<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-24053
The National Capital Companies, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0350154
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
18952 MacArthur Avenue, Suite 315, Irvine, California
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(Address of principal executive offices)
(949) 261-2101
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(Issuer's telephone number)
Noble Onie, Inc.
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 [_]
As of May 18, 2000 the Company had 7,368,090 shares of its $.001 par value
common stock issued and outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) PAGE
----
Report on Review by Independent Certified Public Accountants ............. 3
Condensed Consolidated Balance Sheet at March 31, 2000.................... 4
Condensed Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999........................................... 5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999.............................. 6
Notes to Condensed Consolidated Financial Statements...................... 7
2
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May 12, 2000
Independent Accountants' Review Report
--------------------------------------
To the Board of Directors of
The National Capital Companies, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
The National Capital Companies, Inc. and its subsidiaries as of March 31, 2000,
and the related condensed consolidated statements of income and cash flows for
the three months then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial statements is
the representation of the management of The National Capital Companies, Inc.
A review of interim financial information consists principally of inquiries
of Company personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
/s/ Lesley, Thomas, Schwarz & Postma, Inc.
A Professional Accountancy Corporation
Newport Beach, California
3
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THE NATIONAL CAPITAL COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2000 (Unaudited) (In 000's)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CASH AND CASH EQUIVALENTS $ 2,194
RECEIVABLES FROM CLEARING ORGANIZATIONS 2,665
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $11 357
OTHER RECEIVABLES 363
SECURITIES OWNED, AT ESTIMATED FAIR VALUE 2,868
FURNITURE AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF $107 1,194
GOODWILL, LESS ACCUMULATED AMORTIZATION OF $131 6,483
OTHER ASSETS 447
-------
$16,571
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
- -----------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 362
COMMISSIONS PAYABLE 2,408
PAYABLE TO CLEARING ORGANIZATIONS 1,096
INCOME TAXES PAYABLE 1,449
OTHER LIABILITIES 418
DUE TO AFFILIATES 325
DEFERRED TAX LIABILITY 16
NOTES PAYABLE 1,715
-------
7,789
-------
STOCKHOLDERS' EQUITY
- --------------------
COMMON STOCK $.001 PAR VALUE, 50,000,000 SHARES
AUTHORIZED; 7,368,090 SHARES ISSUED AND OUTSTANDING 7
ADDITIONAL PAID IN CAPITAL 6,795
RETAINED EARNINGS 1,980
-------
TOTAL STOCKHOLDERS' EQUITY 8,782
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,571
=======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
THE NATIONAL CAPITAL COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In 000's except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31,
------------------
<S> <C> <C>
2000 1999
------ ------
REVENUES $6,389 $1,859
------ ------
COMMISSIONS, COMPENSATION AND BENEFITS 3,594 549
GENERAL AND ADMINISTRATIVE 1,530 354
------ ------
TOTAL EXPENSES 5,124 903
------ ------
INCOME BEFORE INCOME TAXES 1,265 956
PROVISION FOR INCOME TAXES 569 410
------ ------
NET INCOME $ 696 $ 546
====== ======
BASIC EARNINGS PER SHARE $ 0.09 $ 0.39
====== ======
DILUTED EARNINGS PER SHARE $ 0.09 $ 0.39
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
THE NATIONAL CAPITAL COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In 000's)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31,
------------------
2000 1999
------- -----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,348 $ 283
------- -----
NET CASH USED IN INVESTING ACTIVITIES (44) (1)
------- -----
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (200) 92
------- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,104 374
CASH AND CASH EQUIVALENTS, beginning of period 1,090 451
------- -----
CASH AND CASH EQUIVALENTS, end of period $ 2,194 $ 825
======= =====
NON-CASH INVESTING AND FINANCING ACTIVITIES
Business acquisitions
Assets acquired $ 3,714 $ 0
Liabilities assumed (3,424) 0
Common stock issued (290) 0
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Cash paid for acquisition $ 0 $
======= =====
SUPPLEMENTAL INFORMATION, CASH PAID FOR:
Interest $ 11 $ 10
======= =====
Income taxes $ 0 $ 0
======= =====
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<PAGE>
THE NATIONAL CAPITAL COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements include the accounts of the
Company and all of its wholly owned and majority owned subsidiaries. All
significant intercompany transactions have been eliminated. The unaudited
financial statements included herein have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information 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 period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. Operating results for the three months ended March 31, 1999
were not reviewed by the Company's independent certified public accountants. For
further information, the statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999 and the
Company's Current Report on Form 8-K/A dated April 24, 2000.
NOTE 2 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
March 31,
-----------------------
<S> <C> <C>
2000 1999
---------- ----------
NUMERATOR $ 696,000 $ 546,000
========== ==========
DENOMINATOR:
DENOMINATOR FOR BASIC EARNINGS PER SHARE -
WEIGHTED-AVERAGE SHARES 7,368,090 1,390,000
========= ==========
DENOMINATOR FOR DILUTED EARNINGS PER SHARE 7,368,090 1,390,000
========== ==========
BASIC EARNINGS PER SHARE $ .09 $ .39
---------- ----------
DILUTED EARNINGS PER SHARE $ .09 $ .39
---------- ----------
</TABLE>
7
<PAGE>
NOTE 3 - ACQUISITIONS
On February 4, 2000, the Company conducted a reorganization with National
Capital Companies, Inc., an Oklahoma corporation ("NCC"). Pursuant to the terms
of a Securities Purchase Agreement and Plan of Reorganization between the
Company and the stockholders of NCC, the Company acquired all of the outstanding
capital stock of NCC in exchange for the issuance of 4,000,000 shares of the
Company's common stock to the former stockholders of NCC. Because the
stockholders of NCC owned approximately 61.5% of the outstanding shares of the
common stock of the Company after giving effect to the reorganization, the
acquisition of NCC was considered a reverse merger and the Company has been
deemed the acquirer for accounting purposes. As such, the equity of NCC has been
carried forward as the equity of the Company.
On March 9, 2000, the Company acquired all of the outstanding voting
securities of AISCO Holdings, Ltd., an Illinois corporation ("AISCO"). AISCO is
a full-service financial services company that provides brokerage, trading,
investment advisory and insurance services. Pursuant to a Securities Purchase
Agreement between the Company and the stockholders of AISCO, the Company issued
approximately 818,090 shares of its common stock to the former stockholders of
AISCO in exchange for their interests in AISCO. The acquisition has been
accounted for under the purchase method of accounting and is intended to qualify
as a tax-free reorganization under IRC (S)368(a)(1)(B). The fair value of
purchase consideration of approximately $5,725,000 has been allocated to
tangible and identifiable intangible assets acquired and liabilities assumed
based on their relative fair values. The excess of the fair value of purchase
consideration over assets acquired and liabilities assumed has been allocated to
goodwill and is being amortized on a straight-line basis over ten (10) years.
The following pro forma results of operations give effect to these
acquisitions as if the transactions had occurred January 1, 2000 (in 000's):
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 2000
--------------
<S> <C>
Revenues $11,633
=======
Net income $ 787
=======
Earnings per share $ 0.11
=======
</TABLE>
The unaudited pro forma consolidated statements of income are not
necessarily indicative of the operating results that would have occurred as if
these acquisitions had occurred as of the beginning of the periods presented and
should not be construed as being representative of future operating results.
NOTE 4 - NOTES PAYABLE
Notes payable at March 31, 2000 primarily consists of various bank notes
with principal amounts in the aggregate of approximately $1,150,000, Per the
terms of the notes, monthly payments vary from approximately $1,500 - $6,000 and
aggregate to approximately $13,250 per month at interest rates from 9% - 11%.
These notes are due at various dates and are secured by first and second deeds
of trust on the Company's property acquired in the AISCO purchase in Peoria,
Illinois as previously described in Note 3.
In addition, the Company's remaining notes, aggregating to approximately
$565,000, consist of various unsecured notes with clearing organizations assumed
in the Company's purchase of AISCO. These notes are due upon demand and payable
in monthly installments of $10,000 at varying interest rates from 8% - 10%.
8
<PAGE>
NOTE 5 - CONTINGENCIES
A subsidiary of the Company has also been named as a defendant in ten (10)
lawsuits alleging various claims. The suits ask for actual damages totalling
approximately $1,800,000 plus punitive damages, interest, costs, and attorney
fees. Outside counsel for the Company has advised that at this stage in the
proceedings, they cannot offer an opinion as to the probable outcome of these
cases. The Company believes that all of these actions are without merit and is
vigorously defending itself in all of these actions.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company and its subsidiaries provide full-service investment
banking, brokerage, trading and financing services to new and rapidly growing
companies. The Company's primary focus is servicing small capitalized companies
and special situation investments for individual and institutional investors.
The National Capital Reorganization.
- ------------------------------------
In February 2000, the Company closed a Securities Purchase Agreement
and Plan of Reorganization ("Reorganization Agreement") with the National
Capital Companies, Inc., an Oklahoma corporation ("NCC"). Pursuant to the terms
of the Reorganization Agreement, the shareholders of NCC became the controlling
stockholders of the Company and NCC became a wholly owned subsidiary of the
Company (referred to herein as the "NCC Reorganization"). In May 2000, the
company changed its name to The National Capital Companies, Inc.
Since the NCC shareholders owned approximately 61.5% of the
outstanding shares of the common stock of the Company after giving effect to the
NCC Reorganization, NCC was deemed the accounting acquirer and the Company's
acquisition of NCC is accounted for as a reverse merger under the purchase
method. Accordingly, from an accounting standpoint, the equity of NCC is carried
forward as the equity of the combined entity. There will be no step up in the
Company's accounting basis and, as a result, NCC will be assumed to have
acquired the Company at the Company's book value of $0, after giving effect to
the consummation of the NCC Reorganization. This adjustment will reflect the
adjustment of the Company's equity and accumulated deficit.
The AISCO Holding, Ltd. Acquisition.
- ------------------------------------
On March 9, 2000, the Company acquired all of the outstanding voting
securities of AISCO Holdings, Ltd. ("AISCO"). Pursuant to a Securities Purchase
Agreement and Plan of Reorganization dated March 9, 2000 by and among the
Company and the Class A shareholders of AISCO, the Company issued 818,090 shares
of its common stock to the former shareholders of AISCO in exchange for all of
the outstanding voting shares of AISCO. The operations of AISCO since the date
of its acquisition by the Company are included in the Company's consolidated
financial statements contained in this report.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999.
- --------------------------------------------------------------------------------
Revenue. During the three months ended March 31, 2000, the Company
received revenues of $6,389,000 compared to revenues of $1,859,000 for the three
months ended March 31, 1999, an increase of approximately $4,530,000 over the
prior year period. The increase in revenue is due in part to the overall
increase of all stock markets in terms of both price and volume in the first
quarter of 2000 as compared to the prior year period. The increase in revenues
is also the result of the Company's acquisitions of NC Corporate Services, Inc.
and Cornerstone Capital Management, both of which occurred subsequent to January
1, 1999, as well as the Company's acquisition of AISCO in March 2000.
Total Expenses. Total expenses increased proportionally with the
increase in the prices and trading volume on the national stock markets as well
as the Company's acquisition of subsidiaries subsequent to the first quarter of
1999. Total expenses increased by $4,221,000 to $5,124,000 for the three months
ended March 31, 2000 as compared to the $903,000 reported for the three months
ended March 31, 1999. The increase in expenses is primarily the result of the
increase in expenses for employee commissions, compensation and benefits, which
increased by $3,045,000 in the first quarter of 2000 as compared to the prior
year period. The increase in employee compensation and benefits expenses is
primarily the result of the Company's acquisitions of NC Corporate Services,
Inc. and Cornerstone Capital Management, both of which occurred subsequent to
January 1, 1999, as well as the Company's acquisition of AISCO in March 2000.
Net Income. Net income increased by $150,000 to $696,000 for the three
months ended March 31, 2000 as compared to the $546,000 reported for the three
months ended March 31, 1999. The increase in net income is primarily the result
of the overall increase of all stock markets in terms of both price and volume
in the first quarter of 2000 as compared to the prior year period, as well as
the expansion of the Company's operations as a result of the NC Corporate
Services,
10
<PAGE>
Cornerstone and AISCO acquisitions.
Liquidity and Financial Condition
The Company historically has generated revenues from its investment
banking services, from commissions on trades in which it acts as a broker and
from profits on trades in which it acts as a principal. The Company's revenues
and financial condition are substantially dependent upon factors outside its
control, including the level of activity in the national securities markets,
particularly the Nasdaq National Market and the OTC Bulletin Board, as well as
the strength of the overall economy. The Company's revenues and overall
financial condition increased significantly in the first quarter of 2000 as a
result of the record levels reached by the national stock markets in terms of
both price and volume in the first quarter of 2000. Since the end of the first
quarter, however, the Company has seen both its revenues and its total assets
decrease as a result of the overall decline in both the price and the trading
volume of the stocks traded on the Nasdaq and the OTC Bulletin Board. Management
of the Company estimates that the Company's total assets and the level of its
revenues have decreased by approximately 25% since the end of March 2000.
The Company believes that despite the decrease in the national
securities markets, its existing capital resources, together with its income
from its operations, will be sufficient to finance continued operations and
planned growth. The Company intends to seek additional capital over the next 12
months from the sale of its securities in order to fund the continued expansion
of its operations. However, the Company has no commitments from any outside
sources to purchase its securities and there can be no assurance that additional
financing will be available when needed on terms favorable to the Company or at
all.
Forward Looking Statements
This report contains forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions, including, without limitation, the overall
strength of the national securities markets; the difficulties faced by the
Company in assimilating its recently acquired businesses; the Company's present
financial condition and the risks and uncertainties concerning the availability
of additional capital as and when required; technological changes; increased
competition; and general economic conditions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, or
projected. The Company cautions potential investors not to place undue reliance
on any such forward-looking statements, all of which speak only as of the date
made.
Statement by Management Concerning Review of Interim Financial Information by
Independent Certified Public Accountants
The March 31, 2000 condensed consolidated financial statements
included in this filing on Form 10-QSB have been reviewed by Lesley, Thomas,
Schwarz & Postma, Inc., independent certified public accountants, in accordance
with established professional standards and procedures for such review. The
report of Lesley, Thomas, Schwarz & Postma, Inc. commenting upon their review
accompanies the condensed consolidated financial statements included in Item 1
of Part I.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
AISCO is also defendant in a total of ten lawsuits brought by
different investors alleging various claims. These actions collectively seek
approximately $1,800,000 in actual damages plus punitive damages, interest,
costs, and attorney fees. The Company believes that these actions are all
without merit and the Company intends to vigorously defend itself in connection
with these actions.
Item 2. Changes in Securities.
---------------------
On March 9, 2000, the Company issued 818,090 shares of its common
stock to the former shareholders of AISCO in exchange for all of their
outstanding voting securities. The shares were issued pursuant to Section 4(2)
of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
-------------------------------
11
<PAGE>
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information.
-----------------
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
On February 20, 2000, the Company filed a Current Report on Form
8-K with the Securities and Exchange Commission to report the NCC
Reorganization. On April 25, 2000, the Company filed an amendment to that Form
8-K to include the financial statements of NCC as of December 31, 1999 and for
the two years ended December 31, 1999 and 1998.
On March 24, 2000, the Company filed a Current Report on Form 8-K
to report its acquisition of the outstanding voting securities of AISCO. The
Company intends to file an amendment to this Form 8-K to include the historical
financial statements of AISCO as well as the pro forma financial statements of
the Company that give effect to the AISCO acquisition.
27. Financial Data Schedule
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE NATIONAL CAPITAL COMPANIES, INC.
Dated: May 23, 2000 By: /s/ Joseph A. Cerbone
------------------------------------
Joseph A. Cerbone, President
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,194
<SECURITIES> 2,868
<RECEIVABLES> 3,385
<ALLOWANCES> 11
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,194
<DEPRECIATION> 107
<TOTAL-ASSETS> 16,571
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 8,775
<TOTAL-LIABILITY-AND-EQUITY> 16,571
<SALES> 6,370
<TOTAL-REVENUES> 6,389
<CGS> 0
<TOTAL-COSTS> 5,124
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 1,265
<INCOME-TAX> 569
<INCOME-CONTINUING> 696
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 696
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
