SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) August 8, 2001
--------------
IKON VENTURES, INC.
--------------------------------------------------
(Exact name of registrant as specified in Charter)
Nevada 000-29331 76-0270295
- ---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (IRS employer
of incorporation) file no.) identification no.)
1000 Woodbury Road, Suite 214, Woodbury, NY 11797
- ------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (516) 682-9700
--------------
Suite 305, Collier House, 163/169 Brompton Road, London SW3 1 PY, England
-------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Forward Looking Statements
This Form 8-K and other reports filed by Registrant from time to time
with the Securities and Exchange Commission (collectively the "Filings") contain
or may contain forward looking statements and information that are based upon
beliefs of, and information currently available to, Registrant's management as
well as estimates and assumptions made by Registrant's management. When used in
the filings the words "anticipate", "believe", "estimate", "expect", "future",
"intend", "plan" or the negative of these terms and similar expressions as they
relate to Registrant or Registrant's management identify forward looking
statements. Such statements reflect the current view of Registrant with respect
to future events and are subject to risks, uncertainties, assumptions and other
factors (including the risks contained in the section of this report entitled
"Risk Factors") relating to Registrant's industry, Registrant's operations and
results of operations and any businesses that may be acquired by Registrant.
Should one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may differ significantly
from those anticipated, believed, estimated, expected, intended or planned.
Although Registrant believes that the expectations reflected in the
forward looking statements are reasonable, Registrant cannot guarantee future
results, levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, Registrant
does not intend to update any of the forward-looking statements to conform these
statements to actual results. The following discussion should be read in
conjunction with Registrant's financial statements and the related notes that
appear elsewhere in this report and Registrant's quarterly report on Form 10-QSB
for the three months ended June 30, 2001, as filed with the Securities and
Exchange Commission (the "Commission").
Item 1. Changes in Control of Registrant.
Pursuant to an Agreement and Plan of Share Exchange, dated as of June
19, 2001, and as amended as of July 18, 2001 (the "Exchange Agreement"), by and
among Ikon Ventures, Inc., a Nevada corporation ("Ikon"), Sutton Online, Inc., a
Delaware corporation ("Sutton"), and the stockholders of Sutton (collectively,
the "Stockholders"), Ikon agreed to issue to the Stockholders 2.2222222 shares
of Ikon's common stock, par value $.001 per share (the "Ikon Common Stock"), in
exchange for each share of Sutton's common stock, par value $.025 per share (the
"Sutton Common Stock") issued and outstanding on the date of the consummation of
such exchange. The ratio of 2.2222222 shares of Ikon Common Stock for each share
of Sutton Common Stock is referred to herein as the "Exchange Ratio". The
closing of the exchange (the "Closing") occurred on August 8, 2001 (the "Closing
Date").
At the Closing, the Stockholders were issued an aggregate of 15,222,219
shares of Ikon Common Stock, which shares, after giving effect to certain other
transactions effected at or prior to the Closing, represented approximately 76%
of the total then issued and outstanding shares of Ikon Common Stock. Pursuant
to the Exchange Agreement, on the Closing Date, Kurt Schlapfer and Stephen
Gross, two of Ikon's three officers and directors, resigned, Ikon's remaining
director and officer, Ian Rice, resigned as an officer and Mr. Rice appointed
Jonathan D. Siegel, the Chief Executive Officer of Sutton ("Siegel"), and
Gregory C. Frank, the Chief Operating Officer of Sutton ("Frank"), as the Chief
Executive Officer and Chief Operating Officer, respectively, of Ikon. In
addition, subject to and effective upon compliance with Rule 14f-1 under the
Securities Exchange Act of 1934 (the "Act"), Mr. Rice appointed Siegel, Frank
and Richard C. Joyce as the new board of directors of Ikon and tendered his
resignation as a director.
The details of the transaction, including all information required by
Item 1 of this Current Report on Form 8-K (this "Report"), are set forth in
"Item 2. Acquisition or Disposition of Assets" below, the contents of which are
incorporated by reference herein.
Item 2. Acquisition or Disposition of Assets.
Overview of the Transaction
- ---------------------------
The information below is a summary description of the Exchange
Agreement and is qualified in its entirety by reference to the Exchange
Agreement and related documents that the Registrant has filed as exhibits to
this Report.
Pursuant to the Exchange Agreement, on the Closing Date Ikon issued an
aggregate of 15,222,219 shares of Ikon Common Stock to the Stockholders
(including parties who became stockholders of Sutton after the execution of the
Exchange Agreement as a result of the transactions described below, each of whom
executed a counterpart of the Exchange Agreement) and in exchange the
Stockholders conveyed to Ikon all of the issued and outstanding shares of Sutton
Common Stock, consisting of an aggregate of 6,850,000 shares. The Exchange Ratio
of Ikon Common Stock for Sutton Common Stock was determined arbitrarily by the
parties to the Exchange Agreement, and the parties did not assign any value to
the shares of Ikon Common Stock or the shares of Sutton Common Stock.
In connection with the Exchange Agreement, the following transactions
took place on or before the Closing Date:
- Ikon issued a convertible promissory note in the amount of
$100,000 to an accredited, non-affiliated investor. The
proceeds of such note were loaned to Sutton. On the Closing
Date, the note was converted into 25,000 shares of Ikon Common
Stock in accordance with the terms thereof.
- Frank entered into an amendment to his employment agreement
with a predecessor of Sutton and Global Capital Partners
Inc.("GCAP"), pursuant to which GCAP was removed as a party to
such agreement.
- Siegel entered into an amendment to his employment agreement
with GCAP and a subsidiary thereof pursuant to which the
obligations of such parties under the agreement were assumed
by Sutton, and such parties were released from their
obligations thereunder. In addition, such parties released
Siegel from his non-compete agreement with such parties.
2
- Ikon entered into a one year consulting agreement with each of
Sigma Limited S.A., a Swiss corporation for which Mr. Rice
acts as a consultant but is not an officer, director or
shareholder thereof, and Corporate Communications Network
Inc., a Nevada corporation owned by Steven Kerr ("CCN"). Each
of the consulting agreements provides for an annual fee of
$50,000, payable in substantially equal installments in
arrears. At Ikon's option, the annual fee may be paid in cash
or in shares of Ikon Common Stock, each such share to be
valued at the closing bid price per share of Ikon Common Stock
on the trading day immediately preceding each issuance.
- Each holder of a warrant to purchase shares of Sutton Common
Stock executed a written agreement, pursuant to which such
holder agreed that upon exercise of such warrant after the
Closing the holder would be entitled to receive shares of Ikon
Common Stock in lieu of shares of Sutton Common Stock
determined on the basis of the Exchange Ratio.
- Holders of Sutton promissory notes in the aggregate amount of
$600,000 converted their notes into an aggregate of 850,000
shares of Sutton Common Stock and warrants to purchase an
aggregate of 100,000 shares of Sutton Common Stock for $2.50
per share exercisable at any time until May 3, 2004. The
holders also terminated certain pledge agreements with GCAP
pursuant to which they held an aggregate of 1,000,000 shares
of Sutton Common Stock owned by GCAP and such shares of Sutton
Common Stock were returned to GCAP.
- GlobalNet Financial.com, Inc. ("GNet") and Sutton entered into
an Exchange Agreement pursuant to which GNet exchanged its
$525,000 note of Sutton for 888,888 shares of Sutton's Series
A Exchangeable Preferred Stock (the "Series A"). The Series A
is exchangeable at the option of GNet at any time and from
time to time into the following (collectively, the "Ikon
Exchangeable Securities"): 888,888 shares of Ikon Common Stock
(subject to adjustment under certain circumstances) and a
warrant to purchase 388,889 shares of Ikon Common Stock
exercisable at any time and from time to time until May 3,
2004, at $2.50 per share. The Series A are also exchangeable
in whole, at the option of Sutton, into the Ikon Exchangeable
Securities at any time after Ikon has raised an aggregate of
$1,500,000 in capital in addition to the $500,000 raised by
Ikon as contemplated under the Agreement. Holders of shares of
the Series A are not entitled to receive dividends, except
when and as declared by Sutton's board of directors. With
respect to rights on liquidation, winding up and dissolution,
the Series A ranks prior to any other series of preferred
stock that may be created by Sutton's board of directors, any
other equity securities of Sutton, including the Sutton Common
Stock and, without the prior consent of the holders of the
Series A (which may not be unreasonably withheld or delayed)
any debt securities of Sutton (other than trade creditors or
debt incurred in the ordinary course of business). Each share
of Series A entitles the holder thereof to one vote on all
matters submitted to a vote of the Sutton's stockholders,
3
voting together as one class except as otherwise may be
required by law. In addition, GNet delivered to Sutton 250,000
shares of GCAP's common stock that were pledged to GNet as
security for the repayment of the Sutton note. In
consideration therefor, GCAP granted GNet an option,
exercisable on and after the exchange of the Series A for the
Ikon Exchangeable Securities, to purchase 246,916 shares of
Ikon Common Stock owned by GCAP for the aggregate
consideration of $1.00.
- Sutton delivered to Donald J. Egan ("Egan") and Skyline Real
Estate Management Pension Plan ("Plan") an aggregate of
310,000 shares of common stock of GCAP owned by Sutton as
payment in full of promissory notes of Sutton in the aggregate
amount of $175,000.
- Siegel, Frank and the JB Sutton Group Inc. 401 (k) Profit
Sharing Plan dated 10/1/95 f/b/o Jonathan D. Siegel (the
"Siegel 401 (k)") sold to Egan an aggregate of 347, 490 shares
of GCAP common stock (89,912, 48,180 and 209,398 shares,
respectively) in exchange for cash in the aggregate amount of
$100,000 ($24,280, $14,169 and $61,551, respectively).
- GCAP sold to Siegel, the Siegel 401(k), Frank and Sigma an
aggregate of 2,684,000 shares of Sutton Common Stock (238,854,
432,136, 671,000 and 1,342,000 shares, respectively) and
warrants to purchase 500,000 shares of Sutton Common Stock at
an exercise price of $2.50 per share (44,498, 80,502, 125,000
and 250,000, respectively) for an aggregate purchase price of
$1,800,000, of which $200,000 was paid in cash and the balance
by the delivery of notes of Siegel, Frank and Sigma ($375,000,
$375,00 and $850,000, respectively). The notes bear interest
at 6% per annum, payable annually, and the principal is due
August 1, 2003. All of the purchased shares of Sutton Common
Stock were pledged to GCAP to secure repayment of the notes.
- Siegel, the Siegel 401(k), Frank and Sigma entered into an
agreement pursuant to which they agreed not to sell any of the
shares of Sutton Common Stock purchased from and pledged to
GCAP (and which were exchanged for an aggregate of 5,964,444
shares of Ikon Common Stock pursuant to the Agreement) without
the consent of all of the parties to the agreement, to apply
the proceeds of any sale of such shares or any prepayment of
the notes for which the shares serve as security as provided
in the pledge agreement with GCAP. In addition, the agreement
provides that Ikon will vote one-half of its shares with
Siegel so long as he serves as Chief Executive Officer of Ikon
and one-half of its shares with Frank so long as he serves as
Chief Operating Officer of Ikon.
- Ikon effected a private placement of 100,000 shares of Ikon
Common Stock at $4.00 per share to three accredited,
non-affiliated investors.
4
- Ikon issued 1,000,000 shares of Ikon Common Stock to each of
four individuals, Charles Buhlmann, Carol Codalonga,
Anne-Miriam Sacher and Catherine Claden, for consulting
services rendered to Ikon. None of such individuals are
affiliates of Ikon. Such issuances were effected under Ikon's
2001 Employee Stock Compensation Plan. Such plan has been
registered with the Commission on Form-S-8 and therefore the
shares are not subject to any restrictions on transferability
under applicable Federal securities laws.
- GCAP entered into an agreement with Douglas Kiggins and CCCN
pursuant to which an aggregate of 26,668 shares of Ikon Common
Stock were pledged to GCAP to secure GCAP's guaranty of
certain equipment leases entered into by Sutton.
- Ikon entered into a one year consulting agreement, dated
August 8, 2001, with Investor Relations Services, Inc.
("IRSI"), pursuant to which IRSI agreed to provide investor
relations services to Ikon.
- Ikon entered into a Payment Agreement, dated August 8, 2001,
with Summit Trading Limited ("STL"), pursuant to which STL
agreed to pay all of the fees and expenses of IRSI in exchange
for which Ikon issued to STL, an accredited, non-affiliated
party, 500,000 shares of Ikon Common Stock.
- Kurt Schlapfer and Stephen Gross resigned as officers and
directors of Ikon and Ikon's then remaining sole director, Ian
Rice, appointed Siegel and Frank as the Chief Executive
Officer and Chief Operating Officer, respectively, of Ikon.
- Subject to and effective upon compliance with Rule 14f-1 under
the Act, Mr. Rice appointed Siegel, Frank and Richard C. Joyce
as the new board of directors of Ikon and tendered his
resignation as a director.
All references above to shares of GCAP common stock do not give effect to the
recent four for one reverse split of GCAP's common stock.
Description of Ikon's Business
- ------------------------------
Ikon was formed in Nevada on May 31, 1997. It operated a Zeolite and
related chemical production facility in Mira, Italy, through its main subsidiary
Zeolite Mira S.r.l ("Zeolite Mira"). At the beginning of 1999 Zeolite Mira was
sold. Ikon was inactive until the acquisition of 100% of the issued and
outstanding shares of common stock of Sutton, a Delaware corporation, originally
formed as a limited liability company on April 22, 1999. The acquisition of all
the issued and outstanding shares of Sutton's common stock was completed on
August 8, 2001 the Share Exchange whereby Ikon acquired 6,850,000 shares of
Sutton's common stock in exchange for 15,222,219 of Ikon's common stock, all of
5
which are restricted regarding transferability. After giving effect to certain
other transactions effected in connection with the Share Exchange, the shares of
Ikon's common stock issued to the stockholders of Sutton represented
approximately 76% of the total issued and outstanding shares of Ikon common
stock immediately after the Share Exchange. As a result of the Share Exchange,
Ikon now carries on business through its wholly-owned subsidiary Sutton, which
maintains its business office at 1000 Woodbury Road, Suite 214, Woodbury, New
York 11797.
Description of Sutton's Business
- --------------------------------
Sutton is a direct access application service provider ("ASP") that
provides online trading solutions to individuals, broker dealers, and financial
institutions worldwide. Sutton's solutions currently enable users to trade on
the New York Stock Exchange ("NYSE"), American Stock Exchange ("AMEX") and
Nasdaq. In Spring 2001, Sutton began marketing solutions that will enable users
to trade in multiple global markets and it expects that it will realize its
first sale of such solutions during the fourth quarter of 2001.
Products
--------
Sutton's principal products consist of advanced electronic trading
systems, order management and routing software applications. These products can
be utilized to enable traders to execute and manage large volumes of
transactions at high speed with accuracy, reliability and security.
Sutton's trading systems and routing software are capable of routing
orders to multiple markets and electronic communication networks ("ECNs") via a
single user-friendly interface. By connecting Sutton's platform to various third
parties, users can send orders to purchase or sell securities through Sutton's
brokerage partners in a designated market.
GlobalDAT (TM) is Sutton's proprietary direct access software platform
in a production environment. Sutton believes that this product is the first
global direct access trading platform geared toward the end user, i.e., the
actual purchaser or seller of securities. It is capable of connecting major
European and American stock exchanges and ECNs through one user interface for
share dealing. Its open architecture and its compatibility with the most
commonly used messaging protocol (know as a "FIX") provides the ability to add
markets and exchanges on demand. Each user can have the ability to: (i) view
level I and level II price quotes, order status, profit and loss and cash-flow;
(ii) route orders via market makers and direct connections to ECNs and
exchanges; and (iii) benefit from dynamic charting and account management, all
in real-time utilizing a program written in the user's native language.
Sutton is a distributor of SONIC 2000(TM), a direct access software
platform that provides users with stock price quotations from the NYSE, AMEX,
and Nasdaq, combined with instant trade routing to market makers and ECNs.
Direct access allows the individual trader to electronically route orders to the
financial markets through Sutton's servers. The software communicates directly
to market makers, stock exchanges or other individual traders via ECNs. By
eliminating a third party, the user can avoid interim price markups and
confirmation delays.
6
Business Divisions
------------------
Historically Sutton has operated through the following four divisions
which it expects to continue to operate:
1. Retail Online Trading
2. Sutton Online Trading Solutions
3. Sutton Data Services
4. Sutton Online Europe, N.V.
Retail Online Trading
---------------------
In order to execute transactions, broker dealers must be registered
with the National Association of Securities Dealers ("NASD") and must be members
of the Securities Investor Protection Corporation ("SIPC"). Sutton is not
registered with the NASD and is not a member of SIPC. However, Sutton has a
contractual relationship, which expires in March 2002 (and at Sutton's option
and upon the payment of $20,000, may be extended for an additional six months),
with Global Capital Securities Corporation ("Global Capital"), a registered U.S.
broker dealer and a member of the NASD. As a result of such relationship, Sutton
is deemed a designated Office of Supervisory Jurisdiction of Global Capital. All
of Sutton's retail online transactions are executed by Global Capital, and all
of such transactions are cleared through Penson Financial Services ("Penson"), a
division of Service Asset Management Company, located in Dallas, Texas. Penson
is a member of the NASD and the SIPC.
Sutton Online Trading Solutions
-------------------------------
Sutton provides its application services through this division by
offering turnkey online trading solutions to domestic and foreign financial
institutions. Utilizing complete front-end software, trade routing and
back-office management applications, Sutton has become a resource for small,
medium and large brokerage firms seeking an easy and cost effective entree to
the direct access trading industry. Sutton offers the user state-of-the-art
direct access trading systems, brokerage and clearing arrangements, and other
services, including website design and hosting and customer service to allow
both domestic and foreign brokerage firms to offer online trading to their
clients. These services enable Sutton's customers to focus on advertising and
marketing, while utilizing Sutton's infrastructure and knowledge. As a result,
Sutton has become a worldwide resource for turnkey trading solutions. For
example, Sutton has customers who utilize its infrastructure ("Service Bureau
Customers") in Bahrain, Russia, Czech Republic, Belgium, Spain, Peru, Bulgaria,
Brazil and the United States. Sutton has received Service Bureau Status from
Nasdaq and two ECNs and expects that during the next 12 months it will receive
such status from additional exchanges and ECNs.
7
Sutton Data Services
--------------------
Sutton operates its data service division through Sutton Data Services,
an online trading software developer in which Sutton maintains a majority
interest. This division was established to develop and support GlobalDAT and to
design and maintain software systems for third parties utilizing the know-how
amassed through its work on GlobalDAT. Sutton plans to have this division take
on projects in the future on a for hire basis.
Sutton Online Europe, N.V.
--------------------------
Sutton Online Europe, N.V. is a Netherlands wholly owned subsidiary of
Sutton that Sutton expects will serve as the vehicle through which it will
provide the European community with direct access trading to the Pan-European
markets, as well as the American markets.
Competitive Position
- --------------------
The online trading industry is highly competitive and consists of
several large and medium sized companies, as well as numerous small competitors,
including Belzberg Technologies Inc., ITG, Inc., NYFIX, Inc., 724 Solutions Inc.
and Ariba, Inc. Many of these competitors have financial, marketing and other
resources substantially greater than those of Sutton, as well as a substantially
longer history of operations than Sutton. Competition in the industry is
generally based upon price, reliability and compatibility with other financial
applications. Sutton believes that its ability to compete depends on elements
both within and outside its control, including the success and timing of new
product developments by Sutton and its competitors, product performance and
price, distribution and customer service. Sutton believes its competitive
position is based primarily on the versatility of its GlobalDAT(TM) components
and its FIX 4.1 and 4.2 compatibility with many front-end and back-end products.
As a result, Sutton's software applications are able to interface with a user's
existing systems and this allows Sutton's customers to choose between various
programs to route transactions. It also permits Sutton and its customers to save
on infrastructure costs by utilizing existing services, while creating
transactional relationships due to Sutton's flexibility and value added
services. Sutton also believes that it is the first company to market a global
direct access trading platform geared toward the end user, as well as stock
exchanges, broker dealers and financial institutions.
Market Potential
- ----------------
Forrester Research, a leading independent research company that
analyzes and forecasts technological advancements and their impact upon
business, consumers and society, estimated that the number of online trading
accounts in Europe was 4,400,000 as of year end 2000. Forrester Research also
estimated that the number of online accounts in Europe is expected to grow
significantly to 16,800,000 by year end 2003. Sutton believes the market is
increasing based upon the wide expansion of cross-border trading, the need for
financial ASP services, and the unprecedented growth of the online trading
industry as a whole. Sutton's believes that it will be able to benefit from such
projected growth because it software platform is capable of tying together
multiple global markets through a single user-friendly interface.
8
Sutton's Management Team
- ------------------------
Jonathan D. Siegel ("Siegel"), 41, has served as the Chairman and Chief
Executive Officer of Sutton since its inception. From May 1995 until devoting
his full time efforts to Sutton, in January 2001, he also served as the Chairman
and Chief Executive Officer of Global Capital Markets, LLC, a full service
brokerage firm (acquired in November 1999 by Global Capital Partners, Inc.
("GCAP"), a Nasdaq listed holding Company). In March 1990 Siegel joined in the
formation of Prime Charter Ltd., where he served as Managing Director until May
1995. Siegel earned a B.S.E.E. degree from the University of Pennsylvania and an
M.S.C.E. degree from Syracuse University.
In connection with the Share Exchange, Siegel entered into an amendment
to his employment agreement with GCAP and a subsidiary thereof pursuant to which
the obligations of such parties under the agreement were assumed by Sutton, and
such parties were released from their obligations thereunder. In addition, such
parties released Siegel from his non-compete agreement with such parties. The
Agreement, as amended terminates on November 21, 2001 and provides for an annual
base salary of $240,000 and participation in a bonus pool.
Gregory C. Frank ("Frank"), 31, has served as the President and a
director of Sutton since its inception. From March 1998 until he founded Sutton,
Frank served as the Chief Operating Officer of Livetrade.com. Prior to that,
from December 1997 to March 1998, he served as the Chief Operating Officer of
Talon Trading, an on-site trading firm in Garden City, New York. Frank earned an
A.S. degree in Sales and a B.S. in Direct Marketing from Johnson & Wales
University.
In connection with the Share Exchange, Frank entered into an amendment
to his employment agreement with a predecessor of Sutton and "GCAP", pursuant to
which GCAP was removed as a party to such agreement. The agreement, as amended,
terminates on November 21, 2001 and provides for an annual base salary of
$120,000 and participation in a bonus pool.
Richard W. Joyce ("Joyce"), 45 joined Sutton's board of directors in
May 2000. Joyce is a London-based senior vice president of worldwide sales at
3Com Corp., a broad-based global supplier of networking systems and services.
Previously, he was president of 3Com Europe and Asia/Pacific Rim. Joyce joined
3Com UK in 1987 as manager for the workgroup systems division, became president
of 3Com Europe in 1990 and assumed responsibility for Asia/Pacific Rim sales in
1993. Before joining 3Com, Mr. Joyce held a variety of management positions at
Cambridge International Trading Corp., Esso Petroleum and RRL Electronics.
Radek Hulan ("Hulan"), 29, has served as the Chief Technology Officer
of Sutton since its inception. Hulan is the Chief Executive Officer and founder
of Sutton Data Services and the Chief Executive Officer of Total Solutions, a
market leader in portfolio management and financial accounting systems for the
Prague Stock Exchange. He has also served in management positions at Burzovni
Software and Atlantik Financial trhy, S.R.O. Hulan has a Faculty of Economics
degree from Masaryk University, Czech Republic and has computer programming
skills for Oracle 7,x, 8.x, Paradox, Pascal, C++, SQL, and FoxPro.
9
Security Ownership of Certain Beneficial Owners and Management.
- ---------------------------------------------------------------
The following table sets forth information available to the Company, as
of August 8, 2001 with respect to the beneficial ownership of the outstanding
shares of the Company's Common Stock by (i) any holder of more than five percent
(5%) of the outstanding shares; (ii) the Company's officers and directors; and
(iii) the Company's officers and directors as a group:
Name and Address of Shares of Percentage (%) of
Beneficial Owner (1) Common Stock Owned Common Stock
- -------------------- ------------------ ------------
Jonathan D. Siegel (2) 4,641,991 (5) (11) 21.30 (5) (11)
Gregory C. Frank (2) 4,641,991 (6) 21.30 (6)
Radek Hulan (2) 1,300,000 (9) 6.31 (9)
Richard Joyce (2) 155,555 (10) 0.77 (10)
The J.B. Sutton Group Inc. 401(k) Profit
Sharing Plan, dated 10/1/95
f/b/o Jonathan D. Siegel ("Siegel 401(k)") (2) 1,139,195 (7) (13) 5.60 (7) (13)
Sigma Limited S.A. ("Sigma")
(3) (4) 3,537,778 (8) 17.08 (8)
All officers and directors
as a group (four (4) persons) (2) 10,739,537 (12) 49.67 (12)
Global Capital Partners, Inc. (14) 2,222,222 (15) 10.45 (15)
Tiburon Asset Management LLC (16) 1,029,629 5.11
(1) Beneficial ownership as reported in the table above has been determined
in accordance with Instruction (1) to Item 403 (b) of Regulation S-B of
the Act.
(2) The business address of each of the stockholders noted above is 1000
Woodbury Road, Suite 214, Woodbury, NY 11797.
(3) The business address of Sigma is Rue-Fritz-Courvoisier 40, 2300 La
Chaux-de-Fonds, Switzerland.
10
(4) Sigma is a company organized under the laws of Switzerland owned by a
discretionary trust, whose beneficiaries include members of Ian Rice's
family. Mr. Rice is neither a trustee nor a beneficiary of the trust
and disclaims any beneficial ownership of Sigma. Prior to the Share
Exchange, Mr. Rice was the Company's Chairman of the board of
directors.
(5) Includes 1,631,617 shares of common stock issuable upon the exercise of
outstanding warrants; and 960,302 shares held in the name of the Siegel
401(k).
(6) Includes 1,631,620 shares of common stock issuable upon the exercise of
outstanding warrants.
(7) Includes 178,893 shares of common stock issuable upon the exercise of
outstanding warrants.
(8) Includes 555,556 shares of common stock issuable upon the exercise of
outstanding warrants.
(9) Includes 433,333 shares of common stock issuable upon the exercise of
outstanding warrants.
(10) Includes 44,444 shares of common stock issuable upon the exercise of
outstanding warrants.
(11) Does not include 1,491,111 shares of common stock under the control of
the stockholders noted above pursuant to a Voting Rights Agreement
dated as of August 1, 2001, among Sigma, the Siegel 401(k) and the
stockholders noted above.
(12) Includes 3,741,014 shares of common stock issuable upon the exercise of
outstanding warrants.
(13) Does not include 2,982,222 of common stock under the control of the
stockholders noted above pursuant to the Voting Rights Agreement
described in note 11 above.
(14) The business address of the stockholder noted above is 6000 Fairview
Road, Suite 1420, Charlotte, NC 28210.
(15) Includes 1,111,111 shares of common stock issuable upon the exercise of
outstanding warrants.
(16) The business address of the stockholder noted above is 110 William
Street, New York, NY 10038.
Risk Factors.
- -------------
Prospective investors should carefully consider the following risks, in
addition to the other information contained in this Report, concerning Ikon and
the business of Sutton, before making any investment in Ikon's securities.
SUTTON HAS A HISTORY OF LOSSES AND EXPECTS LOSSES IN THE FUTURE; IF SUTTON DOES
NOT ACHIEVE AND SUSTAIN PROFITABILITY, ITS BUSINESS WILL SUFFER.
11
Sutton incurred a net loss of approximately $1,789,230 in the year
ended March 31, 2001 and had an accumulated deficit of $1,821,676 at such date.
The revenues generated by Sutton to date have been insufficient to support its
operations. For working capital, Sutton has relied primarily on debt and equity
financings. The Sutton business may not enable the Company to achieve its profit
or revenue goals, and its losses may continue to grow in the future. As a
result, Ikon may never achieve or sustain profitability on a quarterly or annual
basis.
SUTTON WILL REQUIRE ADDITIONAL FINANCING; IF THE NECESSARY FINANCING CANNOT BE
OBTAINED OUR BUSINESS WILL SUFFER.
Sutton's operations, including the development and marketing of the
GlobalDat trading platform software, will require substantial up-front
expenditures. As of August 08, 2001, Ikon, had liquid assets of approximately
$300,000. Ikon believes that such assets, together with cash generated from
operations, will be sufficient to fund Sutton's operations for the next 60 days.
Accordingly, additional financing will be required to implement Sutton's
business plan. Neither Ikon nor Sutton have any commitments from third parties
for any future funding, and there can be no assurance that financing will be
available on acceptable terms, if at all. If Ikon is not able to obtain
necessary financing, it will be required to curtail its activities or cease
operations.
SUTTON'S REVENUES DEPEND PRIMARILY ON AGREEMENTS WITH ITS CUSTOMERS; IF THESE
ARRANGEMENTS ARE TERMINATED OR SUTTON FAILS TO GENERATE NEW AGREEMENTS AND/OR
NEW CUSTOMERS, OUR FUTURE OPERATING RESULTS MAY SUFFER.
All of Sutton's customer agreements have a one year term and
automatically renew for additional one year terms, unless sooner terminated in
writing by either party no later than sixty (60) days prior to the current
expiration date. If these agreements are not renewed or replaced with agreements
containing similar or better terms, Ikon's revenues would decrease.
SUTTON'S DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL AMOUNT OF
ITS SALES AS WELL AS OTHER FACTORS COULD LEAD TO FLUCTUATIONS IN OPERATING
RESULTS.
Sutton's business depends on sales of its products to a limited number
of customers, which may cause fluctuations in operating results. Sutton does not
have long-term contracts with any of its current customers. The top five of its
customers accounted for approximately 17% of Sutton's total revenues during the
year ended March 31, 2001. Any of those customers could stop using Sutton's
products in the future. As a result, a customer that generates substantial
revenue in one period may not be a source of revenue in subsequent periods. The
loss of a significant customer would have a material and adverse effect on our
revenues and results of operations.
Ikon may also experience significant fluctuations in quarterly
operating results due to a variety of other factors, such as technical
difficulties, system downtime, Internet brownouts, interruptions, delays or
capacity problems experienced in the Internet or with telephone communications.
12
SUTTON MUST CONTINUE TO OVERCOME SIGNIFICANT AND INCREASING COMPETITION IN ORDER
TO CONTINUE ITS GROWTH AND PRODUCTIVITY.
The market for global Internet trading solutions, intelligent order
routing systems and online trading solutions is intensely competitive,
fragmented and rapidly changing. Sutton faces competition from Belzberg
Technologies Inc., ITG, Inc., NYFIX, Inc., 724 Solutions Inc., and Ariba, Inc,
among others. The introduction of products embodying new technology and the
emergence of new industry standards can render existing products obsolete and
unmarketable and can exert price pressure on existing products. Sutton's ability
to anticipate changes in technology and industry standards and to successfully
develop and introduce new and enhanced products, as well as additional
applications for existing products, in each case on a timely basis, will be a
critical factor in its ability to grow and to remain competitive. Should Sutton
be unable, for technological or other reasons, to develop products that are
competitive in technology and price and are responsive to customer needs, its
business will be materially adversely affected.
THE LOSS OF OUR KEY MANAGEMENT PERSONNEL OR ITS FAILURE TO ATTRACT AND RETAIN
ADDITIONAL PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.
Currently we employ twelve (12) employees. If we fail to retain the
necessary personnel, our business and ability to obtain new customers, develop
new products and provide acceptable levels of customer service could suffer. The
success of our business is heavily dependent on the leadership of our key
management personnel, including Siegel and Frank.
Ikon's future success also depends on our ability to attract and retain
highly qualified personnel. The competition for qualified personnel in the
computer software and Internet markets is intense and we may be unable to
attract or retain highly qualified personnel in the future. In addition, due to
intense competition for qualified employees, it may be necessary for Ikon to
increase the level of compensation paid to existing and new employees to the
degree that Ikon's operating expenses could be materially increased.
SUTTON MAY BE UNABLE TO ADEQUATELY PROTECT ITS PROPRIETARY RIGHTS; FAILURE TO
PROTECT THESE RIGHTS MAY SIGNIFICANTLY IMPAIR OUR COMPETITIVE POSITION.
Sutton's success depends to a significant extent on its ability to
protect its proprietary software and other proprietary rights from copying,
infringement or use by unauthorized parties. To protect its proprietary rights,
Sutton will rely primarily on a combination of patent, copyright, trade secret
and trademark laws, confidentiality agreements with employees and third parties,
and protective contractual provisions such as those contained in agreements with
consultants, vendors and customers, although Sutton has not signed these types
of agreements in every case. Despite these efforts to protect our proprietary
rights, unauthorized parties may copy aspects of Sutton's products and obtain
and use information that Sutton regards as proprietary. Other parties may breach
confidentiality agreements and other protective contracts Sutton has entered
into. We may not become aware of, or have adequate remedies in the event of,
these types of breaches or unauthorized activities.
13
SUTTON'S SOFTWARE PRODUCTS CONTAIN ENCRYPTION TECHNOLOGY, WHOSE EXPORT IS
RESTRICTED BY LAW, WHICH MAY SLOW ITS GROWTH OR RESULT IN SIGNIFICANT COSTS.
The U.S. government generally limits the export of encryption
technology, which Sutton's products incorporate. A variety of cryptographic
products generally require export approvals from certain U.S. government
agencies. If any export approval that we receive is revoked or modified, if any
of our software is unlawfully exported or if the U.S. government adopts new
legislation or regulations restricting export of software and encryption
technology, Sutton may not be able to distribute its products to potential
customers, which will cause a decline in sales. Sutton may need to incur
significant costs and divert resources to develop replacement technologies or
may need to adopt inferior substitute technologies to satisfy these export
restrictions. These replacement or substitute technologies may not be the
preferred security technologies of our customers, in which case Sutton's
business may not grow. In addition, Sutton may suffer similar consequences if
the laws of any other country limit the ability of third parties to sell
encryption technologies to Sutton.
SUTTON'S REVENUES COULD DECREASE IF THERE IS A DECLINE IN SECURITIES TRADING
ACTIVITY.
Because most of Sutton's current customers are financial institutions
or securities brokerage firms and because Sutton relies heavily on
transaction-based billing in its license agreements, revenues will be sensitive
to changes in the amount of securities trading activity both via the Internet
and otherwise.
A decline in Securities trading activity may result from:
- loss of confidence in the reliability or security of on-line
trading systems;
- changes in government regulation of the securities industry or
on-line trading activities; or
- a downturn in the stock market.
THE MARKET FOR SUTTON'S PRODUCTS AND SERVICES MAY NOT GROW AS QUICKLY AS
ANTICIPATED, WHICH WOULD CAUSE REVENUES TO FALL BELOW EXPECTATIONS.
The market for Sutton's products and services is relatively new and
evolving. In the past Sutton earned a substantial portion of its revenue from
service fees associated with its Service Bureau and Retail Division. We expect
to earn substantially all of our revenue in the foreseeable future from fees
relating to these products and services. Future financial performance will
depend on continued growth in the number of organizations demanding software and
services for online transaction services. Many of our potential customers have
made significant investments in internally developed systems and would incur
significant costs in switching to third-party products, which may substantially
inhibit the growth of the market for enterprise infrastructure software. If this
market fails to grow, or grows more slowly than expected, Sutton's sales will be
adversely affected.
14
Sutton relies exclusively on Penson to process and clear orders placed
through Sutton's Online Trading Solutions division and any failure by Penson
could damage Sutton's reputation and adversely affect its business.
As a member of the SIPC, through Global Capital Securities, Inc., all
of Sutton's accounts are provided with $500,000 in liability insurance coverage
per account (with a $100,000 cash limit). In addition, for added protection,
Penson provides additional insurance on each account in the amount of
$24,500,000 per account (with a $900,000 cash limit) in additional supplemental
securities protection. This insurance is obtained through the National Union
Fire Insurance Company of Pittsburgh, PA (a member company of American
International Group). These policies insure each account against liability in
the event of the brokerage or clearing firm failure. However, there is no
guaranty that the existing insurance coverage is sufficient to insure Sutton
against all liability for potential claims or damages it may incur as a result
of its customer's trades that are not cleared in an accurate and timely manner.
PURCHASER'S OF IKON'S SECURITIES MAY BE ADVERSELY EFFECTED BY THE PENNY STOCK
REGULATIONS.
Ikon's common stock is currently traded on the OTC Electronic Bulletin
Board. Unless and until Ikon's common stock is quoted on the Nasdaq System or on
a national securities exchange and if and so long as the common stock trades
below $5.00 par share, the common stock would come within the definition of a
"penny stock" as defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and be covered by Rule 15g-9 of the Exchange Act. That rule
imposes additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by Rule 15g-9, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to sale.
In addition, prior to effecting any penny stock transaction, the broker-dealer
must provide a customer with a document that discloses the risks of investing in
the penny stock market, including a description of the broker-dealer's duties to
the customer and the rights and remedies available to the customer, explain the
nature of "bid" and "ask" prices in the penny stock market, supply a toll-free
telephone number to provide information on disciplinary histories and describe
all significant terms used in such disclosure document. Consequently, Rule
15g-9, if it becomes applicable, would affect the willingness of broker-dealers
to sell the Ikon's securities and therefore would affect the ability of
purchaser of the Ikon's securities to sell their securities in the secondary
market.
THE AVAILABILITY OF SHARES ELIGIBLE FOR FUTURE SALE MAY HAVE AN ADVERSE EFFECT
ON THE MARKET PRICE OF IKON'S SECURITIES.
Sales of substantial amounts of Ikon's common stock in the public
market or the prospect of such sales could materially and adversely effect the
market price of Ikon's common stock. Prior to the completion of the share
exchange between Ikon and the stockholders of Sutton and the related
15
transactions, there were 310,913 shares of Ikon common stock outstanding. Of
such amount, approximately 130,913 shares were immediately eligible for sale in
the public market without restriction or were restricted securities eligible for
sale in the public market pursuant to Rule 144 promulgated under the Securities
Act of 1933, as amended. Upon completion of the share exchange and related
transactions, an additional 4,000,000 shares of Ikon common stock are eligible
for sale in the public market without restriction.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year including affiliates of the Company, wold be entitled to sell in
brokers' transactions or to market makers within any three-month period a number
of Restricted Shares that does not exceed the greater of 1% of the then
outstanding Company's Common Stock or the average weekly trading volume in the
principal market on which such securities trade during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. A person who is not an affiliate of the Company at any time during the
90 days preceding a sale, and who has beneficially owned Restricted Shares for
at least two years is currently entitled to sell such Restricted Shares without
any of the restrictions above-mentioned. However, Restricted Shares held by
affiliates must continue, after the two-year holding period to be sold in a
brokers' transaction or to market makers subject to the volume, manner of sale,
notice and availability of public information limitations described above. The
above is a summary of Rule 144 and is not intended to be a complete description.
THE LIMITED PUBLIC MARKET FOR IKON'S SECURITIES MAY RESULT IN ILLIQUIDITY FOR
PURCHASER'S OF IKON'S SECURITIES AND VOLATILITY IN THE PRICE OF SUCH SECURITIES.
Ikon's outstanding shares of common stock are currently traded to a
very limited extent on the OTC Bulletin Board. Factors such as announcements by
Ikon or its competitors concerning technological innovations, new products or
procedures, proposed government regulations and developments, interruptions in
Internet service or disputes relating to patents or proprietary rights may have
a significant effect on the market price of Ikon's securities. Changes in the
market price of Ikon's common stock may bear no relation to Ikon's actual
operational or financial results. There is no assurance than an active trading
market for Ikon's common stock will be established or maintained. As a result,
purchaser's of Ikon's securities could find it difficult to sell their
securities.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Sutton Online, Inc.
(b) Pro Forma Financial Information.
(c) Exhibits.
Listed below are all exhibits to this Current Report on Form 8-K.
16
Exhibit
Number Description
- ------ -----------
10.1 Agreement and Plan of Share Exchange, dated as of June 19,
2001, by and among Ikon Ventures, Inc., Sutton Online, Inc.
and certain stockholders of Sutton Online, Inc. (omitting all
schedules and exhibits.*
10.2 Amendment to Agreement and Plan of Share Exchange, dated as of
July 18, 2001, by and among Ikon Ventures, Inc., Sutton
Online, Inc. and certain stockholders of Sutton Online, Inc.
10.3 Employment Agreement, dated November 22, 1999, by and among
Eastbrokers International Incorporated, Sutton Online, LLC and
Gregory C. Frank.
10.4 Amendment to Employment Agreement, dated as of August 1, 2001,
by and among Global Capital Partners Inc. (f/k/a Eastbrokers
International Incorporated), Sutton Online, Inc. and Gregory
C. Frank.
10.5 Amendment to Employment Agreement, dated as of August 8, 2001,
by and between Sutton Online, Inc. and Gregory C. Frank.
10.6 Employment Agreement, dated November 22,1999, by and among
Eastbrokers International Incorporated, JB Sutton Group, LLC
and Jonathan D. Siegel.
10.7 Amendment to Employment Agreement, dated as of August 1, 2001,
by and among Global Capital Partners, Inc., Global Capital
Securities Corp., (successor to JB Sutton Group, LLC), Sutton
Online, Inc. and Jonathan D. Siegel.
10.8 Amendment to Employment Agreement, dated as of August 8, 2001,
by and among Sutton Online, Inc. and Jonathan D. Siegel.
10.9 Consulting Agreement, dated as of August 1, 2001, between Ikon
Ventures, Inc. and Sigma Limited, S.A.
10.10 Consulting Agreement, dated as of August1, 2001, between Ikon
Ventures, Inc. and Corporate Communications Network Inc.
10.11 Exchange Agreement, dated as of July 31, 2001, by and among
Sutton Online, Inc. and GlobalNet Financial.com, Inc.
(including form of Certificate of Designation of Series A
Preferred Exchangeable Stock of Sutton Online, Inc.).
17
10.12 Consulting Agreement, dated as of August 8, 2001, by and
between Ikon Ventures, Inc. and Investor Relations Services,
Inc.
10.13 Payment Agreement, dated as of August 8, 2001, by and between
Ikon ventures, Inc. and Summit Trading Limited.
10.14 Lease, dated May 14,2001, by and between The Tilles Investment
Company and Sutton Online, Inc.
10.15 Agreement, dated as of March 23, 2001, by and among Global
Capital Services Corporation and Sutton Online, Inc.
10.16 Extension Agreement, dated as of august 1, 2001, by and among
Global Capital Securities Corporation and Sutton Online, Inc.
- ---------------
* The Registrant shall furnish all omitted and schedules and exhibits to
the Agreement and Plan of share Exchange, dated as of June 19, 2001, by
and among Ikon Ventures, Inc., Sutton Online, Inc. and the stockholders
thereof, upon request of the Securities and Exchange Commission.
ITEM 8. CHANGE IN FISCAL YEAR.
Prior to the acquisition of all of the outstanding common stock of
Sutton Online, Inc. ("Sutton"), Ikon's fiscal year ended on December 31. The
fiscal year of Sutton ends on March 31. The acquisition of Sutton is considered
a reverse acquisition and accounted for under the purchase method of accounting.
Under reverse acquisition accounting, Sutton is considered the acquiror for
accounting and financial reporting purposes. Accordingly, future financials
statements of Ikon will reflect a March 31 fiscal year end.
18
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.
IKON VENTURES, INC.
By: /s/ JONATHAN D. SIEGEL
------------------------------
Name: Jonathan D. Siegel
Title: Chief Executive Officer
Dated: August 22, 2001
19
SUTTON ONLINE, INC. AND SUBSIDIARY
----------------------------------
(formerly Sutton Online, LLC)
-----------------------------
FINANCIAL STATEMENTS
--------------------
YEAR ENDED MARCH 31, 2001 AND
-----------------------------
THE PERIOD FROM INCEPTION
-------------------------
(APRIL 22, 1999) TO MARCH 31, 2000
----------------------------------
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
TABLE OF CONTENTS
=================
Page
----
Independent Auditors' Report 2
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Changes in Shareholders' (Members') Equity 6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-15
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Sutton Online, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Sutton Online,
Inc. (formerly Sutton Online, LLC) and Subsidiary as of March 31, 2001 and 2000,
and the related consolidated statements of operations, comprehensive income,
changes in shareholders' (members') equity, and cash flows for the year ended
March 31, 2001 and the period from inception (April 22, 1999) to March 31, 2000.
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 used 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sutton Online, Inc.
(formerly Sutton Online, LLC) and Subsidiary as of March 31, 2001 and 2000, and
the results of their operations and their cash flows for the year ended March
31, 2001 and the period from inception (April 22, 1999) to March 31, 2000, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations and has a
working capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1.
SPICER, JEFFRIES & CO.
Denver, Colorado
May 31, 2001
2
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
CONSOLIDATED BALANCE SHEETS
===========================
March 31,
--------------------------
ASSETS 2001 2000
------ ----------- -----------
CURRENT ASSETS:
Cash $ 207,879 $ 123,905
Receivables:
Trade, net 3,644 14,146
Employee advances 27,450 --
Affiliated company (Note 3) 101,759 207,385
Other 90,754 20,954
Prepaid expenses 160,208 --
----------- -----------
Total current assets 591,694 366,390
----------- -----------
PROPERTY AND EQUIPMENT, at cost (Note 1):
Computers 141,118 158,430
Equipment 667,830 --
Software 1,321,219 --
Furniture and fixtures 77,287 22,730
Vehicles 70,064 --
Leasehold Improvements 40,850 22,387
----------- -----------
2,318,368 203,547
Less: accumulated depreciation and amortization (124,138) (22,508)
----------- -----------
2,194,230 181,039
----------- -----------
OTHER ASSETS:
Investments (Note 1) 367,196 --
Goodwill, net of amortization of $1,070 14,973 --
Other, net 6,181 --
----------- -----------
388,350 --
----------- -----------
$ 3,174,274 $ 547,429
=========== ===========
LIABILITIES AND SHAREHOLDERS' (MEMBERS') EQUITY
-----------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,517,262 $ 252,056
Capital lease obligation (Note 8) 66,490 9,470
Notes payable (Note 4) 1,000,000 --
Interest payable 36,639 --
Other 10,607 --
----------- -----------
Total current liabilities 2,630,998 261,526
----------- -----------
OTHER LIABILITIES:
Capital lease obligation (Note 8) 78,953 12,361
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' (MEMBERS') EQUITY (Note 5):
Common stock, $.025 par value, 20,000,000 shares authorized,
6,000,000 and 0 shares issued and outstanding, respectively 150,000 --
Additional paid-in capital 2,278,488 --
Accumulated other comprehensive income (142,489) --
Deficit (1,821,676) --
Members' equity -- 273,542
----------- -----------
464,323 273,542
----------- -----------
$ 3,174,274 $ 547,429
=========== ===========
3
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
CONSOLIDATED STATEMENTS OF OPERATIONS
=====================================
Period from inception
Year ended (April 22, 1999)
March 31, to March 31,
2001 2000
----------- -----------
REVENUE:
Transaction fees $ 2,214,050 $ 1,007,607
Data fees 353,169 54,740
Other 30,888 52,512
----------- -----------
Total Revenue 2,598,107 1,114,859
----------- -----------
EXPENSES:
Clearing costs 363,174 138,142
Trading costs 337,564 73,444
User fees 239,761 81,128
Service fees (Note 5) 526,105 --
Selling expenses 155,680 124,594
Salaries and related expenses 824,597 283,237
Licensing fees 328,253 --
Travel 120,053 24,007
Communications 236,268 73,888
Legal and professional 250,857 22,812
Occupancy costs 327,238 183,578
Advertising 243,811 152,272
General and administrative 179,310 101,795
Consulting 29,715 94,954
Depreciation and amortization 106,391 22,508
----------- -----------
Total operating expenses 4,268,777 1,376,359
----------- -----------
OTHER INCOME/(EXPENSE)
Interest expense (92,079) (14,958)
Interest income 1,357 --
Loss on sale of securities (28,774) --
----------- -----------
Total other expense (119,496) (14,958)
----------- -----------
NET LOSS BEFORE MINORITY INTEREST (1,790,166) (276,458)
MINORITY INTEREST IN LOSS OF SUBSIDIARY 936 --
----------- -----------
NET LOSS $(1,789,230) $ (276,458)
=========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE:
Net loss $ (.38) $ N/A
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,737,534 N/A
=========== ===========
4
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
===============================================
Period from inception
Year ended (April 22, 1999)
March 31, to March 31,
2001 2000
----------- -----------
NET LOSS $(1,789,230) $ (276,458)
OTHER COMPREHENSIVE INCOME:
Unrealized holding losses (160,449) --
Exchange gains 17,960 --
----------- -----------
COMPREHENSIVE LOSS $(1,931,719) $ (276,458)
=========== ===========
5
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (MEMBERS') EQUITY
=====================================================================
Accumulated
Common Stock Additional Other
Members' ------------------------- Paid-in Comprehensive
Equity Shares Par Value Capital Income Deficit
----------- ----------- ----------- ----------- ----------- -----------
INCEPTION, April 22, 1999 $ -- -- $ -- $ -- $ -- $ --
Contributions 550,000 -- -- -- -- --
Net loss (276,458) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
BALANCES, March 31, 2000 273,542 -- -- -- -- --
April 28, 2000, converted to
Corporation from an LLC (273,542) 4,000,000 100,000 173,542 -- --
Sold shares to related party -- 400,000 10,000 990,000 -- --
Shares issued in exchange for 450,000
shares of related party common stock -- 800,000 20,000 542,500 -- --
Shares issued for compensation and to
acquire a minority interest (Note 5) -- 400,000 10,000 270,000 -- --
Shares issued for services -- 400,000 10,000 270,000 -- --
Net income (loss) (Note 5) -- -- -- 32,446 -- (1,821,676)
Other comprehensive loss -- -- -- -- (142,489) --
----------- ----------- ----------- ----------- ----------- -----------
BALANCES, March 31, 2001 $ -- 6,000,000 $ 150,000 $ 2,278,488 $ 142,489) $(1,821,676)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
6
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================
INCREASE (DECREASE) IN CASH
Period from inception
Year ended (April 22, 1999)
March 31, to March 31,
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,789,230) $ (276,458)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization 106,391 22,508
Loss on sale of securities 28,774 --
Gain on sale of fixed assets (797) --
Issuance of stock for services 526,105 --
Issuance of stock for interest 76,365 --
Decrease (increase) in trade receivables 10,502 (14,146)
Increase in other receivables (69,800) (20,954)
Increase in employee advances (27,450) --
Increase in prepaid expenses (160,208) --
Increase in other assets (9,030) --
Increase in accounts payable and accrued expenses 1,265,206 252,056
Increase in minority interest in subsidiary (936) --
Increase in interest payable 36,639 --
Increase in other payables 10,607 --
----------- -----------
Net cash provided by (used in) operating activities 3,138 (36,994)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in affiliated company receivables 105,626 (207,385)
Acquisition of subsidiary, net of cash acquired (15,618) --
Purchases of property and equipment (1,992,627) (174,539)
----------- -----------
Net cash used in investing activities (1,902,619) (381,924)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations (34,505) (7,177)
Proceeds from notes payable 1,000,000 --
Member contributions -- 550,000
Issuance of common stock 1,000,000 --
----------- -----------
Net cash provided by financing activities 1,965,495 542,823
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 17,960 --
----------- -----------
NET INCREASE IN CASH 83,974 123,905
CASH, beginning of period 123,905 --
----------- -----------
CASH, end of period $ 207,879 $ 123,905
=========== ===========
The accompanying notes are an integral part of these statements.
7
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================
INCREASE (DECREASE) IN CASH
(Continued)
Period from inception
Year ended (April 22, 1999)
March 31, to March 31,
2001 2000
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 15,714 $ 14,958
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Issuance of common stock for LLC interest $ 273,542 $ --
=========== ===========
Issuance of common stock for common stock of related party (Note 5) $ 562,500 $ --
=========== ===========
Equipment acquired under capital lease $ 249,723 $ 33,885
=========== ===========
The Company purchased 51% of the capital stock of Sutton Data Services s.r.o.
for cash. In connection with the acquisition, liabilities were assumed as
follows:
Fair value $ --
Cash paid, net of cash acquired (15,618)
Goodwill 16,043
----------
Liabilities assumed $ 425
==========
The accompanying notes are an integral part of these statements.
8
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
- -------------------------
The consolidated financial statements include Sutton Online, Inc. (formerly
Sutton Online, LLC) and its wholly owned foreign subsidiary, Sutton Online
Europe BV ("Europe"). All significant intercompany balances and transactions
have been eliminated in consolidation. The Company is a majority owned
subsidiary of Global Capital Partners, Inc. ("GCAP"). The fiscal year end of the
Company's European subsidiary is December 31. This subsidiary is included on the
basis of closing dates that precede the Company's closing date by three months.
The Company offers trade routing and level II software and data for online
investors including individuals, hedge funds and money managers, and provides
brokerage firms with the necessary tools to offer financial products via the
internet. Through its European subsidiary, the Company is developing software to
provide a trading platform to customers for the purpose of routing trades in US
stocks as well as stocks traded on several European exchanges.
The Company's business requires them to have a relationship with a securities
broker-dealer as well as a clearing organization to clear trades. Management
believes that it could replace its current relationships with another
broker-dealer and/or clearing organization at similar costs of trading.
The Company has suffered losses from operations and has a working capital
deficiency that raises substantial doubt about its ability to continue as a
going concern. However, the Company is pursuing a strategic alternative of
merging with another entity, as well as debt to equity conversions, to be
followed by a capital raising endeavor, which management believes is likely to
result in eliminating the working capital deficiency.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash Equivalents
- ----------------
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
Fair Value of Financial Instruments
- -----------------------------------
Financial instruments, including cash, receivables, investments and other
assets, are carried at amounts which approximate fair value. Accounts payable,
loans and notes payable and other liabilities are carried at amounts which
approximate fair value.
9
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 1- ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
Software Development Costs
- --------------------------
The Company capitalizes software development costs incurred to develop certain
of the Company's software for advanced online trading systems that will allow
users to buy and sell securities on various worldwide exchanges in accordance
with Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." As of this date, the software has not
been completed and, accordingly, is not available for use. The software will be
amortized over the economic life of the software. For the year ended March 31,
2001, the Company has capitalized $1,097,665 of internal software development
costs.
Property and Equipment
- ----------------------
The Company provides for depreciation of leasehold improvements, furniture,
vehicles, computers and equipment using the straight-line method based on
estimated useful lives of, generally, three to seven years.
Investments
- -----------
The Company has invested in restricted securities of its parent, GCAP. These
securities are classified as available-for-sale. Available-for-sale securities
are carried at fair market value, with unrealized gains and losses reported as a
separate component of shareholders' equity. These available-for-sale securities
subject the Company's financial position to market risk. The Company may
experience losses if the market values of these securities decline subsequent to
March 31, 2001. At March 31, 2001, the Company's available-for-sale equity
securities had a fair market value of $333,301 and a cost basis of $493,750,
resulting in a net unrealized loss of $160,449.
Through its subsidiary, the Company holds a minority investment in an entity
that is not publicly traded. This investment is recorded at cost of $33,895 and
is included in investments in the accompanying consolidated balance sheet. The
Company monitors this investment for impairment.
Foreign Currency
- ----------------
The Company's foreign subsidiary uses the local currency as their functional
currency. Accordingly, assets and liabilities of the foreign subsidiary are
translated into United States dollars at end-of-period exchange rates. Revenue
and expenses are translated at average exchange rates in effect during the
period. Gains or losses from foreign currency translation are included in other
comprehensive income.
Goodwill
- --------
Goodwill is amortized on a straight-line basis over a period of fifteen years.
10
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
Long-Lived Assets
- -----------------
The Company reviews its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived assets,
the recoverability test is performed using undiscounted net cash flows estimated
to be generated by the asset.
Revenue Recognition
- -------------------
The Company recognizes revenue from trade routing on a transaction by
transaction basis. Revenue from Level II software and data is recognized on a
monthly usage basis.
Income Taxes
- ------------
The Company utilizes the asset and liability method of accounting for income
taxes, as prescribed by Statement of Financial Accounting Standards No. 109
(SFAS 109). Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply in the years in which these temporary
differences are expected to be recovered or settled. Changes in tax rates are
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Net Loss Per Share of Common Stock
- ----------------------------------
Net loss per share of common stock is based on the weighted average number of
shares of common stock outstanding. Common stock equivalents are not included in
the weighted average calculation since their effect would be anti-dilutive.
Recent Accounting Pronouncements
- --------------------------------
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. This
statement has had no impact on the Company.
Stock Split
- -----------
On March 22, 2001, the Company announced a 1 to 2.5 reverse stock split whereby
each 2.5 shares will be exchanged for one newly issued share. All references to
shares and share prices, including retroactive treatment, reflect the split on
the basis of the effective ratio.
11
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 2- BUSINESS COMBINATIONS
In June, 2000, the Company organized a newly formed subsidiary in the
Netherlands, Sutton Online Europe BV for cash of approximately $17,000. Through
this subsidiary, the Company acquired a 51% interest in the outstanding common
stock of Sutton Data Services s.r.o. ("SDS") during the same period. SDS was a
recently formed entity and had no operations. The acquisition was accounted for
as a purchase and the results of operations of Europe on a consolidated basis
have been included from the acquisition date. The excess of the purchase price
over the fair value of tangible net assets acquired amounted to approximately
$16,000. Since both Europe and SDS had no operations prior to formation and
acquisition, the pro forma results of operations for the years ended March 31,
2001 and 2000 (assuming formation and acquisition as of April 22, 1999) would
not be different than those in the accompanying results of operations.
NOTE 3- RECEIVABLES FROM AFFILIATED COMPANIES
A subsidiary of the Company's parent owed the Company transaction fees of
$101,759 and $207,385 at March 31, 2001 and 2000, respectively. The receivables
are paid currently.
NOTE 4- NOTES PAYABLE
Notes payable at March 31, 2001 consist of the following:
Promissory notes, interest rate of 10% per annum plus
10,000 shares of GCAP per month, due April 30, 2001,
subsequently renewed to July 16, 2001 $ 175,000
Convertible promissory notes, interest rate of 10% per
annum plus 55,000 shares of GCAP, due July 31, 2001,
convertible into 200,000 shares and warrants to purchase
100,000 shares of common stock at $2.50 per share 300,000
Convertible promissory note, interest rate of 10% per
annum, due July 31, 2001, convertible into 350,000 shares
and warrants to purchase 175,000 shares of common stock
at $2.50 per share (if holder does not convert this note,
holder will receive warrants to purchase 50,000 shares
at $2.50 per share) 525,000
-----------
$ 1,000,000
===========
12
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 5- SHAREHOLDERS' EQUITY
Common Stock
- ------------
As of May 1, 2000, Sutton Online, LLC (formed in April, 1999), was merged into a
newly formed company, Sutton Online, Inc. by issuing 4,000,000 shares of common
stock and 1,440,000 warrants to purchase stock at $2.50 per share to the LLC's
members. In addition, 3,080,000 warrants to purchase stock at $2.50 per share
were issued to certain shareholders of which 1,900,000 were subsequently
surrendered back to the Company.
On June 12, 2000, the Company issued 400,000 shares and 800,000 warrants to
purchase common stock to its parent, GCAP, and another unrelated third party for
cash of $1,000,000. The warrants allowed GCAP to purchase 800,000 shares of the
Company's common stock at $5.00 per share or 450,000 shares of GCAP common
stock. On February 12, 2001, GCAP exercised its warrants and the Company issued
800,000 shares of its common stock to GCAP in exchange for 450,000 shares of
GCAP common stock valued at $562,500.
In March, 2001, the Company issued 400,000 shares of its common stock and
200,000 warrants to purchase common stock at $2.50 per share to the 49%
shareholders of SDS for a minority interest in a European company valued at
$33,895 as well as an agreement to reduce the contract price of the software
being developed for the Company by SDS. The value of the contract reduction to
the minority shareholders of SDS was determined to be $246,105. In addition, the
Company issued 400,000 shares of its common stock and 180,000 warrants to
purchase common stock at $2.50 per share to its president and other related
individuals for services valued at $280,000.
Stock Warrants
- --------------
At March 31, 2001, warrants to purchase common stock at various prices were
outstanding, which expire as follows:
Number Outstanding
And Exercisable at
Expiration Date March 31, 2001 Exercise Price
--------------- -------------------- --------------
May 3, 2004 3,000,000 $ 2.50
13
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 6- INCOME TAXES
At March 31, 2001, the Company has a U.S. federal net operating loss
carry-forward of approximately $1,500,000 that may be used against future U.S.
taxable income until it expires in 2021. Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The components of the Company's deferred tax asset and liability as of
March 31 are as follows (the Company was an limited liability company in 2000):
2001 2000
----------- -----------
Deferred tax liabilities $ -- $ --
=========== ===========
Deferred tax assets:
Net operating loss carry-forwards $ 510,000 $ --
Valuation allowance for deferred tax assets (510,000 --
----------- -----------
$ -- $ --
=========== ===========
The valuation allowance for deferred tax assets was increased by $510,000 during
2001.
NOTE 7- BUSINESS SEGMENTS
The Company operates in only one business segment, online trading. Accordingly,
the following table presents information by geographic area as of and for the
periods ended March 31, 2001 and 2000:
Revenues Long-Lived Assets
----------------------- -----------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
United States $2,539,269 $1,114,859 $1,259,548 $ 181,039
Czech Republic 30,064 -- 935,833 --
---------- ---------- ---------- ----------
$2,569,333 $1,114,859 $2,195,381 $ 181,039
========== ========== ========== ==========
NOTE 8- COMMITMENTS AND CONTINGENCIES
The Company leases office space and equipment from unrelated entities under
operating and capital leases. Future minimum lease payments under the
non-cancelable leases as of March 31, 2001 are as follows:
14
SUTTON ONLINE, INC. AND SUBSIDIARY
(formerly Sutton Online, LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 8- COMMITMENTS AND CONTINGENCIES (continued)
Principal
due on
Capital
Operating Capital Lease
---------- ---------- ----------
2002 $ 29,191 $ 81,637 $ 66,490
2003 28,591 60,477 51,892
2004 9,165 29,920 27,061
---------- ---------- ----------
$ 66,947 172,034 $ 145,443
========== ==========
Less amount
Representing interest (26,591)
----------
Present value of net
minimum lease payments $ 145,443
==========
The amount of assets under the capital leases above were $214,095 and $29,008 as
of March 31, 2001 and 2000, respectively.
Total rental expense for the year ended March 31, 2001 and the period from
inception (April 22, 1999) to March 31, 2000 were $136,977 and $61,857,
respectively.
NOTE 9 - SUBSEQUENT EVENT
The Company, on May 14, 2001, signed two promissory notes due on or before
August 14, 2001. Each note is for $150,000 bearing interest of 75,000 shares of
common stock. The promissory notes are each secured by 500,000 shares of
restricted common stock of the Company owned by GCAP.
15
Ikon Ventures, Inc.
Introduction to Pro Forma Condensed
Combined Consolidated Financial Statements
The following unaudited pro forma combined balance sheets and statements of
operations reflect the acquisition of Sutton Online, Inc. ("SOL") by Ikon
Ventures, Inc. ("Ikon"), through the exchange of stock, as if it had occurred on
January 1, 2000. The fiscal year-end of SOL is March 31. Therefore, SOL is
included in the accompanying financial statements on a basis that differs three
months from Ikon's closing date of December 31.
The acquisition was accomplished through the exchange of all of the outstanding
common shares of SOL for 15,222,219 shares of Ikon common stock, representing a
controlling interest in Ikon. Prior to the acquisition, $600,000 of notes
payable were converted into 850,000 shares of SOL common stock, $525,000 of
notes payable were converted into 888,888 shares of SOL preferred stock, and
$175,000 of notes payable were exchanged for 310,000 shares of Global Capital
Partners, Inc. held as an investment of SOL.
The acquisition of SOL is considered a reverse acquisition and accounted for
under the purchase method of accounting. Under reverse acquisition accounting,
SOL is considered the acquiror for accounting and financial reporting purposes,
and acquired the assets and assumed the liabilities of Ikon. Under the purchase
method of accounting, assets acquired and liabilities assumed are recorded at
their fair values. No adjustments have been made in the pro forma balance sheet
to the carrying values of the Ikon assets acquired or liabilities assumed since
management believes that their carrying values approximate fair value.
16
Ikon Ventures, Inc.
Notes to Pro Forma Condensed
Combined Consolidated Balance Sheet
Proforma adjustments include the following:
(a) Adjustment to record the conversion of $600,000 notes payable into shares
of SOL common stock, $525,000 of notes payable into shares of SOL preferred
stock, and $175,000 of notes payable exchanged for 310,000 shares of Global
Capital Partners, Inc. ("GCap") common stock held in the investment account
of SOL. This adjustment also includes the recognition of realized losses on
the GCap stock at the time of the exchange.
(b) Adjustment to record the exchange of common stock of Ikon for all the
outstanding common stock of SOL, the removal of Ikon's deficit, correction
of common stock to reflect outstanding shares of Ikon common stock at
Ikon's par value of $.001 and the cumulative effect of the stock exchange
on paid in capital.
17
Ikon Ventures, Inc.
Notes to Pro Forma Condensed
Combined Consolidated Statements of Operations
(a) Adjustment to recognized realized losses on the Gcap stock at the time of
the exchange of the Gcap shares for the $175,000 note payable.
(b) The weighted average shares outstanding after the acquisition represents
the issuance of 15,222,219 shares of common stock of Ikon to the
shareholders of SOL. The weighted average shares outstanding were computed
as if the shares issued in connection with the acquisition had been
outstanding for the entire period.
18
Ikon Ventures, Inc.
Proforma Condensed Combined
Consolidated Balance Sheet
March 31, 2001
(in $000's)
Ikon Sutton Pro Forma Pro Forma
Ventures, Inc. Online, Inc. Adjustments As Adjusted
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
Cash $ -- $ 100 $ -- 100
Other current assets 3 777 -- 780
--------------- --------------- --------------- ---------------
Total current assets 3 877 -- 880
--------------- --------------- --------------- ---------------
Property and equipment, net 2 3,021 -- 3,023
Investments -- 220 (186) (a) 34
Other assets, net -- 21 -- 21
--------------- --------------- --------------- ---------------
TOTAL ASSETS $ 5 $ 4,139 $ (186) $ 3,958
=============== =============== =============== ===============
Accounts payable and accrued expenses $ 195 $ 2,384 $ -- $ 2,579
Current portion of notes payable -- 1,300 (1,300) (a) --
Other current liabilities -- 74 (39) (a) 35
--------------- --------------- --------------- ---------------
Total current liabilities 195 3,758 (1,339) 2,614
--------------- --------------- --------------- ---------------
Other liabilities -- 113 -- 113
--------------- --------------- --------------- ---------------
Preferred stock, $.025 par value -- -- 22 (a) 22
Common stock, $.001 par value -- 150 21 (a) 16
(155) (b)
Additional paid-in capital 11,830 2,246 1,114 (a) 3,325
(11,865) (b)
Accumulated other comprehensive income -- (258) 202 (a) (56)
Deficit (12,020) (1,870) (206) (a) (2,076)
12,020 (b)
--------------- --------------- --------------- ---------------
Total shareholders' equity (190) 268 1,153 1,231
--------------- --------------- --------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 5 $ 4,139 $ (186) $ 3,958
=============== =============== =============== ===============
The accompanying notes are an integral part of this statement.
19
Ikon Ventures, Inc.
Proforma Condensed Combined
Consolidated Statement of Operations
Three Months Ended March 31, 2001
(in $000's)
Ikon Sutton Pro Forma Pro Forma
Ventures, Inc. Online, Inc. Adjustments As Adjusted
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
Revenue:
Transaction fees $ -- $ 551 $ -- $ 551
Data fees -- 116 116
Other -- 1 1
------------- ------------- ------------- -------------
Total revenue -- 668 -- 668
------------- ------------- ------------- -------------
Expenses:
Service fees -- 4 4
Salaries and related expenses -- 321 321
Clearing costs -- 64 64
Trading costs -- 174 174
Licensing fees -- 50 50
Occupancy costs -- 79 79
Depreciation and amortization -- 4 4
Other general and administrative 40 287 327
------------- ------------- ------------- -------------
Total operating expenses 40 983 -- 1,023
Other income (expense), net -- (50) (206) (a) (256)
------------- ------------- ------------- -------------
Net loss before minority interest (40) (365) (206) (611)
Minority interest in loss of subsidiary -- 1 1
------------- ------------- ------------- -------------
NET LOSS $ (40) $ (364) $ (206) $ (610)
============= ============= ============= =============
Net loss per share of common
stock-basic and diluted $ (0.13) $ (0.04)
============= =============
Weighted average number of
common shares outstanding 311 15,533 (b)
============= =============
The accompanying notes are an integral part of this statement.
20
Ikon Ventures, Inc.
Proforma Condensed Combined
Consolidated Statement of Operations
Year Ended December 31, 2000
(in $000's)
Ikon Sutton Pro Forma Pro Forma
Ventures, Inc. Online, Inc. Adjustments As Adjusted
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
Revenue:
Transaction fees $ -- $ 2,214 $ -- $ 2,214
Data fees -- 353 353
Other -- 31 31
--------------- --------------- --------------- ---------------
Total revenue -- 2,598 -- 2,598
--------------- --------------- --------------- ---------------
Expenses:
Service fees -- 526 526
Salaries and related expenses -- 825 825
Clearing costs -- 363 363
Trading costs -- 338 338
Licensing fees -- 328 328
Occupancy costs -- 327 327
Depreciation and amortization -- 106 106
Other general and administrative 305 1,456 1,761
--------------- --------------- --------------- ---------------
Total operating expenses 305 4,269 -- 4,574
Other income (expense), net -- (119) (119)
--------------- --------------- --------------- ---------------
Net loss before minority interest (305) (1,790) -- (2,095)
Minority interest in loss of subsidiary -- 1 -- 1
--------------- --------------- --------------- ---------------
NET LOSS $ (305) $ (1,789) $ -- $ (2,094)
=============== =============== =============== ===============
Net loss per share of common
stock-basic and diluted: $ (0.02) $ (0.07)
=============== ===============
Weighted average number of
common shares outstanding 15,250 30,472 (b)
=============== ===============
The accompanying notes are an integral part of this statement.
21