U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER: 000-26271
FIRST CAPITAL INTERNATIONAL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 76-0582435
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5120 WOODWAY, SUITE 9004, HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER: (713) 629-4866
ISSUER'S FAX NUMBER: (713) 629-4913
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PAST 12
MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH
REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90
DAYS.
YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON EQUITY, AS OF NOVEMBER 1, 2000, THERE WERE 75,051,412 SHARES OF
COMMON STOCK OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE); YES [ ] NO [X]
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
PART II - OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CAPITAL INTERNATIONAL, INC.
__________
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
F-1
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
TABLE OF CONTENTS
__________
PAGE(S)
-------
Unaudited Consolidated Condensed Financial
Statements:
Consolidated Condensed Balance Sheet as of
September 30, 2000 and December 31, 1999 F-3
Unaudited Consolidated Condensed Statement
of Operations for the three months and nine
months ended September 30, 2000 and 1999 F-4
Unaudited Consolidated Condensed Statement
of Stockholders' Deficit for the nine months
ended September 30, 2000 F-5
Unaudited Consolidated Condensed Statement
of Cash Flows for the nine months ended
September 30, 2000 and 1999 F-6
Selected Notes to Unaudited Consolidated
Condensed Financial Statements F-7
F-2
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
__________
SEPTEMBER 30, DECEMBER 31,
2000 1999
ASSETS (UNAUDITED) (NOTE)
------ ------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 222,134 $ 67,193
Accounts receivable, net 88,370 2,331
Inventory 109,049 35,457
Other 4,345 9,981
Net current assets of discontinued
operations - 145,954
------------- ------------
Total current assets 423,898 260,916
Property and equipment, net 130,225 3,463
Excess of cost over net assets of
businesses acquired, net 322,688 -
------------- ------------
Total assets $ 876,811 $ 264,379
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable to related parties $ 17,577 $ 11,372
Accounts payable and accrued liabilities 134,815 32,106
------------- ------------
Total current liabilities 152,392 43,478
Net non-current liabilities of discontinued
operations - 199,123
Minority interest 2,697 -
------------- ------------
Total liabilities 155,089 242,601
------------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 100,000,000
shares authorized; 75,051,412 and 70,061,142
shares issued and outstanding at September 30,
2000 and December 31, 1999, respectively 75,051 70,061
Additional paid-in capital 3,975,259 2,794,371
Accumulated deficit (3,317,935) (2,820,817)
Accumulated foreign currency translation
adjustments (10,653) (21,837)
------------- ------------
Total stockholders' equity 721,722 21,778
------------- ------------
Total liabilities and stockholders'
equity $ 876,811 $ 264,379
============= ============
<FN>
Note: The consolidated balance sheet at December 31, 1999 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.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
__________
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Revenue:
Merchandise sales $ 11,365 $ - $ 43,180 $ -
Internet service fees 149,870 - 249,182 -
Travel transactions 20,207 - 62,903 -
------------ ------------ ------------ ------------
Total revenue 181,442 - 355,265 -
------------ ------------ ------------ ------------
Cost of sales and services:
Cost of merchandise sold 4,073 - 22,242 -
Cost of providing internet
services 66,542 - 142,787 -
Cost of travel transactions 3,544 - 11,033 -
------------ ------------ ------------ ------------
Total cost of sales and
services 74,159 - 176,062 -
------------ ------------ ------------ ------------
Gross margin 107,283 - 179,203 -
Selling, general and admin-
istrative expense 310,535 100,736 678,078 256,933
Common stock and option based
compensation - 17,500 18,000 416,210
------------ ------------ ------------ ------------
Loss from operations (203,252) (118,236) (516,875) 673,143
------------ ------------ ------------ ------------
Other income (expenses):
Interest expense (173) (21,583) (357) (244,848)
Other income 144 - 7,825 -
------------ ------------ ------------ ------------
Total other income (expense) (29) (21,583) 7,468 (244,848)
------------ ------------ ------------ ------------
Loss from continuing operations (203,281) (139,819) (509,407) (917,991)
------------ ------------ ------------ ------------
Discontinued operations:
Gain (loss) from operation of
discontinued leasing division - 42,261 (26,548) 80,275
Gain on disposal of discontin-
ued leasing division, inclu-
ding provision for losses
during the phaseout period - - 38,837 -
------------ ------------ ------------ ------------
Total income from discontin-
ued operations - - 12,289 -
------------ ------------ ------------ ------------
Net loss $ (203,281) $ (97,558) $ (497,118) $ (837,716)
============ ============ ============ ============
Basic and diluted net loss per
common share:
Continuing operations $ (0.00) $ (0.00) $ (0.01) $ (0.01)
Discontinued operations 0.00 0.00 0.00 0.00
------------ ------------ ------------ ------------
Net loss $ (0.00) $ (0.00) $ (0.01) $ (0.01)
============ ============ ============ ============
Weighted average shares out-
standing 74,532,158 66,558,479 73,571,481 64,287,809
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
__________
(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, 1999 $ 70,061 $2,794,371 $(2,820,817) $ (21,837) $(2,807,413)
Net loss - - (497,118) - (497,118)
Other comprehensive income-
foreign currency transla-
tion adjustment - - - 11,202 11,202
---------
Comprehensive income (485,916)
----------
Common stock issued,
(4,990,270 shares) 4,990 1,180,888 - - -
---------- ---------- ------------ ------------ ------------
Balance at September 30,
2000 $ 75,051 $3,975,259 $(3,317,935) $ 10,635 $(3,293,329)
========== ========== ============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
__________
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
2000 1999
---------- ----------
(RESTATED)
<S> <C> <C>
Cash flows from operating activities $(462,559) $(205,451)
---------- ----------
Cash flows from investing activities:
Acquisition of Mainor Anet AS (50,000) -
---------- ----------
Net cash used by investing activities (50,000) -
---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock 655,000 278,139
Proceeds from notes payable to a
related party 12,500 133,190
---------- ----------
Net cash provided by financing
activities 667,500 411,329
---------- ----------
Effects of exchange rate changes on cash - 1,989
---------- ----------
Net increase in cash and cash equivalents 154,941 207,867
Cash and cash equivalents, beginning
of period 67,193 61,467
---------- ----------
Cash and cash equivalents, end of period $ 222,134 $ 269,334
========== ==========
</TABLE>
See accompanying notes.
F-6
<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 nine month periods ended September 30, 2000 and 1999 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, 1999 and 1998. Accordingly, the Company's
audited financial statements should be read in connection with these
financial statements.
2. RESTATEMENT OF FINANCIAL STATEMENTS
--------------------------------------
During the nine months ended September 30, 1999, the Company issued 22,000
shares of its common stock for services at prices representing a discount
from the quoted market price of the Company's common stock at the dates of
issue. The Company also issued 300,000 non-qualified compensatory stock
options for shares of its common stock and convertible debt with a
beneficial conversion feature. The stock options bear exercise prices that
represent a discount from the quoted market price of the Company's common
stock at the date of issue. The fair value of the Company's common stock,
for purposes of determining compensation expense associated with stock and
stock options and the value of the beneficial conversion feature associated
with convertible debt, was determined based upon quoted market prices in an
inactive market with discounts for trading restrictions on such shares and
a thin market for the Company's common stock. Generally accepted accounting
principles do not allow for such discounts from the quoted market price.
The effect of correcting this error in application of generally accepted
accounting principles on the Company's financial statements at September
30, 1999 and for the nine months then ended, is as follows:
F-7
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
2. RESTATEMENT OF FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------
Decrease in total assets $ -
===========
Decrease in total liabilities $ -
===========
Increase in common and preferred stock
and additional paid-in capital $1,258,873
===========
Increase in accumulated deficit $1,258,873
===========
Increase in net loss $ 445,217
===========
Increase in basic and dilutive net
loss per common share $ (0.00)
===========
3. INCOME TAXES
-------------
The difference between the 34% federal statutory income tax rate shown in
the accompanying interim financial statements is primarily attributable to
an increase in the valuation allowance applied against the tax benefit from
utilization of net operating loss carryforwards.
4. STOCKHOLDERS' EQUITY
---------------------
During the nine months ended September 30, 2000, the Company issued shares
of common stock and had other increases to stockholders' equity as follows:
F-8
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
4. STOCKHOLDERS' EQUITY, CONTINUED
---------------------------------
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL TOTAL
-------- ---------- ----------
Common stock and stock options
issued for cash (4,350,000
shares and 1,300,000 options) $ 4,350 $ 650,650 $ 655,000
Common stock issued in connec-
tion with acquisitions 604 512,274 512,878
Compensation recognized on
common stock issued to of-
ficers or employees at below
market value (36,000 shares) 36 17,964 18,000
-------- ---------- ----------
Total $ 4,990 $1,180,888 $1,185,878
======== ========== ==========
In addition to the 1,300,000 options shown above, the Company also issued
1,150,000 options to employees for services and 20,000 options to a vendor
for services. All employee and vendor options bear strike prices equal to
the fair value of the Company's common stock at the date of issue.
5. ACQUISITIONS
------------
On July 5, 2000, the Company acquired 98.8% of AS Andevis ("Andevis") and
Andevis became a majority-owned consolidated subsidiary of the Company.
Andevis is an Estonian corporation that provides software subcontracting
services to European clients. This acquisition has been accounted for using
the purchase method of accounting and the results of operations of Andevis
have been consolidated with the Company's from the date of acquisition. The
$177,000 purchase price was accomplished through the issuance of 354,270
shares of the Company's common stock. The purchase price could be adjusted
upward based upon Andevis' financial results for the year ending December
31, 2000 as compared to 1999. The purchase price has been allocated to the
assets acquired and liabilities assumed based on an internal valuation.
Approximately $122,000 was allocated to excess of cost over net assets of
businesses acquired and is being amortized over a fifteen year estimated
useful life.
F-9
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
5. ACQUISITIONS, CONTINUED
------------------------
On March 24, 2000, the Company acquired 100% of Mainor Anet AS ("Mainor")
and Mainor became a wholly-owned consolidated subsidiary of the Company.
Mainor is an Estonian corporation that provides internet service and is
engaged in other internet-related activities in the Baltic region and
Russia. This acquisition has been accounted for using the purchase method
of accounting and the results of operations of Mainor have been
consolidated with the Company's from the date of acquisition. The $253,000
purchase price was accomplished through the issuance of 250,000 shares of
the Company's common stock and a commitment to pay $50,000 in cash within
90 days of the acquisition. The purchase price has been allocated to the
assets acquired and liabilities assumed based on an internal valuation.
Approximately $130,000 was allocated to excess of cost over net assets of
businesses acquired and is being amortized over a fifteen year estimated
useful life.
Effective April 27, 2000, the Company acquired 100% of Flamingo Travel,
Inc. ("Flamingo"), a Texas corporation engaged in the booking of travel
services that the Company plans to fully integrate into its Internet
business plans. Under the terms of the acquisition, the owner of Flamingo
will receive shares of the Company based on a formula of three times
Flamingo's pre-tax income for the year ended March 31, 2000, divided by
$0.62 per share, the market value of the Company's common stock at the date
of the agreement. Management believes that this formula will yield a
purchase price of approximately 150,000 shares or $93,000. The purchase
agreement also provides for the Company to issue additional shares of its
common stock based upon five times the increase in Flamingo's pre-tax
income for the year ended March 31, 2000 as compared to the year ending
March 31, 1999, divided by 70% of the quoted price of the Company's common
stock at December 31, 2000, not to exceed $1.00 per share. Management
cannot currently predict the contingent consideration that will be yielded
by this formula. The $93,000 estimated purchase price has been allocated to
the assets acquired and liabilities assumed based upon internal valuations.
Approximately $82,000 of the purchase price was allocated to excess of cost
over net assets of businesses acquired and is being amortized over a
fifteen year estimated useful life.
F-10
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
5. ACQUISITIONS, CONTINUED
------------------------
The following is a summary of assets acquired and liabilities assumed in
the purchases:
MAINOR FLAMINGO ANDEVIS
--------- -------- --------
Assets acquired:
Fair value of tangible assets
acquired $ 192,000 $ 19,000 $ 110,000
Excess of cost over net assets of
business acquired 124,000 82,000 122,000
---------- --------- ----------
Total assets acquired 316,000 101,000 232,000
Cash paid or payable, net of cash
acquired (43,000) - -
Market value of common stock issued
or issuable (203,000) (93,000) (177,000)
---------- --------- ----------
Liabilities assumed and minority
interest $ 70,000 $ 8,000 $ 55,000
========== ========= ==========
6. DISCONTINUED OPERATIONS
------------------------
During the quarter ended June 30, 2000, the Company adopted a plan to
dispose of all leasing operations. The Company's leasing operations are
conducted through its wholly owned subsidiary, EIP Liisingu AS.
In July 2000, the Company sold EIP for $10,000 cash and recognized a gain
of $38,837 on the sale. The operations of the discontinued leasing
operation have been separated and presented as a single line item in the
accompanying statements of operations as gain (loss) from operations of
discontinued leasing operations.
Current assets and liabilities of the discontinued leasing operations have
been netted and presented as current assets of discontinued leasing
operations at their estimated net realizable value. Non-current assets and
liabilities of discontinued leasing operations have also been netted and
presented at their net realizable value.
F-11
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
7. SEGMENT AND GEOGRAPHIC INFORMATION
-------------------------------------
The Company currently operates in the Internet and software subcontracting
services, Internet merchandise and travel agency businesses. The Company's
three reportable segments are based upon geographic area and type of
business. All of the Company's continuing foreign operations are currently
conducted by Mainor and Andevis in Estonia. Mainor and Andevis both operate
with the Estonian kroon as their functional currency.
The corporate component of operating loss represents corporate general and
administrative expenses and expenses incurred in developing the Company's
internet site.
Following is a summary of segment information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Net Revenue:
United States-Corporate $ 11,365 $ - $ 43,180 $ -
Estonia-Internet services 149,870 - 249,182 -
United States-Travel services 20,207 - 62,903 -
----------- ---------- ---------- ----------
Total net revenue $ 181,442 $ - $ 355,265 $ -
=========== ========== ========== ==========
Income (loss) from operations:
United States-Corporate $ (204,137) $(118,236) $(485,584) $(673,143)
Estonia-Internet services (19,664) - (39,070) -
United States-Travel services 20,549 - 7,779 -
----------- ---------- ---------- ----------
Total loss from operations $ (203,252) $(118,236) $(516,875) $(673,143)
=========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
Assets:
United States-Corporate $ 278,877 $ 118,425
Estonia-Internet services 490,478 -
United States-Travel services 107,456 -
Estonia-Discontinued operations - 145,954
------------- ------------
Total assets $ 876,811 $ 264,379
============= ============
</TABLE>
F-12
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENT AND INFORMATION
The Company is including the following cautionary statement in this Form
10-QSB 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 current operations and planned acquisitions; the political, economic and
military climate in nations where the Company may have interests and operations;
the ability to engage the services of suitable consultants or employees in
foreign countries; and competition and the ever-changing nature of the Internet
and e-commerce. The Company has no obligation to update or revise these
forward-looking statements to reflect the occurrence of future events or
circumstances.
The following description of our financial position and results of
operations should be read in conjunction with our Financial Statements and the
Notes to Financial Statements contained in this report and in our annual report
on Form 10-KSB.
INTRODUCTION
It is our current intent to grow First Capital International, Inc. through
the continued development and commercialization of our internet based
businesses. We intend to make any business acquisitions by issuing common
stock; however, we may need additional cash to complete acquisitions. If
additional capital is needed, we will raise substantially all such funds from
outside sources. We anticipate that most acquisitions we make during the next
12 months will be of operating entities with existing management in place.
We are currently working on establishing IP Telephony and wireless Internet
service applications in the Baltic Region. We have signed a contract with
Networks Technology Corporation ( a wholly-owned subsidiary of Infonet Services
Corporation) to provide full voice over IP services ("VOIP"), including
equipment, connectivity and back office services for our operations in the
Baltic Region. Through our subsidiary, Anet Eesti AS, an Estonian corporation,
we are negotiating the purchase of IP Telephony equipment locally and we are
negotiating with potential business customers that have the appropriate level of
telephone usage.
<PAGE>
We have signed an Alliance Agreement with Estonian TV cable Companies to
expand our ISP services to cable tv subscribers in Estonia. This will enable us
to expand out ISP and VOIP services in Estonia.
www.3Dzip.com. In April 2000 we launched the formal operation of our
www.3Dzip.com web site and subsequently received our first contract to provide
3-D web design services. At present, we are developing bids for several
projects and are in the process of making proposals to various retail customers.
Additionally, we are planning to register with U.S. Government agencies to
explore 3D design possibilities. These activities will be subject
to our receiving funding.
Anet Eesti AS. In April 2000, we acquired Anet Eesti AS (formerly known as
AS Mainor Anet, an internet service provider in Estonia. This ISP will
contribute about $400,000 per year in revenue to our consolidated income
statement and will set the stage for additional acquisitions in the
telecommunications and Internet fields in Eastern Europe. The management of
Anet Eesti AS provides us with expertise and infrastructure for not only present
activities but also future activities and acquisitions in the region.
www.FlamingoTravel.net. In April 2000, we also acquired Flamingo Travel,
Inc., an existing U.S. travel agency with online operations at
www.flamingotravel.net. This acquisition will allow us to enter into the
lucrative e-travel business and will provide increased exposure of our web sites
to travel consumers in various regions throughout the world.
www.MDGshop.com. We are actively pursuing brand recognition of merchandise
offered at this site. At present, the site generates gross sales of $4,000 to
$7,000 per month and has not increased our advertising costs. We recently
signed an agreement with Nabisco Championship wherein we became an official
supplier of watches for the Nabisco Championship Golf Tournament for 2001. We
estimate that this agreement will result in revenues exceeding $130,000 through
2001. We have completed the selection of vendors to supply our site and such
vendors are now prepared to provide our customers with luxury items that we have
picked for sale at our web site. Our current plan requires additional marketing
personnel, as well as additional advertising expenditures. We plan to conduct
showings with certain major retail chains to promote our luxury goods and will
be attempting to negotiate formal agreements to sell "Marchese di Genin" branded
items through these major retail chains.
www.LegalClaims.com. We are actively looking for partnerships and formal
alliances with major law firms, in order to launch a marketing campaign and
membership drive. At the present time, our site is being actively visited by
the general public and our bulletin board is receiving a variety of legal
questions from all over the world. However, we are currently unable to answer
most of these postings due to a lack of the necessary legal specialists, who
have the experience to respond to these postings. We are proceeding with a
plan to build alliances with qualified law firms that are capable of responding
to the legal questions posted to our LegalClaims.com bulletin board.
www.Andevis.ee, In July 2000, we acquired an Internet solutions company, AS
Andevis We believe that this acquisition will result in annual revenues in
excess of $300,000 for the next fiscal year. Andevis has been in business since
1992 and provides Internet and database solutions, for European clients.
Andevis employs 15 experienced programmers, and includes the designation of
Oracle certified specialist among its capabilities. We plan to use Andevis to
develop our own Baltic Region capabilities, and as a solutions provider in the
U.S.
Disposition and sale of our EIP leasing subsidiary. On July 24, 2000 we
sold our subsidiary, EIP Liisingu AS, an Estonian corporation ("EIP"). The
buyer was Literary Financing Limited, a Hong Kong corporation, which purchased
all of the outstanding shares of EIP from us for the sum of $10,000. EIP is in
the leasing business in Estonia. We sold EIP because EIP has not been
profitable and because EIP does not fit into our current business model. Our
current business model is to start or acquire businesses that can be conducted
as e-commerce entities on the Internet. The terms and conditions of this
transaction were determined by the parties through arms length negotiations.
However, no formal appraisal was conducted.
<PAGE>
ANALYSIS OF FINANCIAL CONDITION
We are actively seeking new acquisitions in the United States and Europe.
In the United States, negotiations currently are underway for the acquisition of
several E-commerce companies, as well as travel related service companies, with
E-commerce features. In Eastern Europe, we are pursuing various acquisition
opportunities, including certain ISP's in the Baltic Region. We are seeking to
accomplish any future acquisitions through exchange of our common stock for
target companies. This approach will enable us to expand our asset base
without using our cash resources. Although, current stockholders may experience
substantial dilution in per share book value.
We currently plan to increase the number of our employees by hiring a
marketing manager and an operations manager. Expansion of our work force and
support of our current operations will be financed from sale of our common
stock. Accordingly, we expect that our existing stockholders will suffer
significant dilution in per share book value.
GOING CONCERN ISSUE
During the nine months ended September 30, 2000 and the year ended December
31, 1999 we have been dependent on debt and equity raised from individual
investors and related parties to sustain its operations. During those periods
we have incurred significant net losses. For the nine months ended September
30, 2000 we had a net loss of $497,118 and for the year ended December 31
1999, we had a net loss of $1,141,821.
Additionally, we had negative cash flows from operations of $462,559 during
the nine months ended September 30, 2000, and $440,781 for the year ended
December 31, 1999. These factors along with an accumulated deficit of
$3,317,935 at September 30, 2000 raise substantial doubt about our ability to
continue as a going concern.
Our long-term viability as a going concern is dependent upon three key
factors as follows:
- Our ability to obtain adequate sources of debt or equity funding to meet
current commitments and fund the continuation of its business operations.
- Our ability to acquire or internally develop viable businesses.
- Our ability to ultimately achieve adequate profitability and cash flows
from operations to sustain its operations.
As a result of potential liquidity problems that we face, our auditors,
Ham, Langston & Brezina, L.L.P. have added an explanatory paragraph in their
opinion on the Company's financial statements for the year ended December 31,
1999 indicating that substantial doubt exists about our ability to continue as a
going concern.
We have specific plans to address the financial situation as follows:
- In the near term we plan private placements of our common stock to
qualified investors to fund our current operations.
- In the long-term, we believe that cash flows from acquired businesses and
businesses we are currently developing will provide the resources for our
continued operations.
We have developed and launched several e-commerce web sites.
We believe that revenues from these our web sites, as well as revenues from
newly acquired companies, will more than cover overhead at the corporate level
if our marketing is successful. Acquisition activities and development of our
internet projects resulted in corporate headquarters accounting for more
than 90% of our total net loss for the nine months ended September 30, 2000.
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COMPETITION
We believe that only a very limited number of sites on the internet offer
the same type of 3-D shopping experience found at PlazaRoyal.com and MDGshop.com
We also believe that as technology and related internet access speeds improve,
that our 3-D web sites will attract both a greater number of customers and more
intense competition from other 3-D Internet shopping sites. Such competition
could ultimately make 3-D an ordinary feature of internet shopping malls. We
have developed a normal 2-D version of our sites that requires less graphic data
transfer and are better suited for current technology. These 2-D internet web
sites are already subject to extreme competition and our inability to properly
target our customers and differentiate our internet web sites from the sites of
our competitors could have a significant adverse impact on our financial
results. We plan to target markets in Eastern Europe that we believe are
either undeveloped or are not adequately served.
Our 3Dzip.com web site has lessor competition because there are relatively
few companies marketing 3-D web site design and development. However, the 3-D
marketplace could become crowded in the future.
RESULTS OF OPERATIONS
During the quarter ended June 30, 2000, the Company adopted a plan to
dispose of all leasing operations. The Company's leasing operations are
conducted through its wholly owned subsidiary, EIP Liisingu AS.
In July 2000, the Company sold EIP for $10,000 cash and recognized a gain
of $38,837 on the sale. The operations of the discontinued leasing operation
have been separated and presented as a single line item in the accompanying
statements of operations as gain (loss) from operations of discontinued leasing
operations.
Current assets and liabilities of the discontinued leasing operations have
been netted and presented as current assets of discontinued leasing operations
at their estimated net realizable value. Non-current assets and liabilities of
discontinued leasing operations have also been netted and presented at their net
realizable value.
Nine Months Ended September 30, 2000 as Compared to the Nine Months Ended
September 30, 1999:
During the nine months ended September 30, 2000, our revenues from
continuing operations were $355,265 as compared to $-0- for the nine months
ended September 30, 1999. The increase was due primarily to the acquisitions of
www.FlamingoTravel.net, Anet Eesti AS and AS Andevis.
During the nine months ended September 30, 2000 selling, general and
administrative costs increased by approximately $421,145 as compared to the nine
months ended September 30, 1999. This increase in costs was made up of
increases in personnel costs and in legal and other professional fees. The
increases were attributable to the development of our internal structure to
support growing operations and the acquisitions of www.FlamingoTravel.net and
Anet Eesti AS and AS Andevis.
During the nine months ended September 30, 2000 we had stock and option
based compensation of $18,000 due to the sale of common stock to an employee at
a below market price. The sale resulted in a charge to compensation expense for
the difference between the sales price and the market price at the date of sale.
<PAGE>
Interest expense for the nine months ended September 30, 2000 was $357 as
compared to $244,848 for the nine months ended September 30, 1999. The
significant decrease in interest expense is the direct result of our conversion
of very high rate debt to equity in February 2000 and the elimination of the
interest charges associated with such debt.
During the nine months ended September 30, 2000 we had a net loss of
$497,118 as compared to a net loss of $837,716 in the nine months ended
September 30, 1999. The primary reason for our decreased losses was reduced
stock and option based compensation charges. Our losses during both periods
were attributable to our operations in the United States, as the Company's
operations in Estonia produced minimal losses.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000 we had cash resources of approximately $222,134. We
estimate that during the last quarter of the year 2000, our cash requirements
will be approximately $150,000 and such requirements will need to be met from
outside sources. We plan to obtain additional financing through the sale of our
common stock and by obtaining debt financing. Such sales of our common stock
will continue until cash flow from operations is adequate to fund the Company's
ongoing requirements. There is no assurance that capital will be available from
any source, or, if available, upon terms and conditions acceptable to us.
We currently have no material commitments for capital expenditures for our
U.S. operations; however, we anticipate that the following near-term
expenditures will be made if funds are available: $20,000 for advertising our
www.MDGshop.com web site, $30,000 for merchandise to be offered for sale at our
www.MDGshop.com web site and $10,000 for Internet e-commerce operating expenses.
We will ultimately need to produce positive cash flows from operations to
meet our long-term capital needs.
YEAR 2000 ISSUES
We have not had any Year 2000 deficiencies internally or externally. We
do not expect to have any Year 2000 deficiencies internally and externally. If
a Year 2000 deficiency occurs internally or externally, we will shift our
internal and external resources to fix the deficiency. We do not expect any
Year 2000 deficiency to require an expenditure of more than $10,000.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the quarter ended September 30, 2000, the following transactions
were effected by the Company in reliance upon exemptions from registration under
the Securities Act of 1933 as amended 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. The Company believes that each of
these persons had knowledge and experience in financial and business matters
which allowed them to evaluate the merits and risk of the purchase or receipt of
these securities of the Company. The Company believes that each of these
persons were knowledgeable about the Company's operations and financial
condition.
In August 2000, we issued a total of 354,270 shares of common stock to two
persons to purchase AS Andevis. This transaction was a private placement made
in reliance on Section 4(2) of the Act.
In September 2000, we issued 1,000,000 of common stock to one investor for the
$150,000 in cash. This transaction was a private placement made in reliance on
Section 4(2) of the Act.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NO.
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
On August 14, 2000 we filed a report on Form 8-K reporting item 2 acquisition or
disposition of assets.
On July 17, 2000 we filed a report on Form 8-K reporting item 2 acquisition or
disposition of assets.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
First Capital International, Inc.
Date: November 12, 2000 By: /s/ Alex Genin
-------------------------------
Alex Genin
Chief Executive Officer
Date: November 12, 2000 By: /s/ Joselito H. Sangel
-------------------------------
Joselito H. Sangel
Vice President of Finance
Exhibit Index
EXHIBIT
NO.
27.1 Financial Data Schedule
**
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