<PAGE> 1
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: March 31, 1997
[ ] 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: 33-11062-D
CAPITAL 2000, INC.
---------------------------------------------
(Name of small business issuer in its charter)
Colorado 84-1049047
------------------------------- -----------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
602 Main Street, Suite 1102, Cincinnati, Ohio 45202
---------------------------------------------------
(Address of principal executive offices,
including zip code)
(513) 241-7470
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 14, 1997, 10,590,100 shares of common stock, no par value per share,
were outstanding.
Transitional Small Business Disclosure Format: Yes No X
--- ---
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CAPITAL 2000, INC.
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements:
Page
----
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996 3
Consolidated Statements of Operations for
the Quarters Ended March 31, 1997 and 1996
and for the period from October 22, 1986
(Date of Inception) through March 31, 1997 4
Consolidated Statements of Cash
Flows for the Quarters Ended March 31, 1997 and 1996
and for the period from October 22, 1986
(Date of Inception) through March 31, 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Plan of Operation 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 12
2
<PAGE> 3
CAPITAL 2000, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31 December 31
1997 1996
------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,473 $ 107
Accounts receivable - officer 6,955 6,955
------------- -----------------
Total current assets 9,428 7,062
MARKETING AGREEMENT, net 76,667 81,667
------------- -----------------
$ 86,095 $ 88,729
============= =================
LIABILITIES
CURRENT LIABILITIES
Notes payable - stockholders $ 98,919 $ 79,919
Accounts payable 9,085 241,853
Accrued liabilities - interest 11,831 11,831
Payable to related party - 15,200
------------- -----------------
Total current liabilities 119,835 348,803
COMMITMENTS - -
DEFICIT IN STOCKHOLDERS' EQUITY
Common stock - authorized 500,000,000 shares without
par value; issued and outstanding 10,590,100 at
March 31, 1997 and 10,230,506 at December 31, 1996 538,616 130,652
Stock subscribed, not yet issued - 133,000
Additional paid-in capital 142,956 142,956
Deficit accumulated (715,312) (666,682)
------------- -----------------
(33,740) (260,074)
------------- -----------------
$ 86,095 $ 88,729
============= =================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
CAPITAL 2000, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended From October 22, 1986
March 31, (Date of Inception) to
1997 1996 March 31, 1997
------------- ------------- -------------------------
<S> <C> <C> <C>
REVENUE:
Interest income $ 28 $ - $ 103
EXPENSES:
Amortization 5,000 5,000 38,333
Professional fees 40,760 1,754 116,295
Office 2,898 - 23,093
Start-up costs - 5,083 106,864
Bottle purchase requirements - - 232,363
Payments to related parties - - 154,486
Stock issued for services - - 32,150
Other - 4,110 11,831
------------- ------------- -------------------------
48,658 15,947 715,415
------------- ------------- -------------------------
NET LOSS $(48,630) $(15,947) $(715,312)
============= ============= ==========================
PER SHARE (0.01) (0.01) (0.06)
============= ============= ===========================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
CAPITAL 2000, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended From October 22, 1986
March 31, (Date of Inception) to
1997 1996 March 31, 1997
------------- ------------- -------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(48,630) $(15,947) $ (715,312)
Stock issued for services - - 32,150
Amortization 5,000 5,000 38,333
(Increase) in accountants receivable - - (6,955)
Increase in accounts payable (232,768) (18,065) 9,085
Increase in accrued expenses - 2,175 11,831
Increase in accounts payable stockholder (15,200) 2,000 -
------------- ------------- -------------------------
(291,598) (24,837) (630,868)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of marketing agreement - - (115,000)
------------- ------------- -------------------------
- - (115,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on notes payable stockholders 19,000 (6,100) 216,878
Payments on notes payable stockholders - - (117,959)
Proceeds from issuance of stock 407,964 20,000 639,622
Proceeds from stock subscribed (133,000) - -
Company accounts payable assumed
by stockholder - - 9,800
------------- ------------- -------------------------
293,964 13,900 748,341
------------- ------------- -------------------------
NET INCREASE IN CASH 2,366 (10,937) 2,473
Cash at beginning of period 107 11,966 -
------------- ------------- -------------------------
Cash at end of period $ 2,473 $ 1,029 $ 2,473
============= ============= =========================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
CAPITAL 2000, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
March 31, 1997 (Unaudited)
(1) Condensed Financial Statements
The financial statements included herein have been
prepared by Capital 2000, Inc. without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations, and Capital 2000, Inc.
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
financial statements be read in conjunction with the December 31,
1996 audited financial statements and the accompanying notes
thereto. While management believes the procedures followed in
preparing these financial statements are reasonable, the accuracy
of the amounts are in some respect's dependent upon the facts
that will exist, and procedures that will be accomplished by
Capital 2000, Inc. later in the year.
The management of Capital 2000, Inc. believes that the
accompanying unaudited condensed financial statements contain all
adjustments (including normal recurring adjustments) necessary to
present fairly the operations and cash flows for the periods
presented.
(2) Change in Control of The Company
Effective February 12, 1997, the Company acquired all of
the outstanding shares of United Shields Corporation ("USC") in
exchange for restricted shares of Common Stock (the "Exchange")
pursuant to a Share Exchange Agreement between the Company and
USC. In connection with the Exchange, the directors and officers
of USC became the directors and officers of the Company. After
the Exchange, USC's shareholders own approximately 90% of the
outstanding Common Stock.
(3) Issuance of Shares by Subsidiary
In January 1997, USC completed a private offering of
204,000 shares of its common stock at $2.00 per share. Total
proceeds of $408,000 were used to fund operations.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
Capital 2000, Inc.'s (the "Company") principal focus is to make one or
more acquisitions. The Company believes that acquisitions are a means of
increasing its asset and revenue base, adding expertise and diversifying its
product offerings. The consummation of one or more acquisitions would likely
have the effect of significantly increasing the number of employees of the
Company. Acquisitions may involve a number of risks including, without
limitation, diversion of management's attention, dependence on retaining, hiring
and training key personnel, adverse short-term effects on operating results and
amortization of acquired intangible assets, some of which could have a material
adverse effect on the Company's operations and financial results. The success of
any acquisition requires that the Company be able to successfully integrate the
operations of the acquired company with its ongoing operations without
substantial costs, delays or other problems and to manage the acquired company
profitably or achieve levels of profitability that justify the investment made
by the Company in the acquired company. There can be no assurance that the
Company will be successful in consummating the acquisition of candidates or in
integrating acquired companies.
The Company has entered into a letter of intent to acquire an
Ohio-based manufacturer of plastic bottle injection molded pre-forms with
annual revenues for 1996 of approximately $14.5 million. However, negotiations
with this manufacturer have been put on hold due to the manufacturer's sales
for the first quarter of 1997 falling below projections. The Company is
currently engaged in negotiations to acquire three other manufacturers of
injection molded products and anticipates that one or more of these
acquisitions may be consummated during the second quarter.
The Company is currently in the process of evaluating, and the Company
intends to continue to identify and evaluate other potential acquisition
candidates whose product or product lines could benefit the operations of the
Company. The Company anticipates that such acquisition candidates would be
involved in plastics manufacturing, production, packaging, distribution and/or
production of various consumer beverage products.
The Company, through its wholly-owned subsidiary United Shields
Corporation ("USC"), has acquired from In-Flo North America Limited ("In-Flo")
the exclusive world-wide marketing rights for a patented collapsible plastic
bottle (the "Bottle") for use in the retail/consumer sale of water and other
water based beverages and pre-packed powdered instant drink mixes. The Bottles
are filled with liquid by consumers or retailers using a manually operated
spigot, filling through a flip top cap. The compressed plastic Bottle expands
as filled and remains semi-rigid. When filled, the Bottle stands on its own;
when empty, it folds into a compressible flat package approximately four inches
by five inches by two inches. USC also has the right to use a patented bottle
processing unit (integrator) that can prepack concentrates, and evacuate, cap,
label and fold the Bottles.
The Company believes that the marketing potential for the Bottle is
that it would significantly reduce the costs associated with manufacturing,
distributing and marketing bottled beverages. The primary benefit of the Bottle
is derived from the fact that the Bottle can be shipped and stored in its
collapsible state; water can be added to it manually, without the use of
special equipment. The Company believes that the convenience of being able to
add water to the Bottle at any stage in the sales and distribution chain
enables the Company to market the
7
<PAGE> 8
Bottle for a variety of uses. For example, the Company believes that there is a
segment of the consumer market (e.g., homemakers, hikers, campers, daycare
centers, etc.) that would have access to water and would desire the Bottle and
related products for drinks without transporting the weight of a bottle
pre-filled with liquid. The Company also believes that there are distributors
and retailers who would benefit from the convenience of being able to control
when and where the Bottles are filled in order to reduce transportation and/or
storage costs.
The Company, through USC, intends to market the Bottle for the sale of
filtered bottled water and for use with various powdered instant drink mixes and
bottled water-based flavored drinks. USC's initial marketing efforts will be
directed to the following: 1) contracting with a food broker to develop one or
more private label products for sale to manufacturers of retail/consumer water
or water based beverages; and 2) forming one or more alliances with major
marketers to supermarket and convenience store markets. Actual results could
differ materially from the Company's expectations because the developing and
marketing of any new product in a new market, particularly a new beverage
product is intensely competitive. Most new products are not successful. Even if
successful, success may not be achieved without incorporating numerous changes
or refinements to the product and/or its packaging.
The Company may manufacture and distribute the Bottle although it is
not required to manufacture the Bottle under the Sales Agreement. USC will
coordinate the production and shipping of the Bottle in cooperation with
In-Flo. It is expected that the actual distribution of the product will be
handled by existing food brokers, marketing companies, copackers and other
suppliers to, and distributors of, food and grocery products (collectively
referred to as "distributors"). In other words, it is contemplated that the
distributors will actually generate the sales to supermarket and convenience
stores, service accounts, invoice sales and collect receivables.
The marketing of the Bottle is expected to be funded by either an
additional equity investment in the Company or from operating revenues, if the
Company is successful in acquiring an existing business, as described above.
The inability of the Company to meet sales volume and other requirements of the
Agreement with In-Flo could have a material adverse effect on the results of
the Company.
USC borrowed from Ramsay-Hughes, Inc. the principal amount of $85,000
on December 12, 1995, and the principal amount of $66,568.70 on December 1,
1996, pursuant to two promissory notes. As of March 31, 1997, USC had paid
$124,290.70 leaving a remaining principal amount of $98,918.70. The $85,000
note bears interest at a rate of 8% per annum; both notes were due and payable
on March 31, 1997. The unpaid balance is now due on demand and to date,
Ramsay-Hughes, Inc. has not made a demand for payment of the balance due.
Ramsay- Hughes, Inc. owns beneficially approximately 16.5% of the outstanding
common stock of the Company (including approximately 2.2% which is owned
individually by the directors and executive officers of Ramsay-Hughes, Inc.).
The Company believes that it will be required to seek additional
equity financing in order to fulfill its plan of operations as described above.
Management is currently investigating the possibility of a registered stock
offering to raise additional equity financing.
8
<PAGE> 9
The preceding description of "Management's Plan of Operation"
constitutes forward-looking statements for purposes of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended, and as such involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Important factors that could cause the
actual results, performance or achievement of the Company to differ materially
from the Company's expectations include the factors discussed in connection with
the particular statements contained in the Plan of Operations and the following
factors: 1) the Company's inability to obtain financing for acquisitions and for
general operations including the marketing of the Bottle; 2) the Company's
inability to establish a successful alliance with a major marketer to the
supermarket and convenience store markets; 3) the Company's inability to obtain
significant shelf space in supermarkets and convenience stores due to
competition for space by all food products, requirements to sell through
specific distributors, commission or other rate structures which prevent the
Company from achieving adequate profit margins and other similar factors; 4)
non-acceptance of the product in the marketplace due to costs or other reasons;
5) the Company's inability to supply the product to meet market demand; 6)
generally unfavorable economic conditions which would adversely affect
purchasing decisions by retailers or consumers; 7) development of a similar
competing product which is not an infringement of the patent on the Bottle; 8)
inability of the owner of the patent for the Bottle to protect against
infringement; and 9) the Company's inability to successfully complete and
integrate acquisitions. All forward-looking statements attributable to the
Company are expressly qualified in their entirety by such factors.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
Filed Herewith
(Page #) or
Incorporated by
Reference to:
---------------
2 Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession
(1) Share Exchange Agreement between the Exhibit 10.1 to the
Company and USC dated February 12, Company's Form 8-K
1997 filed on April 1, 1997
9
<PAGE> 10
Filed Herewith
(Page #) or
Incorporated by
Reference to:
---------------
3(a)
(1) Articles of Incorporation Exhibit 3.1 to the
Company's Registration
Statement
(No. 33-11062-D)
(2) Articles of Amendment to the Exhibit 3.1(a) to the
Articles of Incorporation dated Company's Form 10-
March 15, 1995 KSB for the year
ended December 31, 1995
(3) Articles of Amendment to the Exhibit 3.1(b) to the
Articles of Incorporation dated Company's Form 10-K
February 26, 1996 SB for the year ended
December 31, 1995
3(b) Bylaws of the Company Exhibit 3.2 to the
Company's Registration
Statement
(No. 33-11062-D)
10(i) Material Agreements
(a)(1) Sales Agreement between In-Flo Liquid Exhibit 10(i)(a)(1) to
Dispensing Corporation and Diverse the Company's Form 10-K
Products Incorporated dated May SB for the year ended
5, 1995 December 31, 1996
(a)(2) Assignment of Sales Agreement between Exhibit 10(i)(a)(2) to
Diverse Products Incorporated and the Company's Form 10-K
Health Shields Corporation dated SB for the year ended
May 9, 1995 December 31, 1996
(a)(3) Assignment of Sales Agreement between Exhibit 10(i)(a)(3) to
In-Flo Liquid Dispensing Corporation the Company's Form 10-K
and In-Flo North America Limited dated SB for the year ended
January 22, 1996 December 31, 1996
(a)(4) Addendum to Assignment of Sales Exhibit 10(i)(a)(4) to
Agreement between Diverse Products the Company's Form 10-
Incorporated and KSB for the year ended
10
<PAGE> 11
Filed Herewith
(Page #) or
Incorporated by
Reference to:
---------------
Health Shields Corporation dated December 31, 1996
August 8, 1996
(a)(5) Amending Agreement between In-Flo North Exhibit 10(i)(a)(5) to
America Limited and Health Shields the Company's Form 10-
KSB for the year
ended December 31,
1996
(a)(6) Second Addendum to Assignment of Sales Exhibit 10(i)(a)(6) to
Agreement between Diverse Products the Company's Form 10-K
Incorporated and USC dated SB for the year ended
April 10, 1997 December 31, 1996
(a)(7) Promissory Note of USC dated December 12, Exhibit 10(i)(a)(7) to
1995 in favor of Ramsay-Hughes, Inc. the Company's Form
10-K SB for the year
ended December 31, 1996
(a)(8) Letter of Ramsay-Hughes, Inc. dated Exhibit 10(i)(a)(8) to
December 1, 1996 extending Promissory the Company's Form
Note dated December 12, 1995 10-K SB for the year
ended December 31, 1996
(a)(9) Promissory Note of USC dated December 1, Exhibit 10(i)(a)(9) to
1996 in favor of Ramsay-Hughes, Inc. the Company's Form
10-K SB for the year
ended December 31, 1996
27 Financial Data Schedule E-1
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated February 2, 1997
reporting that the Company signed a letter of intent to acquire all of the
shares of USC in exchange for shares of the Company's common stock.
11
<PAGE> 12
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.
CAPITAL 2000, INC.
By: /s/ T. J. TULLY
----------------------------------------
T. J. Tully, Chief Executive Officer
Chief Financial Officer, Chief
Accounting Officer and President
Dated: May 14, 1997
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 2473
<SECURITIES> 0
<RECEIVABLES> 6,955
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,428
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,095
<CURRENT-LIABILITIES> 119,835
<BONDS> 0
0
0
<COMMON> 538,616
<OTHER-SE> (572,356)
<TOTAL-LIABILITY-AND-EQUITY> 86,095
<SALES> 0
<TOTAL-REVENUES> 28
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 48,658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (48,630)
<INCOME-TAX> 0
<INCOME-CONTINUING> (48,630)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,630)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
