SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-SB
AMMENDMENT No. 1
GENERAL INFORMATION FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
FIRST CAPITAL INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 76-0375627
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(State of Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
5120 Woodway, Suite 9004, Houston, Texas 77056
- --------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
tel. (713) 629-4866 fax (713) 629-4913
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(Registrant's Telephone Number, including Area Code)
With copies to: Robert D. Axelrod, Attorney At Law
Axelrod, Smith & Kirshbaum
5300 Memorial Drive, Suite 700
Houston, Texas 77007
tel. (713) 861-1996 ext. 116 fax (713) 552-0202
Securities to be registered pursuant to Section 12(b) of the Act:
None.
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
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TABLE OF CONTENTS
PART I
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<S> <C>
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis.. . . . . . . . . . . . . . . . . . . . 5
Item 3. Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Security Ownership of Certain Beneficial Owners and Management . . . . . . . 11
Item 5. Directors, Executive Officers, Promoters and Control Persons . . . . . . . . 12
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 7. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . 14
Item 8. Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II
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Item 1. Market Price of and Dividends
on the Registrant's Common Equity and
Other Shareholder Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 3. Changes in and Disagreements With Accountants. . . . . . . . . . . . . . . . 18
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . . . . . . . . . . 19
Item 5. Indemnification of Directors and Officers. . . . . . . . . . . . . . . . . . 21
PART F/S
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Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PART III
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Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 2. Description of Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
The Exhibits required by this item
are included as set forth in the Exhibit Index.
<PAGE>
PART I
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Item 1. Description of Business
INTRODUCTION
First Capital International, Inc., a Delaware company, (the "Company") was
incorporated in January, 1977. The principal executive offices of the Company
are located at 5120 Woodway, Suite 9004, Houston, Texas 77056; tel. (713)
629-4866, fax (713) 629-4913.
The Company's common stock is currently traded on the over-the-counter
bulletin board ("OTC BB") under the symbol "FCAI."
The Company presently operates in two business segments:
- - A leasing company in the Republic of Estonia named EIP Liisingu AS ("EIP")
an Estonian corporation, which leases business and consumer items. The
Company acquired 100% of EIP in 1998.
- - An internet retail shopping site called PlazaRoyal.com, located at
www.plazaroyal.com. The Company started this website in March 1999. The
Company's main focus for this business segment is to market U.S. retailers
on this website to European consumers. The Company is presently seeking
cyber retail tenants to sublease space on this website. To date, the
Company has not had any revenues from this website.
References to the Company in this Form 10-SB include First Capital
International, Inc. and EIP Liisingu AS.
HISTORY
The Company was originally incorporated in the State of Utah in 1977 under
the name Galt-Atlantis Corporation. The Company had insignificant operations
until December, 1981 at which time the Company changed its name to Kan-Tx Energy
Company and commenced activities in the natural resources industry. Being
unsuccessful with its oil an gas business, Kan-Tx Energy Company suspended
operations from 1986 until May, 1994, at which time the Company effectuated a
one-for-ten reverse stock split and re-incorporated itself by merger into Kan-Tx
Energy Company, a Delaware company, formed for the purpose of permitting the
Company to conduct its affairs pursuant to Delaware corporate law rather than
Utah corporate law by changing the domicile of the Company to Delaware. Also in
May, 1994, the Company acquired all of the outstanding capital stock of Ranger
Car Care Corporation, an automotive service company, which until that time had
been a privately owned Texas corporation, in exchange for 10,000,000 shares of
the Company's common stock. In June, 1994, the Company changed its name to
Ranger/USA, Inc. and commenced activities in the automotive service business
through its wholly owned subsidiary Ranger Car Care Corporation. In December,
1997, the Company suspended its automotive service business and was dormant from
December, 1997 until August, 1998.
1
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In August, 1998, in anticipation of a business combination, the Company
changed its name to First Capital International, Inc. , increased the number of
authorized shares to 100,000,000 shares of capital stock, and the present
directors and officers were appointed. In September, 1998, the Company entered
into a Stock Exchange Agreement with the two stockholders of EIP, who were
Eurocapital Group, Ltd. and United Capital Group Limited. Pursuant to the
Stock Exchange Agreement, the Company issued a total of 34,000,000 shares of its
common stock to the EIP stockholders in exchange for all of the outstanding
shares of EIP. The terms and conditions of the Stock Exchange Agreement were
determined by the parties through arms length negotiations and approved by the
Board of Directors. However, no appraisal was performed.
BUSINESS ACTIVITIES
Leasing Activities. The Company, through its wholly owned subsidiary EIP,
operates a leasing business in Estonia, a nation which gained its independence
during the fall of the Soviet Union. At one time, EIP was owned by the Estonian
Innovation Bank, a bank in Estonia. EIP owns a portfolio of leases of
apartments, appliances, equipment and automobiles. These leases are made to
consumers and businesses in Estonia. The main types of services offered by EIP
are finance (lease-to-own, or option to purchase) leases and operating (rental)
leases. A lease is considered to be a finance lease if ownership of the leased
asset is transferred by EIP to the lessee at the end of lease term. A lease is
considered to be an operating lease when EIP continues ownership and takes
possession of the leased asset at the end of lease term, or meets certain other
criteria. EIP then re-leases or sells the asset. The typical lease term is for
two to three years. EIP markets its services using newspaper advertisements and
other printed media in Estonia.
EIP funds its leasing operations through its cash flow from operation and
from existing debt financing which it presently has from third parties. EIP
utilizes these funds to acquire the assets which it leases. The current
principal balance on this loan, which bears interest at 10% per annum, is
$333,641, which is payable interest only on a monthly basis with a final balloon
payment of principal and interest due in May, 2002. The Company does not
believe that this funding source will provide any additional financing.
The lender, Estonian Innovation Bank, owned EIP at one time. The Company
Believes that Estonian Innovation Bank is insolvent. Therefore the Company
believes that the Estonian Innovation Bank will not provide any additional
financing to the Company.
Customers. EIP's current customer base is 60% consumer and 40% business.
---------
The customer base can be further characterized as 52% real estate related, such
as apartments, 20% automobile, 20% furniture and household goods such as major
appliances and 8% miscellaneous categories. The business base can be further
characterized as 65% automobile, 18% industrial equipment, 12% computers and
office equipment and 5% real estate. In 1997, EIP entered into 111 leases. In
1998, EIP entered into 37 leases.
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Disposition at the end of the lease. At the end of a finance lease, EIP
--------------------------------------
disposes of the leased asset by transferring ownership of the leased asset to
the lessee. At the end of an operating lease, EIP continues ownership of the
leased asset and takes possession of the leased asset. EIP then either
re-leases the asset to a different customer or sells the asset.
Disposition upon customer default. If a customer defaults
-----------------------------------
on a lease payment, the Company repossesses the property and either leases the
asset to a different customer or sells the asset. In 1997 and 1998
approximately 10% of EIP's leases went into default.
The leasing industry is relatively new in Estonia. The Company believes
that there are more than 10 other leasing companies in Estonia. Many of the
Company's competitors are well established and have substantially greater
capital resources and greater marketing capabilities than the Company. There
can be no assurance that the Company will be competitive.
E-commerce Related Activities. The Company recently began development of an
internet cyber shopping mall called Plaza Royal.com at www.plazaroyal.com. Plaza
Royal.com provides U.S. retailers an opportunity to be part of a cyber shopping
mall. The Company's main focus for Plaza Royal.com is to market U.S. retailers
to European consumers. Plaza Royal.com is a 3-D, virtual reality, fully
interactive cyber shopping experience with the capability to market to
non-English speaking customers. The 3-D cyber shopping experience at Plaza
Royal.com is designed to be entertaining to the consumer and to provide the
feeling of being in a shopping mall. The Company is presently seeking cyber
retail tenants to sublease space on this website. To date, the Company has not
had any revenues from this website. The Company believes it can create revenue
from three sources:
- - Revenues from rent fees paid by retail organizations who sell from the
site.
- - Revenues from advertisers on the site.
- - Revenues from retailers for transaction and credit card processing fees.
The Company has entered into affiliated e-commerce merchant programs with
the following companies: Dell Computers, CBS Sports Store, Sharper Image,
Amazon.com, Discover Nature, CarPrice.com, Reel.com, Nextcard and Swiss Army
Depot. The affiliated merchant program enables the Company to earn a percentage
of the sales generated when a visitor to the Company's website links to the
websites of affiliated merchants and makes a purchase. The Company will receive
between 1% and 20% as a sales commission on these types of transactions.
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The Company has plans to develop a legal directory portal website under the
name Legal Claims.com. The Company has already reserved the website name
www.legalclaims.com. The target markets for Legal Claims.com are providers and
users of legal services.
RISKS ASSOCIATED WITH THE FOREIGN OPERATIONS
EIP operates in a part of the world which could be viewed as having a high
potential for political, economic and military instability. For example,
Estonia is near Russia. If the political situation in Russia worsened, a spill
over effect into Estonia could have adverse consequences for EIP. Some other
nations which gained independence after the fall of the Soviet Union have
experienced instability. If such instability were to occur in Estonia, the
Company's business could be adversely affected.
Presently, the Company's operations in Estonia are conducted in
transactions denominated in the local currency of Estonia, the EEK. Therefore,
the Company has exposure to foreign currency fluctuations and foreign government
intervention such as a devaluation of the local currency.
Risk of Non-Availability of Long Term Financing for EIP
EIP funds its leasing operations through its cash flow from operation and
from long term debt financing which it presently has from third parties. EIP
utilizes these funds to acquire the assets which it leases. EIP presently owes
long term debt in the remaining principal balance of $333,641, payable monthly
at 10% per annum. The final payment is due in May, 2002. The Company does not
believe that this funding source will provide any additional financing. The
lender, Estonian Innovation Bank, owned EIP at one time.
GOING CONCERN RISK
In Note 3 to the audited financial statements, the Company's independent
auditors have reported that the Company has suffered recurring losses from
operations that raise substantial doubt about its ability to continue as a going
concern. The Company has developed plans to address this situation. The Company
believes that by becoming a reporting company by filing this Form 10-SB, its
common stock can be used as an exchange vehicle for acquisitions. The Company
believes that its businesses will ultimately provide positive cash flow. See,
Part F/S.
EMPLOYEES
As of May 6, 1999, the Company had five employees in the USA and EIP had
four employees in Europe.
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SUBSIDIARIES
The Company has two wholly-owned subsidiaries, EIP Liisingu AS ("EIP"), an
Estonian corporation, which is a leasing company in Europe, and Ranger Car Care
Corporation, a Texas corporation, which is presently dormant.
PENDING ACQUISITIONS
The Company has entered into a letter of intent to acquire all of stock of
a company in the Republic of Estonia named TGK-LINK AS which is a
telecommunications company specializing in internet telephony and other internet
applications. Internet telephony is the use of the Internet for real-time voice
communications, which is a lower cost substitute for using a regular telephone.
If this acquisition is consummated, selling equity holders of TGK-LINK AS would
receive 400,000 restricted shares of common stock of the Company immediately,
and later could receive an option to acquire up to 200,000 shares of common
stock of the Company at an exercise price of $.05 per share of common stock,
expiring March 1, 2000, if the net profit for TGK-LINK AS for the year ended
December 31, 1999 is not less than $75,000. If the closing bid on the Company's
stock is less than $0.05 per share for 60 consecutive trading days through the
period ending 14 months after the acquisition date, the former shareholders of
TGK-LINK AS may repurchase their shares for $0.01 per share. There is no
assurance that this acquisition will occur.
Item 2. Management Discussion and Analysis
FORWARD-LOOKING STATEMENT AND INFORMATION
The Company is including the following cautionary statement in this Form
10-SB to make applicable and take advantage of the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies,
expectations, future events or performance and underlying assumptions and other
statements which are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and, accordingly,
involve risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitations, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectations, beliefs or
projections will result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: the ability
of the Company's management to operate on a global basis; the ability of the
Company to effectuate and successfully operate acquisitions, and new operations;
the ability of the Company to obtain acceptable forms and amounts of financing
to fund planned acquisitions; the political, economic and military climate in
nations where the Company may have interests and operations; and the ability to
engage the services of suitable consultants or employees in foreign countries.
The Company has no obligation to update or revise these forward-looking
statements to reflect the occurrence of future events or circumstances.
5
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The following description of the Company's financial position and results
of operations should be read in conjunction with the Financial Statements and
the Notes to Financial Statements, contained in this report as set forth
beginning on page F-1.
INTRODUCTION
In August, 1998, as part of the Company's transition from dormancy into an
operating entity, the present directors and officers were appointed. It is the
present intent of management to grow the Company's asset and revenue base
through the acquisition of operating businesses in the United States and Europe
in the financial services, e-commerce and internet industries.
The Company intends to make all of the acquisitions by issuing common stock
in exchange for the acquired businesses. However, the Company may need
additional capital to enter into acquisitions. In the event that capital is
needed to effectuate certain acquisitions, the Company will be required to raise
substantially all of the funds for such acquisitions. The Company anticipates
that most, if not all, of any acquisitions it may make during the next 12 months
will be of operating entities that have current management in place.
The Company's first acquisition occurred in September, 1998 when the
Company completed the acquisition of 100% of the stock of EIP from the
stockholders of EIP in exchange for a total of 34,000,000 shares of the
Company's common stock.
EIP operates in a part of the world which could be viewed as having a high
potential for political, economic and military instability. For example,
Estonia is near Russia. If the political situation in Russia worsened, a spill
over effect into Estonia could have adverse consequences for EIP. Some other
nations which gained independence after the fall of the Soviet Union have
experienced instability. If such instability were to occur in Estonia, the
Company's business could be adversely affected.
The operations of EIP are conducted in Estonia with transactions
denominated in the local currency of Estonia, the EEK. Therefore, the Company
has exposure to foreign currency fluctuations and foreign government
intervention such as a devaluation of the local currency.
The Company believes that EIP's existing cash flow is adequate to fund its
existing lease portfolio and to fund a limited number of new leases. However,
one of the Company's objectives for the next 12 months is to increase its
capital resources, so that EIP can increase the size of its lease portfolio.
6
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The Company presently believes that the development and expansion of its
e-commerce business website, Plaza Royal.com, will require additional capital.
The Company will seek financing for Plaza Royal.com through the sale of debt or
equity. In order to achieve these objectives, the Company will be required to
raise additional funds from the sale of equity or debt. The sale of equity
securities could dilute the Company's existing stockholders' interest, and
borrowings from third parties could result in restrictive loan terms which would
increase the Company's debt service requirements and could restrict the
Company's operations. It is unknown at this time whether the Company will be
successful in raising capital on reasonable terms for the purpose of increasing
the capital base of EIP or for financing the further development of Plaza
Royal.com.
During late 1998 through March 31, 1999, the Company, in private
transactions, raised approximately $65,000 in cash through the sale of its
common stock and options.
PLAN OF OPERATION
The current plan of operation involves the further development of our main
E-commerce Portal: PlazaRoyal.com. The Company originally developed this portal
in March and April of 1999. At the present time the Company is actively in the
process of signing on new merchants for the PlazaRoyal.com Mall. Among those
already signed are Dell Computers, CBS Sport Stores, Discover Nature Stores,
the Sharper Image, Omaha Steaks, the Swiss Army Depot, Office Max, Hickory Farms
and Amazon.com.
Additionally, the Company is working on the development of the new
cyberstore concept, which will allow merchants to operate their respective
stores on the Internet as a joint venture with our Company. Also, we are in the
process of developing a detailed marketing program, which will enable our
shopping mall to function in several languages in several different countries.
Various local Internet providers in several countries have expressed an active
interest in supporting these developments in Europe.
ANALYSIS OF FINANCIAL CONDITION
At the present time, the Company still has a balance of $60,161.93 left
from the original $300,000.00 credit line with United Capital Group. It is our
belief that an additional $200,000.00 line of credit can be negotiated with this
same investor.
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Also, the Company is actively seeking new acquisitions in the United States
and throughout Europe and currently negotiations are underway for the
acquisition of several E-commerce companies in the United States, as well as
travel related service companies with E-commerce features. The Company is
pursuing several new acquisition opportunities in Eastern Europe and is
presently negotiating for the acquisition of several Internet providers in the
Baltic Region. The Company is seeking to accomplish any further acquisition on
a stock exchange basis only. This would enable the Company to acquire additional
assets and maintain its cash flow as well.
Further, the Company is in the process of actively developing a new
international legal directory portal under the name of "LegalClaims.com." This
portal will enable us to expand our E-commerce services into this new market
segment, as well as, generate new revenue(s) for the Company from the sale of
memberships to legal professionals, as well as, revenue from advertising and
other types of services to the global legal community.
The Company currently has plans to increase the number of its employees by
hiring a marketing manager and an operations manager. Also, the Company is
actively considering a contract with the E-commerce Solution Company in order to
provide full E-commerce services to the PlazaRoyal.com portal and to
LegalClaims.com. The Company intends to finance these respective expenditures
from the sale of its securities.
COMPETITION
Currently, only a few sites on the Internet offer the same type of a full,
interactive 3-D shopping experience that PlazaRoyal.com will offer. However, in
the future, the Company expects substantial competition. As technology
progresses, technology could make 3-D shopping malls and/or full 3-D stores a
rather "ordinary" feature offered by e-commerce web sites. At the present time,
however, this is still quite a novelty and will provide our Company with an
additional "edge" against any current competition.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
RESULTS OF OPERATIONS
During the year ended December 31, 1998, the Company had revenues of
$43,822 compared to revenues of $109,628 for the year ended December 31, 1997.
This decrease in revenue of $65,806 is a result of EIP's limited availability of
capital to enter into new leases.
During the year ended December 31, 1998, the Company had operating, general
and administrative expenses of $257,745 compared to operating, general and
administrative expenses of $82,146 for the year ended December 31, 1997. This
increase of $175,599 resulted from the commencement of business operations after
a dormant period. The commencement of management activities, the start-up of the
Plaza Royal.com internet website, and expenses related to business development
combined to create the significant increase.
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During the year ended December 31, 1998, the Company had depreciation and
amortization expense of $8,563 compared to $12,109 for the year ended December
31, 1997. The decrease in depreciation and amortization expense of $3,546 was
the result of the expiration of certain operating leases and the disposition of
certain related assets.
During the year ended December 31, 1998, the Company incurred interest
expense of $31,611 as compared to $65,570 for the year ended December 31, 1997.
The decrease in interest expense of $33,959 resulted from EIP's partial
repayment of its credit line.
During the year ended December 31, 1998, the Company had a net loss of
$(787,870) compared to $(26,953) for the year ended December 31, 1997. This
increase in net loss of $760,917 is attributable to the Company's sale of stock
and options at below market value, the Company's acquisition activities and the
development costs of the Company's e-commerce website www.plazaroyal.com.
During the year ended December 31, 1998, the Company had a net loss
available to common stockholders of $(895,859) compared to a net loss of
$(26,953) for the year ended December 31, 1997, or an increase in net loss of
$760,917. A significant portion of the net loss amount is attributable to the
accounting treatment of the Company's sale of stock and options at below market
value, the Company's acquisition activities and the ramp up of the Company's
e-commerce website www.plazaroyal.com.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1999.
RESULTS OF OPERATIONS
During the three months ended March 31, 1999, the Company had revenues of
$12,946 compared to revenues of $12,805 for the three months ended March 31,
1998.
During the three months ended March 31, 1999, the Company had operating,
general and administrative expenses of $65,656 compared to $4,152 for the three
months ended March 31, 1998. This increase in operating, general and
administrative expenses resulted from commencement of business operations in the
U.S.A. after a dormant period, which involved the commencement of management
activities, the start-up of the Plaza Royal.com internet website, and expenses
related to business development.
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During the three months ended March 31, 1999, depreciation, interest
expense and amortization expense were consistent with levels for the three
months ended March 31, 1998.
During the three months ended March 31, 1999, the Company had a net loss of
$(155,115) compared to a net loss of $(3,061)for the three months ended March
31, 1998. A significant portion of the net loss amount is attributable to the
the Company's sale of stock and options to employees at prices below market
value, the Company's acquisition activities and the development costs of the
Company's e-commerce website www.plazaroyal.com.
During the three months ended March 31, 1999, the Company had a net loss
available to common stock holders of $(1,515,970) compared to a net loss
available to common stock holders of $(3,061)for the three months ended March
31, 1998. The significant increase in the net loss available to common stock
holders is attributable to the Company's sale of stock and options at below
market value, the Company's acquisition activities and the development costs of
the Company's e-commerce website www.plazaroyal.com.
LIQUIDITY AND CAPITAL RESOURCES
The financial statements of the Company include a going concern
qualification by the Company's independent auditors. The Company's operating
losses and the Company's need for financing raise substantial doubts about the
Company's ability to continue as a going concern.
The Company believes that EIP's cash requirements for EIP's current
operations during 1999 can be met through EIP's internal cash flow from
operations. During the year ended December 31, 1998, the Company had revenues
of $43,822 compared to revenue of $109,628 for the year ended December 31, 1997.
The decrease in revenue of $65,806, was a direct result of EIP's limited
availability of capital to enter into new leases.
During late 1998 through March 31, 1999, the Company raised approximately
$65,000 in cash through the sale of its common stock and options.
YEAR 2000 ISSUES AND Y2K
The Company presently believes that its computers are Y2K compliant and the
Company presently anticipates no Y2K impact in connection with its suppliers or
customers. However, the Company is presently assessing its Year 2000 compliance
status and the status of its suppliers and customers. There can be no assurance
that the Company will escape the consequences of a Year 2000 compliance
deficiency.
Item 3. Description of Property.
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The Company's principal executive offices are located at 5120 Woodway,
Suite 9004, Houston, Texas 77056, in approximately 2,000 square feet of office
space which is subleased from a firm owned by Alex Genin, the President of the
Company, on a month to month sublease for $2,343 per month. EIP leases
approximately 3,000 square feet of office space in Estonia on a month to month
lease for approximately $2,100 per month from an independent third party. The
Company believes that its offices are adequate for its present and future needs.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of May 1, 1999 with
respect to the beneficial ownership of shares of common stock by (i) each person
who is known to the Company to beneficially own more than 5% of the outstanding
shares of common stock, (ii) each director of the Company, (iii) each executive
officer of the Company and (iv) all executive officers and directors of the
Company as a group. Unless otherwise indicated, each stockholder has sole voting
and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Name and Address Shares of Common Percent
of Beneficial Holder Stock Beneficially Owned of Class
- -------------------------------- ------------------------- --------
<S> <C> <C>
Eurocapital Group, Ltd.. . . . . 25,500,000 (1)(2) 39.2%
19 Peel Road
Douglas, Isle of Man
British Isles 1M1 4LS
United Capital Group Limited . . 17,016,761 (1)(2)(3) 25.7%
50 Town Range, Suite 7B
Gibraltar
Alex Genin . . . . . . . . . . . 6,700,000 (1)(2) 9.9%
5120 Woodway, Suite 9004
Houston, Texas 77056
Michael Dashkovsky . . . . . . . 4,500,000 (4) 6.8%
5120 Woodway, Suite 9004
Houston, Texas 77056
Abrador, SA. . . . . . . . . . . 3,618,100 5.6%
48 East Street
Bella Vista, Sucre Building
Panama
Joseph A. Bond . . . . . . . . . 400,000 .6%
5120 Woodway, Suite 9004
Houston, Texas 77056
Walter C. Wilson . . . . . . . . 200,000 (5) .3%
1900 West Loop South, Suite 2050
Houston, Texas 77027
Joselito H. Sangel. . . . . . . 500,000 (5) 0.8%
5120 Woodway, Suite 9004
Houston, Texas 77056
All officers and directors as
a Group--Five Persons. . . . . . 12,300,000 17.7%
<FN>
_____________________________
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(1) Includes options to purchase up to 2,700,000 shares of common stock of the
Company which are presently exercisable at excise prices of from $.05 to
$.25 per share.
(2) Alex Genin currently holds powers of attorney from Eurocapital Group, Ltd.
and United Capital Group Limited by which Mr. Genin is granted the power to
make limited management and investment decisions. Mr. Genin advises and
consults with Eurocapital Group, Ltd. and United Capital Group Limited to
formulate management decisions on behalf of Eurocapital Group, Ltd. and
United Capital Group Limited, including management decisions related to the
Company. Mr. Genin does not own any stock of Eurocapital Group, Ltd. or
United Capital Group Limited.
(3) Includes 1,076,761 shares issueable in exchange for debt owed by the
Company to United Capital Group, Ltd. The exchange price is $0.05 per
share.
(4) Includes an option to purchase up to 1,500,000 shares of common stock of
the Company which is presently exercisable at an exercise price of $0.05
per share.
(5) Includes an option to purchase up to 100,000 shares of common stock of the
Company which is presently exercisable at an exercise price of $0.05 per
share.
</TABLE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company are as follows.
<TABLE>
<CAPTION>
Name and Address Age Position
- ------------------------------- --- ----------------
<S> <C> <C>
Alex Genin . . . . . . . . . . . 47 Director, CEO, and
5120 Woodway, Suite 9004 . . . . President
Houston, Texas 77056
Joseph A. Bond . . . . . . . . . 65 Director and
5120 Woodway, Suite 9004 . . . . Secretary
Houston, Texas 77056
Michael Dashkovsky . . . . . . . 37 Director
5120 Woodway, Suite 9004
Houston, Texas 77056
Walter C. Wilson . . . . . . . . 51 Director
1900 West Loop South, Suite 2050
Houston, Texas 77027
Joselito H. Sangel . . . . . . . 45 Vice President of
5120 Woodway, Suite 9004 . . . . Finance
Houston, Texas 77056
</TABLE>
Directors are elected annually and hold office until the next annual
meeting of the stockholders of the Company or until their successors are elected
and qualified. Officers serve at the discretion of the Board of Directors. There
is no family relationship between or among any of the directors and executive
officers of the Company.
BIOGRAPHIES
Alex Genin has been a Director, President and a major shareholder of the
Company since August, 1998. Since 1992, Mr. Genin has been the President of ECL
Trading Company, which trades goods and commodities in Europe and countries of
the former Soviet Union. Since 1985, Mr. Genin has been the President of Eastern
Credit Ltd. Inc. which provides mortgage and financial consulting services in
Europe, Asia and the United States. Mr. Genin has extensive experience in
business activities in Europe, Asia and countries of the former Soviet Union.
12
<PAGE>
Joseph A. Bond has been a Director and the Secretary of the Company since
August, 1998. For more than five years, Mr. Bond has been an attorney in the
private practice of law in Texas. Mr. Bond has extensive experience in
international tax law.
Michael Dashkovsky has been a Director of the Company since August, 1998
and since March, 1999 he has been the Company's manager of European operations.
Since 1990, Mr. Dashkovsky has been employed by Eastern Credit Ltd., Inc. as a
manager, and as the President of the Estonian Innovation Bank until February,
1999. This bank owned EIP at one time.
Walter C. Wilson has been a Director of the Company since January, 1999.
Since 1974, Mr. Wilson has been an attorney in private practice in Texas. Mr.
Wilson is licensed to practice law in Texas and Florida. He has a J.D. degree,
1969, from the University of Florida Law School. Mr. Wilson practices in
international law and international taxation.
Joselito H. Sangel has been the Company's Vice-President of Finance since
September, 1998. Since 1996, Mr. Sangel has been an accountant with EC Group
Companies, a firm controlled by Alex Genin. From 1988 through 1995 Mr. Sangel
was a portfolio accountant with First Interstate Bank.
Item 6. Executive Compensation.
The following table reflects all forms of compensation for services to the
Company for years ended December 31 , 1998 , 1997 and 1996 of the chief
executive officer. No executive officer of the Company received compensation
which exceeded $100,000 during these periods.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------- ------------------------
AWARDS PAYOUTS
------ -------
OTHER ALL
NAME AND ANNUA RESTRICTED SECURITIES OTHER
PRINCIPAL COMPEN- STOCK UNDERLYING LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARDS OPTIONS/SARS PAYOUTS SATION
- --------- ---- ------------- ----- ------ ---------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alex. . . 1998 $37,000- (1) -0- -0- -0- -0- (2) -0- -0-
Genin . . 1997 $ -0- -0- -0- -0- -0- -0- -0-
CEO and . 1996 $ -0- -0- -0- -0- -0- -0- -0-
President
<FN>
________________________
(1) See, Certain Relationships and Related Transactions.
(2) On April 7, 1999, the Company awarded Mr. Genin with an immediately exercisable
option to purchase up to 200,000 shares of common stock of the Company at an
exercise price of $0.25 per share expiring on March 31, 2002. This was
compensation for services rendered from August, 1998 through March 31, 1999.
</TABLE>
In 1998, Mr. Genin purchased an option to purchase up to 2,500,000 shares
of common stock of the Company at an exercise price of $0.05 per share which is
presently exercisable. He has not exercised this option. At December 31,
1998, the value of Mr. Genin's unexercised in the money option is $500,000.
13
<PAGE>
EMPLOYMENT AGREEMENTS
The Company does not have an employment contract with any of its employees.
The Company presently intends to negotiate an employment contract with Alex
Genin.
DIRECTOR COMPENSATION
The Company does not currently pay any cash directors' fees.
EMPLOYEE STOCK OPTION PLAN
The Company believes that equity ownership is an important factor in its
ability to attract and retain skilled personnel, and the Board of Directors of
the Company may adopt an employee stock option plan in the future. The purpose
of the stock option program will be to further the interest of the Company, its
subsidiaries and its stockholders by providing incentives in the form of stock
options to key employees and directors who contribute materially to the success
and profitability of the Company. The grants will recognize and reward
outstanding individual performances and contributions and will give such persons
a proprietary interest in the Company, thus enhancing their personal interest in
the Company's continued success and progress. This program will also assist the
Company and its subsidiaries in attracting and retaining key employees and
directors.
Item 7. Certain Relationships and Related Transactions.
Alex Genin currently holds powers of attorney from Eurocapital Group, Ltd.
and United Capital Group Limited by which Mr. Genin is granted the power to make
limited management and investment decisions. Mr. Genin advises and consults
with Eurocapital Group, Ltd. and United Capital Group Limited to formulate
management decisions on behalf of Eurocapital Group, Ltd. and United Capital
Group Limited, including management decisions related to the Company. Mr. Genin
does not own any stock of Eurocapital Group, Ltd. or United Capital Group
Limited.
Effective September, 1998, United Capital Group Limited and the Company
entered into a loan agreement, pursuant to which the Company may borrow up to
$300,000. As part of the loan agreement, during 1998, United Capital Group
Limited, on behalf of the Company, paid entities owned by Alex Genin for
Services which they provided the Company including office space and business
services, managerial and consultant staffing and (including payments to Mr.
Gennin of $37,000 in 1998) travel expenses. Mr. Genin's entities provided these
Services on terms no less favorable to the Company than terms obtainable from
unaffiliated third parties. In 1998, Mr. Genin's entities' received $168,553
under this arrangement and the cumulative total was $186,000 as of January 31,
1999. United Capital Group and the Company agreed to exchange this debt for
7,440,000 shares of common stock. The Company continues to use this method of
financing to provide itself with resources and capabilities, and will do so
until it is able to secure alternative sources of capital on better terms.
United Capital Group Limited may exchange additional debt for shares of common
stock of the Company pursuant to the loan agreement at an exchange price of
$0.05 per share. At the present time the Company owes $60,161 to United Capital
Group Limited pursuant to this agreement. United Capital Group Limited owns
approximately 25.7% of the common stock of the Company.
14
<PAGE>
During 1998, Mr. Genin's entities compensated Mr. Genin in the amount of
$37,000 for services he rendered related to the Company. During 1999 to date,
Mr. Genin's entities compensated Mr. Genin in the amount of $6,200 per month for
services he rendered related to the Company. Mr. Genin owns approximately
9.9% of the common stock of Company
In September, 1998, the Company entered into a Stock Exchange Agreement
with the two stockholders of EIP, who were Eurocapital Group, Ltd. and United
Capital Group Limited. The Company issued a total of 34,000,000 shares of
common stock of the Company to the EIP stockholders in exchange for all of the
outstanding shares of EIP. The terms and conditions of the Stock Agreement
Exchange were determined by the parties through arms length negotiations.
However, no appraisal was performed. As a result of these transactions,
Eurocapital Group, Ltd. now owns 39.2% of the common stock of the Company, and
United Capital Group Limited now owns 25.7% of the common stock of the Company.
At one time EIP was owned by the Estonian Innovation Bank, which made a
loan to EIP. The current principal balance on this loan, which bears interest at
10% per annum, is $333,641, which is payable interest only on a monthly basis
with a final balloon payment of principal and interest due in May, 2002.
The Company does not believe that this funding source will provide any
additional financing. Eurocapital Group, Ltd. owns approximately 54% of Estonian
Innovation Bank and approximately 39.2% of the Company.
In October, 1998, the Company sold to Alex Genin 4,000,000 shares of common
stock at one-tenth cent per share and granted Mr. Genin an option to purchase
2,500,000 shares of common stock of the Company exercisable at $0.05 per share
expiring in August, 2001, for the total cash sum of $4,140. This option is
presently exercisable. These issuances were approve by the Board of Directors.
This was an incentive approved by the Board of Directors to persuade Mr. Genin
to become an officer and director and to devote virtually all of his time to the
management of the Company at a time when there was no meaningful market for the
shares and when the Company had limited financial resources. In April, 1999 the
Company granted Mr. Genin an option to purchase up to 200,000 of common stock to
the Company exercisable at $0.25 per share expiring in March, 2002.
In October, 1998, Company sold to Michael Dashkovsky 3,000,000 shares of
common stock at one-tenth cent per share and granted Mr. Dashkovsky an option
to purchase 1,500,000 shares of common stock of the Company exercisable at $0.05
per share expiring in August, 2001, for the total cash sums of $3,080. This
option is presently exercisable. These issuances were approve by the Board of
Directors. This was an incentive approved by the Board of Directors to persuade
Mr. Dashkovsky to become an officer and director and to devote substantially all
of his time to the management of the Company at a time when there was no
meaningful market for the shares and when the Company had limited financial
resources.
15
<PAGE>
Item 8. Description of Securities.
The authorized capital stock of the Company consists of 100,000,000 shares
of common stock, par value $0.001, and 10,000,000 shares of preferred stock, par
value $0.001. The Board of Directors may establish series or classes of shares
out of the authorized shares. As of May 3, 1999, the Company had outstanding
65,123,142 shares of common stock, and no outstanding preferred stock. However,
the Company may designate Series A Convertible Preferred Stock in the near
future in connection with a proposed sale of securities.
The following summary description of the securities of the Company is
qualified in its entirety by reference to the Certificates of Incorporation, as
amended, and the Bylaws of the Company, as amended, copies of which are filed
as exhibits to this Form 10-SB.
COMMON STOCK
The holders of common stock are entitled to one vote per share with respect
to all matters required by law to be submitted to stockholders of the Company,
including the election of directors. The common stock does not have any
cumulative voting, preemptive, subscription or conversion rights. The election
of directors and other general stockholder action requires the affirmative vote
of a majority of shares represented at a meeting in which a quorum is
represented, except that pursuant to the Bylaws a consent to corporate action by
a majority of shareholders entitled to vote on a matter is permitted. The
outstanding shares of common stock are validly issued, fully paid and
non-assessable.
The holders of common stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available therefor.
In the event of liquidation, dissolution or winding up of the affairs of the
Company, the holders of common stock are entitled to share ratably in all assets
remaining available for distribution to them.
PREFERRED STOCK
There are no shares of preferred stock outstanding. However, the Company
may designate Series A Convertible Preferred Stock in the near future in
connection with a proposed sale of securities. The Company's Articles of
Incorporation authorize 10,000,000 shares of preferred stock and provide that
the Board of Directors may designate the voting power, preferences, relative,
participating optional or other special rights, and qualifications, limitations
or restrictions of preferred stock. The Company's Articles of Incorporation
also provide that the Board of Directors may create one or more classes of
preferred stock and one or more series of preferred stock.
Series A Convertible Preferred Stock. If designated, the description of
---------------------------------------
Series A Convertible Preferred Stock would be qualified in its entirety by
reference to the Company's Articles of Incorporation, Bylaws and the Certificate
of the Designation, Preferences, Rights and Limitations of Series A Convertible
Preferred Stock
16
<PAGE>
Series A Convertible Preferred Stock would be convertible into common stock
beginning 24 months after purchase as follows: (i) at a conversion ratio of 20
shares of common stock per share of Series A Convertible Preferred Stock, or,
(ii) at a conversion price calculated as 70% of the average of the daily high
and low bid per share of common stock during the 20 trading days preceding
conversion, whichever method results in a greater of shares of common being
issued on the conversion date. However, the conversion price shall not be less
than $.10 per share of common stock. The Series A Convertible Preferred Stock
dividend would be the payment-in-kind of common stock for the equivalent of a
15% annual dividend rate on the stated value of the Series A Convertible
Preferred Stock. The value of common stock in connection with a dividend is
calculated as the average of the daily high and low bid per share of common
stock during the 20 trading days preceding the record date of the annual
dividend payment. Series A Convertible Preferred Stock would be non-voting.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Stock and
Other Shareholder Matters.
The Company's common stock is currently traded on the over-the-counter
bulletin board ("OTC BB") under the symbol "FCAI." The following table sets
forth, for the periods indicated, the reported high and low closing bid
quotations for the common stock of the Company as reported on the OTC BB. The
bid prices reflect inter-dealer quotations, do not include retail markups,
markdowns or commissions and do not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
QUARTER ENDED BID BID
- --------------------- ------- -----
<S> <C> <C>
March 31, 1997. . . . $ (*) $ (*)
June 30, 1997 . . . . $ (*) $ (*)
September 30, 1997. . $ (*) $ (*)
December 31, 1997 . . $ (*) $ (*)
March 31, 1998. . . . $ (*) $ (*)
June 30, 1998 . . . . $ (*) $ (*)
September 30, 1998. . $ (*) $ (*)
December 31, 1998 . . $ (**) $(**)
March 31, 1999. . . . $ 1/2 $ 1/4
April 1, 1999 through
June 1, 1999. . . . . $ 1 7/16 $ 1/4
<FN>
____________________
(*) To the best of the Company's knowledge, from January 1, 1996 through
October, 1998, no broker-dealer made an active market or regularly
submitted quotations for the Company's stock. During this period there
were only an infrequent number of trades and virtually no trading volume.
(**) To the best of the Company's knowledge, from November, 1998 through
January, 1999, there were only an infrequent number of trades and little
trading volume.
</TABLE>
17
<PAGE>
The closing bid price on the Company's common stock was $0.875 per share on
June 1, 1999. As of June 1, 1999, there were approximately 1,008 holders of
record of the Company's common stock.
The Company's transfer agent is OTC Stock Transfer, Inc., 321 East 2100
South, Salt Lake City, UT 84115; PO Box 65665, Salt Lake City, UT 84165; tel.
(801) 485-555, fax (801) 486-0562.
DIVIDEND POLICY
The Company has not paid, and the Company does not currently intend to pay
cash dividends on its common stock in the foreseeable future. The current policy
of the Company's Board of Directors is for the Company to retain all earnings,
if any, to provide funds for operation and expansion of the Company's business.
The declaration of dividends, if any, will be subject to the discretion of the
Board of Directors, which may consider such factors as the Company's results of
operations, financial condition, capital needs and acquisition strategy, among
others.
Item 2. Legal Proceedings.
None.
Item 3. Changes in and Disagreements With Accountants.
(a) On July 2, 1998 the Company engaged Ham, Langston & Brezina, L.L.P.
("Ham, Langston & Brezina") as its independent accountant. The decision to
engage Ham, Langston & Brezina as the Company's independent accountant was
recommended and approved by the chairman of the Company's Board of Directors.
(b) In a report dated May 2, 1994, Darrell T. Schvaneveldt, Certified Public
Accountant, reported on the Company's financial statements as of April 30, 1994,
December 31, 1993, 1992 and 1991, and the related statements of operations,
stockholders' equity and cash flows for the accumulated period January 3, 1977
to April 30, 1994, the period January 1, 1994 to April 30, 1994, and for the
years ended December 31, 1993, 1992 and 1991. Such report did not contain an
adverse opinion or disclaimer of opinion, nor was such report qualified or
modified as to uncertainty, audit scope, or accounting principles. Darrell T.
Schvaneveldt, Certified Public Accountant, understands that he was terminated as
the Company's independent accountant effective May 2, 1994. Thereafter, the
Company engaged Ham, Langston & Brezina as its independent accountant on July 2,
1998.
18
<PAGE>
(c) During the Company's two fiscal years ended December 31, 1998 and 1997,
and the subsequent interim period preceding the decision to engage independent
accountants, there were no "reportable events" (hereinafter defined) requiring
disclosure pursuant to Item 304 of Regulation S-B.
(d) Effective July 2, 1998, the Company engaged Ham, Langston & Brezina as its
independent accountant. During the two years ended December 31, 1998 and 1997,
and the subsequent interim period preceding the decision to engage independent
accountants, neither the Company nor anyone on its behalf consulted Ham,
Langston & Brezina regarding either the application of accounting principles to
a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial statements, nor has
Ham, Langston & Brezina provided to the Company a written report or oral advice
regarding such principles or audit opinion.
Darrell T. Schvaneveldt, Certified Public Accountant, has provided the
Company with a letter pursuant to Rule 304 of Regulation S-B.
Item 4. Recent Sales of Unregistered Securities.
During the past three years, the following transactions were effected by
the Company in reliance upon exemptions from registration under the Securities
Act of 1933 as amended (the "Act") as provided in Section 4(2) thereof. Each
certificate issued for unregistered securities contained a legend stating that
the securities have not been registered under the Act and setting forth the
restrictions on the transferability and the sale of the securities. No
underwriter participated in, nor did the Company pay any commissions or fees to
any underwriter in connection with any of these transactions. None of the
transactions involved a public offering.
In September, 1998, the Company entered into a Stock Exchange Agreement
with the two stockholders of EIP, whereby the Company issued a total of
34,000,000 shares of common stock of the Company to the EIP stockholders in
exchange for all of the outstanding shares of EIP. The Stock Exchange Agreement
was the result of negotiations between the Company and the EIP stockholders.
In October, 1998 the Company sold a total of 7,650,000 shares of common
stock to six employees of the Company for prices ranging from $.001 to $.01 per
share in cash. In November, 1998 the Company sold 80,000 shares to another
employee at a purchase price of $.005 per share. In October, 1998, the Company
sold a total of 4,250,000 options to purchase common stock of the Company to
eight persons who were employees of the Company. The Company believes that each
of the persons had knowledge and experience in financial and business matters
which allowed them to evaluate the merits and risk of the purchase of these
securities of the Company. All of these persons were employees or vendors of
the Company and in such capacity they were knowledgeable about the Company's
operations and financial condition.
19
<PAGE>
In October, November and December, 1998, the Company sold a total of
1,420,000 shares of common stock to eight persons at prices ranging from $.005
to $.04 per share. The Company believes that these persons had knowledge and
experience in financial and business matters which allowed them to evaluate the
merits and risk of the purchase of these securities of the Company. The Company
believes that each of them was knowledgeable about the Company's operations and
financial condition.
In January, February and March, 1999, the Company sold a total of 1,780,000
shares of common stock to 14 persons at prices ranging from $.005 to $.05 per
share in cash. The Company believes that these persons had knowledge and
experience in financial and business matters which allowed them to evaluate the
merits and risk of the purchase of these securities of the Company. The Company
believes that each of them was knowledgeable about the Company's operations and
financial condition.
In February, 1999, pursuant to a loan agreement effective September, 1998,
United Capital Group Limited and the Company agreed to exchange the existing
indebtedness on this loan ($186,000) for 7,440,000 shares of common stock, or
$0.025 per share. The Company believes that each of the EIP stockholders had
knowledge and experience in financial and business matters which allowed them to
evaluate the merits and risk of the exchange or purchase of these securities of
the Company. The Company believes that the EIP stockholders had knowledge and
experience in financial and business matters which allowed them to evaluate the
merits and risk of the purchase of these securities of the Company, and that
they were knowledgeable about the Company's operations and financial condition.
In April, 1999, the Company awarded Mr. Genin with an immediately
exercisable option to purchase up to 200,000 shares of common stock of the
Company at an exercise price of $0.25 per share expiring on March 31, 2002.
This was compensation for services rendered from August, 1998 through March 31,
1999. Mr. Genin is an officer and director of the Company. The Company
believes that Mr. Genin had knowledge and experience in financial and business
matters which allowed him to evaluate the merits and risk of the receipt of this
option The Company believes that each of he was knowledgeable about the
Company's operations and financial condition.
20
<PAGE>
Item 5. Indemnification of Directors and Officers.
The following summary description of certain provisions of the Company's
Certificate of Incorporation and Bylaws is qualified in its entirety by
reference to the Certificate of Incorporation and the Bylaws of the Company,
copies of which are included as exhibits to this Form 10-SB.
The Company's Certificate of Incorporation, Section Seven, provide that a
Director of the Company is not liable to either the Company or its shareholders
for breach of fiduciary duties unless the breach involves a breach of loyalty to
the Company or its shareholders, acts or omissions not in good faith which
involve intentional misconduct or knowing violation of law, liability for
unlawful payments of dividends or unlawful stock purchase or redemption by the
Company, or a transaction from which the director derived an improper personal
benefit.
The Company's Bylaws, Article V, Section 14, provide for the
indemnification of present and future officers and directors for all liabilities
against the officer or director in connection with any claim by reason of his
being or having been an officer or director of the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the Company's Certificate of Incorporation or Bylaws, the Company has been
informed that, in the opinion of the SEC, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
PART F/S
The financial information required by this item is included as set forth on
Pages F-1 through F-29.
<TABLE>
<CAPTION>
PART III
Item 1. Index to Exhibits.
All exhibits set forth below were previously provided.
<S> <C>
3.1 Certificate of Incorporation and Amendments thereto.
3.2 By-Laws and Amendments thereto.
4.1 Form of Common Stock Certificate.
10.1 Stock Exchange Agreement by and among First Capital International, Inc.
and certain registered holders of capital stock of EIP Liisingu AS, an
Estonian corporation.
10.2 Loan agreement between the Company and United Capital Group, Ltd
21
<PAGE>
16.1 Letter on change of certifying accountant.
21.1 Subsidiaries of the registrant.
27.1 Financial Data Schedule for the year ended December 31, 1997.
27.2 Financial Data Schedule for the year ended December 31, 1998.
27.3 Financial Data Schedule for the three months ended March 31, 1999.
</TABLE>
Item 2. Description of Exhibits.
The Exhibits required by this item were previously provided in the
Company's original filing of its Form 10SB as filed with the Commission on June
4, 1999.
22
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this ammendment No. 1 to Form 10SB registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
First Capital International, Inc.
JuLY 20, 1999 By /s/ Alex Genin
------------------------------------------
Alex Genin
Director, CEO and President
JuLY 20, 1999 By /s/ Joselito H. Sangel
------------------------------------------
Joselito H. Sangel
Vice-President of Finance
23
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
__________
CONSOLIDATED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
TABLE OF CONTENTS
__________
PAGE(S)
-------
<S> <C>
Report of Independent Auditors . . . . . . . . . . . F-3
Audited Financial Statements
Consolidated Balance Sheet as of December 31, 1998 F-4
Consolidated Statement of Operations for the
years ended December 31, 1998 and 1997 . . . . . F-5
Consolidated Statement of Stockholders' Deficit
for the years ended December 31, 1998 and 1997 . F-6
Consolidated Statement of Cash Flows for the
years ended December 31, 1998 and 1997 . . . . . F-7
Notes to Consolidated Financial Statements . . . . . F-8
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
First Capital International, Inc.
We have audited the accompanying consolidated balance sheet of First Capital
International, Inc. as of December 31, 1998, and the related statements of
operations, stockholders' deficit and cash flows for each of the two years in
the period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of EIP Liisingu AS, a company with which the Company merged in
1998. The financial statements of EIP Liisingu AS reflect total assets
constituting 99% of the consolidated total as of December 31, 1998, total
revenues constituting 100% of the consolidated totals for the years ended
December 31, 1998 and 1997 and total costs and expenses constituting 11% and
100% of the consolidated totals for the years ended December 31, 1998 and 1997,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to amounts included
for EIP Liisingu A.S., is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of First Capital International, Inc.
as of December 31, 1998, and the results of its operations and its cash flows
for each of the two years in the period then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has suffered recurring losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Ham, Langston & Brezina, L.L.P.
Houston, Texas
April 21, 1999
F-3
<PAGE>
PRICEWATERHOUSECCOPERS PWC
AS PricewaterhouseCoopers
Narva mnt. 9A
10117 Tallinn
Estonia
Telephone +(372) 6 141 800
Facsimile +(372) 6 141 900
RE PORT OF INDEPENDENT ACCOUNTANTS
To the shareholders of EIP Liisingu AS
We have audited the financial statements of EIP Liisingu AS for the years ended
31 December 1998 and 1997 as set out on pages 1 to 13. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion the financial statements present fairly, in all material
respects, the financial position of the EIP Liisingu AS at 31 December 1998 and
1997 and the results of its operations and its cash flows for the years then
ended in comformity with accounting principles generally accepted in the United
States of America.
As discussed in note 14 to the Financial Statements, the equity of EIP Liisingu
AS is negative. The owners of EIP Liisingu AS plan to increase the share
capital to the extent that equity will be in accordance with Estonian Commercial
Code. Based on the these planned actions the management of EIP Lissingu AS
prepared the financial statements on a going concern basis.
/s/ AS PricewaterhouseCoopers
AS PricewaterhouseCoopers
9 March 1999
F-3A
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
__________
ASSETS
- ---------------------------------------------
<S> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . $ 61,467
Lease receivables, net. . . . . . . . . . . 107,200
Accounts and notes receivable, net. . . . . 8,862
Prepaid expenses. . . . . . . . . . . . . . 6,974
Assets held for sale. . . . . . . . . . . . 18,958
----------
Total current assets. . . . . . . . . . . 203,461
Lease receivables . . . . . . . . . . . . . . 119,339
Accounts and notes receivable, net. . . . . . 3,082
Property and equipment, net . . . . . . . . . 9,519
----------
Total assets. . . . . . . . . . . . . . $ 335,401
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- ---------------------------------------------
Current liabilities:
Note payable-related party. . . . . . . . . $ 166,810
Accounts payable. . . . . . . . . . . . . . 21,276
Accrued liabilities . . . . . . . . . . . . 5,225
----------
Total current liabilities . . . . . . . . 193,311
Long-term debt-related party. . . . . . . . . 333,641
----------
Total liabilities . . . . . . . . . . . 526,952
----------
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.001 par value; 100,000,000
shares authorized; 55,751,142 shares
issued and outstanding. . . . . . . . . . 55,751
Additional paid-in capital. . . . . . . . . 581,660
Accumulated deficit . . . . . . . . . . . . (826,106)
Accumulated foreign currency translation
adjustments . . . . . . . . . . . . . . . (2,856)
----------
Total stockholders' deficit . . . . . . (191,551)
----------
Total liabilities and stockholders'
deficit . . . . . . . . . . . . . . $ 335,401
==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
__________
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenue:
Interest income . . . . . . . . . . . $ 43,822 $ 109,628
Other operating revenue . . . . . . . 13,352 23,244
------------ ------------
Total revenue . . . . . . . . . . . 57,174 132,872
------------ ------------
Costs and expenses:
Operating, general and administrative
expenses. . . . . . . . . . . . . . 257,745 82,146
Stock and option based compensation . 546,822 -
Depreciation and amortization . . . . 8,563 12,109
Interest expense. . . . . . . . . . . 31,611 65,570
Other expense, net. . . . . . . . . . 303 -
------------ ------------
Total costs and expenses. . . . . . 845,044 159,825
------------ ------------
Net loss. . . . . . . . . . . . . . . . $ (787,870) $ (26,953)
============ ============
Net loss applicable to common
stockholders. . . . . . . . . . . . . $ (895,859) $ (26,953)
============ ============
Basic and dilutive net loss per
common share. . . . . . . . . . . . . $ (0.04) $ (0.00)
============ ============
Weighted average shares outstanding . . 24,477,471 12,651,142
============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
__________
FOREIGN COMPRE-
ADDITIONAL CURRENCY HENSIVE
COMMON PAID-IN ACCUMULATED TRANSLATION INCOME
STOCK CAPITAL DEFICIT ADJUSTMENT (LOSS)
--------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 . $ 40,241 $ - $ (11,283) $ - $ 28,958
----------
Net loss . . . . . . . . . . . - - (26,953) - (26,953)
Other comprehensive income-
foreign currency transla-
tion adjustment. . . . . . . - - - (3,125) (3,125)
----------
Comprehensive income (30,078)
----------
Cancellation of shares (48
shares). . . . . . . . . . . (38,631) 38,631 - - -
Common stock issued for cash
(8 shares) . . . . . . . . . 5,780 - - - -
--------- ------------ ------------- ------------- ----------
Balance at December 31, 1997 . 7,390 38,631 (38,236) (3,125) (1,120)
----------
Net loss . . . . . . . . . . . - - (787,870) - (787,870)
Other comprehensive income-
foreign currency transla-
tion adjustment. . . . . . . - - - 269 269
----------
Comprehensive income (787,601)
----------
Common stock issued for cash
before recapitalization
(30 shares). . . . . . . . . 21,314 376 - - -
Recapitalization effective
September 17, 1998 . . . . . 26,137 (26,137) - - -
Common stock issued for cash
and services after capital-
ization (9,100,000 shares) . 910 518,790 - - -
Stock options issued to
officers below fair market
value. . . . . . . . . . . . - 50,000 - - -
--------- ------------ ------------- ------------- ----------
Balance at December 31, 1998 . $ 55,751 $ 581,660 $ (826,106) $ (2,856) $(788,721)
========= ============ ============= ============= ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
__________
YEAR ENDED DECEMBER 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . $(787,870) $ (26,953)
Adjustment to reconcile net loss to net
cash used in operating activities:
Loss from sale of property and equipment . . . - 304
Depreciation expense . . . . . . . . . . . . . 8,563 12,109
Provision for bad debts. . . . . . . . . . . . 53,148 -
Common stock and stock options issued for
services . . . . . . . . . . . . . . . . . . 546,822 -
Change in operating assets and liabilities:
Lease receivables. . . . . . . . . . . . . . 28,187 257,925
Accounts receivable. . . . . . . . . . . . . 14,612 242,649
Prepaid expenses . . . . . . . . . . . . . . 67 -
Assets held for sale . . . . . . . . . . . . (18,958) -
Accounts payable . . . . . . . . . . . . . . 18,157 (60,988)
Accrued liabilities. . . . . . . . . . . . . (53,295) (21,782)
---------- ----------
Net cash provided by (used in)
operating activities . . . . . . . . . . (190,567) 403,264
---------- ----------
Cash flows from investing activities:
Proceeds from sale of property and equipment . . 138 9,721
Capital expenditures . . . . . . . . . . . . . . - (9,041)
---------- ----------
Net cash provided by investing
activities . . . . . . . . . . . . . . . 138 680
---------- ----------
Cash flows from financing activities:
Proceeds from notes payable. . . . . . . . . . . 166,810 -
Proceeds from sale of common stock . . . . . . . 44,568 (5,780)
Payments on notes payable. . . . . . . . . . . . - (355,872)
---------- ----------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . 211,378 (361,652)
---------- ----------
Effects of exchange rate changes on cash . . . . . (1,774) -
Net increase in cash and cash equivalents. . . . . 19,175 42,292
Cash and cash equivalents, beginning
of year. . . . . . . . . . . . . . . . . . . . . 42,292 -
---------- ----------
Cash and cash equivalents, end of year . . . . . . $ 61,467 $ 42,292
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest . . . . . . . . . . . . . $ 31,611 $ 65,570
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------
First Capital International, Inc. (the "Company"), formerly Ranger/USA, Inc.,
assumed its current name in August 1998 when new management took over the
Company which, at the time, had no existing operations, and began implementation
of a new business plan. The Company is now involved primarily in the
identification, acquisition and operation of businesses serving or focussed on
Central and Eastern European markets. To date, the Company's initial business
has been EIP Liisingu AS, an Estonian company that provides lease financing of
real estate, motor vehicles and equipment. The Company is currently identifying
additional acquisition targets that are involved in the financial services or
high technology sectors (See Note 2 and 16) and is devoting substantial
resources to the development of a virtual shopping mall, PlazaRoyal.com, for
deployment on the Internet.
PRINCIPLES OF CONSOLIDATION
-----------------------------
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries after elimination of all significant intercompany
accounts and transactions.
MANAGEMENT ESTIMATES
---------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of 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. These
estimates mainly involve the useful lives of property and equipment, the
valuation of deferred tax assets and the realizability of accounts receivable.
REVENUE RECOGNITION
--------------------
Interest income is recognized using the interest method over the terms of
underlying leases. Other operating revenue is recognized at the time services
are provided.
CONCENTRATIONS OF CREDIT RISK
--------------------------------
Cash and accounts and lease receivables are the primary financial instruments
that subject the Company to concentrations of credit risk. The Company
maintains its cash in banks selected based upon management's assessment of the
bank's financial stability. Cash balances are currently maintained in banks in
Estonia and the United States. Cash balances in U.S. banks may periodically
exceed the $100,000 federal depository insurance limit.
Continued
F-8
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
----------------------------------------------------------------
CONCENTRATIONS OF CREDIT RISK, CONTINUED
--------------------------------------------
Accounts and leases receivable arise primarily from transactions with customers
in Estonia. The Company performs credit reviews of its customers and provides a
reserve for accounts where collectibility is uncertain. Collateral is required
for credit granted in connection with certain lease transactions.
CASH EQUIVALENTS
-----------------
For purposes of reporting cash flows, the Company considers all short-term
investments with an original maturity of three months or less to be cash
equivalents.
PROPERTY AND EQUIPMENT
------------------------
Equipment is stated at cost. Depreciation is computed principally by the
straight-line method over the estimated useful lives of 2 to 5 years for office
furniture and equipment and 2 to 3 years for machinery and equipment.
IMPAIRMENT OF LONG-LIVED ASSETS
----------------------------------
In the event that facts and circumstances indicate that the carrying value of a
long-lived asset, including associated intangibles, may be impaired, an
evaluation of recoverability is performed by comparing the estimated future
undiscounted cash flows associated with the asset to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow is
required.
INCOME TAXES
-------------
The Company uses the liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and income tax carrying amounts of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
The Company includes fair value information in the notes to financial statements
when the fair value of its financial instruments is different from the book
value. When the book value approximates fair value, no additional disclosure is
made.
Continued
F-9
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
----------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION
------------------------------
The Company has determined that the local currency is the functional currency
for its Estonian subsidiary under Financial Accounting Standards Board Statement
No. 52, "Foreign Currency Translation" (FAS 52). Under FAS 52, assets and
liabilities denominated in foreign functional currencies are translated at the
exchange rate as of the balance sheet date. Translation adjustments are
recorded as a separate component of stockholders' deficit. Revenues, costs and
expenses denominated in foreign functional currencies are translated at the
weighted average exchange rate for the period.
The Estonian kroon ("EEK") is the functional currency of the Company's foreign
subsidiary and the EEK is pegged to the German mark ("DEM") in the ratio of 8
EEK = 1 DEM.
COMPREHENSIVE INCOME
---------------------
Effective January 1, 1998 the Company adopted FAS 130, "Reporting Comprehensive
Income". FAS 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. It requires (a)
classification of the components of other comprehensive income by their nature
in a financial statement and (b) the display of the accumulated balance of the
other comprehensive income separate from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
Prior years financial statements have been reclassified to conform to these
requirements.
2. REVERSE MERGER WITH EIP LIISINGU AS
----------------------------------------
On September 28, 1998, the Company recapitalized EIP Liisingu AS ("EIP"), an
Estonian corporation, by exchanging 34,000,000 shares of the Company's common
stock for all outstanding shares of EIP. For financial reporting purposes EIP
has been treated as an acquiring company in a reverse merger transaction.
Accordingly, the accompanying financial statements reflect the financial
position and results of operations of EIP, although First Capital International,
Inc. remains as the legal reporting entity. This acquisition has been accounted
for as a recapitalization because the Company was a shell company with no
operations prior to the merger.
Continued
F-10
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
3. GOING CONCERN CONSIDERATIONS
------------------------------
During the years ended December 31, 1998 and 1997, the Company has been
dependent on debt and equity raised from individual investors and related
parties to sustain its operations. During the years ended December 31, 1998 and
1997, the Company incurred net losses of $787,870 and $26,953, respectively.
Also, during the year ended December 31, 1998, the Company had negative cash
flows from operations of $190,567. These factors along with a stockholders'
deficit of $191,551 at December 31, 1998 raise substantial doubt about the
Company's ability to continue as a going concern.
Management has specific plans to address the financial situation as follows:
- - In the near term the Company plans a private placement of its common stock
to qualified investors to fund its current operations.
- - In the intermediate term, the Company plans to file a Form 10SB and become
a full reporting company under the Securities and Exchange Act of 1934.
Management believes this step will provide a market for its common stock and
provide a means of obtaining future funds necessary to implement its business
plan.
- - In the long-term, the Company believes that cash flows from acquired
businesses and businesses that it is currently developing will provide the
resources for its continued operations. The Company is currently developing a
virtual mall for launch on the Internet. Management believes that revenues from
this virtual mall, if successfully launched, will more than cover overhead at
the corporate level. Acquisition activities and development of the Company's
internet project resulted in corporate headquarters accounting for 95% of the
Company's total net loss in 1998.
- - The Company has identified businesses operating in the telecommunications
and Internet sector that the Company believes will provide good near term
results and believes that its planned operations in Eastern European markets
will provide positive returns (See Note 16).
There can be no assurance that the Company's planned private placement of equity
securities or its planned full public reporting status will be successful or
that the Company will have the ability to implement its business plan and
ultimately attain profitability. The Company's long-term viability as a going
concern is dependent upon three key factors, as follows:
Continued
F-11
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
3. GOING CONCERN CONSIDERATIONS, CONTINUED
------------------------------------------
The Company's ability to obtain adequate sources of debt or equity funding
to meet current commitments and fund the continuation of its business
operations.
The ability of the Company to acquire or internally develop viable
businesses.
The ability of the Company to ultimately achieve adequate profitability and
cash flows from operations to sustain its operations.
4. ACCOUNTS AND NOTES RECEIVABLE
--------------------------------
Accounts and notes receivable at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Trade accounts receivable. . . . . . . . . $ 6,618
Notes receivable . . . . . . . . . . . . . 4,042
Accrued interest receivable. . . . . . . . 3,537
Other. . . . . . . . . . . . . . . . . . . 409
-------
14,606
Less allowance for doubtful accounts . . . 2,662
-------
11,944
Less current portion of accounts and notes
receivable . . . . . . . . . . . . . . . 8,862
-------
$ 3,082
=======
</TABLE>
5. INVESTMENT IN DIRECT FINANCING LEASES
-----------------------------------------
The Company owns and leases various buildings, transportation and other
equipment under leases that meet the criteria to be classified as direct
financing leases. Assets owned and leased under direct financing leases are
carried at the Company's gross investment in the lease less unearned income.
Unearned income is recognized in such a manner as to produce a constant periodic
rate of return on the net investment in the direct financing lease.
The components of the Company's investment in direct financing leases at
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Lease contracts receivable (net of
accounts reserved of $5,439) . . . . $280,986
Less unearned income . . . . . . . . . 54,447
--------
Investment in direct financing leases. $226,539
========
</TABLE>
Continued
F-12
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
5. INVESTMENT IN DIRECT FINANCING LEASES, CONTINUED
-----------------------------------------------------
The minimum lease payment receivables under noncancellable leasing arrangements
at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ----------------------------------------
<S> <C>
1999. . . . . . . . . . . . . . . . $133,092
2000. . . . . . . . . . . . . . . . 91,716
2001. . . . . . . . . . . . . . . . 50,700
2002. . . . . . . . . . . . . . . . 5,478
--------
Net minimum lease receipts. . . . . 280,986
Less unearned income. . . . . . . . 54,447
--------
Net investment in direct financing
leases. . . . . . . . . . . . . . 226,539
Less current portion. . . . . . . . 107,200
--------
119,339
========
</TABLE>
Continued
F-13
<PAGE>
6. PROPERTY AND EQUIPMENT
------------------------
Property and equipment at December 31, 1998 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Transportation equipment . . . $24,111
Office equipment . . . . . . . 4,934
-------
29,045
-------
Less accumulated depreciation. 19,526
-------
9,519
=======
</TABLE>
7. NOTE PAYABLE AND LONG-TERM DEBT-RELATED PARTY
--------------------------------------------------
Notes payable and long-term debt at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Note payable to a related foreign corpora-
tion under a $300,000 line of credit,
bearing interest at 8.0% per year and
currently due February 1, 1999. This
note includes provisions under which it
may, at the option of the Company, be
converted to restricted shares of the
Company's common stock based on a con-
version price of $0.25 per share. In
February 1999, upon maturity, this note
was converted. . . . . . . . . . . . . . . $166,810
Note payable to EIP's former parent company,
bearing interest at 10% per year and due
in monthly payments of interest only
through May 2002, at which date the en-
tire principal balance is payable. This
note is collateralized by substantially
all of EIP's property and equipment and
leased assets excluding buildings and
transportation equipment.. . . . . . . . . 333,641
--------
500,451
Less current portion . . . . . . . . . . . . 166,810
--------
$333,641
========
</TABLE>
Future maturities of notes payable and long-term debt at December 31, 1999 were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------
<S> <C>
1999 . . . $166,810
2000 . . . -
2001 . . . -
2002 . . . 333,641
--------
500,451
========
</TABLE>
Continued
F-14
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
8. INCOME TAXES
-------------
The Company has incurred losses since its inception and, therefore, has not been
subject to federal income taxes. As of December 31, 1998, the Company had net
operating loss ("NOL") carryforwards for income tax purposes of approximately
$480,000 which expire in 2008 through 2018. Under the provisions of Section 382
of the Internal Revenue Code the greater than 50% ownership change in the
Company in connection with the reverse merger with EIP (See Note 2) severely
limits the Company's ability to utilize the NOL carryforward to reduce future
taxable income and related tax liabilities. Additionally, because United States
tax laws limit the time during which NOL carryforwards may be applied against
future taxable income, the Company will not be able to take full advantage of
its NOL for federal income tax purposes should the Company generate taxable
income.
The composition of deferred tax assets and the related tax effects at December
31, 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Net operating losses. . . . . . . . $ 163,200
Allowance for doubtful accounts and
notes receivable. . . . . . . . . 2,754
Valuation allowance . . . . . . . . (165,954)
----------
Net deferred tax assets . . . . . $ -
==========
</TABLE>
The difference between the income tax benefit in the accompanying statement of
operations and the amount that would result if the U.S. Federal statutory rate
of 34% were applied to pre-tax loss is as follows (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
------------------ ----------------
AMOUNT % AMOUNT %
---------- ------ -------- ------
<S> <C> <C> <C> <C>
Benefit for income tax at
federal statutory rate. . $ 267,875 34.0 $ 9,164 34.0
Non-deductible compensation (185,919) (23.6) - -
Increase in valuation
allowance . . . . . . . . (81,956) (10.4) (9,164) (34.0)
---------- ------ -------- ------
$ - - $ - -
========== ====== ======== ======
</TABLE>
Continued
F-15
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
9. STOCKHOLDER'S EQUITY
---------------------
During the year ended December 31, 1998, the Company sold and issued, above
existing shares, a total of 43,100,000 shares of common stock. In order to
remain within the constraints of authorized shares on August 28, 1998, the
Company adopted amendments to its certificate of incorporation to (i) increase
the authorized capital stock of the corporation from 50,000,000 shares to
100,000,000 shares and (ii) decrease the par value of common stock from $0.01 to
$0.001 per share. On April 1, 1999 the Company also authorized 10,000,000
shares of serial preferred stock for which the Company's Board of Directors may
designate voting power, preferences, limitations and restrictions.
10. STOCK OPTIONS
--------------
During the year ended December 31, 1998, the Company issued non-qualified
options to employees, officers and directors of the Company that will allow them
to acquire a total of 4,250,000 shares of the Company's common stock at prices
ranging from $0.05 to $0.10 per share. The table below summarizes the annual
activity of the Company's stock option plan:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
--------- ---------
<S> <C> <C>
Balance at December 31, 1996
and 1997 . . . . . . . . . - $ -
Granted. . . . . . . . . . 4,250,000 0.05
Canceled . . . . . . . . . - -
Exercised. . . . . . . . . - -
--------- ---------
Balance at December 31, 1998 4,250,000 $ 0.05
========= =========
</TABLE>
The Company utilizes the disclosure-only provisions of SFAS No. 123 "Accounting
for Stock-Based Compensation" and applies Accounting Principles Board ("APB")
Opinion No. 25 and related interpretations in accounting for its stock option
plans. Under APB No. 25, because the exercise prices of the Company's employee
stock options were less than the market prices of the underlying Company stock
on the date of grant, compensation expense totaling $50,000 has been recognized
in these financial statements to reflect the value of the employee stock options
granted.
Continued
F-16
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
10. STOCK OPTIONS, CONTINUED
--------------------------
Had the Company elected to recognize compensation cost for its stock option
plans based on the calculated fair value at the grant dates for awards under
such plans, consistent with the method prescribed by SFAS No. 123, net income
(loss) per share would have reflected the proforma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Net loss
as reported. . . . . . . . . . . . . . . $(787,870) $(26,953)
proforma . . . . . . . . . . . . . . . . (873,187) (26,953)
Net loss applicable to common stockholders (981,170) (26,953)
Basic and diluted net loss per share . (0.04) (0.00)
</TABLE>
The fair values of the stock options are estimated on the dates of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for options granted in 1998:
<TABLE>
<CAPTION>
<S> <C>
Dividend yield. . . . . 0.0%
Expected volatility . . 70.0%
Risk-free interest rate 4.9%
Expected holding period 2 years
</TABLE>
The table below summarizes information regarding Company stock options
outstanding and exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
CONTRACTUAL EXERCISE
EXERCISE PRICE SHARES LIFE PRICE
- --------------- --------- ----------- ---------
<S> <C> <C> <C>
0.05 . . . . . 4,000,000 2.66 $ 0.05
0.10. . . . . . 250,000 2.66 0.10
</TABLE>
11. EARNINGS PER SHARE
--------------------
Following is the reconciliation of net loss to the net loss available to common
stockholders.
Continued
F-17
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
11. EARNINGS PER SHARE, CONTINUED
--------------------------------
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Net loss. . . . . . . . . . . . $(787,870) $(26,953)
Less: Accretion of discount on
issuance of common stock. . . (107,989) -
---------- ---------
Net loss available to common
stockholders. . . . . . . . . $(895,859) $(26,953)
========== =========
</TABLE>
In October through December 1998, common stock was sold to various individuals
at prices below the quoted market price. The discount upon issuance of such
shares is analogous to a dividend to the holders of newly issued shares and is
deducted from the net loss available to common stockholders in the calculation
of earnings per share.
12. RELATED PARTY TRANSACTIONS
----------------------------
During the years ended December 31, 1998 and 1997, the Company engaged in
certain related party transactions as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Direct financing leases with
officers and directors of EIP
Total lease contract amount . . . . $ 3,792 $ 1,066
Balance of lease receivable at
year end. . . . . . . . . . . . . $ 1,050 $ 169
Interest rate . . . . . . . . . . . 15% 10%
Interest incurred on long-term debt
to former parent of EIP . . . . . $31,611 $69,613
</TABLE>
During 1998 the Company began subleasing office space from a company 100% owned
by the Company's president. The sublease is on a month-to-month basis and
provides for monthly payments of $2,343. Total rent expense recognized with
respect to this lease during 1998 was $9,372.
Continued
F-18
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
13. LITIGATION
----------
The Company is a party to certain litigation arising in the normal course of
business. Management believes that such litigation will not have a material
impact on the Company.
14. IMPACT OF THE YEAR 2000 ISSUE
----------------------------------
The Year 2000 issue is the result of computer programs and hardware with
embedded date technology using two digits to define the applicable year rather
than four. Any programs or hardware that are time sensitive and have not been
determined to be Year 2000 compliant may recognize a date using "00" as the year
1900 rather than the year 2000. Such improper date recognition could, in turn,
result in erroneous processing of data, or, in extreme situations, system
failure.
The Company is currently implementing a Year 2000 program which encompasses
performing an inventory of information technology and non-information technology
systems, assessing the potential problem areas, testing the systems for Year
2000 readiness, and modifying systems that are not Year 2000 compliant.
To date, inventory and assessment are in progress for all core systems that are
essential for business operations. The Company believes all of its core systems
are Year 2000 compliant. Because many of the Company's systems are new and
designed to be year 2000 compliant, the Company's management estimates that the
work they have completed represents more than seventy-five percent of the work
involved in preparing the Company's systems for the Year 2000.
Although the Company expects to be ready to continue business activities without
interruption by a Year 2000 problem, Company management recognizes the general
uncertainty inherent in the Year 2000 issue, in part because of the uncertainty
about the Year 2000 readiness of third parties, particularly in Estonia and
other Eastern European countries. Under a "worst case Year 2000 scenario", it
may be necessary for the Company to temporarily interrupt normal business
activities or operations and to seek outside financing for cash flow problems
brought on by customer payment problems. The Company believes that such
circumstances could result in a material adverse impact to its operations and in
its current financial position, threaten its continued existence. The Company
has begun, but not yet completed, development of a contingency plan to deal with
the "most likely worst case Year 2000 scenario". The contingency plan is
expected to be completed during the fourth quarter of 1999.
Continued
F-19
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
14. IMPACT OF THE YEAR 2000 ISSUE, CONTINUED
----------------------------------------------
Based on a current assessment, the Company's total cost of becoming Year 2000
compliant is not expected to be significant to its financial position, results
of operations or cash flows and is estimated to be less than $10,000.
15. SEGMENT AND GEOGRAPHIC INFORMATION
-------------------------------------
The Company currently operates in the equipment and real estate direct financing
lease business but is actively seeking qualified businesses to acquire. The
Company's two reportable segments are based upon geographic area and type of
business. All of the Company's foreign operations are currently conducted by
EIP in Estonia. EIP operates with the Estonian kroon as its functional
currency.
The corporate component of operating income (loss) represents corporate general
and administrative expenses. Corporate assets include cash and cash
equivalents.
Following is a summary of segment information:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Net Revenue:
United States - Corporate. . $ - $ -
Estonia - Leasing. . . . . . 57,174 132,872
---------- ---------
Total net revenue. . . . . $ 57,174 $ 132,872
========== =========
Depreciation and Amortization:
United States - Corporate. . $ - $ -
Estonia - Leasing. . . . . . 8,563 12,109
---------- ---------
Total depreciation and
amortization . . . . . . $ 8,563 $ 12,109
========== =========
Loss from Operations:
United States - Corporate. . $(749,179) $ -
Estonia - Leasing. . . . . . (38,691) (26,953)
---------- ---------
Total loss from operations $(787,870) $(26,953)
========== =========
</TABLE>
Continued
F-20
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
__________
15. SEGMENT AND GEOGRAPHIC INFORMATION, CONTINUED
-------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Assets:
United States - Corporate. . $ 906 $ -
Estonia - Leasing. . . . . . 334,495 324,293
-------- --------
Total assets . . . . . . . $335,401 $324,293
======== ========
Capital Expenditures:
United States - Corporate. . $ - $ -
Estonia - Leasing. . . . . . 138 9,721
-------- --------
Total capital expenditures $ 138 $ 9,721
======== ========
</TABLE>
16. SUBSEQUENT EVENTS - LETTERS OF INTENT
------------------------------------------
Subsequent to year-end the Company entered into a letter of intent to acquire
TGK-LINK, an Estonian Corporation that provides global data connections and
links to local banks in Estonia. The purchase price for TGK-LINK will be
400,000 shares of First Capital International, Inc. common stock. In connection
with this acquisition, the Company has agreed to invest up to $300,000 in
ventures involving TGK-LINK and to issue to TGK-LINK options to acquire an
additional 200,000 restricted shares of the Company's common stock at $0.05 per
share if TGK-LINK produces net income of at least $75,000 in 1999. Such
options, if granted, will expire February 29, 2000. The TGK-LINK letter of
intent also includes a provision that if the quoted market price of the
Company's common stock falls below $0.05 per share for 60 consecutive trading
days, TGK-LINK will have the right to purchase its shares for $0.01 per share.
F-21
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
__________
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
F-22
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
TABLE OF CONTENTS
__________
PAGE(S)
-------
<S> <C>
Unaudited Financial Statements
Consolidated Balance Sheet as of March 31,
1999 and December 31, 1998 . . . . . . . . . . . . F-24
Consolidated Statement of Operations for the
three months ended March 31, 1999 and 1998. . . . F-25
Consolidated Statement of Stockholders' Deficit
for the three months ended March 31, 1999 and 1998 F-26
Consolidated Condensed Statement of Cash Flows
for the three months ended March 31, 1999 and 1998 F-27
Selected Notes to Consolidated Financial Statements. . F-28
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 AND DECEMBER 31, 1998
__________
MARCH 31, DECEMBER 31,
1999 1998
ASSETS (UNAUDITED) (NOTE)
- ------------------------------------------------ ------------ --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . $ 91,539 $ 61,467
Lease receivables, net . . . . . . . . . . . . 91,269 107,200
Accounts and notes receivable, net . . . . . . 13,893 8,862
Prepaid expenses . . . . . . . . . . . . . . . 8,015 6,974
Assets held for sale . . . . . . . . . . . . . - 18,958
------------ --------------
Total current assets . . . . . . . . . . . . 204,716 203,461
Lease receivables. . . . . . . . . . . . . . . . 101,102 119,339
Accounts and notes receivable, net . . . . . . . 2,595 3,082
Property and equipment, net. . . . . . . . . . . 6,774 9,519
------------ --------------
Total assets . . . . . . . . . . . . . . . $ 315,187 $ 335,401
============ ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
- ------------------------------------------------
Current liabilities:
Note payable-related party . . . . . . . . . . $ 32,013 $ 166,810
Accounts payable . . . . . . . . . . . . . . . 279 21,276
Accrued liabilities. . . . . . . . . . . . . . 3,370 5,225
------------ --------------
Total current liabilities. . . . . . . . . . 35,662 193,311
Long-term debt-related party . . . . . . . . . . 306,646 333,641
------------ --------------
Total liabilities. . . . . . . . . . . . . 342,308 526,952
------------ --------------
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.001 par value; 100,000,000
shares authorized; 65,023,142 and 55,751,142
shares issued and outstanding at March 31,
1999 and December 31, 1998, respectively . . 65,023 55,751
Additional paid-in capital . . . . . . . . . . 887,028 581,660
Accumulated deficit. . . . . . . . . . . . . . (978,432) (826,106)
Accumulated foreign currency translation
adjustments. . . . . . . . . . . . . . . . . (740) (2,856)
------------ --------------
Total stockholders' deficit. . . . . . . . (27,121) (191,551)
------------ --------------
Total liabilities and stockholders'
deficit. . . . . . . . . . . . . . . . $ 315,187 $ 335,401
============ ==============
</TABLE>
Note: The consolidated balance sheet at December 31, 1998 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. See accompanying notes.
F-24
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
__________
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
Interest income . . . . . . . . . . . $ 10,470 $ 10,700
Other operating revenue . . . . . . . 2,476 2,105
------------ ------------
Total revenue . . . . . . . . . . . 12,946 12,805
------------ ------------
Costs and expenses:
Operating, general and administrative
expenses. . . . . . . . . . . . . . 65,656 4,152
Stock and option based compensation . 89,325 -
Depreciation and amortization . . . . 2,057 2,085
Interest expense. . . . . . . . . . . 8,160 7,597
Other expense, net. . . . . . . . . . 2,863 2,032
------------ ------------
Total costs and expenses. . . . . . 168,061 15,866
------------ ------------
Net loss. . . . . . . . . . . . . . . . $ (155,115) $ (3,061)
============ ============
Net loss applicable to common
stockholders. . . . . . . . . . . . . $(1,515,970) $ (3,061)
============ ============
Basic and dilutive net loss per
common share. . . . . . . . . . . . . $ (0.02) $ (0.00)
============ ============
Weighted average shares outstanding . . 61,107,031 46,651,142
============ ============
</TABLE>
See accompanying notes.
F-25
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1999
__________
(UNAUDITED)
FOREIGN COMPRE-
ADDITIONAL CURRENCY HENSIVE
COMMON PAID-IN ACCUMULATED TRANSLATION INCOME
STOCK CAPITAL DEFICIT ADJUSTMENT (LOSS)
------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998. $55,751 $ 581,660 $ (826,106) $ (2,856) $(788,721)
Net loss. . . . . . . . . . . - - (155,115) - (155,115)
Other comprehensive income-
foreign currency transla-
tion adjustment . . . . . . - - - 2,116 2,116
----------
Comprehensive income (152,999)
----------
Common stock issued for cash
(9,272,000 shares). . . . . 9,272 305,368 - - -
------- ----------- ------------- ------------- ----------
Balance at March 31, 1999 . . $65,023 $ 887,028 $ (981,221) $ (740) $(941,720)
======= =========== ============= ============= ==========
</TABLE>
See accompanying notes.
F-26
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
__________
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . $(155,115) $(3,061)
Adjustment to reconcile net loss to net
cash provided by operating activities: . 165,636 32,321
---------- --------
Net cash provided by operating
activities . . . . . . . . . . . . 10,521 29,260
---------- --------
Cash flows from financing activities:
Proceeds from sale of common stock . . . . 42,950 18,520
Payments on notes payable. . . . . . . . . (24,207) (9,598)
---------- --------
Net cash provided by financing
activities . . . . . . . . . . . . 18,743 8,922
---------- --------
Effects of exchange rate changes on cash . . 808 -
---------- --------
Net increase in cash and cash equivalents. . 30,072 38,182
Cash and cash equivalents, beginning
of period. . . . . . . . . . . . . . . . . 61,467 42,242
---------- --------
Cash and cash equivalents, end of period . . $ 91,539 $80,424
========== ========
Non-cash investing and financing activities:
Conversion of note payable to a related
party to common stock. . . . . . . . . . $ 186,000 $ -
</TABLE>
See accompanying notes.
F-27
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
1. INTERIM FINANCIAL STATEMENTS
------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month periods ended March 31,
1999 and 1998 are not necessarily indicative of the results that may be expected
for the respective full years.
A summary of the Company's significant accounting policies and other information
necessary to understand these consolidated interim financial statements is
presented in the Company's audited financial statements for the years ended
December 31, 1998 and 1997. Accordingly, the Company's audited financial
statements should be read in connection with these financial statements.
2. INCOME TAXES
-------------
The difference between the 34% federal statutory income tax rate shown in the
accompanying interim financial statements if primarily attributable to an
increase in the valuation allowance applied against the tax benefit from
utilization of net operating loss carryforwards.
3. EARNINGS PER SHARE
--------------------
Following is the reconciliation of net loss to the net loss available to common
stockholders.
<TABLE>
<CAPTION>
1998 1997
------------ --------
<S> <C> <C>
Net loss. . . . . . . . . . . . $ (155,115) $(3,061)
Less: Accretion of discount on
issuance of common stock. . . (1,360,855) -
------------ --------
Net loss available to common
stockholders. . . . . . . . . $(1,515,970) $(3,061)
============ ========
</TABLE>
F-28
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
3. EARNINGS PER SHARE, CONTINUED
--------------------------------
During the three months ended March 31, 1999, common stock was sold to various
individuals at prices below the quoted market price. The discount upon issuance
of such shares is analogous to a dividend to the holders of newly issued shares
and is deducted from the net loss available to common stockholders in the
calculation of earnings per share.
F-29
<PAGE>
