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 June 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 August 7, 2000, there were 73,989,012 shares of common
stock outstanding.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
1
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Condensed Balance Sheet as of December 31,
1999 and June 30, 2000
Consolidated Condensed Statement of Operations for the
Six months ended June 30, 2000 and 1999
Consolidated Condensed Statement of Stockholders' Equity
for the six months ended June 30, 2000
Consolidated Condensed Statement of Cash Flows for the
six months ended June 30, 2000 and 1999
Selected Notes to 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
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CAPITAL INTERNATIONAL, INC.
__________
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
F-1
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FIRST CAPITAL INTERNATIONAL, INC.
TABLE OF CONTENTS
__________
PAGE(S)
-------
Unaudited Consolidated Condensed Financial
Statements:
Condensed Consolidated Balance Sheet as of
June 30, 2000 and December 31, 1999 F-3
Unaudited Consolidated Condensed Statement
of Operations for the three months and six
months ended June 30, 2000 and 1999 F-4
Unaudited Consolidated Condensed Statement
of Stockholders' Deficit for the six months
ended June 30, 2000 F-5
Unaudited Consolidated Condensed Statement
of Cash Flows for the three months and six
months ended June 30, 2000 and 1999 F-6
Selected Notes to Unaudited Consolidated
Condensed Financial Statements F-7
F-2
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<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
__________
JUNE 30, DECEMBER 31,
2000 1999
ASSETS (UNAUDITED) (NOTE)
------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 256,209 $ 67,193
Accounts receivable, net 47,537 2,331
Inventory 84,063 35,457
Other 5,659 9,981
Net current assets of discontinued
operations 140,973 145,954
----------- ------------
Total current assets 534,441 260,916
Property and equipment, net 106,804 3,463
Excess of cost over net assets of
businesses acquired, net 202,706 -
----------- ------------
Total assets $ 843,951 $ 264,379
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable to related parties $ 151,684 $ 11,372
Accounts payable and accrued liabilities 86,167 32,106
----------- ------------
Total current liabilities 237,851 43,478
Net non-current liabilities of discontinued
operations 130,973 199,123
----------- ------------
Total liabilities 368,824 242,601
----------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 100,000,000
shares authorized; 73,697,142 and 70,061,142
shares issued and outstanding at June 30,
2000 and December 31, 1999, respectively 73,697 70,061
Additional paid-in capital 3,516,860 2,794,371
Accumulated deficit (3,114,654) (2,820,817)
Accumulated foreign currency translation
adjustments (776) (21,837)
----------- ------------
Total stockholders' equity 475,236 21,778
----------- ------------
Total liabilities and stockholders'
equity $ 843,951 $ 264,379
=========== ============
</TABLE>
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.
F-3
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<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
__________
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Revenue:
Merchandise sales $ 15,855 $ - $ 31,815 $ -
Internet service fees 99,312 - 99,312 -
Travel transactions 42,696 - 42,696 -
------------ ------------ ------------ ------------
Total revenue 157,863 - 173,823 -
------------ ------------ ------------ ------------
Cost of sales and services:
Cost of merchandise sold 11,782 - 18,169 -
Cost of providing internet
services 76,245 - 76,245 -
Cost of travel transactions 7,489 - 7,489 -
------------ ------------ ------------ ------------
Total cost of sales and
services 95,516 - 101,903 -
------------ ------------ ------------ ------------
Gross margin 62,347 - 71,920 -
Selling, general and admin-
istrative expense 225,459 93,502 367,543 154,738
Common stock and option based
compensation 8,000 77,860 18,000 400,850
------------ ------------ ------------ ------------
Loss from operations (171,112) (171,362) 313,623 555,588
------------ ------------ ------------ ------------
Other income (expenses):
Interest expense (184) (104,205) (184) (224,814)
Other income 6,999 - 7,681 -
------------ ------------ ------------ ------------
Total other income (expense) 6,815 (104,205) 7,497 (224,814)
------------ ------------ ------------ ------------
Loss from continuing operations (164,297) (275,567) (306,126) (780,402)
------------ ------------ ------------ ------------
Discontinued operations:
Gain (loss) from operation of
discontinued leasing division (18,566) 42,652 (26,548) 38,104
Gain on disposal of discontin-
ued leasing division, inclu-
ding provision of $2,000
for losses during the phase-
out period 38,837 - 38,837 -
------------ ------------ ------------ ------------
Total income from discontin-
ued operations 20,271 42,652 12,289 38,104
------------ ------------ ------------ ------------
Net loss $ (144,026) $ (232,915) $ (293,837) $ (742,298)
============ ============ ============ ============
Basic and diluted net loss per
common share:
Continuing operations $ (0.00) $ (0.00) $ (0.00) $ (0.01)
Discontinued operations 0.00 0.00 0.00 0.00
------------ ------------ ------------ ------------
Net loss $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============ ============ ============ ============
Weighted average shares out-
standing 73,091,142 65,137,977 71,991,742 46,651,142
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 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 - - (293,837) - (426,137)
Other comprehensive income-
foreign currency transla-
tion adjustment - - - 21,061 21,061
------------
Comprehensive income - - - - (405,076)
------------
Common stock issued,
(3,636,000 shares) 3,636 722,489 - - -
----------- ---------- ------------- ------------- ------------
Balance at June 30, 2000 $ 73,697 $3,516,860 $ (3,114,654) $ (776) $(3,212,489)
=========== ========== ============= ============= ============
</TABLE>
See accompanying notes.
F-5
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<TABLE>
<CAPTION>
FIRST CAPITAL INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
__________
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
----------------------
2000 1999
---------- ----------
(RESTATED)
<S> <C> <C>
Cash flows from operating activities $(302,357) $(135,481)
---------- ----------
Cash flows from investing activities:
Acquisition of Mainor Anet AS (25,000) -
---------- ----------
Net cash used by investing activities (25,000) -
---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock 505,000 68,139
Proceeds from notes payable to a
related party 11,373 133,190
---------- ----------
Net cash provided by financing
activities 516,373 201,329
---------- ----------
Effects of exchange rate changes on cash - 10,328
---------- ----------
Net increase in cash and cash equivalents 189,016 76,176
Cash and cash equivalents, beginning
of period 67,193 61,467
---------- ----------
Cash and cash equivalents, end of period $ 256,209 $ 137,643
========== ==========
</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 six month periods ended June 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 six months ended June 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 June 30, 1999 and
for the six months then ended, is as follows:
F-7
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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 $1,179,249
===========
Increase in accumulated deficit $1,179,249
===========
Increase in net loss $ 387,406
===========
Increase in basic and dilutive net
loss per common share $ (0.01)
===========
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 six months ended June 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
---------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL TOTAL
<S> <C> <C> <C>
-------- -------- --------
Common stock and stock options
issued for cash (3,350,000
shares and 1,000,000 options) $ 3,350 $501,650 $505,000
Common stock issued in connec-
tion with acquisition of
Mainor Anet AS 250 202,875 203,125
Compensation recognized on
common stock issued to of-
ficers or employees at below
market value (36,000 shares). 36 17,964 18,000
-------- -------- --------
Total $ 3,636 $722,489 $726,125
======== ======== ========
</TABLE>
5. ACQUISITIONS
------------
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.
F-9
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
5. ACQUISITIONS, CONTINUED
------------------------
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.
The following is a summary of assets acquired and liabilities assumed in
the purchases:
<TABLE>
<CAPTION>
MAINOR FLAMINGO
---------- -----------
<S> <C> <C>
Assets acquired:
Fair value of tangible assets
acquired $ 192,000 $ 19,000
Excess of cost over net assets of
business acquired 124,000 82,000
---------- ---------
Total assets acquired 316,000 101,000
Cash paid or payable, net of cash
acquired (43,000) -
Market value of common stock issued
or issuable (203,000) (93,000)
---------- ---------
Liabilities assumed $ 70,000 $ 8,000
========== =========
</TABLE>
F-10
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
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 Lissingu 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.
7. SEGMENT AND GEOGRAPHIC INFORMATION
-------------------------------------
The Company currently operates in the Internet service, 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
Anet AS in Estonia. Mainor Anet AS operates with the Estonian kroon as its
functional currency.
The corporate component of operating loss represents corporate general and
administrative expenses and expenses incurred in developing the Company's
internet site. Corporate assets include cash and cash equivalents.
F-11
<PAGE>
FIRST CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
7. SEGMENT AND GEOGRAPHIC INFORMATION, CONTINUED
-------------------------------------------------
Following is a summary of segment information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------
2000 1999 2000 1999
------------- ----------- -------- -----------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Net Revenue:
United States-Corporate $ 15,855 $ - $ 31,815 $ -
Estonia-Internet services 99,312 - 99,312 -
United States-Travel services 42,696 - 42,696 -
------------- ----------- -------- --------
Total net revenue $ 157,863 $ - $173,823 $ -
============= =========== ======== ========
Loss from operations:
United States-Corporate $ 146,433 $ 275,567 $281,447 $780,402
Estonia-Internet services 11,909 - 11,909 -
United States-Travel services 12,770 - 12,770 -
------------- ----------- -------- --------
Total loss from operations $ 171,112 $ 275,567 $306,126 $780,402
============= =========== ======== ========
JUNE 30, DECEMBER 31,
2000 1999
----------- -------------
Assets:
United States-Corporate $ 138,489 $118,425
Estonia-Internet services 466,791 -
United States-Travel services 97,698 -
Estonia-Discontinued operations 140,973 145,954
----------- --------
Total assets $ 843,951 $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.
3
<PAGE>
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. Through our subsidiary, Anet Eesti
AS, an Estonian corporation, we are negotiating the purchase of IP Telephony
equipment and we are negotiating with potential business customers that have the
appropriate level of telephone usage.
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.
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 $500,000 in revenue to our consolidated income statement and
will set the stage for additional acquisitions in the e-commerce area 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 $7,000 to $8,000 per month and has not increased our advertising costs. 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.
4
<PAGE>
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.
In July 2000, we acquired an Internet solutions company, Andevis, Ltd., an
Estonian corporation. Andevis is a provider of Internet and e-commerce
solutions, as well as database solutions, to its European clients. Andevis
employs 15 experienced programmers, and includes the designation of Oracle
certified specialist among its capabilities. Andevis has been in business
since 1992.
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.
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 six months ended June 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 six months ended June 30, 2000 we had
a net loss of $293,837 and for the year ended December 31 1999, we had a net
loss of $1,141,821.
5
<PAGE>
Additionally, we had negative cash flows from operations of $302,357 during
the six months ended June 30, 2000, and $440,781 for the year ended December 31,
1999. These factors along with am accumulated deficit of $3,114,654 at June
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
approximately 91% of our total net loss for the three months ended June 30,
2000.
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
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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 crowed in the future.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2000 as Compared to the Six Months Ended June 30,
1999:
During the six months ended June 30, 2000, our revenues from continuing
operations were $157,863 as compared to zero for the six months ended June 30,
1999. The increase was due primarily to the acquisitions of
www.FlamingoTravel.net and Anet Eesti AS.
During the six months ended June 30, 2000 selling, general and
administrative costs increased by approximately $210,000 as compared to the six
months ended June 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.
During the six months ended June 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.
In the six months ended June 30, 1999 we had significant issuances of
compensatory stock options and stock issuances that resulted in charges to
expense totaling $400,850. As the Company becomes more established, it
anticipates fewer issuances of common stock and options for compensation.
Interest expense for the six months ended June 30, 2000 was $184 as
compared to $224,814 for the six months ended June 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 six months ended June 30, 2000 we had a net loss of $293,837 as
compared to a net loss of $742,298 in the six months ended June 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.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000 we had cash resources of approximately $256,209. We
estimate that during the second half 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 June 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.
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In April 2000, we issued 16,000 shares of common stock to one employee as
compensation for services rendered that we valued at $8,000. We also issued
250,000 shares of common stock to the former owners of Anet Eesti AS in
connection our acquisition of Anet Eesti AS which we valued at $203,125. This
transaction was a private placement made in reliance on Section 4(2) of the Act.
In June, 2000, we sold 1,000,000 shares of common stock to one investor for
$200,000 in cash. We also granted this investor an option to purchase up to
1,000,000 shares of common stock. This option is immediately exercisable at an
exercise price of $.38 per share and expires in June 2003. We valued this
transaction at $270,000. This transaction was a private placement made in
reliance on Section 4(2) of the Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NO.
10.1 Transaction document for the sale of EIP. Incorporated by reference to
Form 8-K filed August 9, 2000.
10.2 Transaction document the acquisition of Anet Eesti AS (formerly, AS
Mainor Anet) Incorporated by reference to Form 8-K filed April 18, 2000.
10.3 Transaction document for acquisition of www. FlamingoTravel.net.
Incorporated by reference to Form 8-K filed May 8, 2000.
10.4 Transaction document for acquisition of Andevis Ltd. Incorporated by
reference to Form 8-K filed July 17, 2000.
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
On April 18, 2000, we filed a report on Form 8-K dated April 6, 2000 reporting
Item. 2. Acquisition of Assets.
On May 8, 2000, we filed a report on Form 8-K dated April 27, 2000 reporting
Item. 2. Acquisition of Assets.
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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: August 14, 2000 By: /s/ Alex Genin
Alex Genin
Chief Executive Officer
_____________________________
Date: August 14, 2000 By: /s/ Joselito H. Sangel
Joselito H. Sangel
Vice President of Finance
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