------- -------- ---------- ---------- -------- ----------
Total Costs
and Expenses 453,313 - 453,313 1,565,487 - 1,565,487
--------- -------- ---------- ---------- -------- ----------
Net Loss from
Operations (217,658) (31,429) (217,658) (436,651) - (436,651)
--------- -------- ---------- ---------- -------- ----------
Other Revenue
(Expense)
Realized loss
on sale of
securities - - - - - -
Interest income - - - - - -
Miscellaneous
revenue - - - 11,737 - 11,737
Finance charges - - - (35,172) - (35,172)
---------- -------- ---------- ---------- -------- ----------
- - - (23,435) - (23,435)
---------- -------- ---------- ---------- -------- ----------
Net Loss from
continuing
operation (217,658) (31,429) (217,658) (460,086) - (460,086)
Income (Loss)
from discontinuing
operation - - - - 302,064 302,064
---------- -------- ---------- ---------- -------- ----------
Net Income (Loss)
before Provision
for Income Tax (217,658) (31,429) (217,658) (460,086) 302,064 (158,022)
---------- -------- ---------- ---------- -------- ----------
Provision for
Income Tax 1,649 - 1,649 7,675 - 7,675
---------- -------- ---------- ---------- -------- ----------
Net Income
(Loss) $ (219,307)$(31,429)$ (219,307) $ (467,761)$302,064 $ (165,697)
========== ======== ========== ========== ======== ==========
Income (Loss)
per Share:
Basic and diluted
Income (loss)
per share from:
continuing
operations $ - $ - $ (0.01) $ - $ - $ (0.02)
---------- -------- ---------- ---------- -------- ----------
discontinuing
operations - - 0.00 - - 0.01
---------- -------- ---------- ---------- -------- ----------
Total basic and
diluted income
(loss) per
share $ - $ - $ (0.01) $ - $ - $ (0.01)
---------- -------- ========== ---------- -------- ==========
Basic and diluted
common shares
outstanding - - 21,086,319 - - 21,086,319
========== ======== ========== ========== ======== ===========
See accompanying notes to these pro forma financial statements.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On October 31, 2001 TradinGear and the Company entered into an Agreement and
Plan of Merger. Under the terms of the Agreement, the shareholders of
TradinGear will receive one share of common stock of the Company for each
share of common stock held and the stockholders of the Company will receive
one share for each share of common stock held after a 1 for 21 reverse stock
split, resulting in the current stockholders of TradinGear owning
approximately 93% of common stock.
Pro Forma Adjustments
(1) To record charges of $ 139,899 to additional paid in capital for costs
incurred in connection with the merger consisting of the issuance of 200,000
shares (post revenue split) of the company's common stock to consultants
valued at $80,000 and to write-off deferred cost of merger of $ 59,899. The
issuance of the 200,000 shares of common stock was contingent upon the
completion of the merger.
(2) To record the merger of TradinGear and the Company , the issuance of
19,626,809 shares of common stock to the shareholders of TradinGear and to
adjust the company's common stock from $0.0001 to $ 0.01 resulting in total
issued outstanding common stock of approximate 21,086,319 and the elimination
of the Company's accumulated deficit as a result of the merger.