SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 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 No. 33-31639
FINCA CONSULTING, INC.
Exact Name of Registrant as Specified in its Charter
COLORADO 84-1121635
State or Other Jurisdiction of IRS Employer
Incorporation or Organization Identification Number
Koenigsallee 106, 40215 Dusseldorf, Germany
Address of Principal Executive Offices Zip Code
(011-49-211) 384-860
Registrant's Telephone Number, Including Area Code
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Title of Each Class Name of Each Exchange on Which Registered
NONE NONE
Securities Registered pursuant to Section 12(g) of the
Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934 during the
preceding 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____
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
NOT APPLICABLE
The Registrant's revenues for the fiscal year ended December 31, 1997, were
$81,014,978.
The aggregate market value of the vesting stock held by non-affiliates of the
Registrant cannot be determined because there has been no appreciable trading in
the stock for the past several years.
As of March 31, 1998, 10,300,322 shares of Common Stock, $.01 par value, were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: SEE EXHIBIT INDEX
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FINCA CONSULTING, INC.
CONTENTS
PART I. Page
----
Item 1. Business ................................................ 4..
Item 2. Properties .............................................. 6..
Item 3. Legal Proceedings ....................................... 7
Item 4. Submission of Matters to a Vote of Security Holders .... 7
PART II.
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ............................. 8
Item 6. Selected Financial Data ................................. 8
Item 7. Managements' Discussion and Analysis of
Financial Condition and Results of Operations .......... 9
Item 8. Financial Statements and Supplementary Data ............ 11
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ................. 11
PART III.
Item 10. Directors and Executive Officers of the Registrant ...... 12
Item 11. Executive Compensation .................................. 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management .................................... 14
Item 13. Certain Relationships and Related Transactions .......... 15
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K .......................... 16
Signatures ............................................................... 17
Exhibit Index ............................................................ 18
<PAGE>
PART I
ITEM 1: BUSINESS
(a) General Development of Business
The Company was incorporated in Colorado on October 25, 1988 for the purpose of
acquiring or completing a merger with another company. In June 1989, the Company
established a wholly-owned subsidiary, Finca Consulting Costa Brava, S.A.,
incorporated and located in Spain, with a principal business of acting as a real
estate broker for sales of Spanish properties, mainly holiday homes. In January
1991, the Company established another wholly-owned subsidiary, Finca Consulting
GmbH, incorporated in Germany. Finca Consulting GmbH was formed to engage in the
buying, selling and administration of Spanish real estate.
Effective July 22, 1991, the Company entered into a common stock exchange
agreement with Finca Consulting Costa Brava, S.A. whereby the Company
transferred essentially 100% of its net assets to Finca Consulting Costa Brava,
S.A. As a result of the merger, Finca Consulting Costa Brava, S.A. remained as
the sole ongoing entity for accounting purposes. In September 1991 the Company
established a wholly-owned subsidiary, Finca Consulting Limited, incorporated in
the United Kingdom. Finca Consulting Limited was formed to assist Finca
Consulting Costa Brava, S.A. in the marketing and sales of Spanish properties.
Finca Consulting Limited was liquidated in 1994.
Subsequent to the aforementioned July 22, 1991, merger, the Company generated
capital through an offering of preferred stock in Europe. In May, 1992, the
Company commenced an offering of its Common Shares in Europe.
In July 1992, the Company entered into and consummated a common stock exchange
agreement with King National Corporation, a U.S. corporation, whereby the sole
transferable asset was a 100% ownership interest of Opti-Wert-Interest AG, a
Swiss corporation. Opti-Wert-Interest AG subsequently changed its name to Prime
Core AG. Prime Core AG is principally engaged in the buying and selling of
marketable securities and options on behalf of its customers, primarily in
Germany, via a network of independent brokers. The sale of securities, including
futures options contracts are subject to regulation in Germany by the Banking
Supervisory Authority.
During the years 1993 through 1997, substantially all revenues of the Company
were derived from the securities brokerage business of its subsidiary Prime Core
AG, whose operations continued to expand until they reached a level of
approximately $80 Million in 1996 and 1997.
In April 1996, the Company sold its interest in Finca Consulting GmbH for the
amount of DM100,000. The Company did not acquire or dispose of any material
amount of assets during the fiscal year ended
December 31, 1997.
The Company is currently subject to the reporting requirements under the
Securities Exchange Act of 1934, as amended. The Company has the authority to
issue an aggregate of Twenty Million (20,000,000) common shares, par value $.01
and Twenty Million (20,000,000) preferred shares, $.00001 par value.
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As of December 31, 1997, there were outstanding 10,300,322 Common Shares.
(b) Financial Information About Industry Segments.
The Company operates in two business segments, acting as a real estate broker
for sales and rentals of properties in Europe and, through its subsidiary, Prime
Core AG, the buying and selling of marketable securities and options on behalf
of Prime Core AG's customers in Germany. The Company did not realize any
revenues from its real estate business during the years 1993 through 1997.
The Company operates almost exclusively in Europe. There were no material
operations in the United States in either of the years 1995, 1996, or 1997.
(c) Narrative Description of Business
The Company and its subsidiaries operate in two segments, acting as a real
estate broker for sales and rentals of properties in Europe and the buying and
selling of marketable securities and options on behalf of its customers in
Germany through its subsidiary, Prime Core AG, a Swiss corporation ("Prime
Core").
Historically, the Company operated solely in the European real estate market.
However, since its acquisition of Prime Core, in July, 1992, the Company has
focused its business operation chiefly in the buying and selling of equities and
options on behalf of German customers. The Company and its subsidiaries derived
revenues from its real estate operations in the approximate amount of $36,369 in
1992. No revenues were earned from this business segment in fiscal years 1993 to
1997. The Company and its subsidiaries generated revenues from its securities
brokerage operations of $86,163,171 in 1996 and $81,014,978 in 1997.
The industry segment in which the Company does business is not seasonal. The
Company is not dependent upon a single customer or a few customers. Accordingly,
the loss of any one or more of such customers would not have a material adverse
effect on the business of the Company.
In its securities and options brokerage business, a majority of the companies
with which the Company competes are substantially larger, have more substantial
histories, backgrounds, experience and records of successful operations, greater
financial, technical, marketing and other resources, more employees and more
extensive facilities than the Company now has, or will have in the foreseeable
future. It is also likely that other competitors will emerge in the near future.
The Company competes with these entities on the basis of the quality of its
service and the competitive pricing of sales commissions.
The Company and its subsidiaries at this time employ no personnel in its real
estate operations, and 40 full time persons and no part time persons in its
securities brokerage operations.
5
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ITEM 2: PROPERTIES
In January 1992, the Company entered into a lease agreement for 9,600 square
feet of office space in Dusseldorf, Germany. The lease period extended through
December 1996, at which time it was renewed for a five year term. The Company
also, through its subsidiary Prime Core AG, leases 13,700 square feet of office
space in Zug, Switzerland, as well as automobiles and office equipment under
operating leases. Aggregate rent expense pursuant to operating leases amounted
to $103,288 in 1997 and $117,195 in 1996.
6
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ITEM 3: 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 of 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.
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 fuer 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 administrative 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.
As of January 1, 1998, new German regulations became applicable to the Company's
brokerage business, requiring 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. The
Company is in the process of complying with the new regulations issued by the
"BAK" and intends that all of its securities brokerage and investment services
currently being performed are in full compliance with the applicable
regulations.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the fourth
quarter of this fiscal period.
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PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a)(1)(i) As of December 31, 1997, there was no market for the Company's
securities.
(b) As of December 31, 1997, there were approximately 1,960 shareholders of
record for the Common Stock of the Company.
(c) The Company has not declared or paid, nor has it any present intention to
pay, any cash dividends.
ITEM 6: SELECTED FINANCIAL DATA
The selected financial information presented below under the captions "Statement
of Operations" and "Balance Sheet" for the years ended December 31, 1997, 1996,
1995, 1994, and 1993 is derived from the financial statements of the Company and
should be read in conjunction with the financial statements and notes thereto.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $ 5,586,404 $ 7,767,670 $ 8,360,186 $ 2,407,100 $ 1,816,882
Long Term Debt 0 0 0 .0 0
Minority Interests in Subsidiary 45,632 45,632 45,632 45,632 45,632
Total Stockholders' Equity $ 1,635,805 $ 4,415,304 $ 5,862,009 $ 1,248,603 $ 628,821
Statements of Operations For The Year Ended
December 31,
1997 1996 1995 1994 1993
------ ---- ---- ---- ----
Revenues $ 81,014,978 $ 86,163,171 $ 49,345,488 $ 18,900,827 $ 16,603,901
Cost of Shares and Options 71,345,617 68,525,189 37,695,202 14,450,630 13,728,846
---------- ---------- ---------- ---------- ----------
Gross Profit 9,669,361 17,637,982 11,650,286 4,450,197 2,675,055
Selling general and administrative
expenses 12,767,137 20,476,324 12,491,761 6,801,094 5,314,366
---------- ---------- ---------- --------- ---------
Operating income (loss) (3,097,776) (2,838,342) ( 841,475) (2,350,897) (2,439,311)
Other income (expense) 287,155 (178,167) (365,547) (33,476) (18,320)
------- --------- --------- -------- --------
Net (loss) from operations (2,810,621) (3,016,509) (1,207,022) (2,384,373) (2,457,631)
Provision for Income Taxes - - - - -
- - - - -
Net Income (Loss) $(2,810,621) $(3,016,509) $(1,207,022) $(2,384,373) $(2,457,631)
============ ============ ============ ============ ============
Loss per common share $ (0.27) $ (0.48) $ (0.56) $ (1.11) $ (1.14)
</TABLE>
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter Ended December 31, 1997
The Company's wholly owned Swiss subsidiary Prime Core AG continues to be the
sole source of revenues for the Company. Prime Core AG operates a securities
brokerage business in Germany, utilizing commissioned sales brokers to sell
equity stocks and options to its customers in Germany. The Company, however, is
pursuing plans to geographically expand its activities, and realize efficiencies
in the utilization of management and financial resources, by merger or
acquisition. To that extent, a letter of intent was executed in December 1997
between the Company and Prime Core Holding, Inc. a Delaware corporation owned by
the Company's officers and directors, for a merger, subject to regulatory and
shareholder approval. Prime Core Holding, Inc. intends to operate a brokerage
and financial consulting business, primarily in the United States.
For the quarter ended December 31, 1997, the Company had revenues of $15,611,510
resulting in a net profit of $213,159, compared to revenues of $19,110,756 and a
loss of $481,636 in the fourth quarter a year ago. The decrease in revenues
resulted from a change in the Company's sales strategy which emphasized the
quality of its service and breadth of its product offerings to its existing
client base, at the expense of enlarging sales volume. These efforts were
coupled with a concerted drive to keep costs in line, an effort which began
already early in the fiscal year. As a result, selling, general, and
administrative expenses were considerably lower, at $2,575,283 for the quarter,
compared to $4,603,402, for the quarter a year ago.
Year Ended December 31, 1997
For the year ended December 31, 1997, the Company' gross revenues declined by
approximately 9%, from $86,163,171 in 1996 to $81,014,978 in the current year.
In response to new regulations adopted by the German banking authorities in
1997, which discouraged broker/dealers from engaging in the utilization of "cold
calling" in the historically loosely regulated securities markets which
constitute a large segment of the market in Germany. Finca Consulting Inc.'s
Swiss subsidiary during the year re-organized its marketing organization. The
Company substantially ceased making cold calls as a method of attracting new
customers which in the past had been the major sales promotion tool. As a result
of this change, the Company presently and during a large portion of 1997 offers
securities primarily to its existing clientele which numbers approximately 3,000
German customers. Gross profits for the year totaled $9,669,361. After deduction
of operating expenses which amounted to $12,767,137 , and recognition of
$287,155 in non-operating income which constitutes mostly interest earned on
liquid investments, the Company realized a net loss of $2,810,621 or $0.27 per
share for the fiscal year.
Fiscal Year 1997 Compared to Fiscal Year 1996
The last fiscal year saw a slight decline in revenues from the prior fiscal
year, as a result of the above mentioned circumstances. This decline was
accompanied by a decrease in the gross margin achieved on the business, from
approximately 20% in 1996 to approximately 12% for the current year. The double
effect of decreases in volume and margin put enormous pressure on the Company to
give particular attention to cost control. While the lesser volume and a reduced
number of broker/dealers under contract necessitated lower payments to third
parties which
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provided on-going administrative services to the Company's network of brokers,
management also had negotiated a better pricing structure. The combined effect
was a reduction of approximately $5.7 Million in payments to Prime Core Makler
GmbH, the service provider, of which approximately $1.3 Million pertain to
marketing and administrative services, and $4.4 Million in lower brokerage fees
paid. In addition, efforts to contain in-house expenses were largely successful.
Total operating expenses for 1997 decreased to $12,767,137, from $20,476,324 a
year ago. Nevertheless, the year closed with a loss of $2,810,621, only
marginally lower than the $3,016,509 loss sustained in 1996. The Company,
however, intends to continue in its efforts to streamline its organization in an
effort to reduce expenses, and at the same time improve on the quality and
profitability of its sales operations.
Liquidity and Capital Resources
At December 31, 1997, working capital amounted to $202,434, as opposed to
$1,733,069 on December 31, 1996. This reduction in working capital, which also
included a considerable decrease in liquid cash resources, necessitates a very
close day-to-day control over cash flow and utilization of funds. Moreover, it
imposes constraints on management's ability to embark on any expansion plans at
this time. Management, therefore, is currently focusing its attention on
enhancing its operating business structure. In addition, management plans to
address its working capital shortage by raising additional funds in the first
half of the next fiscal year, either by placing additional capital through
private placements with European investors , or through a combination of debt
and equity capital financing.
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ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Financial Statement and Notes to Financial Statements are attached
hereto as Exhibit A and incorporated herein by reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the reporting period, there were no changes in or disagreements with
accountants on accounting and financial disclosure.
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PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
The names and ages of all directors and executive officers of the Company are as
follows:
Name Position Term(s) of Office
Volker Montag, Age 44 President and Director July 22, 1991
to Present
Roland Schoneberg, Age 40 Secretary and Director November 1, 1995
to Present
Elisabeth Eufinger-Nagel, Age 37 Director May 16, 1998
to Present
There are no family relationships among the Company's Officers and Directors.
All Directors of the Company hold office until the next annual meeting of the
shareholders and until successors have been elected and qualified. Executive
Officers of the Company are appointed by the Board of Directors at the annual
meeting of the Company's Directors and hold office for a term of one year or
until they resign or are removed from office.
Resumes:
Volker Montag - Mr. Montag was born in Essen, Germany, and makes his home in
Weeze, Germany. From 1990 he has been an officer and Director of King National
Corporation (acquired by the Company in July 1992.) From 1988 to 1990, Mr.
Montag was the Managing Director of Prima Core AG (formerly Opti-Wert Interest
AG), Switzerland, a Swiss brokerage company, which is a wholly owned subsidiary
of the Company. He was also associated with VISA Enterprise PLC, London, United
Kingdom.
Roland Schoeneberg - Mr. Schoeneberg was born in Germany and currently lives in
Koeln, Germany. He is member of the board of Prime Core Makler GmbH (formerly
Telecom GmbH), an affiliate of the Company. He served as director of the Company
since November 1995.
Elisabeth Eufinger-Nagels - Ms. Eufinger-Nagels was born in Germany and
makes her home in Ratinger-Hoesel, Germany. Ms. Eufinger-Nagels was appointed as
a Director of the Company at a Special Meeting of the Board of Directors held on
May 16, 1998. On February 5, 1997, Ms. Eufinger-Nagels was hired by the Company
to serve as its Manager of Human Resources, the position she currently holds.
Prior to joining the Company, Ms. Eufinger- Nagels worked as a consultant for
the firm of Deloitte Touche.
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ITEM 11: EXECUTIVE COMPENSATION
Messrs. Volker Montag and Roland Schoeneberg , the President and Secretary of
the Company, respectively, on April 1, 1997, had entered into brokerage service
agreements with Prime Core AG, a wholly owned subsidiary of the Company, which
agreements provide for monthly draw payments of approximately $38,300 in lieu of
salaries. The following table sets forth the amounts of such draw payments and
the executive capacities for the fiscal year ended December 31, 1997, for each
officer whose aggregate cash remuneration exceeded the equivalent of $100,000,
and for all executive officers as a group:
Name of individual Capacity in which served Aggregate cash
remuneration
Volker Montag President and Director $ 459,600 approx.(1)
Roland Schoeneberg Secretary and Director $ 459,600 approx.(1)
Elisabeth Eufinger-Nagels(2) Manager, Human Resources $ 42,360 (1)
and Director
(1) Approximate US$ equivalent of total aggregate monthly draw payments.
(2) Ms. Eufinger-Nagels was appointed as a Director of the Company on
May 16, 1998 to fill a vacancy then existing on the Board of Directors.
The Company has reimbursed and will continue to reimburse its officers and
directors for any and all out of pocket expenses incurred relating to the
business of the Company.
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ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of March 31, 1998, there were 10,300,322 Common Shares outstanding. The
following table shows holdings of the Common Shares of the Company by each
person who, subject to the above, May 8, 1998, holds of record or is known by
Management to own beneficially more than 5.0% of the Common Shares and, in
addition, by all directors and officers of the Company individually and as a
group.
Title Name and Address of Amount and Nature of Percent
of Class Beneficial Owner Beneficial Ownership of Class
Common Prime Core Management Ltd.
15 Herbert Street
Dublin
Ireland 7,523* 6.8%
Volker Montag
c/o Prime Core Holding AG
Koenigsallee 106
40215 Duesseldorf
Germany ,049,226** 10.2%
Roland Schoeneberg
Am Klausenberg 52
51109 Koeln
Germany 0 -
Elisabeth Eufinger-Nagels
c/o Prime Core Holding AG
Koenigsalle 106
40215 Dusseldorf
Germany 0 -
All Directors and Officers
as a Group 1,049,226 10.2%
*Mr. Volker Montag, an officer and director of the Company, is majority
shareholder of Prime Core Management Ltd.
** Includes 697,523 shares held by Prime Core Management Ltd..
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ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(1) The Company advances funds from time to time to certain officers and
directors of the Company and directly or indirectly to entities in which they
are the sole shareholders. Such advances (which are inclusive of amounts due
upon the sale of a subsidiary as discussed at Note 4) amounted to $9,081,475 at
December 31, 1997 and $5,122,322 at December 31, 1996. Management has
established allowances for uncollectability amounting to $5,502,400 and
$3,276,155, respectively.
On December 12, 1997, the Company entered into various revolving credit
agreements between its two officers and directors and Prime Core Holding AG, a
corporation which is wholly owned by them and as to which they are guarantors.
Pursuant thereto aggregate borrowings of approximately $3,352,941 are permitted
with interest of 5% to be paid annually with the entire payment of principal to
be made on or before December 12, 1999.
At December 31, 1997, the collective borrowings under the above referenced
revolving credit agreements exceeded the aggregate credit borrowing amounts by
approximately $5,728,534. On May 16, 1998, the Company executed amendments to
the Revolving Credit Agreements between Volker Montag, an officer and director,
and Prime Core Holding AG extending the credit facilities under their revolving
credit agreements to the aggregate increased amount of approximately $7,808,825.
Roland Schoeneberg, an officer and director of the Company, has not had his
revolving credit agreement modified, increasing his borrowing threshold of
$500,000, whose borrowings exceeded such amount at December 31, 1997 and to the
date hereof.
On December 15, 1997, a letter of intent was executed between the Company and
Prime Core Holding, Inc. (a Delaware corporation owned by the Company's officers
and directors), pursuant to which the Company will merge with into Prime Core
Holding, Inc. on a one for one share exchange basis. The surviving entity will
be reincorporated under the laws of Delaware, which shall become the surviving
reporting company. The consummation of this transaction is subject to regulatory
approval and an affirmative vote of the Company's shareholders.
Upon consummation of this transaction, $8,796,947 of borrowings at December 31,
1997 as described above and the related allowance for uncollectability of
$5,502,400 will be eliminated upon the consolidation of the Company and Prime
Core Holding, Inc.
(2) The Company pays fees for marketing and administration services to Prime
Core Makler GmbH (previously Telecom GmbH), an entity wholly owned by officers
and directors of the Company. Such fees amounted to $4,349,890 in 1997,
$5,659,749 in 1996 and $4,643,639 in 1995. Additionally, Prime Core Makler GmbH
pays brokerage fees on behalf of the Company which amounted to $2,605,706 in
1997, $7,026,135 in 1996 and $5,757,210 in 1995.
(3) During 1994 and 1995 the Company's subsidiary, Prime Core, AG (formerly
Opti-Wert Interest, AG) sold 1,688,146 and 2,404,775 shares of the Company's
preferred stock to its customers. All of these Preferred Shares were converted
to Common Shares of the Company during 1996. Gross proceeds therefrom amounted
to $5,419,638 and $8,250,302, respectively. Prime Core, AG's proportionate costs
of the offering, consisting of allocable selling, general and administrative
expenses amounted to $1,841,260 and $2,110,400, respectively, have been charged
against such proceeds.
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PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a)(1) Financial Statements
The response to this portion of Item 14 is included as a separate section,
Exhibit A, attached hereto and incorporated herein by reference.
(a)(2) Financial Statements Schedules
All schedules are omitted since the required information is not applicable or of
insufficient materiality.
(a)(3) Exhibits
The Exhibits that are filed with this report or that are incorporated by
reference are set forth in the Exhibit Index.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ended December 31,
1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FINCA CONSULTING, INC.
By : _s/Volker Montag______________ Date: June 9, 1998
Volker Montag
President, Chief Executive Officer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Date
_s/Volker Montag__________________ June 9, 1998
Volker Montag, Director
___________________________________ June 9, 1998
Roland Schoeneberg, Director
June 9, 1998
Elisabeth Eufinger-Nagels, Director
_s/Elisabeth Eufinger-Nagels_______
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EXHIBIT INDEX
(A) Financial Statements and Notes to Financial Statements
(3)(i) Articles of Incorporation are incorporated by reference to Form
S-18 filed October 17, 1989. 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.
(3)(ii) Bylaws are incorporated by reference to Form S-18 filed October 17,
1989.
(10.1) Revolving Credit Agreement between Finca Consulting, Inc. and
Volker Montag, with copy of promissory note.
(10.2) Revolving Credit Agreement between Finca Consulting, Inc. and
Roland Schoeneberg, with copy of promissory note.
(10.3) Revolving Credit Agreement between Finca Consulting, Inc. and
Prime Core Holding AG., with copy of promissory note and
guaranty of Messrs. Montag and Schoeneberg as exhibits.
(10.4) Letter of Intent by and between Finca Consulting, Inc. And
Prime Core Holding, Inc.
(10.5) Broker Agreement between Roland Schoenebrg and Prime Core AG.
(10.6) Broker Agreement between Volker Montag and Prime Core AG.
(10.7) Amendment No. 1 to Revolving Credit Agreement between the Company
and
Volker Montag, with copy of Promissory Note.
(10.8) Amendment No. 1 to Revolving Credit Agreement between the Compan
and
Prime Core Holding AG, with copy of Promissory Note.
(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 is the name under which it conducts business
(23) Independent Auditors' Consent - attached to Exhibit A
(27) Financial data Schedule - attached to Exhibit A
18
<PAGE>
OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE
(a) The Company's Quarterly reports on Form 10-Q for the periods ended March
31, 1997, June 30, 1997, and September 30, 1997.
(b) All other reports filed by the Company pursuant to Section 13(a) or 15(d)
of the Exchange Act since the Company's fiscal year ended December 31,
1996.
19
<PAGE>
EXHIBIT A
Finca Consulting, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 1997, 1996 and 1995
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Index to the Consolidated Financial Statements
December 31, 1997, 1996 and 1995
Page
Independent Auditors' Report on the Financial Statements.............. 1
Financial Statements
Consolidated Balance Sheets...................................... 2
Consolidated Statements of Operations............................ 3
Consolidated Statement of Stockholders' Equity................... 4-6
Consolidated Statements of Cash Flows............................ 7
Notes to the Consolidated Financial Statements................... 8-12
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of
Finca Consulting, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Finca
Consulting, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statement of operations, stockholders' equity, and cash
flows for the years ended December 31, 1997, 1996 and 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audits 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 Finca Consulting,
Inc. and Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years ended December 1997, 1996 and 1995
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in the
notes to the consolidated financial statements, as of December 31, 1997 the
Company has experienced net losses and negative cash flows from operations.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are described in
the notes to the consolidated financial statements. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts or classifications of
liabilities that might be necessary should the Company be unable to continue in
operation.
Bridgewater, New Jersey
March 18, 1998, except for Note 3 (1) which is dated May 16, 1998.
1
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31,
------------------------------------
1997 1996
--------------- ---------------
Assets
Current Assets
Cash and cash equivalents $ 780,390 $ 4,928,557
Receivables due from related parties 2,808,553 -
Advances receivable 444,676 -
Other current assets 73,782 111,245
--------------- ------------
Total Current Assets 4,107,401 5,039,802
--------------- ------------
Property and Equipment, net of accumulated
depreciation 572,009 629,826
--------------- ------------
Other Assets
Receivables due from related parties 770,522 1,846,167
Other assets 136,472 251,875
--------------- ------------
Total Other Assets 906,994 2,098,042
--------------- ------------
Total Assets 5,586,404 7,767,670
=============== ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 1,118,366 283,249
Customer credit balances 2,786,601 3,023,484
--------------- ------------
Total Current Liabilities 3,904,967 3,306,733
--------------- ------------
Minority Interest in Subsidiary 45,632 45,632
--------------- ------------
Stockholders' Equity
Preferred stock; $.00001 par value, 20,000,000 shares authorized,
0 shares issued and outstanding - -
Common stock, $.01 par value, 20,000,000 shares
authorized, and 10,300,322 shares issued and
outstanding 103,003 103,003
Capital in excess of par value 13,510,301 13,510,301
Accumulated deficit (12,014,273) (9,203,652
Cumulative translation adjustment 36,774 5,653
--------------- -------------
Total Stockholders' Equity 1,635,805 4,415,305
--------------- -------------
Total Liabilities and Stockholders'
Equity 5,586,404 $ 7,767,670
=============== ===========
See notes to the consolidated financial statements.
2
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1997 1996 1995
-------------- --------------- ---------------
<S> <C> <C> <C>
Revenues $ 81,014,978 $ 86,163,171 $ 49,345,488
Cost of shares and options 71,345,617 68,525,189 37,695,202
-------------- --------------- ---------------
Gross Profit 9,669,361 17,637,982 11,650,286
Selling, general and administrative expenses 6,191,002 11,860,940 7,527,602
Marketing and administrative services - related parties 4,349,890 5,659,749 4,643,639
Allowance for uncollectible receivables - related parties 2,226,245 2,955,635 320,520
-------------- --------------- ---------------
(Loss) From Operations (3,097,776) (2,838,342) (841,475)
-------------- --------------- ---------------
Other Income (Expense)
Interest income 287,155 292,050 91,662
Loss attributable to former subsidiary - (89,268) (457,209)
Loss on disposition of subsidiary - (380,949) -
-------------- --------------- ---------------
Total Other Income (Expense) 287,155 (178,167) (365,547)
-------------- --------------- ---------------
(Loss) Before Provision for Income Taxes (2,810,621) (3,016,509) (1,207,022)
Provision for Income Taxes - - -
-------------- --------------- ---------------
Net (Loss) $ (2,810,621) $ (3,016,509) $ (1,207,022)
============== =============== ===============
Net (Loss) Per Share from Continuing Operations $ (0.27) $ (0.47) $ (0.35)
============== =============== ===============
Net (Loss) Per Share $ (0.27) $ (0.48) $ (0.56)
============== =============== ===============
Weighted Average Common Shares Outstanding 10,300,322 6,223,477 2,146,633
============== =============== ===============
</TABLE>
See notes to the consolidated financial statements.
3
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
From December 31, 1996 Through December 31, 1997
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------------- ----------------------------
Capital Retained
in Excess Earnings Cumulative
Par Par of Par (Accumulated Translation
Shares Value Shares Value Value Deficit) Adjustment
-------------- -------- -------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances - December 31, 1996 - $ - 10,300,322 $ 103,003 $ 13,510,301 $ (9,203,652) $ 5,653
Foreign currency translation
gain - - - - - - 31,121
Net (Loss) for the year ended
December 31, 1997 - - - - - (2,810,621) -
-------------- -------- -------------- ----------- -------------- ----------------- -----------
- $ - 10,300,322 $ 103,003 $ 13,510,301 $ (12,014,273) $ 36,774
Balances - December 31, 1997
============== ======== ============== =========== ============== ================= ===========
</TABLE>
See notes to the consolidated financial statements.
4
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
From December 31, 1995 Through December 31, 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock Treasury Stock
--------------------- -------------------- ----------------------
Capital Retained
in Excess Earnings Cumulative
Par Par of Par Par (Accumulated Translation
Shares Value Shares Value Value Shares Value Deficit) Adjustment
---------- -------- ------------------ -------------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances - December 31, 1995 4,109,226 $ 41 2,146,633 $ 21,466 $ 13,724,083 (275,812) $ 2,758) $ (8,020,268) $ 139,445
Adjustment for accumulated
deficit of former subsidiary - - - - - - - 1,833,125 -
Adjustment to correct Treasury
stock - - - - (2,758) 275,812 2,758 - -
Redemption of preferred shares (32,382) - - - (129,528) - - - -
Conversion of preferred shares
into common shares (4,076,844) (41) 8,153,689 81,537 (81,496) - - - -
Foreign currency translation loss - - - - - - - - (133,792)
Net (Loss) for the year ended
December 31, 1996 - - - - - - - (3,016,509) -
------------- ---- ---------- ---------- ---------- --------- ----- ---------- ---------
- $ - 10,300,322 $103,003 $ 13,510,301 - $ - $ (9,203,652) $ 5,653
Balances - December 31, 1996
============= ==== ========== ========== ========== ========= ====== =========== =========
</TABLE>
See notes to the consolidated financial statements.
5
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
From December 31, 1994 Through December 31, 1995
<TABLE>
<CAPTION>
Preferred Stock Common Stock Treasury Stock
------------------- --------------- ------------------
Capital Retained
in Excess Earnings Cumulative
Par Par of Par Par (Accumulated Translation
Shares Value Shares Value Value Shares Value Deficit) Adjustment
---------- ----- --------- --------- ------------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance-December 31, 1994 1,704,451 $ 17 2,146,633 $ 21,466 7,927,857 (189,899) $(1,899) $(6,813,246) $114,408
Acquisition of treasury stock - - - - (343,652) (85,913) (859) - -
Issuance of preferred stock, less
offering costs of $2,110,400 2,404,775 24 - - 6,139,878 - - - -
Foreign currency transition gain - - - - - - - - 25,037
Net (Loss) for the year ended
December 31, 1995 - - - - - - - (1,207,022) -
---------- --- ---------- ------ ----------- ---------- ------ ----------- -------
4,109,226 $ 41 2,146,633 $ 21,466 $ 13,724,083 (275,812) $ (2,758) $(8,020,268) $139,445
Balance - December 31, 1995
========== === ========== ====== =========== ========== ======== =========== =======
</TABLE>
See notes to the consolidated financial statements.
6
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
Cash Flows From Operating Activities
<S> <C> <C> <C>
Net (Loss) $ (2,810,621) $ (3,016,509) $ (1,207,022)
Adjustments to Reconcile Net (Loss) to Net Cash (Used in)
Operating Activities:
Adjustment for accumulated deficit of former subsidiary - 1,833,125 -
Depreciation 97,311 87,686 51,736
(Increase) in advances receivable (444,676) - -
(Increase) decrease in other current assets 37,463 136,992 (172,625)
(Increase) in receivables due from related parties (1,732,908) (507,734) (815,872)
(Increase) decrease in other assets 115,403 (87,311) (2,378)
Increase (decrease) in accounts payable and accrued
expenses 835,117 (101,636) 105,394
Increase (decrease) in customer credit balances (236,883) 955,824 1,234,286
--------------- --------------- --------------
Net Cash (Used in) Operating Activities (4,139,794) (699,563) (806,481)
--------------- --------------- --------------
Cash Flows From Investing Activities
(Purchase) of property and equipment (39,494) (113,404) (6,321)
--------------- --------------- --------------
Net Cash (Used in) Investing Activities (39,494) (113,404) (6,321)
--------------- --------------- --------------
Cash Flows From Financing Activities
Issuance of preferred shares - - 6,139,902
Redemption of preferred shares - (129,528) -
Acquisition of treasury shares - - (344,511)
--------------- --------------- --------------
Net Cash Provided by (Used in) Financing Activities - (129,528) 5,795,391
--------------- --------------- --------------
Effect of Exchange Rate Changes on Cash 31,121 (133,792) 25,037
--------------- --------------- --------------
Net Increase (Decrease) in Cash (4,148,167) (1,076,287) 5,007,626
Cash and cash equivalents at Beginning of Year 4,928,557 6,004,844 997,218
--------------- --------------- --------------
Cash and cash equivalents at End of Year $ 780,390 $ 4,928,557 $ 6,004,844
=============== =============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ - $ - $ -
=============== =============== ==============
Income taxes $ - $ - $ -
=============== =============== ==============
</TABLE>
See notes to the consolidated financial statements.
7
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Organization
Finca Consulting, Inc. and Subsidiaries (the Company) through
its subsidiary Prime Core AG (previously Opti-Wert Interest AG),
is engaged principally in the buying and selling of marketable
securities and options on behalf of its customers and through
its subsidiaries Finca Consulting Costa Brava, S.A. and Finca
Consulting GmbH the buying, selling and administration of real
estate. Finca Consulting GmbH was sold on April 2, 1996.
Going Concern Uncertainty
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As shown in the consolidated financial statements, the
Company has experienced net losses of $2,810,621, $3,016,509 and
$1,207,022 in each of the past three years. Additionally, the
Company generated negative cash flows from operations of
$4,139,794, $699,563 and $806,481 in each of the past three
years.
These factors raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements
do not include adjustments relating to the recoverability of
assets and classification of liabilities that might be necessary
should the Company be unable to continue in operation.
The Company's plans to overcome this negative trend is to embark
upon a restructuring of its marketing efforts and customer
profile, reduction of administrative expenses, and obtain
additional debt or equity financing.
Principles of Consolidation
The consolidated financial statements include the accounts of
Finca Consulting, Inc. and its wholly owned subsidiaries with
the exception of Finca Consulting GmbH as to which its accounts
are included from January 1, 1996 through March 31, 1996.
All intercompany balances and transactions have been eliminated
in consolidation. Pursuant to Statement of Financial Accounting
Standards (SFAS) No. 52, "Foreign Currency Translation",
substantially all assets and liabilities of the Company's wholly
owned subsidiaries are translated at their respective period-end
currency exchange rates and revenues and expenses are translated
at average currency exchange rates for the period. The resulting
translation adjustments are accumulated as a separate component
of stockholders' equity. All foreign currency transaction gains
and losses are included in other income (expense) on the
accompanying statements of operations and are immaterial in each
year.
Use of Estimates
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.
8
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Revenue Recognition
The Company's primary subsidiary, Prime Core, A.G., recognizes
revenue upon the placing of an order and execution of a trade by
and for the benefit of a customer.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
Property and Equipment
Property and equipment are reported at cost with depreciation
being provided by using the straight line method over the
estimated useful lives of the respective assets which range from
3-5 years as to equipment, furniture and fixtures and 25 years
as to real estate. Repairs and maintenance expenditures which do
not extend the useful lives of the related assets are expensed
as incurred.
Income Taxes
As of January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". Under SFAS No. 109, the liability
method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax bases of
assets and liabilities and are measured using enacted tax rates
that are expected to be in effect when the differences reverse.
The adoption of SFAS No. 109 did not have a material impact on
the Company's position or results of operations.
International subsidiaries are taxed according to applicable
laws of the countries in which they do business.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash
balances. The Company invests its excess cash with large
financial institutions located outside of the United States.
Net (Loss) Per Share
The net (loss) per share has been computed using the weighted
average number of common shares outstanding during the year.
During 1997, 1996 and 1995, 10,300,322, 6,223,477 and 2,146,633
common shares were outstanding, respectively. Common stock
equivalents have not been included as the effect would be
anti-dilutive.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at cost, less accumulated
depreciation, consists of the following:
December 31,
-----------------------------------
1997 1996
--------------- ---------------
Land $ 115,560 $ 115,560
Buildings 462,257 462,257
Office furniture and equipment 373,324 364,486
--------------- ---------------
Subtotal 951,141 942,303
Less accumulated depreciation
and amortization 379,132 312,477
--------------- ---------------
Total $ 572,009 $ 629,826
=============== ===============
Depreciation expense charged to operations was $97,311, $87,686
and $51,736 in 1997, 1996 and 1995, respectively.
9
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 3 - RELATED PARTY TRANSACTIONS
(1) The Company advances funds from time to time to certain
officers and directors of the Company and directly or
indirectly to entities in which they are the sole
shareholders. Such advances (which are inclusive of
amounts due upon the sale of a subsidiary as discussed at
Note 4) amounted to $9,081,475 at December 31, 1997 and
$5,122,322 at December 31, 1996. Management has
established allowances for uncollectability amounting to
$5,502,400 and $3,276,155, respectively.
On December 12, 1997, the Company entered into various
revolving credit agreements between its two officers and
directors and Prime Core Holding AG, a corporation which
is wholly owned by them and as to which they are
guarantors. Pursuant thereto, aggregate borrowings of
approximately $3,352,941 are permitted with interest of 5%
to be paid annually and entire payment of principal to be
made on or before December 12, 1999.
At December 31, 1997, the collective borrowings under
the above referenced revolving credit agreements
exceeded the aggregate credit borrowing amounts by
approximately $5,728,534. On May 16, 1998, the Company
executed amendments to the Revolving Credit Agreements
between an officer and director of the Company and
Prime Core Holding AG extending the credit facilities
under their revolving credit agreements to the aggregate
increased amount of approximately $7,808,825. Another
officer and director of the Company has not had his
revolving credit agreement modified, increasing his
borrowing threshold of $500,000, whose borrowings
exceeded such amount at December 31, 1997 and to the date
hereof.
On December 15, 1997, a letter of intent was executed
between the Company and Prime Core Holding, Inc. (a
Delaware corporation owned by the Company's officers and
directors), pursuant to which the Company will merge with
and into Prime Core Holding, Inc. on a one for one share
exchange basis. The surviving entity will be
reincorporated under the laws of Delaware, which shall
become the surviving reporting company. The consummation
of this transaction is subject to regulatory approval and
an affirmative vote of the Company's shareholders.
Upon consummation of this transaction, $8,796,947 of
borrowings at December 31, 1997 as described above and the
related allowance for uncollectability of $5,502,400 will
be eliminated upon the consolidation of the Company and
Prime Core Holding, Inc.
(2) The Company pays fees for marketing and administration
services to Prime Core Makler GmbH (previously Telecom
GmbH), an entity wholly owned by officers and directors of
the Company. Such fees amounted to $4,349,890 in 1997,
$5,659,749 in 1996 and $4,643,639 in 1995. Additionally,
Prime Core Makler GmbH pays brokerage fees on behalf of
the Company which amounted to $2,605,706 in 1997,
$7,026,135 in 1996 and $5,757,210 in 1995.
(3) During 1994 and 1995 the Company's subsidiary, Prime Core,
A.G. (formerly Opti-Wert Interest, A.G.) sold 1,688,146
and 2,404,775 shares of the Company's preferred stock to
its customers. Gross proceeds therefrom amounted to
$5,419,638 and $8,250,302. Prime Core, A.G.'s costs of the
offering, consisting of commissions and direct selling
expenses amounted to $1,841,260 and $2,110,400 have been
charged against such proceeds.
10
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 4 - SALE OF SUBSIDIARY
Effective April 2, 1996, the Company sold to Prime Core Holding,
A.G. all of the issued and outstanding common stock of its
subsidiary, Finca Consulting GmbH for $67,830. Prime Core
Holding, A.G. is wholly owned by the officers and
directors of the Company.
Finca Consulting GmbH's results of operations through March 31,
1996 are included in the Company's consolidated financial
statements. Finca Consulting GmbH's accumulated deficit at
January 1, 1996 in the amount of $1,833,125 is reflected as an
adjustment to the Company's consolidated accumulated deficit.
NOTE 5 - PREFERRED SHARES CONVERSION
On March 27, 1996, the Company converted 4,076,844 preferred
shares to 8,612,074 common shares pursuant to the terms of the
Company's preferred share certificates.
NOTE 6 - INCOME TAXES
As of December 31, 1997, the Company has U.S. net operating loss
carryforwards of approximately $1,000,000, substantially all of
which expire by 2007.
Net operating losses of non-U.S. subsidiaries amount to
approximately $5,000,000 and are expected
to expire prior to their utilization.
The Company has not provided a deferred tax asset at December 31,
1997 and 1996 since it is undetermined that the deferred asset
would be realized in the future.
The tax effects of temporary differences that give rise to
deferred tax are presented below.
Federal operating loss carryforwards $ 340,000
Less: Valuation Allowance 340,000
---------------
$ -
===============
NOTE 7 - OPERATING LEASE COMMITMENT
The Company leases office facilities, certain office equipment
and motor vehicles under operating leases.
The following is a schedule of future minimum rental payments
required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of December
31, 1997. The schedule is as follows:
Year Ending December 31,
1998 $ 72,632
1999 72,632
2000 72,632
2001 33,059
Aggregate rent expense pursuant to operating leases amounted to
$103,288 in 1997 and $117,195 in 1996 and $116,695 in 1995.
11
<PAGE>
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 8 - MINORITY INTEREST IN SUBSIDIARY
One of the Company's subsidiaries (Prime Core, A.G. (formerly
Opti-Wert Interest, A.G.) has issued 10,500 participation
certificates with a minimal value of Sfr. 10 (US $6.60) for a
subscription price of US $9.07. These participation certificates
carry no voting rights and do not have a fixed return. A total of
5,040 certificates have been subscribed to by the Company and
have been eliminated in the consolidation process. The remaining
5,460 certificates are held by various investors.
NOTE 9 - OPERATIONS OF BUSINESS SEGMENTS AND IN GEOGRAPHIC AREAS
Business Segments
The Company operates in two business segments, through its
subsidiary Prime Core A.G. (formerly Opti-Wert - Interest AG)
buying and selling marketable securities and options on behalf of
its customers in Germany and through its subsidiaries Finca
Consulting Costa Brava, SA and Finca Consulting GmbH, (through
April 2, 1996) buying, selling, and the administration of real
estate in Germany and Spain. The latter activities constitute
less than five percent of the assets, revenues and net loss.
The Company conducts no current business activities and has no
identifiable assets in the United States.
NOTE 10 - NEW AUTHORITATIVE ACCOUNTING PROFESSION PRONOUNCEMENT
The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Other Comprehensive Income." SFAS No. 130 is effective for
periods beginning after December 15, 1997. The provisions of SFAS
No. 130 may be early applied. The Company chose not to do so as
of December 31, 1997. The implementation of this provision may
require that the foreign cumulative translation adjustment be
presented separately in the statement of operations which will
not materially impact the company.
In June 1997, the FASB issued SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information" ("SFAS 131").
This statement establishes additional standards for segment
reporting in the financial statements and is effective for fiscal
years beginning after December 15, 1997. The Company is currently
evaluating the impact, if any, of the adoption of this
pronouncement on the Company's existing disclosures.
12
<PAGE>
EXHIBIT (10.6)
BROKER AGREEMENT
Prime Core AG
Gotthardstrasse 3
CH-6300 Zug
(hereinafter called "AG")
and
Dr. Volker Montag
Am Abelshof 12, D-47445
Moers-Repelen, Germany
(hereinafter called "Broker")
herewith enter into the following contractual agreement:
1. Scope of Activities:
Effective April 1, 1997, Broker will begin representing AG as independent agent
in the Federal Republic of Germany, within the specific geographical area
assigned to him.
Broker will be active as broker and agent in the Investment and Securities
business, on behalf of AG or other entities designated by AG. This activity
encompasses the procurement of contracts, for the purchase and sale of
securities and stock and commodity options issued by AG or third parties, and
the solicitation of potential clients for such business.
It is explicitly understood that Broker's choice of investments for
recommendation to potential buyers is his alone. AG will not assume any
liability with respect to any investment advise issued by Broker.
Broker may use his own literature and collateral if needed and employ his own
personnel and resources as required in the course of his activities.
1
<PAGE>
In conducting his business Broker may elect to utilize the facilities and
personnel resources of an office services company, specifically
Telecom GmbH .
In such case Broker agrees to pay a rental fee, on account of all transactions
which resulted from utilizing the resources of the office services company. For
that purpose, a separate rental and service agreement is required. Broker is not
authorized to enter into any commission business, either in his own name or on
account of AG.
2. Business Conduct:
Broker will apply all normal and usual care in safeguarding the interests of AG
in all respects.
He is required to conduct his marketing and solicitation efforts in a manner
which does not create any obligations or liabilities for AG, particularly with
respect to making unrealistic promises for profits or failing to disclosure the
risks for loss. Broker understands that the enticement to securities
transactions of uninformed investors who are not fully informed about the
associated risks, is considered a punishable offense subject to prosecution.
Broker may dispense information and give advice only after a thorough assessment
of the situation. Where such information is obtained through or from third
parties, he is obliged to state so in all communication to clients.
He is required to especially point out the speculative nature of the investment
which he recommends. He furthermore must refrain from making a comparison with
any other form of investments which is subject to regulatory oversight, in
particular the German stock market, or stocks of other companies.
Clients have to be fully and truthfully informed about all applicable
administrative charges (commission expenses, cost and fee structure in
connection with proprietary AG-Options).
Broker agrees to pass on to AG all orders for purchase or sale which meet the
criteria established for a valid trade (i.e. all forms/contracts have been
executed, the client received the information brochure, he has been advised of
the risks associated with this type of investment).
2
<PAGE>
3. Legal Points:
Broker has been specifically advised that fraudulent and deceitful actions and
the inducement to the speculation in securities are punishable offenses. He
confirms that he has not previously been indicted or punished for fraud,
inducement to the speculation in securities, or other similar offenses.
He furthermore confirms that he is not currently subject to legal action or
discovery in connection with such offenses, and that he will immediately notify
AG if and when such occurs in the future.
4. Responsibilities of Broker:
Broker will observe absolute confidentiality with regard to all aspects of AG's
business which may come to his attention; this obligation extends also for the
time after termination of his relationship with AG, with respect to all
information of confidential or proprietary nature.
Confidential information includes the marketing concepts of AG, as well as all
facts and data pertaining to customers of AG. Broker is required to forward to
AG all applicable data about customers which he may have obtained in discussions
with the customer, especially any information with regard to such customers'
financial circumstances, prior to the execution of any business transaction.
Transactions which are financed solely by or through third parties, should
generally be declined.
Broker may not enter into any contracts, either in his own name, or on behalf of
AG.
In all cases, the current General Terms and Conditions of AG apply. The current
version of these Terms and Conditions is attached to this Agreement.
5. Responsibilities of AG:
AG will - through an office services company - provide to Broker the support and
infrastructure required for conducting this business.
In particular, such support includes the needed documents for this type
business, literature and sales collateral brochures, market information, and
account statements issued by brokerage houses with whom AG transacts business.
Broker is required to verify the accuracy of all such records.
3
<PAGE>
All records and materials must be returned to AG upon termination of this
Agreement, immediately and without special request.
6. Commissions:
Broker is entitled to a commission on all business resulting from his activity,
entered into during the duration of this Agreement. The commission amount
depends upon the particular investment (see below) and is ultimately determined
between the parties hereto at the end of each year. Broker will receive a
monthly draw against the annual commission, in the amount of
DM 65,000
payable to a bank account of Broker's choice.
AG is required to issue credit at the end of a given year for all commissions
accrued to Broker, and to immediately transfer to such account the balance
remaining after deducting the monthly draw payments. Such credit and payment
must be made no later than March 31 of the following year.
Broker is entitled to commissions only after
a) AG's Administrative Agreement, duly executed by customer, has been returned
to and received by AG; b) an order confirmation signed by customer is available;
and c) the customer has made payment for the transaction (if by check, upon
credit), and funds have been received.
The preliminary earned monthly commissions (see above) are paid to Broker per
check on the 5th workday of the month following the month during which an
invoice has been rendered (any deviation from this rule must be explained).
Any claim of Broker for commissions or advances against earned commissions
expires 6 months after the event that gives rise to such claims. Any right of AG
for refund of previously paid commissions or draws expires 6 months after AG
became aware of the circumstances which justify a demand for such refund.
AG specifically advises Broker that he personally is responsible to pay all
income- and social taxes. He indemnifies AG against all claims from and
liabilities to any tax authorities or social pension providers.
4
<PAGE>
7. Term:
This Agreement is valid until terminated.
Either of the two parties may terminate this Agreement effective with the end of
a calendar month, with one month' notice, and after three years effective with
the end of a calendar quarter with observation of a three months' notice.
Notwithstanding the above, both parties have the right to immediately terminate
the Agreement for cause.
This Agreement is subject to a trial period of three months during which either
party may terminate the Agreement without cause or notice.
Any termination, for cause or otherwise, must be done in writing.
8. Miscellaneous:
Broker agrees that AG may sponsor fictitious transactions for test purposes in
which case it is authorized to listen in on relevant negotiations.
Broker is free to set his own working hours. Broker may conduct his business
from the facilities of an independent office services company recommended by AG,
however, is not obliged to do so.
9. Other Conditions:
Any changes to this Agreement, including this clause, must be done in writing.
There are no verbal side agreements.
If any clause in this Agreement should be held invalid, this will not affect the
validity of the other clauses. In such case, the parties are held to agree upon
a formula which meets the intent of the substituted clause in the best possible
way.
The attached "Terms and Conditions for Business Transacted by AG" are made part
of this Agreement. Broker agrees that personal information available through
public or commercial channels may be obtained, stored, transmitted, and deleted
in the course of normal business.
5
<PAGE>
Broker is prohibited from contacting any client of AG after termination of this
Agreement.
All contracts are accepted and closed at the place of business of AG. Any action
or proceeding brought by either party under this Agreement shall be brought
before a court at the place of business of AG.
AG has the right to also bring action against Broker at a court situated at
Broker's location.
This Agreement is governed by Swiss Law.
Place of Business of AG: ________________________
- -------------------------- ----------------------------
AG Broker
6
<PAGE>
EXHIBIT (10.7)
AMENDMENT NO. 1
TO
REVOLVING CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT (the
"Amendment"), dated May 16, 1998, by and between Finca Consulting, Inc.
(the "Lender") and Volker Montag (the "Borrower").
B A C K G R O U N D :
WHEREAS, the Lender and the Borrower executed and delivered a
certain Revolving Credit Agreement, dated December 12, 1997, setting forth the
terms and conditions pursuant to which the Lender granted a credit facility to
the Borrower for funds up to $500,000 (the "Loan Agreement"), and;
WHEREAS, the Borrower has exceeded the credit facility threshold
of $500,000 and the Lender desires to increase the credit facility from $500,000
to $750,000.
NOW, THEREFORE, in consideration of the mutual promises made by
the parties to each other, it is agreed as follows:
1. Amendment. The parties agree that a certain Revolving Credit
Agreement, dated December 12, 1997, by and between the Lender and the Borrower
shall be amended as follows:
A. The amount "$500,000.00" shall be deleted and the amount
"$750,000.00" shall be substituted in lieu thereof in the following sections of
the Agreement: Section 1.1 and Section 1.7.
B. The amount "$330,859.00" shall be deleted and the amount
"$563,232.50" shall be substituted in lieu thereof in the following sections of
the Agreement: Section 1.1 and Section 1.7.
C. The Promissory Note, dated December 12, 1997, in the original
principal amount of $500,000 made by Borrower in favor of the Lender and
attached to the Agreement as Exhibit A shall be canceled and a new Promissory
Note, dated May 16, 1998, in the principal amount of $750,000, a copy of which
is annexed hereto, shall be substituted as the new Exhibit A to the Agreement.
D. The Lender hereby waives any defaults under the Promissory
Note, dated December 12, 1997, by the Borrower.
2. Ratification. The parties hereto ratify and confirm all of the
other terms and provisions set forth in the certain Revolving Credit Agreement,
dated December 12, 1997, by and between the Lender and the Borrower not modified
or changed by this Amendment.
IN WITNESS WHEREOF, the parties have executed this
Amendment No. 1 as of the day, month and year first above written.
LENDER:
FINCA CONSULTING, INC.
By: s/Volker Montag
Volker Montag, President
BORROWER:
s/Volker Montag
Vollker Montag
fin2-rev.mon
1
<PAGE>
PROMISSORY NOTE
$750,000.00 US May 16, 1998
Dusseldorf, Germany
FOR VALUE RECEIVED, the undersigned, Volker Montag, an individual
(the "Borrower"), hereby unconditionally promises to pay to the order of Finca
Consulting, Inc., a Colorado corporation (the "Lender"), at Koenigsallee 106,
40215 Dusseldorf, Germany, Attention: Roland Schoeneberg, Vice President, in
Dollars, US, the lawful money of the United States of America and in immediately
available funds, the principal amount of the lesser of (i) $750,000.00 US and
(ii) the aggregate unpaid principal amount of all Loans made by the Lender to
the undersigned and accrued interest, if any, on or before the second
anniversary date hereof as set forth in Section 1.1 of the Revolving Credit
Agreement, dated December 12, 1997, and Amendment No. 1 thereto, dated as of the
date hereof, between the undersigned and the Lender (collectively, the "Credit
Agreement"). Capitalized terms used herein shall have the same meanings as set
forth in the Credit Agreement, unless otherwise defined herein.
The undersigned further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time from the
date hereof until such amount shall be paid (whether at the stated maturity, by
acceleration or otherwise) on the dates and at the applicable rates per annum as
provided in Section 1.5 of the Credit Agreement.
If any payment on this Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
This Note is the Note referred to in the Credit Agreement; this
Note is intended to and does replace that certain Promissory Note, dated
December 12, 1997, in the original principal amount of $500,000, made by the
Borrower in favor of the Lender which Promissory Note has been cancelled, and;
this Note is entitled to the benefits thereof and is subject to the terms and
conditions provided therein.
Except as expressly provided herein, the undersigned hereby
waives presentation, demand, protest and all other notices of any kind.
This Note shall be governed by, and construed in accordance with,
the laws of the State of New Jersey without regard to principles of conflicts of
law.
LENDER:
FINCA CONSULTING, INC.
By: s/Volker Montag
Volker Montag, President
BORROWER:
s/Volker Montag
Volker Montag
promnot.mon
2
<PAGE>
Exhibit (10.8)
AMENDMENT NO. 1
TO
REVOLVING CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT (the "Amendment"), dated May
16, 1998, by and between Finca Consulting, Inc. (the "Lender") and
Prime Core Holding AG (the "Borrower").
B A C K G R O U N D :
WHEREAS, the Lender and the Borrower executed and delivered a
certain Revolving Credit Agreement, dated December 12, 1997, setting forth the
terms and conditions pursuant to which the Lender granted a credit facility to
the Borrower for funds up to 4,000,000 DM (the "Loan Agreement"), and;
WHEREAS, the Borrower has exceeded the credit facility threshold
of 4,000,000 DM and the Lender desires to increase the credit facility from
4,000,000 DM to 12,000,000 DM.
NOW, THEREFORE, in consideration of the mutual promises made by
the parties to each other, it is agreed as follows:
1. Amendment. The parties agree that a certain Revolving Credit
Agreement, dated December 12, 1997, by and between the Lender and the Borrower
shall be amended as follows:
A. The amount "4,000,000 DM" shall be deleted and the
amount "12,000,000 DM" shall be substituted in lieu thereof in the following
sections of the Agreement: Section 1.1 and Section 1.7.
B. The amount "3,038,000 DM" shall be deleted and the
amount "9,354,040 DM" shall be substituted in lieu thereof in the following
sections of the Agreement: Section 1.1 and Section 1.7.
C. The Promissory Note, dated December 12, 1997, in the
original principal amount of 4,000,000 DM made by Borrower in favor of the
Lender and attached to the Agreement as Exhibit A shall be canceled and a new
Promissory Note, dated May 16, 1998, in the principal amount of
12,000,000 DM, a copy of which is annexed hereto, shall be substituted as the
new Exhibit A to the Agreement.
D. The Lender hereby waives any defaults under the
Promissory Note, dated December 12, 1997, by the Borrower.
2. Ratification. The parties hereto ratify and confirm all of the
other terms and provisions set forth in the certain Revolving Credit Agreement,
dated December 12, 1997, by and between the Lender and the Borrower not modified
or changed by this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment No.
1 as of the day, month and year first above written.
LENDER:
FINCA CONSULTING, INC.
By: s/Volker Montag
Volker Montag, President
BORROWER:
PRIME CORE HOLDING AG
By: s/Volker Montag
Volker Montag, President
fin2-rev.pch(AG)
1
<PAGE>
PROMISSORY NOTE
12,000,000 DM May 16, 1998
Dusseldorf, Germany
FOR VALUE RECEIVED, the undersigned, Prime Core Holding AG (the
"Borrower"), hereby unconditionally promises to pay to the order of Finca
Consulting, Inc., a Colorado corporation (the "Lender"), at Koenigsallee 106,
40215 Dusseldorf, Germany, Attention: Volker Montag,President, in Deutsche
Marks, the lawful money of the Federal Republic of Germany, and in immediately
available funds, the principal amount of the lesser of (i) 12,000,000 DM or (ii)
the aggregate unpaid principal amount of all Loans made by the Lender to the
undersigned and accrued interest, if any, on or before the second anniversary
date hereof as set forth in Section 1.1 of the Revolving Credit Agreement, dated
December 12, 1997, and Amendment No. 1 thereto, dated as of the date hereof,
between the undersigned and the Lender (collectively, the "Credit Agreement").
Capitalized terms used herein shall have the same meanings as set forth in the
Credit Agreement, unless otherwise defined herein.
The undersigned further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time from the
date hereof until such amount shall be paid (whether at the stated maturity, by
acceleration or otherwise) on the dates and at the applicable rates per annum as
provided in Section 1.5 of the Credit Agreement.
If any payment on this Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
This Note is the Note referred to in the Credit Agreement; this
Note is intended to and does replace that certain Promissory Note, dated
December 12, 1997, in the original principal amount of 4,000,000 DM, made by the
Borrower in favor of the Lender which Promissory Note has been cancelled, and;
this Note is entitled to the benefits thereof and is subject to the terms and
conditions provided therein.
Except as expressly provided herein, the undersigned hereby
waives presentation, demand, protest and all other notices of any kind.
This Note shall be governed by, and construed in accordance with,
the laws of the State of New Jersey without regard to principles of conflicts of
law.
BORROWER:
PRIME CORE HOLDING AG
By: s/ Volker Montag
Volker Montag, President
promnot.pch(AG)
2
<PAGE>
EXHIBIT 23
Rosenberg Rich Baker Berman & Company
380 Foothill Road
Bridgewater, New Jersey 08807
Independent Auditors' Consent
We consent to the incorporation by reference in the Annual Report
filed on Form 10-K of Finca Consulting, Inc. and Subsidiaries for
the fiscal year ended December 31, 1997, of our report dated March
18, 1998, except for Note 3 (1) which is dated May 16, 1998.
ROSENBERG RICH BAKER BERMAN & COMPANY
s/Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
June 15, 1998
aud-con2.fin
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1997 FINANCIAL STATEMENTS OF FINCA CONSULTING, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000844718
<NAME> Finca Consulting, Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1997
<CASH> 780,390
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,107,401
<PP&E> 951,141
<DEPRECIATION> 379,132
<TOTAL-ASSETS> 5,586,404
<CURRENT-LIABILITIES> 3,904,967
<BONDS> 0
0
0
<COMMON> 103,003
<OTHER-SE> 1,532,802
<TOTAL-LIABILITY-AND-EQUITY> 5,586,404
<SALES> 81,014,978
<TOTAL-REVENUES> 81,014,978
<CGS> 71,345,617
<TOTAL-COSTS> 71,345,617
<OTHER-EXPENSES> 12,767,137
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,810,621)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,810,621)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,810,621)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
