SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2003
| ¨ | 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 1-15831
MCF CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 11-2936371 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| 601 Montgomery Street, 18th Floor San Francisco, California |
94111 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(415) 248-5600
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ¨ No x
As of August 5, 2003, 26,888,526 shares of the registrant’s common stock, $0.0001 par value, were outstanding.
Form 10-Q
For the Six Months Ended June 30, 2003
| Page No. | ||||||
| PART I |
FINANCIAL INFORMATION |
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| ITEM 1. | Financial Statements (unaudited) |
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| 2 | ||||||
| Condensed Consolidated Statements of Financial Condition as of June 30, 2003 and December 31, 2002 |
3 | |||||
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002 |
4 | |||||
| 5 | ||||||
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | ||||
| ITEM 3. | 25 | |||||
| ITEM 4. | 25 | |||||
| PART II |
OTHER INFORMATION |
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| ITEM 1. | 26 | |||||
| ITEM 4. | 26 | |||||
| ITEM 6. | 26 | |||||
| 28 | ||||||
| Certifications |
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1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
MCF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended |
Six Months Ended |
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| June 30, 2003 |
June 30, 2002 |
June 30, 2003 |
June 30, 2002 |
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| Revenue: |
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| Commissions |
$ | 1,722,758 | $ | 1,678,516 | $ | 3,002,599 | $ | 2,201,101 | ||||||||
| Principal transactions |
516,183 | 106,168 | 731,523 | 124,776 | ||||||||||||
| Investment banking |
340,865 | 220,743 | 712,740 | 246,416 | ||||||||||||
| Other |
— | 3,300 | — | 28,827 | ||||||||||||
| Total revenue |
2,579,806 | 2,008,727 | 4,446,862 | 2,601,120 | ||||||||||||
| Operating expenses: |
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| Compensation and benefits |
1,778,884 | 1,478,743 | 3,166,820 | 2,387,334 | ||||||||||||
| Brokerage and clearing fees |
263,533 | 238,030 | 566,053 | 395,572 | ||||||||||||
| Professional services |
144,886 | 129,917 | 228,975 | 270,036 | ||||||||||||
| Occupancy and equipment |
85,809 | 44,797 | 159,981 | 125,220 | ||||||||||||
| Communications and technology |
200,121 | 57,008 | 384,942 | 88,292 | ||||||||||||
| Depreciation and amortization |
17,049 | 100,281 | 32,279 | 199,375 | ||||||||||||
| Other |
343,248 | 358,180 | 780,061 | 537,965 | ||||||||||||
| Total operating expenses |
2,833,530 | 2,406,956 | 5,319,111 | 4,003,794 | ||||||||||||
| Operating loss |
(253,724 | ) | (398,229 | ) | (872,249 | ) | (1,402,674 | ) | ||||||||
| Interest income |
7,633 | 12,221 | 11,734 | 27,717 | ||||||||||||
| Interest expense |
(1,083,990 | ) | (363,848 | ) | (1,296,061 | ) | (727,620 | ) | ||||||||
| Gain on retirement of convertible note payable |
3,088,230 | — | 3,088,230 | — | ||||||||||||
| Income (loss) from continuing operations |
1,758,149 | (749,856 | ) | 931,654 | (2,102,577 | ) | ||||||||||
| Loss from discontinued operations |
— | — | — | (262,843 | ) | |||||||||||
| Net income (loss) |
$ | 1,758,149 | $ | (749,856 | ) | $ | 931,654 | $ | (2,365,420 | ) | ||||||
| Basic net income (loss) per share: |
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| Income (loss) from continuing operations |
$ | 0.05 | $ | (0.04 | ) | $ | 0.01 | $ | (0.11 | ) | ||||||
| Income (loss) from discontinued operations |
$ | — | $ | — | $ | — | $ | (0.01 | ) | |||||||
| Net income (loss) |
$ | 0.05 | $ | (0.04 | ) | $ | 0.01 | $ | (0.12 | ) | ||||||
| Diluted net income (loss) per share: |
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| Income (loss) from continuing operations |
$ | 0.04 | $ | (0.04 | ) | $ | 0.01 | $ | (0.11 | ) | ||||||
| Income (loss) from discontinued operations |
$ | — | $ | — | $ | — | $ | (0.01 | ) | |||||||
| Net income (loss) |
$ | 0.04 | $ | (0.04 | ) | $ | 0.01 | $ | (0.12 | ) | ||||||
| Weighted average common shares outstanding: |
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| Basic |
26,120,020 | 20,292,922 | 24,827,978 | 20,111,950 | ||||||||||||
| Diluted |
32,846,345 | 20,292,922 | 27,286,542 | 20,111,950 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
2
MCF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
| June 30, 2003 |
December 31, 2002 |
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| ASSETS |
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| Cash and cash equivalents |
$ | 2,989,759 | $ | 1,402,627 | ||||
| Securities owned: |
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| Marketable, at fair value |
1,233,512 | 764,421 | ||||||
| Not readily marketable, at estimated fair value |
22,903 | 16,067 | ||||||
| Restricted cash |
610,240 | 610,240 | ||||||
| Due from clearing broker |
172,198 | 124,053 | ||||||
| Accounts receivable, net |
54,549 | 27,661 | ||||||
| Equipment and fixtures, net |
150,781 | 49,216 | ||||||
| Debt issuance costs |
74,396 | 612,673 | ||||||
| Prepaid expenses and other assets |
367,479 | 162,169 | ||||||
| Total assets |
$ | 5,675,817 | $ | 3,769,127 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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| Accounts payable |
$ | 320,871 | $ | 112,041 | ||||
| Commissions payable |
563,310 | 325,351 | ||||||
| Accrued liabilities |
728,428 | 342,454 | ||||||
| Due to clearing and other brokers |
22,345 | 63,550 | ||||||
| Securities sold, not yet purchased |
176,595 | — | ||||||
| Deferred revenue |
25,000 | — | ||||||
| Capital lease obligation |
4,456 | — | ||||||
| Convertible notes payable, net |
1,142,159 | 8,055,085 | ||||||
| Notes payable |
1,449,122 | 400,000 | ||||||
| Total liabilities |
4,432,286 | 9,298,481 | ||||||
| Commitments and contingencies |
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| Stockholders’ equity (deficit): |
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| Preferred stock, Series A - $0.0001 par value; 2,000,000 shares authorized; 619,999 and 499,999 shares issued and outstanding as of June 30, 2003 and December 31, 2002, respectively; aggregate liquidation preference of $1,899,010 as of June 30, 2003 |
62 | 50 | ||||||
| Preferred stock, Series B - $0.0001 par value; 12,500,000 shares authorized; 8,750,000 shares issued and outstanding as of June 30, 2003; aggregate liquidation preference of $13,125 as of June 30, 2003 |
875 | — | ||||||
| Preferred stock, Series C - $0.0001 par value; 14,200,000 shares authorized; 11,800,000 shares issued and outstanding as of June 30, 2003; aggregate liquidation preference of $1,875 as of June 30, 2003 |
1,180 | — | ||||||
| Common stock, $0.0001 par value; 300,000,000 shares authorized; 26,673,526 and 23,521,580 shares issued and outstanding as of June 30, 2003 and December 31, 2002, respectively |
2,667 | 2,352 | ||||||
| Additional paid-in capital |
92,617,727 | 86,156,666 | ||||||
| Accumulated deficit |
(91,015,327 | ) | (91,324,769 | ) | ||||
| Treasury stock |
(363,653 | ) | (363,653 | ) | ||||
| Total stockholders’ equity (deficit) |
1,243,531 | (5,529,354 | ) | |||||
| Total liabilities and stockholders’ equity (deficit) |
$ | 5,675,817 | $ | 3,769,127 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
MCF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Six Months Ended June 30, |
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| 2003 |
2002 |
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| Cash flows from operating activities: |
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