SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 6, 2000
COMMISSION FILE NUMBER: 0-24053
Nevada The National Capital 88-0350154
(State or other Companies, Inc. (I.R.S. Employer
jurisdiction of (Exact name of registrant Identification No.)
incorporation or as specified in its charter)
organization)
18952 MacArthur Boulevard, Suite 300, Irvine, California 92612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 261-2101
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
None
Item 2. Acquisition or Disposition of Assets.
See Item 7. below.
Item 3. Bankruptcy or Receivership.
None
Item 4. Changes in Registrant's Certifying Accountant.
None
Item 5. Other Events.
None
Item 6. Resignations of Registrant's Directors.
None
Item 7. Financial Statements and Exhibits.
This report amends the current report filed by The National Capital
Companies, Inc. (the "Company") dated March 30, 2000. Effective March 9, 2000,
the Company completed its acquisition of AISCO Holdings, Ltd ("AISCO") in
exchange for 818,090 shares of the Company's common stock.
The audited financial statements of AISCO Holdings, Ltd as of December 31,
1999 and for each of the two fiscal years ended December 31, 1999 are presented
below.
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1999 presented below represent the results for the Company
and AISCO as if the acquisition had occurred on January 1, 1999. This
information is based on the historical financial statements of the Company and
AISCO and the related notes thereto. The acquisition of AISCO has been accounted
for using the purchase method of accounting and, accordingly, the assets
acquired and the liabilities assumed have been recorded at their fair values as
of the date the acquisition, which do not differ significantly from historical
costs. The excess of the purchase price over the fair value of the assets and
the liabilities assumed has been recorded as goodwill.
The unaudited pro forma statements of operations are based on assumptions
and adjustments that we believe are reasonable. This information does not
purport to represent what our actual results of operations would have been if
the events described above had occurred as of the dates indicated or what our
result of operations would be for any future periods. The unaudited pro forma
statements of operations should be read in conjunction with the historical
financial statements and related notes previously filed by the Company and as
included elsewhere in this document.
2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements for AISCO Holdings, Ltd:
Report of Clifton Gunderson LLC, Independent Auditors................4
Consolidated Statements of Financial Condition as of
December 31, 1999 and 1998......................................5
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998......................................7
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999 and 1998......................................8
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998......................................9
Notes to the Consolidated Financial Statements......................10
Unaudited Pro Forma Consolidated Statements of Income:
Pro Forma Consolidated Statements of Income........................19
Additional financial information may be found in the Company's filings on Forms
10QSB and 8K.
3
<PAGE>
Independent Auditor's Report
Board of Directors
AISCO Holdings, Ltd.
East Peoria, Illinois
We have audited the accompanying consolidated statements of financial condition
of AISCO Holdings, Ltd. and its subsidiaries as of December 31, 1999 and 1998
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion of these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AISCO Holdings, Ltd.
and its subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Clifton Gunderson L.L.C.
Peoria, Illinois
May 22, 2000
4
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
December 31, 1999 and 1998
ASSETS
1999 1998
---------- ----------
CURRENT ASSETS
Cash $ 352,099 $ 648,402
Notes Receivable 117,648 152,909
Loans receivable from related parties
(net of allowance for doubtful accounts of
$138,000 in 1999 and $-0- in 1998) 726 35,941
Commissions advanced (net of allowance
for doubtful accounts of $-0- in
1999 and $82,071 in 1998) 358,731 141,072
Commissions receivable 1,135,993 432,413
Receivables from registered representatives 130,639 21,031
Securities inventory marketable, at market value 11,892 14,707
Employee advances 5,136 33,647
Prepaid expenses 1,500 1,592
Other assets 3,291 3,291
---------- ----------
Total current assets 2,117,655 1,485,005
---------- ----------
PROPERTY, PLANT, AND EQUIPMENT
Land 177,447 177,447
Building 670,483 670,483
Equipment and furniture 529,880 489,250
---------- ----------
Total, at cost 1,377,810 1,337,180
Less accumulated depreciation 380,573 260,588
---------- ----------
Total property, plant, and equipment 997,237 1,076,592
---------- ----------
OTHER ASSETS
Deposits - clearing 165,000 155,000
Goodwill, net of accumulated amortization of
$56,786 in 1999 and $28,393 in 1998 369,109 397,502
---------- ----------
Total other assets 534,109 552,502
---------- ----------
TOTAL ASSETS $3,649,001 $3,114,099
========== ==========
5
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
---------- ----------
CURRENT LIABILITIES
Bank overdraft $ -- $ 4,640
Accounts payable 449,295 627,854
Related party loans payable 6,954 12,299
Notes payable 90,388 14,000
Current maturities of long-term debt 823,580 844,580
Accrued payroll 20,565 18,068
Accrued commissions 1,548,054 1,198,634
Accrued interest 8,304 4,102
Securities inventory payable 15,489 15,185
Broker/dealer fees payable 3,203 3,563
Payroll taxes payable 2,502 --
---------- ----------
Total current liabilities 2,968,334 2,742,925
----------- ----------
OTHER LIABILITIES
Subordinated note payable 75,000 85,000
Long-term debt, less current maturities above 196,310 129,857
----------- ----------
Total other liabilities 271,310 214,857
----------- ----------
STOCKHOLDERS' EQUITY
Class A common stock, $.000067 par value;
10,000,000 shares authorized, 1,639,059
issued at December 31, 1999 and 1998 109 109
Class B common stock, $.000067 par value;
10,000,000 shares authorized, 421,821
issued and outstanding at December 31, 1998 28 28
Additional paid-in capital 1,609,880 1,609,880
Retained deficit (1,192,660) (1,450,700)
Less treasury stock, 2.880 shares Class A
common stock, at cost (3,000) (3,000)
Less treasury stock, 35,400 shares Class B
common stock, at cost (5,000) --
----------- ----------
Total stockholders' equity 409,357 156,317
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,649,001 $3,114,099
=========== ==========
These consolidated financial statements should be read only in connection
with accompanying summary of significant accounting policies and notes to
consolidated financial statements.
6
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999 and 1998
1999 1998
------------ ------------
REVENUE
Commissions:
Standard $ 15,221,711 $ 12,267,157
Mutual Fund 3,353,553 3,096,403
Insurance 2,358,552 1,777,187
Commodity 215,587 577,174
Rebates 265,364 247,792
------------ ------------
Total 21,414,767 17,965,713
Rental income 7,200 7,200
------------ ------------
Total revenue 21,421,967 17,972,913
------------ ------------
EXPENSES
Commissions 14,779,636 12,542,096
Broker/dealer fees 2,781,504 2,244,898
Wages and benefits 1,335,533 1,370,718
Bad debt expenses 60,841 710,574
Settlements 286,810 77,500
Trading losses 3,519 108,040
Office expense 764,320 1,259,752
Travel and entertainment 224,719 174,072
Professional fees 568,966 353,398
Recruiting expenses 84,879 72,295
Depreciation and amortization 148,378 155,436
Miscellaneous 81,793 49,961
Rental expenses -- 44,962
Administrative expenses - related parties 236,400 220,200
------------ ------------
Total expenses 21,357,298 19,383,902
------------ ------------
Income (loss) from operations 64,669 (1,410,989)
OTHER INCOME (EXPENSE)
Interest participation 183,923 173,280
Interest earned 24,814 40,778
Miscellaneous income 74,732 73,794
Seminar revenue 66,500 57,650
Seminar expense (66,500) (69,112)
Consulting revenue 36,000 33,863
Interest expense (110,529) (112,219)
Loss on disposal of equipment -- (12,500)
------------ ------------
Income (loss) before income taxes 273,609 (1,225,455)
INCOME TAX PROVISION 15,569 21,414
------------ ------------
NET INCOME (LOSS) $ 258,040 $ (1,246,869)
============ ============
These consolidated financial statements should be read only in connection with
the accompanying summary of significant accounting policies
and notes to consolidated financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1999 and 1998
Class A Class B Additional Class A Class B Total
Common Common Paid-in Retained Treasury Treasury Stockholders'
Stock Stock Capital Deficit Stock Stock Equity
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ 109 $ 28 $ 1,609,880 $ (203,831) $ (3,000) $ -- $ 1,403,186
Net loss -- -- -- (1,246,869) -- -- (1,246,869)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 109 28 1,609,880 (1,450,700) (3,000) -- 156,317
Net income -- -- -- 258,040 -- -- 258,040
Purchase of treasury stock -- -- -- -- -- (5,000) (5,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 $ 109 $ 28 $ 1,609,880 $(1,192,660) $ (3,000) $ (5,000) $ 409,357
=========== =========== =========== =========== =========== =========== ===========
These consolidated financial statements should be read only in connection with
the accompanying summary of significant accounting policies
and notes to consolidated financial statements.
</TABLE>
8
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 258,040 $(1,246,869)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Provision for bad debts 60,841 710,574
Depreciation and amortization 148,378 155,436
Loss on disposal of equipment -- 12,500
Change in market value of securities
inventory purchased, not yet paid for 3,119 (2,189)
Effects of changes in operating assets
liabilities:
Commissions advanced (245,463) (208,928)
Receivables (784,677) 9,551
Other assets -- 8,742
Deposits (10,000) (47,409)
Prepaid expenses 92 758
Accounts payable (178,559) 519,500
Accrued commissions 349,420 454,418
Broker/dealer fees payable (360) (6,533)
Payroll taxes payable 2,502 --
Accrued payroll and interest 6,699 (9,677)
----------- -----------
Net cash provided by (used
in) operating activities (389,968) 349,874
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (4,640) (67,821)
Issuance of notes receivable (74,401) (29,291)
Receipts on notes and loans receivable 111,840 60,303
----------- -----------
Net cash used in investing
activities (3,191) (36,809)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in bank overdraft (4,640) (8,544)
Payments of subordinated loans (10,000) --
Proceeds from issuance of subordinated loans -- 75,000
Proceeds from issuance of loans and notes payable 131,954 195,000
Payments on loans and notes payable (60,911) (255,765)
Payments on long-term debt (239,189) (92,400)
Proceeds from issuance of long-term debt 284,642 --
Purchase of treasury stock (5,000) --
----------- -----------
Net cash provided by (used in)
operating activities 96,856 (86,709)
----------- -----------
NET INCREASE (DECREASE) IN CASH (296,303) 226,356
CASH, BEGINNING OF YEAR 648,402 422,046
----------- -----------
CASH, END OF YEAR $ 352,099 $ 648,402
=========== ===========
These consolidated financial statements should be read only in connection with
the accompanying summary of significant accounting policies
and notes to consolidated financial statements.
9
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
December 31, 1999 and 1998
AISCO Holdings, Ltd. (Holding Company) was incorporated November 7, 1995 to act
as a financial services holding company for the following companies which are
wholly owned subsidiaries:
American Investment Services, Inc. (AIS) operates as a broker/dealer under the
provisions of paragraph (k)(2)(i) of rule 15c3-3 of the Securities and Exchange
Commission and, accordingly, is exempt from the remaining provisions of that
Rule. The requirements of paragraph (k)(2)(i) provide that the Company carry no
margin accounts, promptly transmit all customer funds and deliver all securities
received in connection with its activities as a broker/dealer, hold no funds or
securities for, or owe money or securities to, customers and effectuate all
financial transactions with its customers through a bank account designated as a
special account for exclusive benefit of its customers.
AISCO Development Corporation (Development) was incorporated on February 26,
1996 to operate as a franchise of American Investment Services, Inc.
AISCO Agencies, Inc. (Agencies) was incorporated on December 20, 1993 to operate
as a registered insurance agency.
AISCO Futures, Inc. (Futures) was incorporated on November 7, 1995 to operate as
a commodity brokerage firm.
AISCO Trading, Inc. (Trading) has been in the development stage since it was
incorporated on November 7, 1995 to operate as a nonretail broker/dealer.
Dunnehill Capital Management, Inc. (DCM) has been in the development stage since
it was incorporated on November 7, 1995 to operate as a registered investment
advisory firm.
Facilities Financial Corporation (FFC) was incorporated on November 7, 1995 to
operate as a finance company specializing in lending and leasing. The Company
primarily serves other related companies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Holding Company and its subsidiaries. Intercompany transactions and balances
have been eliminated.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. A material estimate that is
particularly susceptible to significant change in the near term relates to the
determination of the allowance for doubtful accounts related to loans and other
receivables.
10
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
December 31, 1999 and 1998
CASH EQUIVALENTS
The Holding Company considers all liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
An allowance for doubtful accounts has been established in the amount of
$138,000 at December 31, 1999 for related party receivables. The collection of
this receivable is contingent upon future events of which the outcome is
uncertain, therefore, an allowance for bad debts has been established in the
full amount of the receivable.
An allowance for doubtful accounts had been established in the amount of $82,071
at December 31, 1998 for commissions advanced. This amount represented balances
owed to American Investment Services, Inc. by representatives who have
terminated employment subsequent to December 31, 1998. These balances were
written off during the year ended December 31, 1999.
1999 and 1998 commissions receivable have been adjusted for all accounts
considered by management to be uncollectible. No allowance for bad debts is
considered necessary at year end.
COMMISSIONS RECEIVABLE
Cash accounts held by clearing firms cannot be classified as cash per net
capital computation rules. At December 31, 1999 and 1998, cash held by clearing
firms equaled $91,010 and $32,640, respectively. These amounts are classified as
commissions receivable.
SECURITIES INVENTORY
Marketable securities are valued at market value. Profit and loss arising from
all securities transactions entered into for the account and risk of AISCO
Trading are recorded on a trade-date basis.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation of fixed assets is provided over
the estimated useful lives of the respective assets, which range from 5 to 39
years, and is computed on accelerated methods.
GOODWILL
Goodwill is being amortized over 15 years on a straight-line basis.
11
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
December 31, 1999 and 1998
REVENUE RECOGNITION
Commission income and expense is recorded on a settlement-date basis, which does
not produce financial results materially different from a trade-date basis.
INCOME TAXES
Deferred income taxes are provided on temporary differences between financial
statement and income tax reporting. Temporary differences are differences
between the amounts of assets and liabilities reported for financial statement
purposes and their tax bases. Deferred tax assets are recognized for temporary
differences that will be deductible in future years' tax returns and for
operating loss and tax credit carryforwards. Deferred tax assets are reduced by
a valuation allowance if it is deemed more likely than not that some or all of
the deferred tax assets will not be realized. Deferred tax liabilities are
recognized for temporary difference that will be taxable in future years' tax
returns.
This information is an integral part of the accompanying
consolidated financial statements.
12
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - NET CAPITAL REQUIREMENTS
American Investment Services, Inc. is subject to the Securities and Exchange
Commission uniform net capital rule (Rule 15c3-1), which requires the
maintenance of minimum net capital and requires that the ratio of aggregate
indebtedness to net capital, both as defined, shall not exceed 15 to 1 (and the
rule also provides that equity capital may not be withdrawn or cash dividends
paid if the resulting net capital would be reduced below $114,240 and $83,088 at
December 31, 1999 and 1998, respectively, or if the resultant net capital ratio
would exceed 10 to 1). At December 31, 1999 and 1998, AIS had net capital of
$22,657 and $90,133, respectively, which was $(91,583) and $7,045, respectively,
in (deficit) excess of its required net capital of $114,240 and $83,088,
respectively, aggregate indebtedness was $1,713,599 and $1,246,325,
respectively, and the ratio of aggregate indebtedness to net capital was 75.63
and 13.83 to 1, respectively.
AISCO Trading, Inc. is subject to the Securities and Exchange Commission uniform
net capital rule (Rule 15c3-1), which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital,
both as defined, shall not exceed 8 to 1 (and the rule also provides that equity
capital may not be withdrawn or cash dividends paid if the resulting net capital
would be reduced below $100,000, or if the resultant net capital ratio would
exceed 8 to 1). At December 31, 1999 and 1998, Trading had net capital of
$118,782 and $128,906, respectively, which was $18,782 and $28,906,
respectively, in excess of its required net capital of $100,000, aggregate
indebtedness was $64, and the ratio of aggregate indebtedness to net capital was
.05 to 1 at December 31, 1999. Aggregate indebtedness and the ratio of aggregate
indebtedness to net capital was zero at December 31, 1998.
AISCO Futures, Inc. is subject to the Commodity Futures Trading Commission's
(CFTC's) minimum financial requirements (Regulation 1.16 and 1.17), which
requires the maintenance of minimum capital of $36,000 and $48,000 for 1999 and
1998, respectively. Equity capital of Futures must be at least 30 percent of the
required total ($36,000 and $48,000 for 1999 and 1998, respectively). At
December 31, 1999 and 1998, Futures had net capital of $90,124 and $48,929,
respectively, which was $54,124 and $929, respectively, in excess of its
required net capital of $36,000 and $48,000, respectively. The equity capital of
Futures was 250 and 102 percent of the required capital at December 31, 1999 and
1998, respectively.
NOTE 2 - SUBORDINATED NOTE PAYABLE - RELATED PARTY
At December 31, 1999 and 1998, AISCO Holdings, Ltd. had subordinated notes
payable of $75,000 and $85,000, respectively. A $10,000 note was obtained on
December 23, 1993 and bears interest at 8 percent per annum. The note was repaid
during 1999. A $75,000 note was obtained on August 15, 1998 and bears interest
at 8 percent per annum. The note is due in full on August 31, 2001. The
subordinated borrowings are covered by agreements approved by the NASD and are
thus available in computing net capital under the Securities and Exchange
Commission's uniform net capital rule. The notes are subordinate in right of
payment and subject to the prior payment of all present and future claims of
creditors.
13
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 3 - CAPITAL STRUCTURE
AISCO Holdings, Ltd. has the following classes of stock available for sale:
10,000,000 Shares of Class A, $.000067 par value common stock are
authorized. 1,639,059 Shares are issued at December 31, 1999 and 1998. The
shares are noncumulative, voting, and carry no preemptive rights.
10,000,000 Shares of Class B, $.000067 par value common stock are
authorized. 421,821 Shares are issued at December 31, 1999 and 421,821
issued and outstanding at December 31, 1998. The shares are nonvoting, and
carry no preemptive rights.
10,000,000 Shares of Class Y, $1 par value preferred stock are authorized.
No shares are issued and outstanding at December 31, 1999 and 1998. The
shares are noncumulative, nondividend paying, voting, and carry no
preemptive rights. The shares carry preference on dissolution over common
Classes A and B and equal to preferred Class Z.
10,000,000 Shares of Class Z, $1 par value preferred stock are authorized.
No shares are issued and outstanding at December 31, 1999 and 1998. The
shares are nonvoting, nondividend paying, and carry no preemptive rights.
The shares carry preference on dissolution over common Classes A and B and
equal to preferred Class Y.
At December 31, 1998, the Corporation had 251,410 outstanding warrants to
purchase Class B common stock at prices ranging from $5.33 to $6.66 per share.
The warrants expired at various dates through December 31, 1999. At December 31,
1999 and 1998, the Corporation had 300,000 and 343,500, respectively,
outstanding and exercisable noncompensatory stock options to purchase Class B
common stock at a price of $3.33. 43,500 options expired on September 30, 1999.
The remaining 300,000 options expire on June 12, 2002. No warrants or options
were exercised during the years ended December 31, 1999 and 1998.
NOTE 4 - RELATED PARTY TRANSACTIONS
Several of the Holding Company's officers and shareholders are registered
representatives of American Investment Services, Inc. Commissions earned by
these individuals at December 31, 1999 and 1998, totaled $161,296 and $87,472
respectively. Commission advanced to these individuals at December 31, 1999 and
1998 totaled $69,050 and $22,726, respectively. The commissions advanced to
these individuals are included as part of the total commissions advanced on the
statements of financial condition.
The Holding Company has notes and loans receivable due from employees and
registered representatives totaling $256,374 and $188,850 at December 31, 1999
and 1998, respectively. $117,648 and $152,909 of the notes at December 31, 1999
and 1998, respectively, are due at various dates through 2002 and bear interest
at rates ranging from 10.0 to 12.5 percent. $726 and $35,941 of the loans
receivable at December 31, 1999 and 1998, respectively, are due in 2000 and 1999
and bear interest at a rate of 8 percent. The Company has made provisions for
doubtful accounts of $138,000 and $ -0-, respectively, against these notes and
loans receivable.
14
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 4 - RELATED PARTY TRANSACTIONS (CONTINUED)
The Holding Company has a $6,954 loan payable to registered representatives of
American Investment Services, Inc. and $12,299 note payable to MIS, a related
party owned by a stockholder of the Company at December 31, 1999 and 1998,
respectively. The loan payable is unsecured, due January 2000, and noninterest
bearing. The note payable to MIS was repaid during 1999.
AIS, FFC, and Agencies pay a consulting fee to Docu-Management Corporation, a
related party owned by a stockholder of the Company. Consulting expense for the
years ended December 31, 1999 and 1998 was $218,4000 and $220,200, respectively.
Agencies also paid an $18,000 consulting fee to an employee of American
Investment Services, Inc. for accounting services.
FFC receives rent income from Docu-Management Corporation. Building and
equipment charges received from Docu-Management Corporation totaled $7,200 for
each of the years ended December 31, 1999 and 1998.
The Holding company receives consulting revenue from Docu-Management
Corporation. Consulting revenue received was $36,000 and $33,000 during the
years ended December 31, 1999 and 1998, respectively.
The administrative expenses - related parties is summarized as follows:
1999 1998
--------- ---------
AIS consulting fee to Docu-Management Corporation $ 210,000 $ 216,000
FFC consulting fee to Docu-Management Corporation 4,200 4,200
Agencies consulting fee to Docu-Management Corporation 4,200 --
agencies consulting fee to AIS employee 18,000 --
--------- ---------
Total $ 236,400 $ 220,200
========= =========
NOTE 5 - INCOME TAXES
The sources of deferred tax assets and the tax effect of each are as follows:
1999 1998
--------- ---------
Tax benefit of net operating loss carryforwards $ 16,300 $ 93,500
Valuation allowance (16,300) (93,500)
--------- ---------
Net deferred tax asset $ -- $ --
========= =========
At December 31, 1999, the Holding Company has carryforwards available to offset
future years taxable income as follows:
Amount Expiration
------ ----------
Federal net operating loss carry over $ 108,000 December 31, 2018
15
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 5 - INCOME TAXES (CONTINUED)
The provision for income taxes consists of the following components:
1999 1998
--------- ---------
Current $ 175,000 $ 108,117
Benefit of operating loss carryforwards (159,431) (110,586)
--------- ---------
Total provision for income taxes $ 15,569 $ 21,414
========= =========
The Holding Company's provision for income taxes differs from the tax that would
result from applying statutory federal tax rates to income before income taxes
primarily because of state taxes, nondeductible expenses, and the benefits of
net operating loss carryforwards.
NOTE 6 - CASH FLOW DISCLOSURES
Cash paid for interest and income taxes was as follows:
1999 1998
-------- --------
Interest $106,327 $108,117
Income taxes 10,877 21,430
NOTE 7 - NOTE PAYABLE
1999 1998
-------- --------
$125,000 Promissory note payable to RPR Correspondent
Clearing, due September 1, 2000. Interest is being
charged on this loan at 8.50 percent. Note is
unsecured. $ 90,388 $ 14,000
======== ========
NOTE 8 - LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
1999 1998
-------- --------
Note payable to Economic Development Council for the
Peoria Area requiring monthly installments of $961,
including interest at 5.75 percent per year, with
final payment due January 1, 2001. Secured by second
mortgage on the property which houses the Company's
office. guaranteed by personal guarantees of two
principal shareholders. $ 12,082 $ 21,734
16
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 8 - LONG-TERM DEBT (CONTINUED)
1999 1998
--------- ---------
Note payable to First Midwest Bank, due September 5,
2000 requiring monthly payments of $5,948, including
interest at 3.00 percent above the prime rate
published in the Wall Street Journal (11.75 percent).
Secured by first mortgage and assignment of rents on
the property which houses the Company's office.
Guaranteed by AISCO holdings, Ltd., and personal
guarantees of two principal shareholders. $ 593,354 $ 616,292
Note payable to First Midwest Bank, due July 22, 1999,
requiring monthly payments of $3,150, including
interest at the prime rate published in the Wall
Street Journal (7.75 percent). Guaranteed by personal
guarantees of two principal stockholders. -- 21,471
Note payable to First Midwest Bank, due June 6, 2002,
requiring monthly payments of $2,728, including
interest at 11 percent per year. Secured by a mortgage
and assignment of rents on the property which houses
the Company's office. Guaranteed by AISCO Holdings,
Ltd. and personal guarantees of two principal
shareholders. 71,123 94,506
Note payable to First Midwest Bank, requiring monthly
installments of $1,324, including interest at 1.50
percent above the prime rate published in the Wall
Street Journal (10.0 percent). Final payment is due
July 6, 2003. Secured by equipment of Facilities
Financial Corporation. 47,644 58,415
$750,000 line of credit to Fisery Correspondent
Services, Inc., due in monthly installments of $10,000
plus interest at 10.125 percent. Final payment due
December 31, 2002. Note is unsecured. 234,642 70,000
Note payable to First Midwest Bank, requiring monthly
installments of $3,252 including interest at 3.00
percent above the prime rate published in the Wall
Street Journal (11.75 percent). Final payment is due
September 5, 2000. Secured by a second mortgage on the
property which houses the company's office. Guaranteed
by AISCO Holdings, Ltd. and personal guarantees of two
principal shareholders. 61,045 92,019
--------- ---------
1,019,890 974,437
Less current maturities (823,580) (844,580)
--------- ---------
$ 193,310 $ 129,857
========= =========
17
<PAGE>
AISCO HOLDINGS, LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 8 - LONG-TERM DEBT (CONTINUED)
Required future maturities of long-term debt are as follows:
2000 $ 823,580
2001 157,857
2002 29,662
2003 8,801
----------
$1,019,890
==========
NOTE 9 - CONTINGENCIES
American Investment Services, Inc. is also defendant in twelve lawsuits alleging
various claims which include: fraud, misrepresentations and omissions, churning,
trading of unsuitable investments, negligence, breach of fiduciary duty,
conversion, breach of contract, violation of NASD rules, violations of the
Illinois Consumer Fraud & Deceptive Practices Act, defamation, and negligent
supervision. The suits ask for total damages approximating $2,416,000 in actual
damages 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 outcomes.
At December 31, 1999, American Investment Services, Inc. was $91,583 deifcient
in its minimum net capital requirements. AIS rectified this situation on
February 7, 2000 when $255,000 of commissions advanced were sold to a related
party for $255,000 without recourse. As of May 22, 2000, it is not known whether
there will be any fines or penalities assessed to the Company as a result of not
maintaining the minimum net capital at December 31, 1999.
NOTE 10 - SUBSEQUENT EVENT
On March 9, 2000 The National Capital Companies, Inc. acquired all of the
outstanding Class A common stock of AISCO Holdings, Ltd. in exchange for 818,890
shares of The National Capital Companies, Inc. common stock. AISCO Holdings,
Ltd.'s financial information willbe consolidated with The National Capital
Companies, Inc. for future financial reporting purposes.
This information is an integral part of the accompanying
consolidated financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
THE NATIONAL CAPITAL COMPANIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars, except per share amounts)
Year Ended December 31, 1999
NATC AISCO Pro Forma
------------ ------------ ---------------------------------
Historical Adjustments Consolidated
----------------------------- ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUE
Gross revenue ................................... $ 8.704,000 $ 21,422,000 $ -- $ 30,126,000
Cost of revenue ................................. (3,933,000) (17,560,000) -- (21,493,000)
------------ ------------ ------------ ------------
Net revenue ................................ 4,771,000 3,862,000 -- 8,633,000
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling, general and administrative expenses .... (2,914,000) (3,649,000) -- (6,563,000)
Depreciation and amortization ................... (136,000) (148,000) (500,000)(1) (784,000)
------------ ------------ ------------ ------------
Total operating expenses ................... (3,050,000) (148,000) (500,000) (7,347,000)
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS ............................... 1,721,000 65,000 (500,000) 1,286,000
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense ................................ (42,000) (111,000) -- (153,000)
Interest income ................................. 5,000 25,000 -- 30,000
Other ........................................... 210,000 295,000 -- 505,000
------------ ------------ ------------ ------------
Total other income ......................... 173,000 209,000 -- 382,000
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR TAXES .................... 1,894,000 274,000 (500,000) 1,668,000
PROVISION FOR INCOME TAXES
Current ......................................... (741,000) (175,000) -- (916,000)
Deferred ........................................ (46,000) 159,000 -- 113,000
------------ ------------ ------------ ------------
NET INCOME ........................................... $ 1,107,000 $ 258,000 $ (500,000) $ 865,000
============ ============ ============ ============
BASIC EARNINGS PER SHARE ............................. $ 0.55 $ 0.31(2)
DILUTED EARNINGS PER SHARE ........................... $ 0.55 $ 0.31(2)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ........................................... 2,000,000 2,818,090(2)
Diluted ......................................... 2,000,000 2,818,090(2)
</TABLE>
----------
(1) - Amorization of Goodwill related to the acquisition of AISCO
(2) - Includes Shares issued related to the acquisition of AISCO
19
<PAGE>
Item 8. Change in Fiscal Year.
None
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, thereunto duly authorized.
THE NATIONAL CAPITAL COMPANIES, INC.
DATED: November 7, 2000 By: /s/ Tim A. Quintanilla
-------------------------------
Tim A. Quintanilla
Its:Chief Financial Officer
20
<PAGE>
INDEX TO EXHIBITS
(1) UNDERWRITING AGREEMENT
Not Applicable.
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
Not Applicable.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
Not Applicable.
(16) LETTER RE: CHANGE IN CERTIFYING ACCOUNTANT
Not Applicable.
(17) LETTER RE: DIRECTOR RESIGNATION
Not Applicable.
(20) OTHER DOCUMENTS OR STATEMENTS TO SECURITY HOLDERS
Not Applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL
Not Applicable.
(24) POWER OF ATTORNEY
Not Applicable.
(27) FINANCIAL DATA SCHEDULE
Not Applicable.
(99) ADDITIONAL EXHIBITS
Not applicable
