FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[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
OR
[ ] 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: 33-31639
Finca Consulting, Inc.
(Exact name of registrant as specified in its Charter)
Colorado 84-1121635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Koenigsallee 106, 40215 Duesseldorf, Germany
(Address of principal executive offices) (Zip Code)
(011-49-211) 384860
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to filed such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 31, 1997, 10,300,332 shares of Registrant's Common Stock,
$.01 par value, were issued and outstanding.
<PAGE>
Finca Consulting, Inc.
Index
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Part II OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote
of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1
Finca Consulting, Inc. and Subsidiaries
Index to the Consolidated Financial Statements
March 31, 1997
Financial Statements
Consolidated Balance Sheets................................................
Consolidated Statements of Operations......................................
Consolidated Statements of Cash Flows......................................
Notes to the Consolidated Financial Statements.............................
<PAGE>
<TABLE>
<CAPTION>
Finca Consulting, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash ...................................................... $ 3,799,982 $ 4,928,557
Other current assets ...................................... 83,769 111,245
------------ ------------
Total Current Assets ................................. 3,883,751 5,039,802
------------ ------------
Property and Equipment, at cost
Land ...................................................... 115,560 115,560
Buildings ................................................. 462,257 462,257
Office furniture and equipment ............................ 346,237 364,486
------------ ------------
924,054 942,303
Less: Accumulated depreciation ............................ (312,781) (312,477)
------------ ------------
Net Property and Equipment ........................... 611,273 629,826
------------ ------------
Other Assets
Receivables due from related parties ...................... 3,087,229 1,846,167
Other assets .............................................. 230,647 251,875
------------ ------------
Total Other Assets ................................... 3,317,876 2,098,042
------------ ------------
Total Assets ......................................... 7,812,900 7,767,670
============ ============
<PAGE>
<CAPTION>
Finca Consulting, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses ..................... 285,000 283,249
Customer credit balances .................................. 3,105,442 3,023,484
------------ ------------
Total Current Liabilities ............................ 3,390,442 3,306,733
------------ ------------
Minority interest in subsidiary ........................... 45,632 45,632
------------ ------------
Stockholders' Equity
Common stock, $.01 par value, 20,000,000 shares authorized,
10,300,322 shares issued and outstanding, respectively . 103,003 103,003
Capital in excess of par value ............................ 13,510,301 13,510,301
Accumulated deficit ....................................... (9,292,002) (9,203,652)
Cumulative translation adjustment ......................... 55,524 5,653
------------ ------------
Total Stockholders' Equity .............................. 4,376,826 4,415,305
------------ ------------
Total Liabilities and Stockholders' Equity .............. $ 7,812,900 $ 7,767,670
============ ============
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Finca Consulting, Inc. and Subsidiaries
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues ........................................... $ 22,069,936 $ 18,361,597 $ 4,010,666
Cost of shares and options ......................... 18,563,275 14,068,996 4,050,461
------------ ------------ ------------
Gross Profit (Loss) ................................ 3,506,661 4,292,601 (39,795)
Selling, general and administrative expenses ....... 3,610,998 4,512,309 1,852,297
------------ ------------ ------------
(Loss) From Operations ....................... (104,337) (219,708) (1,892,092)
------------ ------------ ------------
Other Income
Interest Income .............................. 15,987 -- --
------------ ------------ ------------
Total Other Income ......................... 15,987 -- --
------------ ------------ ------------
Net (Loss) ......................................... $ (88,350) $ (219,708) (1,892,092)
============ ============ ============
Net (Loss) Per Share ............................... $ (.01) $ (.10) $ (0.88)
============ ============ ============
Weighted Average Number of Common Shares Outstanding 10,300,322 2,146,633 2,146,633
============ ============ ============
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
-----------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net (Loss) ................................................................ $ (88,350) $ (219,708) $(1,892,092)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in)
Operating Activities:
Decrease and amortization .............................................. 22,344 27,482 113,042
Decrease in accounts payable ........................................... -- -- 10,265
Decrease in other current assets ....................................... 27,476 8,862 (7,147)
(Increase) in deposits ................................................. -- -- (28,682)
(Increase) decrease in receivables due from related parties ............ (1,241,062) 435,304 (116,375)
(Increase) decrease in other assets .................................... 21,228 (546,739) (108,647)
Increase in accounts payable and accrued expenses ...................... 1,751 2,200 39,173
Increase in customer credit balances ................................... 81,958 3,272,430
----------- -----------
Net Cash Provided by (Used in) Operating Activities .................. (1,174,655) 2,979,831 (1,285,208)
----------- ----------- -----------
Cash Flows From Investing Activities
(Purchase) of property and equipment ...................................... (3,791) (44,325) (2,069)
----------- ----------- -----------
Net Cash (Used in) Provided by Investing Activities .................. (3,791) (44,325) (2,069)
----------- ----------- -----------
Cash Flows From Financing Activities
Acquisition of Treasury Shares ............................................ -- -- (26,639)
----------- ----------- -----------
Redemption of Preferred Shares ............................................ -- (479,028) 3,570,848
----------- ----------- -----------
Net Cash (Used in) Financing Activities .............................. -- (479,028) 3,544,209
----------- ----------- -----------
Effect on Exchange Rate Changes on Cash ...................................... 49,871 (97,407) (121,967)
----------- ----------- -----------
Net Increase (Decrease) in Cash .............................................. (1,128,575) 2,359,071 2,134,965
Cash at Beginning of the Period .............................................. 4,928,557 6,004,844 953,633
----------- ----------- -----------
Cash at the End of the Period ................................................ $ 3,799,982 $ 8,363,915 $ 3,088,598
=========== =========== ===========
</TABLE>
See notes to the consolidated financial statements
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
March 31, 1997
(Unaudited)
BASIS OF PRESENTATION
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-Q and
Article 10 of Regulation S-X. 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 three month period ended March 31, 1997 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and Subsidiaries' annual
report on Form 10-K for the year ended December 31, 1996.
The balance sheet at December 31, 1996 has been derived from the audited
financial statements of that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
<PAGE>
Finca Consulting, Inc. and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and Notes thereto included herein.
Fiscal Year 1997 vs. Fiscal Year 1996
Results of Operations
Substantially all of the Company's revenues during the quarter ended March
31, 1997, was generated by its subsidiary Prime Core AG through its retail
securities brokerage activities in Europe.
For the quarter ended March 31, 1997, the Company had revenues of $22,069,936
compared to $18,361,597 for same quarter in 1996, and $19,110,756 for the
preceding quarter. Gross profits achieved were $3,506,661 or 15.9% of revenues
which compares to a gross margin of 23.4% last year. The decrease reflects an
increasingly competitive environment in the Company's traditional German market.
This development was the primary reason that the Company experienced a net loss
of $88,350 for the quarter, compared to a loss of $219,708 for the comparable
period a year ago.
Liquidity and Capital Resources
The Company had total assets at March 31, 1997 of $7,812,900, of which
$3,883,751 were current assets, primarily cash in the amount of $3,799,982. The
decrease in cash since the beginning of the fiscal year was a consequence of a
$1,174,655 negative cash flow from operations, mainly due to a similar increase
in receivables from related parties. This amount consists primarily of
receivables from an affiliated company in Germany which provides facilities and
support services for Prime Core AG's retail brokerage operations.
Working capital at March 31, 1997, amounted to $493,309, down from
1,733,069 at the beginning of the year.
Fiscal Year 1996 vs. Fiscal Year 1995
Results of Operations
Substantially all of the Company's revenues during the quarter ended March
31, 1996, was generated by its subsidiary, Opti-Wert-Interest AG ("OWI-AG")
through its retail securities brokerage activities in Europe.
<PAGE>
For the quarter ended March 31, 1996, the Company had revenues of $18,361,597
compared to $4,010,666 for same quarter in 1995. The revenue growth reflects
increased activity resulting from expanded sales and marketing efforts, and was
accompanied by a corresponding increase in gross profits. However, as a
consequence of increased selling, general, and administrative expenses of
$4,512,309 for the quarter, the Company experienced a net loss of $219,708 for
the quarter, compared to a loss of $1,892,092 for the comparable period a year
ago.
Liquidity and Capital Resources
The Company had total assets as of March 31, 1996 of $10,838,673, of which
$8,603,290 were current assets. The current assets include a cash position of
$8,363,915, an increase of $2,359,071 over the position at the beginning of the
year, primarily as a consequence of higher customer prepayment balances brought
about by increased activity.
During the quarter, the Company redeemed 107,860 shares of its preferred
stock, for an aggregate $479,028.
Working capital at March 31, 1996, increased to $2,876,115. Management
believes capital resources to be sufficient to fund current and anticipated
future opearations.
<PAGE>
PART II, OTHER INFORMATION
ITEM 1.Legal Proceedings.
Many aspects of the Company's business involve risks of liability. The
Company has been named as a defendant in civil actions arising in the
ordinary course of business out its activities in securities and futures
options contracts. In the opinion of management of the Company, however,
the Company is not involved in any litigation or legal proceedings that
would have a material effect upon its financial condition, except as may
be indicated below.
Regulatory Matters
Securities regulations in Germany are enforced by the German Banking
Authorities (the "Bundesaufsichtsamt fuer das Kreditwesen", or the "BAK").
The BAK administers and enforces the German banking act (the "Gesetz fur
das Kreditwesen", or the "KWG"). The Company's brokerage business in the
past and as currently operated utilizes the services of independent
brokers in Germany to solicit German customers who are referred to the
Company's Swiss-based subsidiary, Prime Core AG, which maintains
dministrative offices in Zug,Switzerland.
Previously, the KWG or German banking laws, loosely defined brokers and
financial services activities and operations. The mainstream securities
brokerage business in Germany was and continues to be performed by German
banks or firms which are members of recognized stock exchanges. Because of
the loosely defined terms and regulations of the "BAK", many firms conduct
securities brokerage and financial services businesses without being
members of established stock exchanges nor in association with an
established German bank. The Corporation's securities brokerage business
operations, similarly situated and not conducted as a bank or stock
exchange member, has operated in what is called in Germany the "gray
market".
<PAGE>
As of January 1, 1998, Germany has adopted new regulations that will
require entities who conduct any financial services business of any kind,
including securities brokerage and investment services, to register with
the German authorities in order to conduct and, in the Company's case, to
continue performing securities brokerage business in Germany. If the
Company does not comply with these new German regulations, the
continuation of its securities business in Germany could be subject to
enforcement proceedings which could have a material advers effect on the
Company's financial condition. The Company, however, fully intends to
comply with the new German legal requirements and is now taking all
measures necessary for its securities brokerage business to be in full
compliance. It is unclear, however and notwithstanding the Company's
current efforts to comply, whether the Company will be in full compliance
with the new regulations on or shortly after January 1, 1998. The
Company's German-based advisors have informed the Company that it will be,
perhaps, six months before the Company's securities brokerage business is
in full compliance with the new regulations. Under these circumstances, if
the German banking regulators, or the "BAK", were to institute enforcement
proceedings against the Company in Germany, it could have material adverse
effects on the financial condition of the Company.
<PAGE>
ITEM 2.Changes In Securities.
Not Applicable.
ITEM 3.Defaults Upon Senior Securities.
Not Applicable.
ITEM 4.Submission of Matters to a Vote of Security Holders.
Not Applicable.
ITEM 5.Other Information
Not Applicable.
ITEM 6.Exhibits and Reports on Form 8-K
(a) (3)(i) Articles of Incorporation: incorporated by reference to the
Company's Form S-18 Registration Statement, filed with the Securities and
Exchange Commission on October 17, 1989, and declared effective on June 29,
1990.
(3)(i) Articles of Amendment to Articles of Incorporation: incorporated
by reference to the Exhibit to the Company's Form 10-K for the fiscal year ended
December 31, 1991 filed on June 4, 1992 with the Securities and Exchange
Commission.
(3)(ii) Bylaws:incorporated by reference to the Company's Form S-18
Registration Statement, filed with the Securities and Exchange Commission
on October 17, 1989, and declared effective on June 29, 1990.
(21) Subsidiaries of the Company:
(i) Finca Consulting Costa Brava, S.A.
- is a corporation formed under the laws of the Country of Spain and is
the name under which it conducts business.
(ii) Prime Core AG
- is a corporation formed under the laws of the Country of Switzerland
and conducts its retail securities and options business in Germany.
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter for which
this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FINCA CONSULTING, INC.
(Registrant)
Date: December 25, 1997 By: /s/Volker Montag
------------------ -------------------------------
Volker Montag, President
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF FINCA CONSULTING, INC. AND SUBSIDIARIES AT AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,799,982
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,883,751
<PP&E> 924,054
<DEPRECIATION> 312,781
<TOTAL-ASSETS> 7,812,900
<CURRENT-LIABILITIES> 3,390,442
<BONDS> 0
0
0
<COMMON> 103,003
<OTHER-SE> 4,273,823
<TOTAL-LIABILITY-AND-EQUITY> 7,812,900
<SALES> 0
<TOTAL-REVENUES> 22,069,936
<CGS> 0
<TOTAL-COSTS> 18,563,275
<OTHER-EXPENSES> 3,610,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (104,337)
<INCOME-TAX> 0
<INCOME-CONTINUING> (104,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,350)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
