-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fp1OjRD0SLeJxpcXKP7VLEwIqRj6Y0m2dGfRF1AchvoWeFjkYVTmPmuJ4qfo/Wi9 Etn0gKVW7zVqOwRQBvYJFw== 0000950172-96-000489.txt : 19960816 0000950172-96-000489.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950172-96-000489 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINANCIAL SERVICES ACQUISITION CORP /DE/ CENTRAL INDEX KEY: 0000931707 STANDARD INDUSTRIAL CLASSIFICATION: LOAN BROKERS [6163] IRS NUMBER: 593262958 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25056 FILM NUMBER: 96613460 BUSINESS ADDRESS: STREET 1: 667 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10021 BUSINESS PHONE: 2122461000 MAIL ADDRESS: STREET 1: 667 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10021 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d of the Securities Exchange Act of 1934 For the Quarterly period Ended June 30, 1996 Commission File Number 0-25056 FINANCIAL SERVICES ACQUISITION CORPORATION (Exact name of registrant as specified in its charter) Delaware 59-3262958 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 667 Madison Avenue New York, New York 10021 (Address of principal executive office) (212) 317-1000 (Registrant's telephone number, including area code) Indicate by check mark whether 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 registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No_______ The number of shares of common stock, par value $.001 per share, of registrant outstanding as of August 14, 1996 was 4,416,666. The Exhibit Index is on Page 20 FINANCIAL SERVICES ACQUISITION CORPORATION INDEX PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited): Contents F-2 Balance Sheets F-3 Statements of Operations F-4 Statement of Common Stock, Common Stock Subject to Possible Conversion, Preferred Stock, Additional Paid-in Capital and Retained Earnings Accumulated During the Development Stage F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17 Signatures 19 Exhibit Index 20 PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Financial Services Acquisition Corporation (a corporation in the development stage) ______________________________________________________________________ Financial Statements Periods Ended June 30, 1995 and 1996 Financial Services Acquisition Corporation (a corporation in the development stage) Contents FINANCIAL STATEMENTS: Balance sheets F-3 Statements of operations F-4 Statement of common stock, common stock subject to possible conversion, preferred stock, additional paid-in capital and retained earnings accumulated during the development stage F-5 Statements of cash flows F-6 Notes to financial statements F-7-F-12 Financial Services Acquisition Corporation a corporation in the development stage Balance Sheets December 31, June 30, 1995 1996 ________________________________________________________________________ Assets (audited) (unaudited) Cash and cash equivalents $ 159,657 $ 230,922 Short-term investment and accrued interest thereon 1,116,214 754,637 U.S. Government security deposited in Trust Fund and accrued interest thereon (Note 2) 18,489,353 18,944,960 Deferred acquisition costs (Note 8) 60,000 734,672 Prepaid expenses 5,000 - Organization costs, less amortization of $13,937 and $20,483 51,526 44,980 _____________________________________________________________________ $19,881,750 $20,710,171 _____________________________________________________________________ Liabilities and Stockholders' Equity Accrued expenses and taxes $ 253,496 $ 851,123 Deferred income taxes 42,000 42,000 Commitment (Note 4) Common stock, subject to possible conversion, 716,666 shares at conver- sion value (Note 2) 3,696,022 3,787,098 Preferred stock, $.001 par value - shares authorized 1,000,000; none issued (Note 5) - - Common stock, $.001 par value - shares authorized 14,000,000; issued and outstanding 4,416,666 (which includes 716,666 shares subject to possible conversion) (Notes 3 and 6) 3,700 3,700 Additional paid-in capital 15,710,140 15,710,140 Retained earnings accumulated during the development stage 176,392 316,110 ____________________________________________________________________ $19,881,750 $20,710,171 ____________________________________________________________________ See accompanying notes to financial statements. Financial Services Acquisition Corporation (a corporation in the development stage) Statements of Operations (Unaudited) _____________________________________________________________________________ Period from August 18, Three months Six months ended 1994 (incept ended June 30, June 30, ion) to ____________________ ____________________ June 30, 1995 1996 1995 1996 1996 ______________________________________________________________________________ Income: Interest $ 283,218 $ 238,119 $ 558,884 $ 482,237 $1,651,278 ______________________________________________________________________________ Expenses: General and administrative 49,065 46,362 97,389 86,737 266,568 Acquisition costs (Note 7) 199,000 - 199,000 - 239,817 Occupancy (Note 4) 15,000 15,000 30,000 30,000 95,000 Amortization of financing costs, debt discount and organization costs 3,273 3,273 6,546 6,546 59,983 State franchise taxes 5,000 5,910 9,550 9,160 26,124 Interest (Note 3) - - - - 3,836 ___________________________________________________________________________ Total expenses 271,338 70,545 342,485 132,443 691,328 ___________________________________________________________________________ Net income before taxes on income 11,880 167,574 216,399 349,794 959,950 Taxes on income 6,000 57,000 92,000 119,000 338,000 ___________________________________________________________________________ Net income for the period $ 5,880 $ 110,574 $ 124,399 $ 230,794 $ 621,950 ___________________________________________________________________________ Net income per share $ .00 $ .03 $ .03 $ .05 ___________________________________________________________________________ Weighted average common shares outstanding 4,416,666 4,416,666 4,416,666 4,416,666 ___________________________________________________________________________ See accompanying notes to financial statements. Financial Services Acquisition Corporation (a corporation in the development stage)
Statement of Common Stock, Common Stock Subject to Possible Conversion, Preferred Stock, Additional Paid-In Capital and Retained Earnings Accumulated During the Development Stage Period from August 18, 1994 (inception) to June 30, 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Common stock Retained subject to earnings Common stock possible conversion Preferred stock accumulated ------------------------- -------------------- ---------------- Additional during Number Number of Number of paid-in the develop- of shares Amount shares Amount shares Amount capital ment stage - ---------------------------------------------------------------------------------------------------------------------------------- Balance, August 18, 1994 -- $ -- -- $ -- - $ -- $ - $ -- Original issuance of common stock 833,333 833 -- -- - -- 24,167 -- Issuance of warrants to purchase common stock -- -- -- -- - -- 20,000 -- Sale of 3,583,333 units, net of underwriting discounts and offering expenses 2,866,667 2,867 716,666 3,481,258 - -- 15,665,973 -- Net loss for the period -- -- -- -- - -- -- (6,976) Accretion to conversion value of common stock -- -- -- 12,114 - -- -- (12,114) _________________________________________________________________________________________________________________________________ Balance, December 31, 1994 3,700,000 3,700 716,666 3,493,372 - -- 15,710,140 (19,090) Net income for the period -- -- -- -- - -- -- 398,132 Accretion to conversion value of common stock -- -- -- 202,650 - -- -- (202,650) _________________________________________________________________________________________________________________________________ Balance, December 31, 1995 3,700,000 3,700 716,666 3,696,022 - -- 15,710,140 176,392 Net income for the period (unaudited) -- -- -- -- - -- -- 230,794 Accretion to conversion value of common stock (unaudited) -- -- -- 91,076 -- (91,076) _________________________________________________________________________________________________________________________________ Balance, June 30, 1996 (unaudited) 3,700,000 $ 3,700 716,666 $ 3,787,098 - $-- $15,710,140 $ 316,110 _________________________________________________________________________________________________________________________________ See accompanying notes to financial statements.
Statements of Cash Flows (Unaudited) Period from Six months ended June 30, August 18, 1994 ----------------------------------- (inception) to 1995 1996 June 30, 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 124,399 $ 230,794 $ 621,950 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Deferred income taxes -- -- 42,000 Amortization of financing costs, debt discount and organization costs 6,546 6,546 59,983 Interest on U.S. Government securities in Trust Fund (508,637) (455,607) (1,529,962) Interest on short-term investments -- (23,469) (39,691) (Increase) decrease in prepaid expenses (30,212) 5,000 -- Increase in accrued expenses 190,799 597,627 851,123 _______________________________________________________________________________________________________________________________ Net cash provided by (used in) operating activities (217,105) 360,891 5,403 _______________________________________________________________________________________________________________________________ Cash flows from investing activities: U.S. Government security deposited in Trust Fund - December 1994 -- -- (17,414,998) Cumulative maturities of U.S. Government securities deposited in Trust Fund 35,544,253 56,311,000 128,355,713 Cumulative acquisitions of U.S. Government securities reinvested in Trust Fund (35,544,253) (56,311,000) (128,355,713) Cumulative maturities of short-term investments -- 3,144,000 3,144,000 Cumulative acquisitions of short-term investments -- (2,758,954) (3,858,946) Deferred acquisition costs -- (674,672) (734,672) _______________________________________________________________________________________________________________________________ Net cash used in investing activities -- (289,626) (18,864,616) _______________________________________________________________________________________________________________________________ Cash flows from financing activities: Proceeds from notes payable and issuance of warrants -- -- 200,000 Proceeds from public offering of 3,583,333 units, net of underwriting discounts and offering expenses -- -- 19,150,098 Repayment of notes payable -- -- (200,000) Proceeds from sale of 833,333 shares of common stock to founding stockholders -- -- 25,000 Deferred financing costs -- -- (19,500) Organization costs -- -- (65,463) ________________________________________________________________________________________________________________________________ Net cash provided by financing activities -- -- 19,090,135 ________________________________________________________________________________________________________________________________ Net increase (decrease) in cash and cash equivalents (217,105) 71,265 230,922 Cash and cash equivalents, beginning of period 1,783,022 159,657 -- ________________________________________________________________________________________________________________________________ Cash and cash equivalents, end of period $ 1,565,917 $ 230,922 $ 230,922 ________________________________________________________________________________________________________________________________ Supplemental disclosures of cash flow information: Cash paid for: Interest $ -- $ -- $ 3,836 Income taxes -- -- 179,680 ________________________________________________________________________________________________________________________________ See accompanying notes to financial statements.
Financial Services Acquisition Corporation (a corporation in the development stage) Notes to Financial Statements (Information as of June 30, 1996 and for the three months ended June 30, 1995 and 1996 is unaudited). 1. Summary of Income Taxes Accounting Policies Financial Services Acquisition Corporation (the "Company") follows Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes". SFAS No. 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. ("temporary differences"). Temporary differences resulted from the Company using the cash basis for income tax purposes. Organization Costs Organization costs are amortized over 60 months. Net Income Per Share Net income per common share is computed on the basis of the weighted average number of common shares outstanding during the period including common stock equivalents (unless antidilutive) which would arise from the exercise of stock warrants. Cash Equivalents For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents (other than instruments deposited in Trust Fund or described below under "Short-term Investment"). Trust Fund U.S. Government security deposited in Trust Fund at December 31, 1995 represents a U.S. Treasury bill purchased on November 16, 1995 which matured on February 15, 1996. The cost of the security was $18,364,716. U.S. Government security deposited in Trust Fund at June 30, 1996 represents a U.S Treasury bill purchased on June 26, 1996 which matures on July 25, 1996. The cost of the security was $18,919,111. Short-term Investment The short-term investment at December 30, 1995 represents a U.S. Treasury bill purchased on September 22, 1995 at a cost of $1,099,942 which matured on January 25, 1994. The short-term investment at June 30, 1996 represents a U.S. Treasury bill purchased on June 3, 1996 at a cost of $751,698 which matures on July 5, 1996. Investments The Company follows Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity Securities", with no material impact on the Company's financial position. Interim Results (unaudited) The accompanying balance sheet as of June 30, 1996, the statements of operations for the three and six months ended June 30, 1995 and 1996, the statement of common stock, common stock subject to possible conversion, preferred stock, additional paid-in capital and retained earnings accumulated during the development stage as of June 30, 1996 and the statements of cash flows for the six months ended June 30, 1995 and 1996 are unaudited. In the opinion of management, these financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of financial data for such periods. The interim operating results are not necessarily indicative of the results for a full year. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Organization The Company was incorporated in Delaware on and Business August 18, 1994 with the objective of acquiring or Operations merging with an operating business in the financial services industry. The Company's founding stockholders (the "Initial Stockholders") purchased 833,333 of its common shares, $.001 par value (the "Pre-IPO Shares"), for $25,000 in August 1994. The registration statement for the Company's initial public offering ("Offering") was declared effective November 30, 1994. The Company consummated the Offering in December 1994 and raised net proceeds of $19,150,098 (Note 3). The Company's management had broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering were intended to be generally applied toward consummating a business combination with an operating business in the financial services industry ("Business Combination"). There is no assurance that the Company will be able to successfully effect a Business Combination. The Company deposited $17,414,998 of the Offering's proceeds in an interest-bearing trust account ("Trust Fund") to be held until the earlier of (i) the consummation of a Business Combination or (ii) liquidation of the Company. The Trust Fund indenture limits investments to U.S. Government securities with maturities of 180 days or less. The remaining proceeds will be used to pay for business, legal and accounting due diligence on prospective acquisitions, and continuing general and administrative expenses in addition to other expenses. The Company, after signing a definitive agreement for a Business Combination, is required to submit such transaction for stockholder approval. In connection with the vote on such Business Combination all of the Initial Stockholders, consisting of all of the current officers and directors of the Company, have agreed that all Pre-IPO Shares owned by them will be voted with the majority of all the shares of common stock sold in the Offering (the "Public Shares"). After consummation of the Company's first Business Combination, this voting provision will no longer be applicable. With respect to the first Business Combination which is approved and consummated, any holder of Public Shares who votes against the Business Combination may demand that the Company convert his or her shares into cash. The per share conversion price will equal the amount in the Trust Fund as of the record date for determination of stockholders entitled to vote on the Business Combination divided by the number of Public Shares. The Company will not consummate a Business Combination if 20% or more of the Public Shares are voted against the Business Combination and have conversion rights with respect to them exercised. Accordingly, 19.99% of the aggregate number of Public Shares may be converted to cash in the event of a Business Combination. Holders of shares exercising such conversion rights are entitled to receive their per share interest in the Trust Fund computed without regard to the Pre-IPO Shares. Accordingly, a portion of the net proceeds from the Offering (19.99% of the amount held in the Trust Fund) has been classified as common stock subject to possible conversion in the accompanying balance sheets at the conversion value. The Company's Certificate of Incorporation provides for mandatory liquidation of the Company in the event that the Company does not consummate a Business Combination within 24 months from the consummation of the Offering. In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Fund assets) will be less than the initial public offering price per share in the Offering (assuming no value is attributed to the Warrants contained in the Units offered in the Offering discussed in Note 3). 3. Public Offering On December 7, 1994, the Company sold 3,333,333 units ("Units") in the Offering. On December 30, 1994, a further 250,000 Units were sold. Each Unit consists of one share of the Company's common stock, $.001 par value, and two Redeemable Common Stock Purchase Warrants ("Warrants"). Each Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $5.00 during the period commencing on the consummation of a Business Combination and ending November 30, 2001. The Warrants will be redeemable at a price of $.01 per Warrant upon 30 days' notice at any time, only in the event that the last sale price of the common stock is at least $8.50 per share for 20 consecutive trading days ending on the third day prior to the date on which notice of redemption is given. The Company issued an aggregate of $200,000 of promissory notes to certain accredited investors. These notes bore interest at the rate of 10% per annum and were repaid on the consummation of the Company's Offering with accrued interest thereon of $3,836. In addition, the investors were issued 400,000 warrants ("Bridge Warrants") (valued at $0.05 per warrant - aggregate $20,000) which are identical to the Warrants discussed above, except that they are not redeemable by the Company until 90 days after the consummation of a Business Combination. In connection with the Offering, the Company also sold 333,333 Unit Purchase Options (the "IPO Options") to the Offering underwriters and certain of their designees. Each IPO Option entitles the holder thereof to acquire a unit, at $9.90 per unit, consisting of one share of common stock and two warrants (which are identical to the Warrants discussed above, except that the exercise price per warrant is $6.25 and their expiration date is November 30, 1999). 4. Commitment The Company presently occupies office space provided by an affiliate of certain stockholders of the Company. Such affiliate has agreed that, commencing on the effective date of the Offering through the acquisition of a target business by the Company, it will make its office space and certain office and secretarial services available to the Company, as may be required by the Company from time to time. The Company has been paying $5,000 per month for such services. 5. Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. 6. Common Stock At June 30, 1996, 8,566,665 shares of common stock were reserved for issuance upon exercise of Warrants, Bridge Warrants and certain underwriters' options to acquire 333,333 Units. 7. Acquisition On May 16, 1995, the Company executed a letter of Costs intent to acquire all of the outstanding capital stock of Cedar Street Securities Corp. and a seat on the New York Stock Exchange. On July 14, 1995, the letter of intent was terminated. The costs of $239,817 relating to this proposed acquisition were expensed during the year ended December 31, 1995. 8. Proposed On March 8, 1996, the Company entered into an Acquisition agreement to acquire Euro Brokers Investment Corporation ("Euro Brokers"), a privately held international and domestic inter-dealer broker for a broad range of financial instruments. Under the terms of the agreement, each outstanding share of Euro Brokers common stock will be converted into the right to receive, subject to certain adjustments and escrow arrangements, approximately (i) 2.64 shares of the Company's common stock (approximately 4,416,666 shares), (ii) 4.53 of the Company's redeemable common stock purchase warrants (approximately 7,566,666 warrants), and (iii) $9.57 in cash (which, if the transaction had been consummated as of June 30, 1996, would have been adjusted to approximately $12.03 per share, aggregating to approximately $20.1 million). Completion of this transaction is subject to certain conditions, including stockholders' approvals and receipt of certain regulatory approvals. Costs relating to this proposed acquisition, primarily professional fees, aggregated $734,672 at June 30, 1996, and have been deferred. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Services Acquisition Corporation (the "Company") is a Specified Purpose Acquisition Company , the objective of which is to acquire an operating business in the financial services industry (a "Target Business") by merger, exchange of capital stock, asset or stock acquisition or other similar type of transaction (a "Business Combination"). In August 1994, the Company issued 833,333 shares (the "Pre-IPO Shares") of its Common Stock, par value $.001 per share ("Common Stock"), to six initial stockholders. In September 1994, the Company raised $200,000 in bridge financing (the "Bridge Financing") in order to pay certain organizational expenses, the costs of the Bridge Financing and certain costs of its initial public offering ("IPO"). Thirteen investors in the Bridge Financing loaned an aggregate of $200,000 to the Company and were issued promissory notes in that amount payable at the consummation of the IPO, bearing interest at the rate of 10% per annum, and 400,000 bridge warrants (the "Bridge Warrants"). The IPO was consummated in December 1994, with the Company selling 3,583,333 units ("Units") (which includes 250,000 Units sold as part of the underwriters' over-allotment option). Each Unit consists of one share of Common Stock and two Redeemable Common Stock Purchase Warrants (the "Public Warrants"). The Company also sold 333,333 Unit Purchase Options (the "UPOs") to the IPO underwriters and certain of their designees. In the IPO, the Company received net proceeds of approximately $19,150,000 after payment of offering expenses. From these proceeds, the Company repaid the Bridge Financing promissory notes (and interest thereon). The Company's management had broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds were intended to be applied toward consummating a Business Combination with a Target Business. There is no assurance that the Company will be able to successfully effect a Business Combination. A majority of the net proceeds (approximately $17,415,000) was placed in an interest-bearing trust account (the "Trust Fund") until the earlier of (i) consummation of a Business Combination or (ii) liquidation of the Company. The Trust Agreement relating to the Trust Fund limits investments to U.S. Government securities with a maturity of 180 days or less. As of June 30, 1996 and December 31, 1995, the Trust Fund consisted of approximately $18,945,000 and $18,489,000, respectively, of U.S. Government securities (including accrued interest thereon). The remaining proceeds of the IPO, and the interest thereon, have been and are being used to pay for business, legal and accounting due diligence on prospective acquisitions, and for the general and administrative expenses and taxes of the Company, including, but not limited to, legal and accounting fees and administrative support expenses in connection with the Company's reporting obligations to the Securities and Exchange Commission. During the quarter and six months ended June 30, 1996, general and administrative expenses were approximately $46,000 and $87,000, respectively, as compared to $49,000 and $97,000 in the quarter and six months ended June 30, 1995, respectively. As of June 30, 1996 and December 31, 1995, the Company had approximately $986,000 and $1,276,000, respectively, of cash and cash equivalents and short-term investments, other than assets held in the Trust Fund. On May 16, 1995, the Company announced that it had entered into a letter of intent with respect to a potential Business Combination. On July 14, 1995, the Company announced that negotiations with respect to the proposed acquisition had been terminated. Approximately $240,000 of costs relating to negotiation of the proposed transaction were expensed during the year ended December 31, 1995. On March 8, 1996, the Company announced that it had entered into an Agreement and Plan of Merger, dated as of March 8, 1996 (the "Merger Agreement"), with Euro Brokers Investment Corporation ("Euro Brokers"), pursuant to which a newly-formed wholly owned subsidiary of the Company ("Sub") will merge with and into Euro Brokers (the "Merger"), with Euro Brokers thereafter becoming a direct, wholly owned subsidiary of the Company. Consummation of the Merger is subject to a number of conditions, including, but not limited to, receipt of stockholder approvals and certain regulatory approvals. In connection with the proposed Merger, the Company entered into an UPO Exchange and Custodial Agreement, dated as of June 24, 1996 (the "UPO Agreement"), with the holders of the outstanding UPOs, providing for the exchange, contingent upon and effective immediately following the Merger, of all UPOs for an aggregate of 225,000 newly-issued shares of Common Stock. A copy of the UPO Agreement is included as an Exhibit to this Form 10-Q and incorporated herein by reference, and the foregoing description of the UPO Agreement is qualified in its entirety by reference to the full text thereof. Euro Brokers held a special meeting of Euro Brokers stockholders on July 15, 1996, at which the Merger Agreement was approved. A special meeting of the Company's stockholders in connection with the Merger Agreement is scheduled to be held on August 15, 1996. In the event the Company does not consummate the Merger or an alternative business combination by December 7, 1996, the Company will be dissolved and will distribute to all holders of Common Stock sold in the IPO (the "Public Shares"), in proportion to their respective interests in all such Public Shares, an aggregate sum equal to the amount in the Trust Fund, inclusive of any after tax interest thereon, plus any remaining net assets of the Company. Pre-IPO Shares, Public Warrants and Bridge Warrants will have no right to participate in any such distribution from the Trust Fund. During the quarter and six months ended June 30, 1996, the Company earned interest of approximately $238,000 and $482,000, respectively, as compared to $283,000 and $559,000 during the quarter and six months ended June 30, 1995, respectively. Pursuant to the Company's Certificate of Incorporation, a holder of Public Shares also is entitled to receive funds from the Trust Fund in the event that such holder votes against a Business Combination and demands conversion of his or her shares into cash ("Redemption Rights"), and such Business Combination is actually consummated by the Company, although the Company is not permitted to consummate a Business Combination if 20% or more of the Public Shares (or 716,667 shares) exercise such Redemption Rights. Moreover, pursuant to the terms of the Merger Agreement, Euro Brokers is not obligated to consummate the Merger if Redemption Rights are exercised with respect to a number of shares in excess of 10% of all outstanding shares of Common Stock (including shares issued in connection with the UPO Agreement). Substantially all of the Company's working capital needs are attributable to the identification, evaluation and selection of a suitable Target Business and, thereafter, to the structuring, negotiation and consummation of a Business Combination with such Target Business. Such working capital needs have been, and are expected to continue to be, satisfied from the net proceeds of the IPO not deposited in the Trust Fund. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Description 4.5 UPO Exchange and Custodial Agreement, dated as of June 24, 1996, by and among GKN Securities Corp., Barington Capital Group, L.P. the Registrant and Graubard, Mollen & Miller, as custodian (incorporated herein by reference to Exhibit 4.5 of the Registrant's Registration Statement on Form S-4 (No. 333-06753) dated June 25, 1996). 27.1 Financial Data Schedule. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FINANCIAL SERVICES ACQUISITION CORPORATION (Registrant) Date: August 14 , 1996 /s/ Gilbert D. Scharf _________________________________________ Gilbert D. Scharf, Chairman of the Board, President and Chief Executive Officer Date: August 14, 1996 /s/ Michael J. Scharf ________________________________________ Michael J. Scharf, Vice President, Secretary and Treasurer (Chief Financial and Principal Accounting Officer) EXHIBIT INDEX EXHIBIT DESCRIPTION PAGE 4.5 UPO Exchange and Custodial Agreement, dated as of June 24, 1996, by and among GKN Securities Corp., Barington Capital Group, L.P. the Registrant and Graubard, Mollen & Miller, as custodian (incorporated herein by reference to Exhibit 4.2 of the Registrant's Registration Statement on Form S-4 (No. 333-06753) dated June 25, 1996). 27.1 Financial Data Schedule. EX-27 2 EXHIBIT 27.1 - FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from the Financial Statements of Financial Services Acquisition Corporation for the period ended June 30, 1996 and is qualified in its entirety by refer- ence to such Financial Statements. 3-MOS 6-MOS DEC-31-1995 DEC-31-1995 APR-01-1996 JAN-01-1996 JUN-30-1996 JUN-30-1996 231 231 755 755 0 0 0 0 0 0 19931 19931 0 0 0 0 20710 20710 893 893 0 0 0 0 0 0 4 4 16026 16026 20710 20710 0 0 238 482 0 0 0 0 71 132 0 0 0 0 167 350 57 119 110 231 0 0 0 0 0 0 110 231 .03 .05 .03 .05
-----END PRIVACY-ENHANCED MESSAGE-----