U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-27681
LAIDLAW GLOBAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 13-4093923
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 Park Avenue
New York, NY 10017
(Address of principal executive offices)
(212) 376-8800
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 28,201,465 shares of common stock as
of April 30, 2002.
Transitional Small Business Disclosure Format (check one)
Yes |_| No |X|
2
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) Consolidated Balance Sheets as of March 31, 2002 and
December 31, 2001 ............................................... 4
b) Consolidated Statements of Operations for the three months ended
March 31, 2002 and 2001.......................................... 5
c) Consolidated Statements of Cash Flows for three months
ended March 31,2002 and 2001..................................... 6
d) Notes to Consolidated Financial Statements....................... 7 to 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS ................................................... 12 to 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ............................................ 17 to 19
ITEM 5. OTHER INFORMATION ............................................ 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................. 19
a) EXHIBITS .......................................... 19
b) REPORTS ON FORM 8-K ............................... 20
SIGNATURES ............................................................ 20
3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Laidlaw Global Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of As of
March 31,2002 December 31, 2001
------------- -----------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 2,608,382 $ 2,220,119
Receivable from clearing broker and other receivables 277,394 248,600
Securities owned, at market value 139,461 314,764
Property, equipment and leasehold improvements -net 589,734 679,708
Notes receivable 300,000 2,215,000
Deposits 379,485 379,485
Prepaid and other 515,713 588,442
------------ ------------
$ 4,810,169 $ 6,646,118
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 475,000 $ 732,058
Securities sold but not yet purchased, at market value -- 930
Accounts payable and accrued expenses 2,663,827 2,825,152
Commissions and compensation payable 339,939 243,656
Capitalized lease obligations 317,836 421,701
Deferred revenue -- 99,722
Deferred rent 520,327 527,756
Other payable 30,000 30,000
------------ ------------
4,346,929 4,880,975
------------ ------------
Commitments and contingencies
Stockholders' equity
Common Stock; $.00001 par value; 50,000,000 shares
authorized of the Company; 33,446,866 and 33,211,439 shares
issued by the Company as of March 31, 2002 and December 31,
2001, respectively 334 332
Additional paid - in capital 39,566,458 40,131,868
Treasury stock, at cost (5,771,400 shares and 5,632,500 shares as of (2,487,647) (2,415,054)
March 31, 2002 and December 31, 2001, respectively)
Accumulated deficit (36,615,905) (35,952,003)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 463,240 1,765,143
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,810,169 $ 6,646,118
============ ============
The accompanying notes are an integral part of these consolidated statements.
4
Laidlaw Global Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
-----------------------------
2002 2001
------------ ------------
REVENUES
Gross commissions $ 729,495 $ 2,248,678
Asset management fees 60,300 1,333,280
Corporate finance & private placement fees 79,167 --
Investment income & trading profits 432,639 838,926
Other 53,682 178,906
------------ ------------
Total Revenue 1,355,283 4,599,790
------------ ------------
EXPENSES
Salaries and benefits 598,496 2,106,693
Reversal of charge related to variable options (636,036) --
Commissions 681,417 1,285,852
Clearing fees 139,879 257,044
Rent and utilities 198,580 425,582
Depreciation and amortization 89,974 540,907
Client-related marketing 3,436 6,618
Travel and entertainment 119,419 79,374
Professional fees 298,117 393,190
Dues and assessments 39,150 240,795
Communications and information system 207,198 546,468
Office 69,391 239,156
Interest 30,390 79,854
Loss from asset write offs 35,264 --
Amortization of goodwill -- 118,802
Charge in connection with share exchange 70,628 --
Other 73,882 293,316
------------ ------------
Total Expenses 2,019,185 6,613,651
------------ ------------
Loss before minority interest (663,902) (2,013,861)
Minority interest -- (539,036)
------------ ------------
Loss before taxes (663,902) (1,474,825)
Income Taxes -- --
------------ ------------
NET LOSS (663,902) (1,474,825)
Accumulated deficit, beginning of period (35,952,003) (24,761,803)
------------ ------------
Accumulated deficit, end of period $(36,615,905) $(26,236,628)
============ ============
NET LOSS PER SHARE
Basic and diluted $ (.02) $ (.05)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic and diluted 27,554,915 27,074,429
============ ============
The accompanying notes are an integral part of these consolidated statements.
5
Laidlaw Global Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (663,902) $ (1,474,825)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Amortization of goodwill -- 118,802
Depreciation and amortization 89,974 540,907
Deferred rent (7,429) (7,430)
Minority interest in earnings -- (539,036)
Reversal of charge related to variable options (636,036) --
Charge in connection with share exchange 70,628 --
(Increase) decrease in operating assets:
Due from clearing brokers and other receivables (28,794) 56,950
Marketable securities owned 175,303 966,519
Deposit -- (163,085)
Prepaid and other asset 72,729 398,503
Increase (decrease) in operating liabilities
Marketable securities sold but not yet purchased (930) 302,870
Accounts payable and accrued expenses (161,325) (934,224)
Commission and compensation payable 96,283 239,588
Deferred revenue (99,722) (37,150)
Other liabilities -- 7,371
------------ ------------
Net cash used in operating activities (1,093,221) (524,240)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property, Equipment and Leasehold Improvements -- (228,186)
Payment for leased equipment (103,865) (61,033)
------------ ------------
Net cash used in investing activities (103,865) (289,219)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (72,593) (22,933)
Repayment of notes payable (257,058) --
Proceeds from notes receivable 1,915,000 --
Proceeds from issuance of notes payable -- 939,585
------------ ------------
Net cash provided by financing activities 1,585,349 916,652
------------ ------------
Net increase in cash and cash equivalents 388,263 103,193
CASH - BEGINNING OF PERIOD 2,220,119 1,899,274
------------ ------------
CASH - END OF PERIOD $ 2,608,382 $ 2,002,467
============ ============
Supplemental disclosure for cash flow information:
Cash paid during the period for interest $ 30,390 $ 79,854
Cash paid during the period for taxes $ 2,650 $ 921
Supplemental schedule of non cash investing and
financing activities:
During the periods ended May 31, 2002 and 2001 the
following transactions occurred:
Purchases of equipment through capital lease -- 43,147
The accompanying notes are an integral part of these consolidated statements.
6
Laidlaw Global Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2002 and 2001
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
Laidlaw Global Corporation (the Company) is a holding company whose wholly- or
majority-owned operating subsidiaries include Laidlaw Holdings, Inc. (Laidlaw
Holdings), Laidlaw Global Securities, Inc. (Laidlaw Global Securities),
Westminster Securities Corporation, (Westminster), which the Company sold in
June, 2001, H&R Acquisition Corporation (HRAC), an 81%-owned subsidiary which
maintains a 100% interest in Howe & Rusling, Inc., (H&R) which the Company sold
in December, 2001, Globeshare Group, Inc., (GGI), formerly Global Electronic
Exchange, Inc. a 97%-owned internet-based investment services company
established on June 14, 1999 which maintains a 100% interest in Globeshare, Inc.
(Globeshare), an internet-based broker-dealer, whose operations were integrated
with Laidlaw Global Securities in October, 2001, Laidlaw Pacific (Asia) Ltd.
(LPA), a registered broker-dealer and Investment Advisor with the Hong Kong
Securities and Futures Commission, which ceased operations in 2001, and Laidlaw
International, S.A., (LI) a 99.8% owned broker-dealer based in France, which
ceased operations in April, 2002. The business activities include securities
brokerage, investment banking, asset management and investment advisory services
to individual investors, corporations, pension plans and institutions worldwide.
On April 6, 2001, LPA ceased business activity to avoid incurring any further
costs of maintaining a dormant operation. Its license was revoked in May, 2001.
On June 12, 2001, the Company sold its common stock interest in Westminster
pursuant to an Amended and Restated Stock Purchase Agreement dated June 7, 2001.
The parties to the transaction agreed to treat May 31, 2001 as the effective
date of the transaction for financial statement purposes. Accordingly, results
of operations of Westminster for fiscal 2001 incorporated in the consolidated
financial statements pertain to the period through May 31, 2001.
Due to the continuing losses incurred by the Globeshare operations, the Company
deemed it best for economic reasons to integrate the operations of the on-line
broker as a division of Laidlaw Global Securities. The combination of the
operations, which would eliminate the redundancy of services and reduce
operating costs, was made effective on October 5, 2001.
On December 26, 2001, the Company sold its interest in HRAC pursuant to a Stock
Purchase Agreement dated December 21, 2001. Accordingly, all assets,
liabilities, equity and results of operations of H & R for fiscal 2001
incorporated in the consolidated financial statements pertain to the period
through December 26, 2001.
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has suffered recurring
losses and has a significant accumulated deficit as of March 31, 2002. In
addition, the Company continues to incur substantial losses. Accordingly, the
Company anticipates that it will require additional sources of funding during
2002 to maintain its operations and to provide sufficient regulatory net capital
for its broker-dealer operations. The Company is dependent on outside sources of
financing and is presently pursuing several alternatives, although no additional
financing is imminent. These conditions raise substantial doubt about the
ability of the Company to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Certain prior year amounts have been restated to conform to the current year
presentation.
7
NOTE B - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS
No. 141) and Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS No. 142). The new standards require that all
business combinations initiated after June 30, 2001 be accounted for under the
purchase method. In addition, all intangible assets acquired that are obtained
through contractual or legal right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill. Goodwill and intangibles with indefinite lives will no longer be
subject to amortization, but will be subject to at least an annual assessment
for impairment by applying a fair value based test. The Company does not expect
there to be a material impact from the adoption of SFAS NO. 142.
In August 2001, the FASB issued statement of Financial Accounting Standard No.
144 Accounting for the Impairment or Disposal of Long Lived Assets. This
statement is effective for fiscal years beginning after December 15, 2001. This
supercedes Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", while retaining many of the requirements of such statement. The Company is
currently evaluating the impact of the statement.
NOTE C - NET CAPITAL REQUIREMENTS
The Company's broker-dealer subsidiaries are subject to the Securities and
Exchange Commission's Uniform Net Capital Rule (SEC Rule 15c3-1), which requires
the maintenance of minimum net capital and requires that the ratio of aggregate
indebtedness to net capital, both as defined, shall not exceed 15 to 1 for
Laidlaw Global Securities. At March 31, 2002, Laidlaw Global Securities was
required to maintain minimum net capital of $105,899 and had total net capital
of $1,106,916 which was $1,001,017 in excess of its minimum requirement.
NOTE D - NOTES PAYABLE AND SUBORDINATED BORROWINGS
Notes payable and borrowings under subordination agreements at March 31, 2002
consist of the following:
March 31,2002
-------------
Convertible Notes, 8% due 6/01/02 $ 225,000
Convertible Notes, 10% due 6/01/02 250,000
----------
$ 475,000
==========
On March 14, 2001, LI obtained a loan of $446,350 through the issuance of an 8%
note in which the principal and interest are due in one year. This loan was
assumed by the Company in December 2001 in the amount of $482,058 which included
interest of $35,708 to original maturity date. If the Company defaults as
defined in the agreement, then the noteholder may, in lieu of payment of the
Principal Amount, convert the note into common stock of the Company at the
conversion price of $0.30 per Common Share. In March and April of 2002, the
terms were renegotiated wherein $50,000 of the note was converted into 333,329
shares of the Company's stock with the balance of the principal and interest
payable in varying installments with the final payment due in July 2002. No
additional interest is charged on the note from March 14, 2002 until July 2002.
8
On April 5, 2001, GGI obtained a loan of $250,000 through the issuance of a 10%
convertible subordinated note in which the interest is due on a semi-annual
basis and the principal on April 5, 2002. Under the terms of the note, the
noteholder may convert into GGI stock at the greater of $.65 per share or a 40%
discount from the initial public offering price per share or into Company common
shares at a price of $.55 per share. In March and April 2002 the terms were
renegotiated wherein $50,000 of the note was converted into 166,670 shares of
the Company's common stock and the balance is repayable in varying installment
payments through August, 2002. No additional interest is charged on the note
from April 5, 2002 until August 2002.
In March 2002, the Company borrowed securities worth $397,600 and returned the
same by the end of the month. In connection with these borrowings, the Company
paid interest at the rate of 8% for the period the securities were borrowed.
NOTE E - COMMITMENTS AND CONTINGENCIES
Litigation
Galacticomm Technologies, Inc. vs. Laidlaw Global Securities, Inc.
The Company is a defendant in a legal matter involving the underwriting and
initial public offering of Galacticomm Technologies, Inc. ("Galacticomm")
shares. The Company acted as a member of a selling group, pursuant to which the
Company agreed to purchase 200,000 shares of Galacticomm at $5.40 per share and
200,000 warrants of Galacticomm at $0.09 per warrant. Additionally, the Company
agreed to guarantee the purchase of an additional 20,000 shares and warrants if
deemed necessary. Prior to the settlement of the IPO, the Company had satisfied
all its commitments as part of its agreement with the lead underwriters. Prior
to the settlement of the IPO, the lead underwriters aborted the IPO based upon
what they, in their sole discretion, believed was a declining market in the U.S.
and abroad. Pursuant to the underwriting agreement between Galacticomm and the
lead underwriters, the lead underwriters had the right, in their sole
discretion, to abort the IPO in the event of adverse conditions. Galacticomm
commenced suit against the underwriting group in a Florida state court seeking
damages for breach of the underwriting agreement. The Company believes that the
outcome of this matter would not have a material effect on the financial
position, results of operations or liquidity.
Greek Capital Market Commission vs. Laidlaw Global Corporation, Inc.
The Company has been named, as well as its subsidiary Laidlaw Global Securities,
in an administrative proceeding involving the Greek Capital Market Commission
("CMC"). In early 2000, representatives of the Company were introduced to a
representative of Elektra S.A. ("Elektra"), an entity whose securities are
publicly traded in Greece, in order to discuss a business strategy by which the
Company would assist in the sale of a significant amount of Elektra's shares by
certain of its stockholders. Following meetings with such persons, Elektra
announced in the spring of 2000 that its principal shareholders would sell up to
3,000,000 shares of its stock. On March 28, 2000, Elektra sold two million
shares of its stock to institutional investors through a Greek brokerage firm,
Contalexis Financial Services.
On February 28, 2001, the CMC, an administrative body which reviews securities
issues in Greece, found that Laidlaw Global Securities violated certain
notification requirements to the CMC and Elektra. According to the CMC's
findings, the Company (i) failed to notify the CMC and Elektra of the March 28,
2000 acquisition of Elektra shares and (ii) failed to notify the Athens Stock
Exchange of the Company's assignment of voting rights and
9
participation of share capital in Elektra. The Company believes that, since
neither it nor any subsidiary, including the Company, ever owned shares of
Elektra, and for the other reasons set forth below, both of these findings are
without merit and factually inaccurate and will be overturned on appeal.
Additionally, the CMC found that a representative of the Company falsely stated
to the public that the Company was interested in holding Elektra shares two days
prior to selling such shares. Since the Company never held shares of Elektra,
management believes that such statements were misquoted by the Greek press. The
subsidiary Laidlaw Global Securities and the Company have been assessed fines
and penalties aggregating 1,257,168 Euros (US$1,119,004).
These fines were levied after reviewing response letters filed by the Company's
Greek counsel. Greek counsel to the Company will be filing Remedy Petitions
before the CMC against the decisions assessing the fines, which is a form of an
administrative proceeding. In the event the Remedy Petitions are rejected by the
CMC, the Parent will file Writs of Annulment before the Conseil d'Etat, which is
the Greek Court having jurisdiction over such matters. Since neither the
Company, nor any of its subsidiaries, has (i) ever owned shares of Elektra, (ii)
ever acted as a principal or agent for the purchase or sale of shares of
Elektra, (iii) acted as a broker-dealer of securities of Elektra, or (iv) ever
stated, publicly or otherwise, that it, or any of its subsidiaries, did hold, or
intended to hold or own, shares of Elektra, it believes that the findings of the
CMC will be overturned on appeal. The Company's counsel in Greece has advised
that in their opinion, the fines imposed by the CMC are civil fines and can only
be enforced against the assets of the Company in Greece. Further, they advise
that any enforcement of fine in the United States would require commencing a new
action in the United States.
Plural, Inc. vs. Laidlaw Global Corporation, et. al.
In November, 2001, Plural instituted action in the New York State Supreme Court
for services rendered pursuant to a computer consulting agreement. Plural claims
approximately $700,000 is due them pursuant to the agreement. The Company claims
the services did not meet the terms of the agreement and plan to counterclaim
for monies previously paid to Plural.
In February, 2002, the French Commission Bancaire required a capital increase of
2 million Euros in order to maintain LI in compliance with French Net Capital
Regulations. The deadline imposed by the French regulatory authority being very
short, Laidlaw Global Corporation was unable to access additional capital prior
to the nomination of an Administrator by the Commission Bancaire.
Effective April 11, 2002, the French Administrator committed to a process of
liquidation. Accordingly, the Company recognized a loss as of December 31, 2001
from the write-off of all its investment in the French subsidiary amounting to
$634,562. Additional liability resulting from this liquidation, if any, cannot
presently be determined.
On March 5, 2002, Grant Thornton LLP ("Grant") notified the Laidlaw Board of
Directors that pursuant to Section 10A of the Exchange Act of 1934 (the "Grant
Report"), in their belief, an illegal act or acts may have occurred at Laidlaw
during 2001 with respect to the repricing of stock options. Grant alleged in
part that neither management nor the Board of Directors had taken sufficient
steps to determine whether an illegal act had occurred within the meaning of
Section 10A of the Exchange Act of 1934 and, accordingly, Grant notified the
Securities and Exchange Commission (SEC). The Company has been notified that the
SEC has commenced an informal investigation into this matter.
The Company is subject to various other legal actions and claims arising out of
the conduct of its business. Management of the Company, after consultation with
outside legal counsel, believes that the resolution of these proceedings will
not result in any material adverse effects on the Company's financial position.
In the opinion of management of the Company,
10
amounts accrued in connection with these matters are adequate.
NOTE F - INDUSTRY SEGMENTS
In 2002 and prior years, the Company operated in two principal segments of the
financial services industry: Asset Management and Broker-Dealer activities.
Corporate services consist of general and administrative services that are
provided to the segments from a centralized location and are included in
corporate and other.
Asset Management and Investment: activities include raising and investing
capital and providing financial advice to companies and individuals throughout
the United States and abroad. Through this group the Company provides client
advisory services and pursues direct investment in a variety of areas.
Broker-Dealer: Activities include underwriting public offerings of securities,
arranging private placements and providing client advisory services, trading,
and brokerage services including conducting research on, originating and
distributing both foreign and domestic equity and fixed income securities on a
commission basis to both institutional and individual investors throughout the
United States and abroad and for their own proprietary trading accounts.
Laidlaw Global Securities, the Company's majority owned subsidiary, is
substantially engaged in traditional trading, brokerage and investment banking
services.
Foreign Operations and Major Customers: The Company had no significant assets or
revenues (either external or intercompany) from operations in foreign countries
for each of the two periods ended March 31, 2002 and 2001 other than commission
and Investment Banking revenues from the activities of Laidlaw Global Securities
on behalf of foreign and U.S. customers in foreign markets, amounting to $27,500
and $6,188 respectively, which approximates 2.32% and .13% of external revenue,
respectively. Additionally, the Company had no significant individual customers
(domestic or foreign) as of March 31, 2002, or for each of the periods ended
March 31, 2002 and 2001.
The following table sets forth the net revenues of these industry segments of
the Company's business.
Three months ended March 31,
-----------------------------
2002 2001
------------ ------------
(Unaudited)
Revenue from external customers
Asset management $ 60,300 $ 1,076,359
Brokerage 1,277,372 3,221,692
Corporate and other 17,611 301,739
------------ ------------
Total external revenue $ 1,355,283 $ 4,599,790
============ ============
Net (loss)
Asset management $ -- $ 125,920
Brokerage (221,694) (1,154,371)
Corporate and other (442,208) (446,374)
------------ ------------
Total net (loss) $ (663,902) $ (1,474,825)
============ ============
Total assets
Asset management $ -- $ 3,341,389
Brokerage 3,489,898 11,332,349
Corporate and other 1,320,270 6,552,769
------------ ------------
Total assets $ 4,810,168 $ 21,226,507
============ ============
11
NOTE G - EARNINGS PER COMMON SHARE
Earnings per common share are computed in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." Basic earnings per share
excludes the dilutive effects of options and convertible securities and is
calculated by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflect all potentially dilutive securities, as well as the
related effect on net income. Set forth below is the reconciliation of net
income (loss) applicable to common shares and weighted-average common and common
equivalent shares of the basic and diluted earnings per common share
computations:
Three Months ended March 31,
----------------------------
2002 2001
------------ ------------
(Unaudited)
Numerator
Net loss applicable to common shares for basic
and diluted earnings per share $ (663,902) $ (1,474,825)
------------ ------------
Denominator
Weighted-average common shares for basic
and diluted earnings per share 27,554,915 27,074,429
------------ ------------
Earnings (loss) per common share
Basic and diluted $ (.02) $ (.05)
============ ============
All outstanding warrants and options were excluded from the computation of the
diluted earnings per share because the Company incurred losses for the three
months period ended March 31, 2002 and 2001 and the effect would have been
antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Laidlaw Global Corporation is a global financial services firm that operates in
two business segments: brokerage, which includes investment banking and sales
and trading, and asset management.
Asset management activities include raising and investing capital and providing
financial advice to companies and individuals throughout the United States and
overseas. Through this group, Laidlaw provides client advisory services.
Brokerage activities include underwriting public offerings of securities,
arranging private placements and providing client advisory services, trading,
conducting research on, originating and distributing equity and fixed income
securities on a commission basis and for their own proprietary trading accounts.
It has operated through a number of separate entities owned directly by Laidlaw
Global Corporation or through its wholly owned subsidiary, Laidlaw Holdings,
Inc. Laidlaw Global Securities, Inc. provides brokerage services and is wholly
owned by Laidlaw Holdings, Inc. Howe & Rusling, Inc. provided management
services of financial assets and was owned by H&R Acquisition Corp., 81% of
whose stock was owned by Laidlaw Holdings, Inc. Westminster Securities
Corporation, a NYSE member firm acquired by
12
Laidlaw on July 1, 1999 also provided general brokerage services. Another
subsidiary, Globeshare Group, Inc. (formerly Global Electronic Exchange,
Inc.),was a holding company that owned 100% of Globeshare, Inc., an online
broker-dealer. The last subsidiary was a French broker/dealer called Laidlaw
International, S.A., located in France, which was granted the license to operate
as a broker/dealer by Banque de France in April 2001.
Numerous changes in the operation of the businesses of Laidlaw Global
Corporation occurred during fiscal year 2001.The interest in H&R Acquisition
Corp. was sold on December 26, 2001 pursuant to a Stock Purchase Agreement dated
December 21, 2001. Accordingly, the information for fiscal 2001 for H & R
Acquisition Corp. pertains to the period January 1 to December 26, 2001.
Westminster Securities Corporation, a NYSE member firm acquired by Laidlaw on
July 1, 1999, was sold on June 12, 2001. The sale of Westminster Securities
Corporation was completed pursuant to the Amended and Restated Stock Purchase
Agreement dated June 7, 2001. The Agreement stipulated that the transactions
shall be treated solely for tax and financial reporting purposes as having an
effective date of May 31, 2001. Accordingly, the information for fiscal 2001 for
Westminster incorporated in this report pertains to the five months ended May
31, 2001. Globeshare, Inc., filed for withdrawal of its registration as a
broker/dealer with the NASD on November 20, 2001. The operations and customer
accounts of the on-line broker were transferred to Laidlaw Global Securities on
October 5, 2001 after duly informing the customers. After September 11, 2001,
the European market, an essential part of the business generated by the French
subsidiary, Laidlaw International, deteriorated and has not recovered as
promptly as the U.S. markets. In early February, 2002, the French Commission
Bancaire demanded a capital increase of 2 million Euros in order to maintain the
French subsidiary in Compliance with French Net Capital Regulations. Laidlaw
Global Corporation had to make a hard decision since it could not support its
European operations while keeping adequate capital for the U.S. operations. With
a very short deadline imposed by the French regulatory authority, Laidlaw Global
Corporation determined not to provide the additional capital and this resulted
in the nomination of an Administrator for Laidlaw International by the
Commission Bancaire. Effective April 11, 2002, the French Administrator
committed to a process of liquidation. Accordingly, the Company recognized a
loss as of December 31, 2001 from the write off of all its investment in the
French subsidiary amounting to $634,562. In March 2002, the Company incurred an
additional expense of $35,264 in connection with the final settlement in closing
the operations of the French subsidiary as required by the French Administrator.
Market fluctuations in both U.S. and overseas markets, as well as general global
economic factors have and may continue to significantly affect Laidlaw's
operations. These factors include economic and market conditions; the
availability of capital; the availability of credit; the level and volatility of
equity prices and interest rates; currency values and other market indices; and
technological changes and events. The increased use of the Internet for
securities trading and investment services are important factors that may affect
Laidlaw's operations. Inflation and the fear of inflation as well as investor
sentiment and legislative and regulatory developments will continue to affect
the business conditions in which our industry operates. Such factors may also
have an impact on Laidlaw's ability to achieve its strategic objectives on a
global basis, including growth in assets under management, global investment
banking and brokerage service activities.
Laidlaw's securities business, particularly its involvement in primary and
secondary markets in domestic and overseas markets is subject to substantial
positive and negative fluctuations caused by a variety of factors that cannot be
predicted with great certainty. These factors include variations in the fair
value of securities and other financial products and the volatility and
liquidity of global trading markets. Fluctuations also occur due to the level of
market activity, which, among other things, affects the flow of investment
dollars into bonds and equities, and the size, number and timing of transactions
or client assignments.
Laidlaw's results of operations also may be materially affected by competitive
factors. Recent and continuing global convergence and consolidation in the
financial services industry will lead to increased competition from larger
diversified financial services organizations even though Laidlaw's strategy has
been to position itself in markets where it believes it has an advantage over
its competition due to strong local connections and access to foreign brokerage
firms and investors. Laidlaw, though global in its scope, sees itself as
becoming a local player throughout the world. Revenues in any particular period
may not be representative of full-year results and may vary significantly from
year to year and from quarter to quarter. Laidlaw intends to manage its
businesses for the long term and help mitigate the potential effects of market
downturns by strengthening its competitive position in the global financial
services industry through diversification of its revenue sources and enhancement
of its global franchise. Laidlaw's overall financial results will continue to be
affected by its ability and success in maintaining high levels of profitable
business activities, emphasizing technological updates and innovation, and
carefully managing risks in all the securities markets in which it is involved.
In addition, the complementary trends in the financial services industry of
consolidation and globalization present, among other things, technological, risk
management and other infrastructure challenges that will require effective
resource allocation in order for Laidlaw to remain profitable and competitive.
Laidlaw believes that the technological advancements in the internet and the
growth of electronic commerce in recent years will continue to present both
challenges and opportunities to the Company. Laidlaw gives special importance to
innovations in this field, which have and will continue to lead to significant
changes in the financial markets and financial services industry as a whole.
13
Global Economic and Market Developments in the Quarter Ended March 31, 2002
Although the global economy demonstrated some initial signs of recovery,
conditions in the global financial markets remained difficult in the quarter
ended March 31, 2002.
In Europe, certain business survey data within the region reported preliminary
indications that economic performance was beginning to improve and that
industrial production was beginning to recover from the declines experienced
during much of fiscal 2001. As a result of these developments as well as
indications of increased activity in the U.S., the European Central Bank left
the benchmark interest rate unchanged during the quarter.
In the U.S., continuing concerns about the depressed level of economic activity
that existed during much of fiscal 2001 prevailed at the beginning of the first
quarter of fiscal 2002. Subsequent news on economic activity bolstered the view
that the economy was beginning to stabilize. The information reviewed at the
January 29-30, 2002 Federal Open Market Committee (FOMC) meeting indicated that
consumer spending had held up remarkably well, investment orders had firmed
further, and the rate of decline in manufacturing production had lessened toward
the end of 2001. On some signs that the economy was beginning to mend and with
monetary policy having been eased substantially, the FOMC decided not to make
any further rate cutbacks during the first quarter of fiscal 2002. However, the
FOMC still continued to see a trend toward economic weakness.
These uncertain and turbulent market and economic environment adversely affected
the results of operations of Laidlaw Global Securities, Inc. (LGSI), the
remaining subsidiary of the Company, for the first quarter of fiscal 2002, as
the net income for each of its two business segments (brokerage and asset
management) declined from the levels in fiscal 2001. LGSI's brokerage business
recorded lower revenues from its investment banking, institutional sales and
trading, and individual securities activities in fiscal 2002 as compared with
fiscal 2001. The decline in revenues in the LGSI's asset management business
reflected a decrease in customer assets under management and supervision.
The Board of Directors has continued its efforts to position Laidlaw in new
markets and ventures, while trying to optimize the business structure of
Laidlaw. These efforts have included the sale and closing of subsidiaries, where
it was determined that such efforts were in the best interest of the company as
a whole. Refer to "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Sale of Subsidiaries" included in the Form 10-KSB.
Management continues to focus its activities in areas that take into
consideration the operational structure of Laidlaw and the need to allocate
resources efficiently giving priority to ventures that can reasonably be
expected to self-finance on a short term basis. The current Laidlaw business
model is geared to maintain and enhance shareholder value through strategic
alliances and prudent marketing initiatives.
Results of Operations for the Three Months Ended March 31, 2002 and 2001
Laidlaw posted a loss of $0.7 million for the first quarter of 2002, compared to
the net loss of $1.5 million for the first quarter of 2001. While there was a
decrease in the net loss, losses continue due to the adverse economic conditions
experienced both domestically and internationally that persisted in the first
quarter of 2002 since the market decline that started the second half of 2000.
Generally weak stock prices in emerging markets, coupled with low trading
volume, adversely affected Laidlaw.
Domestically, the steep decline of Nasdaq had a great impact on Laidlaw, as its
institutional clients focused their investments in the technology sector. The
combination of sharp reduction in commission revenues from overseas markets, the
drop in volume received from institutional investors, and the sale of loss
generating subsidiaries in fiscal 2001 have resulted in a decrease of
approximately $0.3 million in net loss from operations in the first quarter of
2002 as compared to the first quarter of 2001. In addition , in March 2002, the
Company recorded a credit of $636,000 related to stock options subject to
variable pricing.
Basic and diluted loss per common share was $.02 in the quarter ended March 31,
2002 as compared to a basic and diluted loss per share of $.05 in the quarter
ended March 31, 2001.
Operations of three subsidiaries, Laidlaw Global Securities, Inc. Globeshare
Group, Inc., and Laidlaw International, S.A.,significantly contributed to the
loss incurred during the first quarter of fiscal 2002. Laidlaw Global
Securities, Inc. saw a sharp decrease in its commissions volume strictly related
to the market performance of the emerging global markets and the NASDAQ market
in the U.S. Globeshare Group, Inc. still incurred depreciation costs on the
remaining carrying value of computer hardware and software as well as interest
expense on the note payable which was fully paid in May, 2002 and the equipment
lease contracts. The Company incurred an additional expense of $35,264 in March
2002 pertinent to the final settlement of the closing down of the operations of
the Laidlaw International subsidiary as required by the French Administrator.
Laidlaw's income is derived form its operation in two principal segments of the
financial services industry, namely asset management and brokerage activities.
Income from those activities is summarized as follows.
Brokerage commission revenues which represent 54% and 49% of total revenues for
the first quarter of the fiscal years 2002 and 2001, respectively, are
geographically categorized as follows:
For the quarter ended March 31, 2002, LGSI generated revenues of $146,802 from
its activities on behalf of foreign and U.S. institutional customers in foreign
markets and $582,693 from its activities in the U.S. markets. For the quarter
ended March 31, 2001,
14
revenues of $631,529 were generated from the activities of Laidlaw Global
Securities on behalf of foreign and U.S.institutional customers in foreign
markets and revenues of $2,200,000 were generated from the activities of Laidlaw
Global Securities and Westminster in the U.S. markets. Globeshare generated
$112,540 revenues from online trading U.S. and overseas customers. The investors
transacting in the U.S. markets are both U.S. and non-U.S. entities and
individuals.
Asset Management fees from LGSI amount to $60,300 for the quarter ended March
31, 2002, which represents 4% of the Company's revenue. Asset Management fees
from Howe & Rusling and partly from LGSI amount to $1,333,280 for the quarter
ended March 31, 2001, which represents 29% the Company's revenue. Corporate
finance fees of LGSI for the quarter ended March 31, 2002 amount to $79,167,
which represents 6% of the Company's revenue. Trading profit of LGSI amount to
$432,639 for the quarter ended March 31, 2002, which represents 32% of the
Company's revenue. Trading profit of LGSI and Westminster amount to $838,926 for
the quarter ended March 31, 2001, which represents 18% of the Company's revenue.
Other revenue, which consists principally of interest income and rebates on
securities trades, amount to $53,682 and $178,906 for the quarters ended March
31, 2002 and 2001, respectively, which represent 4% of the Company's revenue for
both periods.
Laidlaw aims at diversifying its commission revenues by generating a large
portion of its revenues from an expanded retail customer business in LGSI.
Salaries and other employee costs for the quarter ended March 31, 2002 decreased
to $0.6 million from $2.1 million for the quarter ended March 31, 2001. The
decrease in this expense primarily relates to the reduction of personnel in
LGSI, the cessation of operations Globeshare, Inc. and Laidlaw International,
and the sale of Westminster and H & R Acquisition Corp.
The Company recorded a credit of $636,036 related to stock options subject to
variable pricing with a corresponding decrease to additional paid-in capital.
Commissions expense for the quarter ended March 31, 2002 decreased to $0.7
million from $1.3 million for the quarter ended March 31, 2001. The decrease is
attributable to the decrease in commission revenue.
Clearing expenses for the quarter ended March 31, 2002 decreased to $0.14
million from $0.26 million for the quarter ended March 31, 2001. Clearing
expenses, which primarily consist of amounts paid to the broker-dealers'
clearing agent for processing and clearing customers' trades, reflect the
decrease related to the decline in commission revenue.
Rent and utility expenses for the quarter ended March 31, 2002 decreased to $0.2
million from $0.4 million for the quarter ended March 31, 2001. Rent and utility
expenses include cost of leasing office space and space with our Internet
service provider. The decrease is primarily attributable to the rental income
received from Westminster Securities Corp. starting June 2001, the increase in
the rental income from the sublease of another office space in New York to a
non-affiliated party, the sale of H & R Acquisition Corp., and the cessation of
the Laidlaw International operations.
Depreciation and amortization expenses for the quarter ended March 31, 2002
decreased to $0.09 million from $0.5 million for the quarter ended March 31,
2001. Depreciation and amortization expenses, which include depreciation of
equipment and amortization of software development costs, decreased primarily
due to the asset write down recorded in 2001 to adjust Globeshare's investment
in computer hardware and customized application software to their net realizable
value and to the sale of Westminster and H & R Acquisition Corp.
Travel and entertainment expenses for the quarter ended March 31, 2002 increased
to $0.12 million from $0.08 million for the quarter ended March 31, 2001. The
increase in travel and entertainment expenses are attributed to the efforts of
management to obtain financing for the Company.
Professional fees for the quarter ended March 31, 2002 decreased to $0.3 million
from $0.4 million for the quarter ended March 31, 2001. The increase in
accounting fees and legal fees pertinent to the efforts of management in
negotiating funding for the firm and to the sale of assets and subsidiaries was
offset by the reduction of the fees paid by the Westminster and H & R
Acquisition Corp. subsidiaries.
Dues and assessments for the quarter ended March 31, 2002 decreased to $0.04
million from $0.2 million for the quarter ended March 31, 2001. The decrease in
dues and assessments resulted from reduction of the registration fees paid to
the NASD and the various states by LGSI with the resignation of certain
personnel and from the lower state corporate franchise taxes. The sale of
Westminster in June, 2001 and H & R acquisition Corp. in December, 2001 as well
as the cessation of the operations of Globeshare, Inc. and Laidlaw International
also contributed to the reduction of dues.
Communications and information systems expenses for the quarter ended March 31,
2002 decreased to $0.2 million from $0.5 million for the quarter ended March 31,
2001. Communications and information systems expenses, which include telephone,
quotes and other information costs, decreased due to the reduction of services
with the cessation of operations of Globeshare, Inc. in October, 2001 and the
sale of Westminster Securities effected in June 2001.
15
Interest expense for the quarter ended March 31, 2002 decreased to $0.03 million
from $0.08 million for the quarter ended March 31, 2001. The decrease in
interest expense resulted from the settlement of most of the borrowing by the
Company in 2001 and the elimination of the carrying cost charged by the clearing
broker of the Westminster subsidiary for its inventory positions.
There was no amortization of goodwill for the quarter ended March 31, 2002 as
compared to the $0.12 million charge for the quarter ended March 31, 2001. All
the goodwill were written off upon the sale of the Westminster and H & R
Acquisition Corp. subsidiaries.
In March 2002, the Company incurred an additional expense of $35,264 in
connection with the final settlement in closing the operations of the French
subsidiary as required by the French Administrator.
All other expenses for the quarter ended March 31, 2002 decreased to $0.07
million from $0.3 million for the quarter ended March 31, 2001. These expenses
consist, among other things, of office supplies, insurance, and other
miscellaneous expenses. The decrease in these expenses resulted from the reduced
cost of operations stemming from the contraction in the volume of operations,
the cessation of operations of Globeshare, Inc. and the sale of Westminster
effected on May 31, 2001and H & R Acquisition Corp.in December 28, 2001
Liquidity and Capital Resources
The Company has incurred continuing net loss from fiscal year ended December 31,
2001 through the first quarter of fiscal 2002. As a result of these matters, the
Company has continued to experience net cash outflows from operations. Although
the Company believes that it will have the resources to maintain its operations
through cost control measures which have been instituted, cash flow from
continuing growth of operations, and financial support from existing
shareholders which has been promised orally, the Company may need to seek
additional infusions of capital. Management is in discussion with prospective
investors to furnish such capital, but no definitive purchase agreements have
been executed and there is no assurance that we will be able to finalize such an
agreement.
In addition to the funding through private financing, the Company's strategic
plan to achieve improved profitability and liquidity focuses on the following:
Cost Containment: We will seek to continually minimize operating costs and
convert fixed costs to variable costs, where appropriate. Recently, decisions
were made to enhance the profitability of Laidlaw by reviewing and reorganizing
its operating infrastructure, which will result in significant expense
reduction. With the integration of the operations of Globeshare into Laidlaw
Global Securities, Laidlaw expects to achieve savings in employment costs and
other operational expenditures.
Brokerage: A focal point of our strategic incentive is to restructure and build
our brokerage base. Laidlaw will focus on the addition of new brokers in Laidlaw
Global Securities and increase the potential of attracting high net worth retail
and institutional sales producers.
If the cash flow problems continue and we are unable to obtain financing from
the sale of our equity and/or debt securities, the ability of the Company to
implement its strategic plan and continue the current levels of its operations
will be impaired.
The Balance Sheet
The following table sets forth our total assets, adjusted assets, leverage
ratios and book value per share. The purpose of illustrating these ratios is to
indicate the liquidity and financial position of Laidlaw for the quarter ended
March 31, 2002 despite the net loss incurred on a year to date basis. The
decrease in total assets as of March 31, 2002 compared to those as of December
31, 2001 attributed mainly to the loss sustained for the period.
As of As of
March 2002 December 2001
(in $ except for ratios)
Adjusted Assets (1) 4,810,169 6,646,118
Leverage Ratio (2) 10.38 3.76
Adjusted Leverage Ratio (3) 10.38 3.76
Book value per share (4) 0.02 0.36
Quick ratio (5) 0.88 1.14
16
(1) Adjusted assets represent total assets.
(2) Leverage ratio equals total assets divided by equity capital.
(3) Adjusted leverage ratio equals adjusted assets divided by equity capital.
(4) Book value per share was based on common shares outstanding at the end of
the respective periods.
(5) Quick ratio equals liquid assets divided by current liabilities.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Galacticomm Technologies, Inc. v. Laidlaw Global Securities, Inc.
The Company is a defendant in a legal matter involving the underwriting and
initial public offering of Galacticomm Technologies, Inc. ("Galacticomm")
shares. The Company acted as a member of a selling group, pursuant to which the
Company agreed to purchase 200,000 shares of Galacticomm at $5.40 per share and
200,000 warrants of Galacticomm at $0.09 per warrant. Additionally, the Company
agreed to guarantee the purchase of an additional 20,000 shares and warrants if
deemed necessary. Prior to the settlement of the IPO, the Company had satisfied
all its commitments as part of its agreement with the lead underwriters. Prior
to the settlement of the IPO, the lead underwriters aborted the IPO based upon
what they, in their sole discretion, believed was a declining market in the U.S.
and abroad. Pursuant to the underwriting agreement between Galacticomm and the
lead underwriters, the lead underwriters had the right, in their sole
discretion, to abort the IPO in the event of adverse conditions. Galacticomm
commenced suit against the underwriting group in a Florida state court seeking
damages for breach of the underwriting agreement. The Company believes that the
outcome of this matter would not have a material effect on the financial
position, results of operations or liquidity.
Greek Capital Market Commission vs. Laidlaw Global Corporation, Inc.
The Company has been named, as well as its subsidiary Laidlaw Global Securities,
in an administrative proceeding involving the Greek Capital Market Commission
("CMC"). In early 2000, representatives of the Company were introduced to a
representative of Elektra S.A. ("Elektra"), an entity whose securities are
publicly traded in Greece, in order to discuss a business strategy by which the
Company would assist in the sale of a significant amount of Elektra's shares by
certain of its stockholders. Following meetings with such persons, Elektra
announced in the spring of 2000 that its principal shareholders would sell up to
3,000,000 shares of its stock. On March 28, 2000, Elektra sold two million
shares of its stock to institutional investors through a Greek brokerage firm,
Contalexis Financial Services.
On February 28, 2001, the CMC, an administrative body which reviews securities
issues in Greece, found that Laidlaw Global Securities violated certain
notification requirements to the CMC and Elektra. According to the CMC's
findings, the Company (i) failed to notify the CMC and Elektra of the March 28,
2000 acquisition of Elektra shares and (ii) failed to notify the
17
Athens Stock Exchange of the Company's assignment of voting rights and
participation of share capital in Elektra. The Company believes that, since
neither it nor any subsidiary, including the Company, ever owned shares of
Elektra, and for the other reasons set forth below, both of these findings are
without merit and factually inaccurate and will be overturned on appeal.
Additionally, the CMC found that a representative of the Company falsely stated
to the public that the Company was interested in holding Elektra shares two days
prior to selling such shares. Since the Company never held shares of Elektra,
management believes that such statements were misquoted by the Greek press. The
subsidiary Laidlaw Global Securities and the Company have been assessed fines
and penalties aggregating 1,257,168 Euros (US$1,119,004).
These fines were levied after reviewing response letters filed by the Company's
Greek counsel. Greek counsel to the Company will be filing Remedy Petitions
before the CMC against the decisions assessing the fines, which is a form of an
administrative proceeding. In the event the Remedy Petitions are rejected by the
CMC, the Parent will file Writs of Annulment before the Conseil d'Etat, which is
the Greek Court having jurisdiction over such matters. Since neither the
Company, nor any of its subsidiaries, has (i) ever owned shares of Elektra, (ii)
ever acted as a principal or agent for the purchase or sale of shares of
Elektra, (iii) acted as a broker-dealer of securities of Elektra, or (iv) ever
stated, publicly or otherwise, that it, or any of its subsidiaries, did hold, or
intended to hold or own, shares of Elektra, it believes that the findings of the
CMC will be overturned on appeal. The Company's counsel in Greece has advised
that in their opinion, the fines imposed by the CMC are civil fines and can only
be enforced against the assets of the Company in Greece. Further, they advise
that any enforcement of fine in the United States would require commencing a new
action in the United States.
Plural, Inc. vs. Laidlaw Global Corporation, et. al.
In November, 2001, Plural instituted action in the New York State Supreme Court
for services rendered pursuant to a computer consulting agreement. Plural claims
approximately $700,000 is due them pursuant to the agreement. The Company claims
the services did not meet the terms of the agreement and plan to counterclaim
for monies previously paid to Plural.
In February, 2002, the French Commission Bancaire required a capital increase of
2 million Euros in order to maintain LI in compliance with French Net Capital
Regulations. The deadline imposed by the French regulatory authority being very
short, Laidlaw Global Corporation was unable to access additional capital prior
to the nomination of an Administrator by the Commission Bancaire.
Effective April 11, 2002, the French Administrator committed to a process of
liquidation. Accordingly, the Company recognized a loss as of December 31, 2001
from the write-off of all its investment in the French subsidiary amounting to
$634,562. Additional liability resulting from this liquidation, if any, cannot
presently be determined.
On March 5, 2002, Grant Thornton LLP ("Grant") notified the Laidlaw Board of
Directors that pursuant to Section 10A of the Exchange Act of 1934 (the "Grant
Report"), in their belief, an illegal act or acts may have occurred at Laidlaw
during 2001 with respect to the repricing of stock options. Grant alleged in
part that neither management nor the Board of Directors had taken sufficient
steps to determine whether an illegal act had occurred within the meaning of
Section 10A of the Exchange Act of 1934 and, accordingly, Grant notified the
Securities and Exchange Commission (SEC). The Company has been notified that the
SEC has commenced an informal investigation into this matter.
The Company is subject to various other legal actions and claims arising out of
the conduct of its business. Management of the Company, after consultation with
outside legal counsel, believes that the resolution of these proceedings will
not result in any material adverse effects on the
18
Company's financial position. In the opinion of management of the Company,
amounts accrued in connection with these matters are adequate.
ITEM 5. OTHER INFORMATION
Laidlaw has received notice from NASD Regulation, Inc. ("NASD"), that its staff
has made a preliminary determination to recommend that disciplinary action be
brought against Laidlaw's subsidiary Laidlaw Global Securities, Inc., for
allegedly violating certain NASD Conduct Rules by engaging in sales of
unregistered securities of Laidlaw during the period June 9-September 9, 1999.
The notice permits us to file a statement with the NASD setting forth why such
an action should not be brought and we intend to do so.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
2.1 Amended and Restated Plan and Agreement of Reorganization
by and among Laidlaw Holdings, Inc., Fi-Tek V, Inc.,
Westminster Securities Corporation and shareholders of the
companies, dated May 27, 1999(1)
3.1 Certificate of Incorporation of Laidlaw and amendments
thereto(2)
3.2 By-Laws of Laidlaw(2)
4.1 Specimen Laidlaw Common Stock Certificate(2)
4.2 Specimen Fi-Tek V, Inc. Class A Warrant(2)
4.3 Specimen Fi-Tek V, Inc. Class B Warrant(2)
10.1 Employment Agreement between Registrant and Anastasio
Carayannis, dated as of January 1, 2000(3)
10.2 Employment Agreement between Registrant and Roger Bendelac,
dated as of January 1, 2000(3)
10.3 Employment Agreement between Registrant and Daniel
Bendelac, dated as of January 1, 2000(3)
10.4 Exchange Agreement to acquire Laidlaw Pacific, dated
May 20, 1999(4)
10.5 Amendment to Exchange Agreement to acquire Laidlaw Pacific,
dated March 29, 2000(4)
10.6 Employment Agreements between Registrant
and Roger Bendelac dated as of July 12, 2001.
10.7 Employment Agreements between
Registrant and Harit Jolly dated as of July 12, 2001.
21.1 List of Subsidiaries of Laidlaw Global Corporation(5)
23.1 Consent of Independent Auditor.(5)
23.2 Consent of Independent Auditor.(5)
----------
(1) Such document is hereby incorporated herein by reference to
Laidlaw's Current Report on Form 8-K dated June 8, 1999.
(2) Such document is hereby incorporated herein by reference to
Laidlaw's Registration Statement on Form 8-A filed October 15, 1999.
19
(3) Such document is hereby incorporated herein by reference to
Laidlaw's Registration Statement on Form SB-2 filed February 14,
2000.
(4) Such document is hereby incorporated herein by reference to
Laidlaw's Current Report on Form 8-K filed April 12, 2000.
(5) Such document is incorporated by reference to Laidlaw's Annual
Report on Form 10-KSB filed on May 17, 2002.
(b) Reports on Form 8-K
On January 29, 2002, Registrant filed a Current Report primarily relating
to the sale of its entire stock interest in H & R Acquisition Corp.
On March 11, 2002, Registrant filed a Current Report stating that its
independent accountant had resigned and that Richard A. Eisner & Company, LLP
had been engaged as its new independent accountants. Pursuant to Section 10A of
the Exchange Act of 1934, the prior accountants filed a report with the
Securities and Exchange Commission("SEC") stating that an illegal act or acts
may have occurred at the Registrant during 2001. The acts referred to the
cancellation and pricing of stock options. The report stated in part "that
neither management nor the Board of Directors had taken sufficient steps to
determine whether or not an illegal act has occurred. The report continued that
"without the ability to determine the accurate facts and circumstances", the
accountants "would be unable to issue an audit report." The Registrant engaged
an independent director and counsel to look into the matter and both persons
concluded that "no unlawful or deceptive practices, or fraudulent conduct" was
engaged in by the Registrant. The Registrant filed its response with the SEC
vigorously rejecting the contentions in the report.
On March 29, 2002, Registrant filed an amendment to the Current Report
filed on March 11th. The amendment included as an exhibit, a letter from its
prior accountant stating whether it agreed or disagreed with the statements made
by the Registrant in the original report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
LAIDLAW GLOBAL CORPORATION
May 30, 2002 By: /s/ Roger Bendelac
--------------------------
Roger Bendelac,
Chief Executive Officer
20