RNS Number:0517Q
Sky Capital Holdings Limited
23 September 2003
SKY CAPITAL HOLDINGS LTD.
("Sky" or the "Company")
Audited Results for the Year Ended 31 March 2003
Highlights
* Substantial increase in revenues generated month on month
* The acquisition in February 2003 of Everett Financial Limited
* Conditional agreement to acquire Cardinal Capital Management Inc.
* Further expansion in New York office
* Trading activities now comprise retail broking (institutional and private
clients,) proprietary trading, fixed income trading and research
* Ranked number one by Investars for equity research for the period 11 July
2002 to 10 July 2003 - total return of 63.47%
Thomas McMillen, Chairman, commented:
"We have seen a substantial increase in our monthly revenues since we began
trading in August 2002 and I am delighted that we were ranked number one by
Investars for the period 11 July 2002 to 10 July 2003 for our equity research
performance. We have a very sound infrastructure, which will enable us to grow
the business strongly during the current financial year, which I look to with
confidence."
For further details, please contact:
Thomas McMillen
Chairman of Sky Capital Holdings Ltd
020 7623 6677
Adam Reynolds
Hansard Communications
020 7245 1100
Chairman's statement
The year under review has been one of intense growth. We began trading in
August 2002 and, from a base of US$ 11,000 revenue a month from retail
commission, we closed the year at monthly revenues of nearly US$ 1,300,000 from
US operations. The group's unaudited management accounts for the five-month
period, April to August 2003, show revenues in excess of US$ 12.0 million.
The US operations have expanded greatly and we currently employ eighty-four
people in our New York headquarters. The business specialises in retail broking
for institutions and private clients, proprietary trading, fixed income trading
and research. In July of this year Sky Capital LLC was ranked as the number one
equity research firm with a total return of 63.47 per cent. by Investars (an
independent agency that ranks the return of brokerage firms' research).
In February we completed the acquisition of Everett Financial Limited in the UK
(now called Sky Capital UK Limited) and we are focusing on building the revenue
stream of this operation. We have recruited a number of experienced individuals
and it is our belief that during the second half of the current financial year
we will see a significant contribution from this operation.
We have entered into a conditional agreement to acquire the entire issued share
capital of Cardinal Capital Management Inc, which would expand our interests in
Florida. We are currently awaiting regulatory approval from the NASD regarding
the change of control status and we expect a decision by early 2004.
Outlook
The current year has started very strongly and we are making substantial
progress. The management team we have in place are of a very high calibre, and
it is mine, and my Board's belief that we will have a successful year ahead of
us. I look forward to reporting further progress to you over the coming months.
Thomas McMillen
Chairman
CONSOLIDATED BALANCE SHEET
(expressed in U.S. dollars)
March 31, 2003
ASSETS
Current assets:
Cash and cash equivalents $ 1,151,000
Due from clearing broker 1,171,000
Securities owned, at market value 430,000
Prepaid expenses and other assets 438,000
Total current assets 3,190,000
Fixed assets, net of accumulated
depreciation and amortization 1,639,000
Note receivable - Dorchester Holdings, Ltd., net
Intangible assets 1,748,000
Restricted certificate of deposit 103,000
Other assets 502,000
$ 7,182,000
LIABILITIES
Current liabilities:
Securities sold, but not yet purchased,
at market value $ 208,000
Accrued interest payable to
Sky Venture Capital, Inc. 22,000
Accounts payable and accrued expenses 1,303,000
Due to Sky Venture Capital, Inc. 38,000
Total current liabilities 1,571,000
Deferred rent 62,000
1,633,000
Commitments and contingency
STOCKHOLDERS' EQUITY
Preferred stock - $.0001 par value; 4,000,000 shares authorized;
1,105,000 Series A preferred shares issued and outstanding
(liquidation preference of $3,319,000)
Common stock - $.0001 par value;
75,000,000 shares authorized; 17,149,658
shares issued and outstanding 2,000
Additional paid-in capital 14,815,000
Accumulated deficit (7,979,000)
Accumulated other comprehensive loss
- foreign currency translation (92,000)
Unearned employee stock-based compensation (1,197,000)
5,549,000
$ 7,182,000
CONSOLIDATED STATEMENT OF OPERATIONS
(expressed in U.S. dollars)
Year ended March 31, 2003
Revenue:
Commission, net $ 1,891,000
Net realized and unrealized
gain on marketable securities 1,260,000
Interest income 34,000
Private placement income 1,714,000
Other income 560,000
5,459,000
Costs and expenses:
General and administrative 13,066,000
Interest expense 22,000
Loan loss reserve - Dorchester Holdings, Ltd. 350,000
13,438,000
Net loss (7,979,000)
Preferred stock beneficial conversion feature (28,000)
Preferred stock dividend in arrears (4,000)
Net loss attributable to common stockholders $ (8,011,000)
Basic and diluted loss per common share $ (0.51)
Weighted average number of common shares
outstanding - basic and diluted 15,791,000
CONSOLIDATED STATEMENT OF CASH FLOWS
(expressed in U.S. dollars)
Year ended March 31, 2003
Cash flows from operating activities:
Net loss $ (7,979,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Expenses paid by Sky Capital Ventures, Ltd. 69,000
Depreciation and amortization 186,000
Loan loss reserve - Dorchester Holdings, Ltd. 350,000
Compensation charge in connection with grant of options 1,136,000
Changes in:
Due from clearing broker (1,171,000)
Securities owned (430,000)
Securities sold, but not yet purchased 208,000
Prepaid expenses and other assets (657,000)
Accounts payable and accrued expenses 953,000
Due to Sky Venture Capital, Inc. 38,000
Accrued interest payable to Sky Venture Capital, Inc. 22,000
Net cash used in operating activities (7,275,000)
Cash flows from investing activities:
Additions to fixed assets (1,031,000)
Advance to Sky Capital Ventures, Ltd. (750,000)
Receipt from Sky Capital Ventures, Ltd 750,000
Note receivable - Dorchester Holdings Ltd. (350,000)
Payment for acquisition (net of $485,000 cash acquired) (507,000)
Net cash used in investing activities (1,888,000)
Cash flows from financing activities:
Cash included in assets contributed by
Sky Capital Ventures, Ltd. 2,089,000
Proceeds from issuance of convertible notes 2,100,000
Net proceeds from the issuance of preferred stock 1,091,000
Net proceeds from the issuance of common stock 5,094,000
Net cash provided by financing activities 10,374,000
Effect of exchange rate changes on cash (65,000)
Net increase in cash and cash equivalents 1,146,000
Cash and cash equivalents at beginning of year 5,000
Cash and cash equivalents at end of year $ 1,151,000
Supplemental disclosures of noncash transactions:
Contribution of certain assets by
Sky Capital Ventures, Ltd.:
Carrying value of membership interest in
Sky Capital LLC (including cash of $1,998,000) $ 1,891,000
Fixed assets at historical carrying amount $ 727,000
Accountability regarding the carrying value
of Capital stock of Sky Capital Limited
(including cash of $91,000) $ (63,000)
Loan receivable from Sky Capital Limited $ 200,000
Conversion of notes into preferred stock $ 2,100,000
Contribution of certificate of deposit $ 103,000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Basis of presentation and consolidation
The financial statements include the accounts of the Company and
its wholly owned subsidiaries. All material intercompany transactions and
account balances have been eliminated in consolidation.
2. Cash and cash equivalents
The Company considers all highly liquid short-term investments with
original maturities of three months or less when purchased to be cash
equivalents.
3. Valuation of securities
In accordance with the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"), securities held by Sky are classified either as
trading, held-to-maturity or available-for-sale.
Unrealized gains and losses on securities held by Sky USA are
recognized as gains or losses in the consolidated statement of operations.
Securities owned, which are listed on a national securities exchange, are valued
at their last reported sales price. Securities owned which trade
over-the-counter are valued at the "bid" price. Securities sold, but not yet
purchased have been recorded at their last reported sales price.
The values of securities owned by the Company can change
substantially because of volatility in the price of each security, changes in
the business prospects of the issuer of the securities, specific events
influencing the operations of the issuer of the securities, and various other
circumstances outside the security issuer's control. Accordingly, the value of
the securities could decline so that a loss would be required to be recognized
for the total carrying amount of such securities.
4. Fixed assets
Furniture, fixtures, and computer equipment are recorded at cost
(which represents the carryover basis for assets obtained from Sky USA and Sky
UK) less accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets which range
from five to seven years. Leasehold improvements are amortized over the lesser
of the economic useful life of the improvement or the term of the lease.
5. Revenue recognition
Consulting and private placement fees are recorded when earned. The
Company may earn fees in the form of securities. These securities are valued at
market or measured at their estimated fair value on the date they are earned.
Security transactions are recorded on a trade date basis.
Commission income is recognized on a trade date basis.
Dividend income is recognized on the ex-dividend date and interest
income is recorded when earned.
6. Deferred rent
The Company leases office space under a lease that provides for a
free rent period and rent increases over the term of the lease. The Company
records rent expense on a straight-line basis. The difference between cash paid
and rent expense is recorded as deferred rent.
7. Net loss per common share
Net loss per common share is based on the weighted average number
of common shares outstanding during the year. Potential shares of common stock
represent options, warrants and convertible securities which have not been
included in the calculation of net loss per share since they would be
antidilutive. At March 31, 2003 there were approximately 2,870,000 potential
shares.
However, when preferred stock is convertible into common stock at
an effective conversion rate that represents a discount from that of common
stock market price at the time of issuance, the discounted amount is an assured
incremental yield to the preferred shareholders and is accounted as an embedded
dividend to preferred shareholders.
8. Stock-based compensation
The Company accounts for its employee stock-based compensation
using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25 and related interpretations, whereby compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company's common stock at the date of grant over the amount employees must pay
to acquire the stock.
Net loss attributable to common stockholders $(8,011,000)
Stock-based employee compensation expense included in
reported net loss, net of related tax effects 718,000
Stock-based employee compensation determined under the fair
value based method, net of related tax effects method for
all awards, net of related tax effects (880,000)
Pro forma net loss attributable to common shareholders $(8,173,000)
Net loss per common share (basic and diluted):
As reported $(0.51)
Pro forma $(0.52)
The weighted-average fair value at date of grant for employee stock
options granted during the year ended
March 31, 2003 was $1.74 and was estimated using the Black-Scholes
option pricing model utilizing the following assumptions: stock price of
$2.90-$4.12, risk-free interest rates of 2.94%-3.46%, volatility of 30%, term of
five years subject to vesting over 2 years and expected dividend yield of 0.0%.
9. Foreign currency
The functional currency of the Company's United Kingdom subsidiary
is the British Pound. Accordingly, the financial statements for the subsidiary's
operations are translated into US dollars at period-end exchange rates for
assets and liabilities, and weighted average exchange rates for revenue and
expenses. The effects of foreign currency translation adjustments are includable
as a component of stockholders' equity, and gains and losses resulting from
foreign currency transactions are includable in net loss. For the year ended
March 31, 2003, foreign currency gains and losses were not material.
10. Use of estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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.
11. Income taxes
The Company accounts for income taxes under the provisions of SFAS
No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company may be subject to tax in
foreign jurisdictions.
12. Intangible assets
The excess of the consideration paid over the fair value of net
assets (including identifiable intangibles) acquired in business combinations is
recorded as goodwill.
In accordance with Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets", goodwill and intangible assets with
indefinite useful lives are not authorized but tested for impairment at least
annually and whenever there is an impairment indicator.
23 September 2003
Contact Details
Ross Mandell - Chief Executive Tel: (00 1) 212 709 1900
Sky Capital Holdings Ltd
www.skycapitalholdings.com
Adam Reynolds / Ben Simons Tel: 020 7245 1100
Hansard Communications ben@hansardcommunications.com
www.hansardcommunications.com
This information is provided by RNS
The company news service from the London Stock Exchange
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