SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 16, 1999
--------------------------------
FIRST CAPITAL RESOURCES.COM, INC.
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(Exact name of registrant as specified in its charter)
Nevada 33-55254-28 87-0438641
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(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
1400 East Oakland Park Boulevard, Suite 100, Fort
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Lauderdale, Florida 33334 (Address of principal
executive offices, including zip code)
Registrant's telephone number, including area code (954) 568-3989
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(Former name or former address, if changed since last report)
1
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
---------------------------------------------------------
Exhibits.
--------
(a) Audited Financial Statements of:
(1) Affordable Dealer Services, Inc. for the period from
inception (October 21, 1998) to December 31, 1998.
(2) Southeast Dealer Acceptance, Inc. for the period
from inception (January 20, 1999) to March 31, 1999.
(b) Through a series of transactions effective April 1, 1999,
First Capital Resources. Com, Inc., a non- operating public
shell (the Company) acquired 100% of the outstanding common
stock of Southeast Dealer Acceptance, Inc. (Southeast) and
Affordable Dealer Services, Inc. (Affordable), collectively
referred to as the operating entities. The merger of the
operating entities into the Company was effectuated through an
exchange by the Company of its common stock for all
outstanding stock of the operating entities in a transaction
with a single selling entity. This transaction is considered
by the Company to be a capital transaction accounted for in a
manner identical to a reverse acquisition as if the combined
operating entities were the accounting acquirer. The operating
entities' unaudited balance sheets as of March 31, 1999 are
included in the unaudited pro forma combining balance sheet as
if the merger was consummated on March 31, 1999, while the
unaudited statements of operations for the three month period
ended March 31, 1999 for Affordable and for the period from
inception (January 20, 1999) through March 31, 1999 for
Southeast are included in the unaudited pro forma combining
statement of income as of the beginning of each such period.
This unaudited pro forma financial information does not
purport to represent what the Company's financial position or
results of operations would actually have been if such
transactions in fact occurred on those dates, or to project
the Company's financial position or results of operations for
any future date or period. These unaudited pro forma combining
financial statements should be read in conjunction with the
historical financial statements of Southeast and Affordable.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned herein duly authorized.
FIRST CAPITAL RESOURCES.COM, INC.
By: /s/ Spiro Lazarou
------------------------------
Spiro Lazarou, President
Dated June 15, 1999
3
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AFFORDABLE DEALER SERVICES, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD
FROM INCEPTION (OCTOBER 21, 1998)
TO DECEMBER 31, 1998
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<PAGE>
C O N T E N T S
Page
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INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations and Deficit 3
Statement of Cash Flows 4
Notes to Financial Statements 5 - 9
<PAGE>
INDEPENDENT AUDITORS' REPORT
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Board of Directors and Stockholder
Affordable Dealer Services, Inc.
Ft. Lauderdale, Florida
We have audited the accompanying balance sheet of Affordable Dealer Services,
Inc. as of December 31, 1998, and the related statements of operations and
deficit and cash flows for the period from inception (October 21, 1998) to
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Dealer Services,
Inc. as of December 31, 1998, and the results of its operations and its cash
flows for the period from inception (October 21, 1998) to December 31, 1998 in
conformity with generally accepted accounting principles.
KAUFMAN, ROSSIN & CO.
Miami, Florida
May 28, 1999
1
<PAGE>
<TABLE>
<CAPTION>
AFFORDABLE DEALER SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1998
====================================================================================================================================
ASSETS
====================================================================================================================================
<S> <C>
CASH $ 121,709
FLOOR PLAN RECEIVABLES (NOTE 2) 475,095
NOTES RECEIVABLE (NOTE 3) 64,702
PROPERTY AND EQUIPMENT (NOTE 4) 574,964
OTHER ASSETS 1,332
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,237,802
====================================================================================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
====================================================================================================================================
LIABILITIES
Due to Parent (Note 5) $ 1,047,752
Note payable (Note 6) 196,600
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 1,244,352
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COMMITMENTS (NOTE 7)
DEFICIENCY IN ASSETS
Common stock, $1 par value; 1,000 shares authorized, issued and
outstanding 1,000
Deficit ( 7,550)
- ------------------------------------------------------------------------------------------------------------------------------------
Total deficiency in assets ( 6,550)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,237,802
====================================================================================================================================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
AFFORDABLE DEALER SERVICES, INC.
STATEMENT OF OPERATIONS AND DEFICIT
FOR THE PERIOD FROM INCEPTION (OCTOBER 21, 1998) TO DECEMBER 31, 1998
====================================================================================================================================
====================================================================================================================================
<S> <C>
LOAN FEE INCOME $ 22,000
OPERATING EXPENSES 30,882
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOSS BEFORE INCOME TAX BENEFIT ( 8,882)
INCOME TAX BENEFIT 1,332
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOSS, representing deficit at December 31, 1998 ( $ 7,550)
====================================================================================================================================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
AFFORDABLE DEALER SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (OCTOBER 21, 1998) TO DECEMBER 31, 1998
====================================================================================================================================
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ( $ 7,550)
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 15,472
Increase in other assets ( 1,332)
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Total adjustments 14,140
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Net cash provided by operating activities 6,590
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 290,436)
Increase in notes receivable ( 44,702)
Increase in floor plan receivables ( 475,095)
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Net cash used in investing activities ( 810,233)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Amounts advanced by Parent 924,352
Proceeds from the issuance of common stock 1,000
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Net cash provided by financing activities 925,352
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NET INCREASE IN CASH, representing
Cash balance at end of year $ 121,709
====================================================================================================================================
Supplemental Disclosures of Non-Cash Transactions:
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Land and building acquired from Parent Company, net of related mortgage
of $196,600 in exchange for debt. $ 103,400
====================================================================================================================================
Note receivable assigned by Parent Company, in exchange for debt. $ 20,000
====================================================================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
AFFORDABLE DEALER SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
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NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
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Organization
Affordable Dealer Services, Inc. (the Company) is a commercial
finance company. Since its inception on October 21, 1998, the
Company has been engaged in the business of inventory based
lending to used car automobile dealerships throughout South
Florida. The receivables are non-interest bearing and the
Company's principal source of revenue is from fees charged to
dealerships based on the total amount of inventory financing
provided.
Concentrations
Four customers comprised the total balance in floor plan
receivables. One customer accounted for approximately 64% of
floor plan receivables at December 31, 1998. Approximately 59%
of the Company's income was earned from this customer.
The Company, from time to time, maintains deposits with
financial institutions in excess of federally insured limits.
Use of Estimates
The accounting and reporting policies of the Company are in
conformity with generally accepted accounting principles and
general practices within the finance industry. 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 disclosures of contingent assets and
liabilities as of the balance sheet dates and the reported
amounts of revenues and expenses for the years presented.
Actual results could differ from those estimates.
Impairment of Loans
The Company has adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards ("SFAS") No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No.
118, Accounting by Creditors for Impairment of a Loan- Income
Recognition and Disclosures, an amendment of SFAS No. 114.
These standards address the accounting for the impairment of
certain loans when it is probable that all amounts due
pursuant to the contractual terms of the loan will not be
collected.
5
<PAGE>
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NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Under the provisions of these standards a loan is impaired
when, based on current information and events, it is probable
that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement.
Individually identified impaired loans are measured based on
the present value of payments expected to be received, using
the historical effective loan rate as the discount rate.
Alternatively, measurement may also be based on observable
market prices, or for loans that are solely dependent on the
collateral for repayment, measurement may be based on the fair
value of the collateral. Loans that are to be foreclosed are
measured based on the fair value of the collateral. If the
recorded investment in the impaired loan exceeds the measure
of fair value, a valuation is required as a component of the
allowance for loan losses. Changes to the valuation allowance
are recorded as a component of the provision for loan losses.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally on the
straight-line method over the estimated useful lives of the
assets as follows:
Building 30 years
Equipment 3 - 5 years
Software 3 years
Income Taxes
Deferred income taxes are provided for the estimated tax
effect of temporary differences between financial and taxable
income. These differences result primarily due to
depreciation. The effective tax rate differed from maximum
statutory rates due primarily to graduated tax rates.
Impact of the "Year 2000" Computer Issue
Because computers frequently use only two digits to recognize
years, on January 1, 2000, many computer systems, as well as
equipment that uses embedded computer chips, may be unable to
distinguish between the years 1900 and 2000. If not
remediated, this problem could create system errors and
failures resulting in the disruption of normal business
operations. In the event the Company fails to identify or
correct a material Year 2000 problem, there could be
disruptions in normal business operations, which could have a
material adverse effect on the Company's results of
operations, liquidity or financial condition. Further, there
may be some third parties, such as governmental agencies,
utilities, telecommunication companies, vendors, suppliers and
customers who may not be able to continue business with the
Company due to their own year 2000 problems. There can be no
assurance that any efforts made will fully mitigate the effect
of Year 2000 issues.
6
<PAGE>
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NOTE 2. FLOOR PLAN RECEIVABLES
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At December 31, 1998, the Company had $475,095 of floor plan
receivables, all of which were collateralized by used
automobiles and dealer bonds. The Company maintains custody of
the title certificates of the automobiles which collateralize
the floor plan receivables. If a floor plan receivable is
deemed to be in default, the Company has the right to take
possession of the automobile. Substantially all of the floor
plan receivables were 30 day notes, with a customer option for
an extension of 30 days. The Company does not provide an
allowance for credit losses, as it is management's opinion
that the short-term nature of these obligations, dealer bonds
and the collateral value reduces potential credit losses to an
immaterial amount. There were no loans charged off in 1998.
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NOTE 3. NOTES RECEIVABLE
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Notes receivable at December 31, 1998 include a $44,702
unsecured note receivable from Carnet, Inc. (Carnet), a used
car automobile dealership related to the Company by virtue of
common ownership (see Note 5). The note bears interest at 10%
per annum and requires monthly interest-only payments of $373,
beginning January 31, 1999 and continuing for 60 months, at
which time the full principal balance is due.
In addition to the above, notes receivable also includes a
$20,000 note receivable which was assigned to the Company by
its Parent (see Note 5). This two year note bears interest at
18% per annum, requires monthly principal and interest
payments of $998, and is personally guaranteed by the owners
of the borrower. Additionally, this note is collateralized by
the borrower's dealer bond of $25,000. As this note was
assigned to the Company on December 31, 1998, no interest
income was recognized in 1998.
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NOTE 4. PROPERTY AND EQUIPMENT
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<TABLE>
<CAPTION>
Property and equipment at December 31, 1998 consisted of the
following:
<S> <C>
Land $ 240,000
Building 60,000
Software (Note 5) 247,000
Equipment 43,436
------------------------------------------------------------------------------------------------------
590,436
Less accumulated depreciation and amortization ( 15,472)
------------------------------------------------------------------------------------------------------
$ 574,964
------------------------------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization amounted to $15,472 for the
period ended December 31, 1998.
7
<PAGE>
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NOTE 4. PROPERTY AND EQUIPMENT (Continued)
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Effective December 31, 1998, without prior written consent
from the mortgagee, the land and building were transferred to
the Company from an entity related by virtue of common control
via a Quitclaim Deed. Additionally, the related mortgage has
been assumed by the Company (see Note 6). Because consent for
the transfer was not obtained from the mortgagee, the debt may
be callable by the mortgagee.
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NOTE 5. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
During 1998, the majority of the Company's investment and
operations were funded by advances from First American Capital
Trust (the Parent), a trust which owned 100% of the
outstanding stock of the Company at year end (see Note 8). The
nature of the advances were to acquire software and fixed
assets and to provide funding for the floor plan loans.
Effective December 31, 1998, outstanding advances totaling
$1,047,752 due to the Parent were converted into a 10-year
note payable. The note bears interest at 10% per annum and
requires monthly interest payments of $8,731. The full
principal balance was to mature on January 31, 2009, however,
effective March 21, 1999, this note was converted by the
Parent to additional paid-in capital.
During 1998, software was acquired from an individual related
to the Company by virtue of a controlling interest in the
Parent, for $247,000. Accordingly, all rights, trademarks and
licenses were obtained by the Company. In connection with this
transaction, at December 31, 1998, $247,000, net of
accumulated amortization of $13,722 is included in property
and equipment.
Included in floor plan receivables is approximately $72,000
due from Carnet. Total fee income earned from Carnet amounted
to $1,800 in 1998.
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NOTE 6. NOTE PAYABLE
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Notes payable at December 31, 1998 consists of a mortgage note
payable to an individual with an original balance of $210,000.
The note bears interest at 10% per annum and requires monthly
principal and interest payments of $2,257 until December 2001,
whereupon the note is due with a balloon payment of $170,765.
This mortgage is collateralized by the Company's land and
building and is personally guaranteed by an individual who is
an officer of the Company.
<TABLE>
<CAPTION>
Aggregate maturities of this note are scheduled as follows:
<S> <C> <C>
1999 $ 7,770
2000 8,583
2001 180,247
------------------------------------------------------------------------------------------------------
$ 196,600
------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
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NOTE 7. COMMITMENTS
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On January 21, 1999, the Company entered into a two year lease
agreement with an unrelated third party. The lease provides
for monthly payments of $4,357, a portion of which are to be
paid by Southeast Dealer Acceptance, Inc. (Southeast), a
Company related by virtue of common control, under a sublease
agreement. Approximate future minimum payments under this
lease and sublease are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 $ 51,000
2000 52,000
2001 4,000
------------------------------------------------------------------------------------------------------
107,000
Less sublease amounts ( 52,000)
------------------------------------------------------------------------------------------------------
$ 55,000
======================================================================================================
</TABLE>
Total rent expense in 1998 amounted to $3,180.
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NOTE 8. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
On April 1, 1999, 100% of the outstanding common stock of the
Company was sold by the Parent to Fact South, LLC (Fact
South), a limited liability company whose manager is the
beneficiary and trustee of the Parent. In exchange for the
stock of the Company, the Parent received a 92% ownership
interest in Fact South .
Subsequent to year end, $2,477,000 was loaned to the Company
by the Parent, approximately $826,000 was repaid to an
individual who is the trustee and beneficiary of the Parent on
behalf of the Parent, and the remaining $1,651,000 was
converted to equity in the Company. Additionally, the Parent
committed to invest an additional $3,000,000 in Fact South.
Also on April 1, 1999, Fact South entered into a Stock
Purchase Agreement (the Agreement) with a non-operating public
shell. The Agreement provided for the exchange of 10,000,000
shares of the public shell in exchange for all of the issued
and outstanding shares of the Company, Southeast and Carnet.
Fact South retained a 91% interest in the public shell. This
merger was treated for accounting purposes as a capital
transaction equivalent to the issuance of stock by the Company
for the net monetary assets of the public shell, accompanied
by a recapitalization. Concurrent with this merger, the merged
entity changed its name to First Capital Resources.Com, Inc.
9
<PAGE>
================================================================================
SOUTHEAST DEALER ACCEPTANCE, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(JANUARY 20, 1999) TO MARCH 31, 1999
================================================================================
<PAGE>
C O N T E N T S
Page
================================================================================
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Stockholder's Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6 - 10
<PAGE>
INDEPENDENT AUDITORS' REPORT
================================================================================
Board of Directors and Stockholder
Southeast Dealer Acceptance, Inc.
Ft. Lauderdale, Florida
We have audited the accompanying balance sheet of Southeast Dealer Acceptance,
Inc. as of March 31, 1999, and the related statements of operations,
stockholder's equity and cash flows for the period from inception (January 20,
1999) to March 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southeast Dealer Acceptance,
Inc. as of March 31, 1999, and the results of its operations and its cash flows
for the period from inception (January 20, 1999) to March 31, 1999 in conformity
with generally accepted accounting principles.
KAUFMAN, ROSSIN & CO.
Miami, Florida
May 28, 1999
1
<PAGE>
<TABLE>
<CAPTION>
SOUTHEAST DEALER ACCEPTANCE, INC.
BALANCE SHEET
MARCH 31, 1999
===================================================================================================================
ASSETS
===================================================================================================================
<S> <C>
CASH $ 41,967
FINANCE RECEIVABLES, NET (NOTE 2) 484,020
PROPERTY AND EQUIPMENT (NOTE 3) 65,052
OTHER ASSETS 1,500
- -------------------------------------------------------------------------------------------------------------------
$592,539
===================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
===================================================================================================================
LIABILITIES
Due to dealers $ 76,663
Accounts payable and accrued liabilities 12,660
Due to affiliate (Note 5) 4,357
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 93,680
- -------------------------------------------------------------------------------------------------------------------
LEASE COMMITMENT (NOTE 5)
STOCKHOLDER'S EQUITY
Common stock, $1 par value; 1,000 shares authorized, issued and
outstanding 1,000
Additional paid-in capital 502,378
Deficit ( 4,519)
- -------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 498,859
- -------------------------------------------------------------------------------------------------------------------
$592,539
===================================================================================================================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
SOUTHEAST DEALER ACCEPTANCE, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JANUARY 20, 1999) TO MARCH 31, 1999
====================================================================================================================
====================================================================================================================
<S> <C>
INTEREST AND FEE INCOME $24,029
PROVISION FOR CREDIT LOSSES 10,000
- --------------------------------------------------------------------------------------------------------------------
INCOME FROM LENDING ACTIVITIES 14,029
GENERAL AND ADMINISTRATIVE EXPENSES 19,121
- --------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAX BENEFIT ( 5,092)
INCOME TAX BENEFIT 573
- --------------------------------------------------------------------------------------------------------------------
NET LOSS ($ 4,519)
====================================================================================================================
</TABLE>
See Accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
SOUTHEAST DEALER ACCEPTANCE, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 20, 1999) TO MARCH 31, 1999
===================================================================================================================
Additional
Common Stock Paid-In
---------------------
Shares Amount Capital Deficit Total
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BALANCES - Inception (January 20, 1999) -- $ -- $ -- $ -- $ --
Issuance of common stock 1,000 1,000 299,000 -- 300,000
Contributed computer equipment -- -- 68,476 -- 68,476
Finance contracts contributed -- -- 134,902 -- 134,902
Net loss -- -- -- ( 4,519) ( 4,519)
- -------------------------------------------------------------------------------------------------------------------
BALANCES - March 31, 1999 1,000 $ 1,000 $502,378 ($ 4,519) $498,859
===================================================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
SOUTHEAST DEALER ACCEPTANCE, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JANUARY 20, 1999) TO MARCH 31, 1999
====================================================================================================================
====================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss ( $ 4,519)
- --------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 3,424
Amortization of discount on finance receivables ( 9,361)
Provision for finance credit losses 10,000
Increase in:
Other assets ( 1,500)
Due to dealers 76,663
Accounts payable and accrued liabilities 12,660
Due to affiliate 4,357
- --------------------------------------------------------------------------------------------------------------------
Total adjustments 96,243
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 91,724
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of finance contracts ( 366,186)
Proceeds from repayment of finance contracts 16,429
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ( 349,757)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 300,000
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH, representing cash
balance at March 31, 1999 $ 41,967
====================================================================================================================
Non-Cash Investing and Financing Activities
- --------------------------------------------------------------------------------------------------------------------
Property and equipment contributed to capital $ 68,476
====================================================================================================================
Finance contracts contributed to capital $134,902
====================================================================================================================
</TABLE>
See accompanying notes
5
<PAGE>
SOUTHEAST DEALER ACCEPTANCE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Organization
Southeast Dealer Acceptance, Inc. (the "Company"),
incorporated on January 20, 1999 under the laws of the State
of Florida, is engaged in the business of purchasing and
servicing sub-prime automobile finance loans in Florida. The
loans are principally on used vehicles to borrowers that would
not be expected to qualify for traditional financing provided
by commercial banks or automobile manufacturers' captive
finance companies.
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.
Finance Receivables
The Company generally acquires finance contracts,
collateralized by motor vehicles, at a discount. The purchase
discount is amortized as an adjustment to the yield of the
related finance contracts over the contractual life of the
related loans.
The Company uses the interest method to determine interest
income on finance contracts acquired. Finance contracts,
including impaired finance contracts, are placed on nonaccrual
status if they are 60 days or more past due as to maturity or
payment of principal or interest. The accrual is resumed when
the receivable becomes contractually current, and past due
interest is recognized at that time. If a finance contract is
deemed to be in default, the Company maintains the right to
repossess the collateral securing that contract.
The Company applies SFAS 114 and 118, which address the
accounting by creditors for impairment of a loan and related
income recognition and disclosures. In accordance with SFAS
114, the Company's approach for estimating losses results in a
measure of impairment based on discounting expected future
cash flows (including the anticipated proceeds from
repossessed collateral) at the loan's original yield. If the
measure of the impaired receivable is less than the net
recorded investment in the receivable, the Company recognizes
an impairment by creating an additional allowance for finance
credit losses in excess of the nonrefundable dealer reserves
available to absorb losses, with a corresponding charge to
provision for finance credit losses.
6
<PAGE>
- --------------------------------------------------------------------------------
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Maintenance and repair costs are charged to
expense as incurred. Depreciation is computed using the
straight-line method over the estimated useful lives of the
assets, which is five years.
Due to Dealers
The Company records a finance receivable and a corresponding
liability "due to dealers" upon receiving a purchased finance
contract from dealerships. The liability is relieved upon
receipt of all required documentation, and the funding of the
contract.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risks consists
principally of finance contracts. The Company acquires finance
contracts from a network of automobile dealers located
primarily in South Florida and substantially all borrowers are
also located in this geographic area. Exposure to losses on
contracts varies by borrower. The Company monitors exposure to
credit losses and maintains allowances for anticipated losses,
which management considers to be appropriate under the
circumstances.
Income Taxes
Deferred income taxes are provided for the estimated tax
effect of temporary differences between financial and taxable
income. These differences result primarily from the provision
for loan losses and depreciation. The effective tax rate
differed from maximum statutory rates due primarily to
graduated tax rates and the provision for loan losses.
Impact of the "Year 2000" Computer Issue
Because computers frequently use only two digits to recognize
years, on January 1, 2000, many computer systems, as well as
equipment that uses embedded computer chips, may be unable to
distinguish between the years 1900 and 2000. If not
remediated, this problem could create system errors and
failures resulting in the disruption of normal business
operations. In the event the Company fails to identify or
correct a material Year 2000 problem, there could be
disruptions in normal business operations, which could have a
material adverse effect on the Company's results of
operations, liquidity or financial condition. Further, there
may be some third parties, such as governmental agencies,
utilities, telecommunication companies, vendors, suppliers and
customers who may not be able to continue business with the
Company due to their own year 2000 problems. Also, risks
associated with some foreign third parties may be greater
since there is general concern that some entities operating
outside the United States are not addressing Year 2000 issues
on a timely basis. There can be no assurance that any efforts
made will fully mitigate the effect of Year 2000 issues.
7
<PAGE>
- --------------------------------------------------------------------------------
NOTE 2. FINANCE RECEIVABLES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Finance receivables at March 31, 1999 consisted of the
following:
<S> <C>
Finance receivables, gross $ 991,237
Less unearned interest (303,623)
------------------------------------------------------------------------------------------------------
Principal balance of finance receivables 687,614
Less: Purchase discounts (193,594)
Allowance for credit losses (10,000)
------------------------------------------------------------------------------------------------------
Finance receivables, net $ 484,020
======================================================================================================
</TABLE>
As of March 31, 1999, the accrual of interest income had not
been suspended on any finance contracts, nor were there any
contracts in the process of repossession.
The contractual maturities of the finance contracts generally
range from one to four years from the balance sheet date. It
is the Company's experience that a portion of the finance
contracts generally will be repaid or charged off before the
contractual maturity date.
<TABLE>
<CAPTION>
Changes in the allowance for credit losses were as follows:
<S> <C> <C> <C>
Balance - Inception (January 20, 1999) $ -
Provision for credit losses charged to operations 10,000
Finance contracts charged off -
Recoveries -
------------------------------------------------------------------------------------------------------
Balance - March 31, 1999 $ 10,000
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1999, contractual maturities of finance
receivables were as follows:
<S> <C> <C>
2000 $ 401,813
2001 339,512
2002 196,117
2003 53,795
------------------------------------------------------------------------------------------------------
$ 991,237
======================================================================================================
</TABLE>
It is the Company's expectation that a substantial portion of
the finance receivables will be repaid prior to contractual
maturity dates. The above, therefore, is not to be regarded as
a forecast of future cash collections.
8
<PAGE>
- --------------------------------------------------------------------------------
NOTE 3. PROPERTY AND EQUIPMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Property and equipment at March 31, 1999 consisted of the
following:
<S> <C>
Computer equipment $ 68,476
Less accumulated depreciation (3,424)
------------------------------------------------------------------------------------------------------
$ 65,052
=======================================================================================================
</TABLE>
Depreciation expense amounted to $3,424 for the period ended
March 31, 1999.
- --------------------------------------------------------------------------------
NOTE 4. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The Company acquires a number of its finance contracts from
Carnet, Inc. (Carnet), an affiliated automobile dealership,
and plans to continue such acquisitions. During the period
from inception to March 31, 1999, finance contracts purchased
from Carnet accounted for approximately 26% of the total
acquired throughout the period and 24% of the principal
balance of finance receivables at March 31, 1999.
- --------------------------------------------------------------------------------
NOTE 5. LEASE COMMITMENT
- --------------------------------------------------------------------------------
On January 21, 1999, the Company entered into a two year
sublease agreement with Affordable Dealer Services, Inc.
(Affordable), an affiliate, for office space and use of
furniture and fixtures. The sublease provides for the payment
of half of the monthly rent of $4,357. As of March 31, 1999,
the Company had included in the accompanying balance sheet an
amount due to Affordable of $4,357 relating to the sublease
commitment.
<TABLE>
<CAPTION>
Approximate future minimum payments for the years subsequent
to March 31, 1999 under the sublease are as follows:
<S> <C> <C>
2000 $ 26,000
2001 22,000
------------------------------------------------------------------------------------------------------
$ 48,000
======================================================================================================
</TABLE>
Rent expense amounted to $4,357 for the period ended March 31,
1999.
9
<PAGE>
- --------------------------------------------------------------------------------
NOTE 6. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
On April 1, 1999, FACT South, LLC (Parent), the Company's sole
stockholder, entered into a Stock Purchase Agreement
(Agreement) with a non-operating public shell. The Agreement
provided for the exchange of 10,000,000 shares of the public
shell in exchange for all of the issued and outstanding shares
of the Company, Affordable and Carnet. The Parent retained a
91% interest in the public shell. This merger was treated for
accounting purposes as a capital transaction equivalent to the
issuance of stock by the Company for the net monetary assets
of the public shell, accompanied by a recapitalization.
Concurrent with this transaction, the public shell changed its
name to First Capital Resources.Com, Inc.
10
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL RESOURCES.COM, INC.
UNAUDITED PRO FORMA COMBINING BALANCE SHEET
MARCH 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
ADJUSTED (4)
(1) (2) (3) ACQUIRED PROFORMA PROFORMA
ASSETS SOUTHEAST AFFORDABLE ADJUSTMENTS ENTITIES ADJUSTMENTS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH $41,967 $445,819 $487,786 $487,786
FINANCE RECEIVABLES, NET 484,020 - 484,020 484,020
FLOOR PLAN RECEIVABLES - 1,681,037 1,681,037 1,681,037
DUE FROM AFFILIATES - 193,264 (139,259) 54,005 54,005
PROPERTY AND EQUIPMENT 65,052 592,619 657,671 657,671
OTHER ASSETS 1,500 13,909 15,409 15,409
- ------------------------------------------------------------------------------------------------------------------------------------
$592,539 $2,926,648 ($139,259) $3,379,928 $ - $3,379,928
====================================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to dealers $76,663 $76,663 76,663
Due to Parent 1,047,752 1,047,752 (1,047,752) -
Mortgage payable 196,600 196,600 196,600
Due to affiliate 4,357 (4,357) - -
Accounts payable and
accrued liabilities 12,660 7,647 20,307 20,307
- ------------------------------------------------------------------------------------------------------------------------------------
93,680 1,251,999 (4,357) 1,341,322 (1,047,752) 293,570
STOCKHOLDERS' EQUITY 498,859 1,674,649 (134,902) 2,038,606 1,047,752 3,086,358
- ------------------------------------------------------------------------------------------------------------------------------------
$592,539 $2,926,648 ($139,259) $3,379,928 $ - $3,379,928
====================================================================================================================================
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
Note 1.
This column includes the unaudited historical balance sheet of Southeast Dealer
Acceptance, Inc. as of March 31, 1999 extracted from the audited financial
statements.
Note 2.
This column includes the unaudited historical balance sheet of the Affordable
Dealer Services, Inc. as of March 31, 1999.
Note 3.
This column includes adjustments for the elimination of intercompany balances.
Note 4.
This column reflects the pro forma effect of the conversion of the amount owed
to First Capital Resources.Com, Inc. by Affordable at March 31, 1999 to equity
upon acquisition on April 1, 1999.
Note 5.
At March 31, 1999, First Capital Resources.Com, Inc. had no assets, liabilities
or net stockholders' equity.
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL RESOURCES.COM, INC.
UNAUDITED COMBINING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
(3) (4)
(1) (2) PRO FORMA PRO FORMA
SOUTHEAST AFFORDABLE ADJUSTMENTS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST AND FEE INCOME $24,029 $130,220 $154,249
PROVISION FOR FINANCE CREDIT LOSSES 10,000 - 10,000
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM LENDING ACTIVITIES 14,029 130,220 144,249
GENERAL AND ADMINISTRATIVE EXPENSES 19,121 92,748 111,869
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (5,092) 37,472 32,380
INCOME TAX BENEFIT (PROVISION) 573 (7,288) (6,715)
- ------------------------------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME $(4,519) $30,184 $25,665
====================================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,000,000 11,000,000
====================================================================================================================================
NET INCOME PER SHARE $0.00
====================================================================================================================================
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Note 1.
This column includes the unaudited historical results of operations of Southeast
Dealer Acceptance, Inc. extracted from the audited financial statements for the
period from inception (January 20, 1999) to March 31, 1999.
Note 2.
This column includes the unaudited historical results of operations of
Affordable Dealer Services, Inc. for the three months ended March 31, 1999.
Note 3.
Weighted average common shares for the period ended March 31, 1999 reflect those
shares issued and outstanding at the time of the acquisitions on April 1, 1999
and have been calculated assuming the shares of common stock issued pursuant to
the transactions were outstanding at the beginning of the period.
Note 4.
For the three months ended March 31, 1999, First Capital Resources.Com, Inc. had
no income or expenses.
