VIE FINANCIAL GROUP INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended December 31, 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: 001-11747

VIE FINANCIAL GROUP, INC.


Delaware		22-6650372
(State of incorporation)		(I.R.S. Employer Identification No.)

1114 AVENUE OF THE AMERICAS, 22^ND FLOOR

NEW YORK, NEW YORK 10036

(212) 575-8200

1835 MARKET STREET, SUITE 420

PHILADELPHIA, PENNSYLVANIA 19103

(215) 789-3300

(Former address of principal executive offices)

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 by Exchange Act Rule 12b-2) Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practical date:


Common Stock $.01 par value		695,971,046
(Title of Class)		(No. of shares as of February 17, 2004)

VIE FINANCIAL GROUP, INC.

INDEX


		PAGE

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets - December 31, 2003 and March 31, 2003	4

	Consolidated Statements of Operations - For the Three and Nine Months Ended December 31, 2003 and 2002	5

	Consolidated Statements of Cash Flows - For the Nine Months Ended December 31, 2003 and 2002	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

	Additional Factors that may Affect Future Results	27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

Item 4.	Controls and Procedures	36

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 2.	Changes in Securities and Use of Proceeds	37

Item 5.	Other Information	37

Item 6.	Exhibits and Reports on Form 8-K	38

Signatures		39

PART I - FINANCIAL INFORMATION

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this document constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance, or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others:

•

our ability to become profitable and continue as a “going concern”;

•

availability and terms of debt and/ or equity capital to fund our operations;

•

our dependence on arrangements with our clearing firm, external liquidity sources, execution venues and self-regulatory organizations;

•

changes in business strategy or development plans;

•

our dependence on proprietary and third-party technology and demand for such technology;

•

fluctuations in securities trading volumes, prices and market liquidity;

•

industry trends;

•

our ability to broaden our customer mix;

•

competition;

•

our ability to expand existing and develop new markets for our products;

•

our ability to develop intended future products;

•

availability and retention of qualified personnel;

•

changes in government regulation;

•

general economic and business conditions; and

•

other risk factors referred to in this Form 10-Q under the heading “Additional Factors That May Affect Future Results”.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” or “continue” or other forms of or the negative of those terms or other comparable terms.

Although we believe that the expectations reflected in the forward-looking statements are based on reasonable assumptions, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We do not have a duty to update any of the forward-looking statements after the date of this filing.

ITEM 1.

FINANCIAL STATEMENTS

VIE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31, 2003			March 31, 2003
	(Unaudited)			(Audited)
Assets
Cash and cash equivalents	$	3,333,035		$	2,250,601
Securities owned, at fair value		—			7,114
Receivables from brokers, dealers and other		595,056			736,306
Prepaid expenses and other current assets		231,711			128,703

Total current assets		4,159,802			3,122,724
Property and equipment, net of accumulated depreciation		118,696			811,339
Exchange memberships		12,000			159,752
Debt issuance costs		—			40,960
Other assets		393,674			465,290

Total assets	$	4,684,172		$	4,600,065

Liabilities and Stockholders’ Deficiency
Accounts payable and accrued expenses	$	1,181,035		$	1,068,386
Payables to brokers, dealers and others		—			97,374
Securities sold, not yet purchased, at fair value		—			353,604
Accrued severance and current portion of lease termination liability		321,409			—
Net liabilities of discontinued operations		61,251			60,841

Total current liabilities		1,563,695			1,580,205
Secured note		4,640,413			4,150,370
Secured convertible note		1,031,019			673,064
Subordinated convertible notes		—			2,130,772
Lease termination liability, net of current portion		543,592			0
Other liabilities		28,306			105,449

Total liabilities		7,807,025			8,639,860

Commitments and contingencies
Preferred Stock – shares authorized: 3,000,000
590,000 shares designated as Series B – (liquidation preference equals $240,000); shares issued and outstanding; 24,000		240,000			240,000
100,000 shares designated as Series G – par value: $0.01; shares issued and outstanding: 12,013		120			—
100,000 shares designated as Series H – par value: $0.01; shares issued and outstanding: 75,562		756			—
Common stock - par value: $.01; shares authorized: 1,000,000,000; shares issued and outstanding: 695,971,046 and 691,674,817		6,959,711			6,916,749
Additional paid-in capital		97,162,434			85,357,668
Accumulated deficit		(107,445,162	)		(96,513,500	)
Accumulated other comprehensive loss		(40,712	)		(40,712	)

Total stockholders’ deficiency		(3,122,853	)		(4,039,795	)

Total liabilities and stockholders’ deficiency	$	4,684,172		$	4,600,065

The accompanying notes are an integral part of these consolidated financial statements.

VIE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended December 31,						Nine Months Ended December 31,
	2003			2002			2003			2002
Revenues	$	2,208,800		$	830,119		$	6,937,589		$	1,668,061

Expenses:
Salaries and employee benefits		863,004			1,423,891			3,347,881			4,137,918
Professional fees		278,947			368,678			717,749			1,074,525
Brokerage, clearing and exchange fees		1,256,986			403,900			3,898,539			1,151,915
Depreciation and amortization		68,698			208,750			335,062			636,578
Non-cash compensation charges		—			—			—			720,000
Loss on trading activities		165,939			114,522			1,782,513			265,866
Selling, general and administrative		613,309			789,751			1,959,559			2,250,351
Restructuring charges		1,342,341			—			1,342,341			—

Total costs and expenses		4,589,224			3,309,492			13,383,644			10,237,153

Loss from operations		(2,380,424	)		(2,479,373	)		(6,446,055	)		(8,569,092	)

Interest income		1,749			8,380			9,630			44,717
Interest expense		(631,305	)		(351,972	)		(1,485,147	)		(1,132,668	)
Debt issue costs		—			—			(6,642	)		—
Other income (expense)		—			—			(47,793	)		1,087
Equity in loss of affiliates		—			(974	)		(1,619	)		(233,852	)

Net loss from continuing operations	$	(3,009,980	)	$	(2,823,939	)	$	(7,977,626	)	$	(9,889,808	)

Loss from discontinued operations of eMC		(390	)		(121	)		(410	)		(840	)

Net loss	$	(3,010,370	)	$	(2,824,060	)	$	(7,978,036	)	$	(9,890,648	)

Dividends attributed to preferred stock		(1,736,009	)		—			(2,937,355	)		—
Dividends in arrears on preferred stock		(5,444	)		(5,444	)		(16,272	)		(16,272	)

Net loss applicable to common stock	$	(4,751,823	)	$	(2,829,504	)	$	(10,931,663	)	$	(9,906,920	)

Basic and diluted net loss per common share from continuing operations	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.02	)
Basic and diluted net income per common share from discontinued operations	$	0.00		$	0.00		$	0.00		$	0.00
Basic and diluted net loss per common share	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.02	)

Weighted average number of common shares outstanding, basic and diluted		695,971,046			691,674,817			695,023,260			606,197,039

The accompanying notes are an integral part of these consolidated financial statements.

VIE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended December 31,
	2003			2002
Cash Flows from Operating Activities
Net loss from continuing operations	$	(7,977,626	)	$	(9,889,808	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		335,062			636,578
Common stock issued in connection with consulting agreement		—			41,250
Common stock issued in connection with separation agreement		—			720,000
Non-cash interest expense		1,477,995			1,129,981
Equity in loss of affiliates		1,619

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