On July 2, 2002, Sutton Data Services, s.r.o. ("SDS"), the Company's wholly-owned subsidiary in the Czech Republic, filed for bankruptcy protection because it was unable to meet its obligations and the Company was unable to provide the necessary funding. Due to the bankruptcy filing in the Czech Republic, the Company has not been able to obtain the books and records of SDS for the quarter ended June 30, 2002. SDS is funded substantially all by its parent company in the United States. Accordingly, in order to prepare the quarterly financial statements, the Company used the prior quarter financial statements of SDS and wrote off all of its assets to zero. In addition, the Company recorded expenses for all funds transmitted to SDS for the quarter.
The accompanying consolidated financial statements of the Company are unaudited and include, in the opinion of management, all normal recurring adjustments necessary to present fairly the consolidated balance sheet as of June 30, 2002, and the related statements of operations, comprehensive income, shareholders' equity and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company's fiscal 2001 audited consolidated financial statements and the related notes thereto included in the Company's Form 10-KSB filed with the Commission on August 16, 2002.
Organization and Business
Sutton Online, Inc. ("Sutton") was originally organized as a limited liability company in April 1999 and was merged into Sutton Online, Inc. in May 2001. In August 2001, Ikon Ventures, Inc. ("Ikon") approved an exchange of common stock of Ikon for all of the outstanding common stock of Sutton. As a result of this transaction, Sutton became a wholly owned subsidiary of Ikon. The stock exchange between Ikon and Sutton has been considered a reverse acquisition. Under reverse acquisition accounting, Sutton was considered the acquirer for accounting and financial reporting purposes, and acquired the assets and assumed the liabilities of Ikon. Ikon had no assets at acquisition and had liabilities of $76,000. The acquisition was accomplished through the issuance of 2.2222222 shares of Ikon common stock for each share of Sutton, or 15,222,219 shares of Ikon common stock. Subsequent to the reverse acquisition, Ikon changed its name to Sutton Trading Solutions, Inc.
The consolidated condensed financial statements include Sutton Trading Solutions, Inc. (formerly Ikon Ventures, Inc.), its wholly owned U.S. subsidiary Sutton Online, Inc., and its wholly owned European subsidiary, SDS (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. The fiscal year end of the Company's European subsidiary is December 31. This subsidiary is included on the basis of closing dates that precede the Company's closing date by three months.
The Company offered trade routing and level II software and data for online investors including individuals, hedge funds and money managers, and provided brokerage firms with the necessary tools to offer financial products via the internet. Through its European subsidiary, the Company was developing software to provide a trading platform to customers for the purpose of routing trades in US stocks as well as stocks traded on several European exchanges.
The Company's business required it to have a relationship with a securities broker-dealer as well as a clearing organization to clear trades.
On July 2, 2002, SDS, the Company's wholly-owned subsidiary in the Czech Republic, filed for bankruptcy protection because it was unable to meet its obligations and the Company was unable to provide the necessary funding. In addition, Sutton, the Company's principal subsidiary, substantially terminated its work force in an effort to conserve cash. As a result, portions of the Company's assets are subject to the bankruptcy. Subsequently, the Company discontinued all operations and began depleting its cash reserves and liquidating its assets which will leave the Company with liabilities, but no assets. The Company is now exploring strategic alternatives, including a sale or merger.
The issues above and the Company's working capital deficiency raise substantial doubt about its ability to continue as a going concern.
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