SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 [Fee Required]
For the Fiscal Year ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange of 1934 [No Fee Required]
For the Transition Period From to
Commission File No. 33-31639
FINCA CONSULTING, INC.
Exact Name of Registrant as Specified in its Charter
COLORADO 84-1101572
State or Other Jurisdiction of IRS Employer
Incorporation or Organization Identification Number
Koenigsallee 106, 40215 Duesseldorf, Germany
Address of Principal Executive Offices , Zip Code
011-44-171-431-4529
Registrants Telephone Number, Including Area Code
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Name of Each Exchange
Title of Each Class 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 [ ]
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. [ ]
The Registrant's revenues for the fiscal year ended December 31, 1996, were
$86,163,171.
The aggregate market value of the common 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 December 31, 1996, 10,300,322 shares of Common Stock, $.01 par
value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: SEE EXHIBIT INDEX
FINCA CONSULTING, INC.
CONTENTS
PART I.
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a
Vote of Security Holders
PART II.
Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Managements' Discussion and
Analysis of Financial Condition
and Results of Operation
Item 8. Financial Statements and
Supplementary Data
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure
PART III.
Item 10. Directors and Executive Officers
of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain
Beneficial Owners
and Management
Item 13. Certain Relationships
and Related Transactions
PART IV.
Item 14. Exhibits, Financial Statement
Schedules, and Reports on 8-K
PART I
ITEM 1: BUSINESS
(a) General Development of Business
The Corporation was incorporated in Colorado on October 25,
1988 for the purpose of acquiring or completing a merger with
another company. Effective July 22, 1991, the Company entered
into a common stock exchange agreement with Finca Consulting
Costa Brava, S.A., a company organized under the laws of the
country of Spain, 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.
Finca Consulting Costa Brava, S.A. is located in and was
incorporated in Spain on June 14, 1989 and its principal
business is acting as a real estate broker for sales of
Spanish properties, mainly holiday homes.
In January 1991, the Corporation formed a wholly-owned
subsidiary, Finca Consulting GmbH, incorporated in Germany,
for the purpose of engaging in the buying, selling and
administration of Spanish real estate. That company, however,
did not generate expected revenues and, in April 1996, the
Company sold its interest in Finca Consulting GmbH for the
amount of DM100,000 to its officers and shareholders. As a
consequence of this divestiture, Finca Consulting GmbH's
accumulated deficit at January 1, 1996 in the amount of
$1,833,125 is reflected as an adjustment to the Corporation's
consolidated accumulated deficit.
In July 1992, the Corporation entered into and consummated a
common stock exchange agreement with King National
Corporation, a U.S. corporation, pursuant to which the
Corporation acquired a 100% ownership of Opti- Wert-Interest
AG ("OWI-AG") a Swiss corporation. OWI-AG, whose name was
changed to Prime Core AG in September 1996, is engaged in the
buying and selling of marketable securities and options on
behalf of its customers in Germany via a network of
independent brokers. Prime Core AG's securities brokerage
business remains the Corporation's sole source of revenues.
The sale of securities, including futures options contracts
are subject to regulation in Germany by the Banking
Supervisory Authority.
The Corporation is currently subject to the reporting
requirements of the Securities Exchange Act of 1934, as
amended. The Corporation 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.
As of December 31, 1996, there were outstanding 10,300,322
Common Shares.
The Corporation did not acquire or dispose of any material
amount of assets during the fiscal year ended December 31,
1996.
(b) Financial Information About Industry Segments.
The Corporation 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
1996, 1995 and 1994.
The Corporation's businesses operate primarily in Europe.
Information regarding each geographic area on an
unconsolidated basis for 1996, 1995 and 1994 is as follows:
December 31, 1996
---------------------------------------------------
United Consolidated
States Europe Eliminations Totals
------------ ------------ ------------ ------------
Sales to unaffiliated customers
Real estate sales ............................... $ 0 $ 0 $ 0 $ 0
Marketable securities
and option sales ............................. 86,163,171 86,163,171
Operating income (loss) continuing operations
Real estate sales ............................... 0 (25,000) 0 (25,000)
Marketable securities
and option sales ............................. 0 (3,813,342) 0 (2,813,342)
Other income (expense) ............................... 0 (178,167) 0 (178,167)
------------ ------------ ------------ ------------
Net (Loss) ........................................... 0 (3,016,509) 0 (3,016,509)
Identifiable assets at December 31, 1995 ............. 0 7,767,670 0 7,767,670
General corporate assets ............................. 0 0 0 0
------------ ------------ ------------ ------------
Total Assets ................................... $ 0 $ 7,767,670 $ 0 $ 7,767,670
============ ============ ============ ============
December 31, 1995
---------------------------------------------------
United Consolidated
States Europe Eliminations Totals
------------ ------------ ------------ ------------
Sales to unaffiliated customers
Real estate sales ............................... $ 0 $ 0 $ 0 $ 0
Marketable securities
and option sales ............................. 0 49,409,821 0 49,409,821
Operating income (loss)
Real estate sales ............................... 0 (25,000) 0 (25,000)
Marketable securities
and option sales ............................. 0 (1,272,928) 0 (1,272,928)
Other income (expense) ............................... 0 90,906 0 90,906
------------ ------------ ------------ ------------
Net (Loss) ........................................... 0 (1,207,022) 0 (1,207,022)
Identifiable assets at December 31, 1995 ............. 0 8,360,186 0 8,360,186
General corporate assets ............................. 0 0 0 0
------------ ------------ ------------ ------------
Total Assets ................................... $ 0 $ 8,360,186 $ 0 $ 8,360,186
============ ============ ============ ============
December 31, 1994
---------------------------------------------------
United Consolidated
States Europe Eliminations Totals
------------ ------------ ------------ ------------
Sales to unaffiliated customers
Real estate sales ............................... $ 0 $ 0 $ 0 $ 0
Marketable securities
and option sales ............................. 0 18,900,827 0 18,900,827
Operating (loss)
Real estate sales ............................... 0 (25,000) 0 (25,000)
Marketable securities
and option sales ............................. 0 (2,325,897) 0 (2,325,897)
Other income (expense) ............................... 0 (33,476) 0 (33,476)
------------ ------------ ------------ ------------
Net (Loss) ........................................... 0 (2,384,373) 0 (2,384,373)
Identifiable assets at December 31, 1994 ............. 0 2,407,100 0 2,407,100
General corporate assets ............................. 0 0 0 0
------------ ------------ ------------ ------------
Total Assets ................................... $ 0 $ 2,407,100 $ 0 $ 2,407,100
============ ============ ============ ============
(c) Narrative Description of Business
The Corporation 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
("PC-AG"). PC-AG currently operates 3 offices in Germany which
oversee the activities of a network of brokers throughout that
country, who are independent contractors.
Historically, the Company operated solely in the European real
estate market. However, since its acquisition of PC-AG, 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 Corporation 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 1996. The Corporation and its
subsidiaries generated revenues from its securities brokerage
operations of $86,163,171 in 1996, $49,409,821 in 1995, and
$18,900,827 in 1994. The significant growth in revenues from
1994 to 1996 occurred as a consequence of a concerted effort
by the Company to expand its network of independent brokers in
Germany, its primary market, in response to a rapidly
developing acceptance of stock and option equities as
investment vehicles in that country.
Neither industry segment in which the Corporation does
business is seasonal. The Corporation 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 either industry segment.
In its securities brokerage operations, the Corporation
competes with established companies, private investors,
limited partnerships and other entities (many of which may
possess substantially greater resources than the Corporation)
in connection with its brokerage business securities and
options brokerage business. A majority of the companies with
which the Corporation 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 Corporation now has, or
will have in the foreseeable future. It is also likely that
other competitors will emerge in the near future. The
Corporation competes with these entities on the basis of
service and sales commissions.
The Corporation and its subsidiaries at this time employ no
personnel in its real estate operations and 22 full time
persons and no part time persons in its securities brokerage
operations.
(d) Financial information about foreign and domestic
operations and export sales.
December 31, 1996
---------------------------------------------------
United Consolidated
States Europe Eliminations Totals
------------ ------------ ------------ ------------
Sales to unaffiliated customers ...................... $ 0 $ 86,163,171 $ 0 $ 86,163,171
Operating (loss) ..................................... 0 (2,838,342) 0 (2,838,342)
Other income (expense) ............................... 0 (178,167) 0 (178,167)
Net (Loss) ........................................... 0 (3,016,509) 0 (3,016,509)
Identifiable assets at December 31, 1995 ............. $ 0 $ 7,767,670 $ 0 $ 7,767,670
General corporate assets ............................. 0 0
------------
Total Assets ................................... $ 7,767,670
============
December 31, 1995
---------------------------------------------------
United Consolidated
States Europe Eliminations Totals
------------ ------------ ------------ ------------
Sales to unaffiliated customers ...................... $ 0 $ 49,409,821 $ 0 $ 49,409,821
Operating (loss) ..................................... 0 (1,297,928) 0 (1,297,928)
Other income (expense) ............................... 0 90,906 0 90,906
Net (Loss) ........................................... 0 (1,207,022) 0 (1,207,022)
Identifiable assets at December 31, 1995 ............. $ 0 $ 8,360,186 $ 0 $ 8,360,186
General corporate assets ............................. 0 0
------------
Total Assets ................................... $ 8,360,186
============
December 31, 1994
---------------------------------------------------
United Consolidated
States Europe Eliminations Totals
------------ ------------ ------------ ------------
Sales to unaffiliated customers ...................... $ 0 $ 18,900,827 $ 0 $ 18,900,827
Operating (loss) ..................................... 0 (2,350,897) 0 (2,350,897)
Other income (expense) ............................... 0 (33,476) 0 (33,476)
Net (Loss) ........................................... 0 (2,384,373) 0 (2,384,373)
Identifiable assets at December 31, 1994 ............. $ 0 $ 2,407,100 $ 0 $ 2,407,100
General corporate assets ............................. 0
------------
Total Assets ................................... $ 2,407,100
============
ITEM 2: Properties
In January 1992, the Corporation entered into a lease
agreement for 9,600 square feet of office space in Dusseldorf,
Germany. The lease required a deposit of $37,345 and calles
for monthly rental payments of $12,448 through December 1996.
The monthly rent may be increased based on a price index and
the lease provides for a five year renewal option. The
Corporation also, through its subsidiary PC-AG, leases 5,500
square feet of office space in Zug, Switzerland, as well as
automobiles and office equipment under operating leases. The
Corporation paid $117,195 for the year ended December 31,
1996, $116,695 for the year ended December 31, 1995, and
$113,455 for the year ended December 31, 1994, pursuant to
above leases.
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 its
activities in securities and futures options contracts. In the
opinion of management of the Company, however, the Company is
not involved in any litigation or legal proceedings that would
have a material effect upon its financial condition, except as
indicated below.
Regulatory Matters
Securities regulations in Germany are enforced by the German
Banking Authorities (the "Bundesaufsichtsamt fuer das
Kreditwesen", or the "BAK"). The BAK administers and enforces
the German banking act (the "Gesetz fur das Kreditwesen", or
the "KWG"). The Company's brokerage business in the past and
as currently operated utilizes the services of independent
brokers in Germany to solicit German customers who are
referred to the Company's Swiss- based subsidiary, Prime Core
AG, which maintains dministrative offices in Zug,Switzerland.
Previously, the KWG or German banking laws, loosely defined
brokers and financial services activities and operations. The
mainstream securities brokerage business in Germany was and
continues to be performed by German banks or firms which are
members of recognized stock exchanges. Because of the loosely
defined terms and regulations of the "BAK", many firms conduct
securities brokerage and financial services businesses without
being members of established stock exchanges nor in
association with an established German bank. The Corporation's
securities brokerage business operations, similarly situated
and not conducted as a bank or stock exchange member, has
operated in what is called in Germany the "gray market".
As of January 1, 1998, Germany has adopted new regulations
that will require entities who conduct any financial services
business of any kind, including securities brokerage and
investment services, to register with the German authorities
in order to conduct and, in the Company's case, to continue
performing securities brokerage business in Germany. If the
Company does not comply with these new German regulations, the
continuation of its securities business in Germany could be
subject to enforcement proceedings which could have a material
advers effect on the Company's financial condition. The
Company, however, fully intends to comply with the new German
legal requirements and is now taking all measures necessary
for its securities brokerage business to be in full
compliance. It is unclear, however and notwithstanding the
Company's current efforts to comply, whether the Company will
be in full compliance with the new regulations on or shortly
after January 1, 1998. The Company's German-based advisors
have informed the Company that it will be, perhaps, six months
before the Company's securities brokerage business is in full
compliance with the new regulations. Under these
circumstances, if the German banking regulators, or the "BAK",
were to institute enforcement proceedings against the Company
in Germany, it could have material adverse effects on the
financial condition of the Company.
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.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a)(1)(i) The Corporation's securities are not currently trading on
any market nor on any exchange.
(b) As of December 31, 1996, there were approximately 2,111
shareholders of record for the Corporation's Common
Stock.
(c) The Corporation has not declared or paid 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, 1996, 1995, 1994, 1993 and 1992 is derived from the
financial statements of the Corporation and should be read in
conjunction with the financial statements and notes thereto.
For The Year Ended
December 31,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
Balance Sheet
Total Assets .................................. $ 7,767,670 $ 8,360,186 $ 2,407,100 $ 1,816,882 $ 1,810,428
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 .................... $ 4,415,305 $ 5,862,009 $ 1,248,603 $ 628,821 $ 1,456,690
December 31,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
Statement of Operations
Revenues from continuing operations ........... $ 86,163,171 $ 49,409,821 $ 18,900,827 $ 16,603,901 $ 2,692,445
Cost of Shares and Options .................... $ 68,525,189 $ 37,695,202 $ 14,450,630 $ 13,728,846 $ 1,749,426
Gross Profit ............................... $ 17,637,982 $ 11,714,619 $ 4,450,197 $ 2,675,055 $ 943,019
Selling general and administrative
expenses ................................... $ 20,476,324 $ 13,012,547 $ 6,801,094 $ 5,314,366 $ 2,732,421
------------ ------------ ------------ ------------ ------------
Operating income (loss) ....................... $ (2,838,342) $ (1,297,928) $ (2,350,897) $ (2,439,311) (1,789,402)
Other income (expense) ........................ $ (178,167) $ (90,906) $ (33,476) $ (18,320) $ 2,765
Net (loss) from continuiing operations ........ $ (3,016,509) $ (1,207,022) $ (2,384,373) $ (2,457,631) $ (1,786,637)
Extraordinary income .......................... $ 0 $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ ------------
Net Income (Loss) ............................. $ (3,016,509) $ (1,207,022) $ (2,384,373) $ (2,457,631) $ (1,786,637)
============ ============ ============ ============ ============
Loss per common share of
outstanding and subscribed stock
(from continuing operations) ............... $ (0.48) $ (0.56) $ (1.11) $ (1.20) $ (1.77)
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter Ended December 31, 1996
The Corporation's wholly owned Swiss subsidiary Prime Core AG
("PC-AG") continues to be the sole source of revenues for the
Corporation. PC-AG operates a securities brokerage business in
Germany, utilizing commissioned sales brokers to sell equity
stocks and options to its customers in Germany.
For the quarter ended December 31, 1996 the Corporation had
revenues of $19,110,756, resulting in a net loss of $481,636,
compared to revenues of $26,941,605 and a profit of $1,382,273
in the fourth quarter a year ago. The primary reason for the
loss are high selling, general, and administrative expenses
which although less than in the fourth quarter of 1995 due to
lower brokerage fees as a result of the lesser sales volume,
still amounted to $4,603,402 for the quarter, compared to
$5,176,526 for the same quarter a year ago.
Year Ended December 31, 1996
For the year ended December 31, 1996, the Corporation had
gross revenues of $86,163,171, generated exclusively by its
subsidiary PC-AG through its securities brokerage business in
Germany. For the same year, the Corporation experienced a net
loss of $3,016,509. The loss is attributable to relatively
high operating expenses which amounted to $20,476,324 for the
year, the majority of which were incurred by PC-AG. PC-AG
utilizes the administrative services of a German affiliate
owned jointly by the officers and directors of the Company,
Prime Core Makler GmbH, which provides the infrastructure and
facilities for the Company's network of brokers, in its equity
securities and options business. During fiscal year 1996, the
Corporation, through PC-AG, paid Prime Core Makler GmbH
$5,659,749 for these administrative services and $7,026,135 in
brokerage fees.
Fiscal Year 1996 Compared to Fiscal Year 1995
During both 1996 and 1995, the Corporation's revenues were
substantially all derived from PC-AG's securities brokerage
activities in Germany. There were no revenues from real estate
operations in either 1996 or 1995. Revenues in 1996 totaled
$86,163,171 compared to $49,409,821 in 1995. The Company in
1996 achieved gross profits of $17,637,982 or 20.5% of
revenues as opposed to $11,714,619 or 23.7% of revenues in
1995. The decrease in the gross margin and resulting relative
profits, however, coupled with the significant increase in
expenses which totaled $20,476,324 for the year compared to
$13,012,547 in 1995, caused the Company to incur a loss for
the year of $3,016,509, compared to a loss of $1,207,022 in
1995. The loss in 1996 includes an amount of $470,217
attributable to a non-recurring loss on disposition of a
subsidiary: see Note 4 to Notes to Financial Statements,
attached hereto.
At December 31, 1996, working capital amounted to $1,733,069,
as opposed to $3,800,538 on December 31, 1995. The decrease in
working capital was a direct consequence of the losses
incurred. Although management considers cash reserves
sufficient to fund current and expected future operations, it
is taking steps to streamline operations in order to decrease
costs and thereby avert a further erosion of liquidity.
Fiscal Year 1995 Compared to Fiscal Year 1994
During 1995 the Corporation's revenues of $49,409,821 were all
derived from PC-AG's securities brokerage activities in
Germany. The same held true in 1994 when revenues totaled
$18,900,827. There were no revenues from real estate
operations in either 1995 or 1994. The Company in 1995
achieved gross profits of $11,714,619 or 23.7% of revenues as
opposed to $4,450,197 or 23.5% of revenues in 1994. In spite
of the increase in revenues and the increase in the gross
profits, however, the Company incurred a loss for the year,
primarily due to the increase in selling, general and
administrative expenses which totaled $13,012,547 during the
year, as compared to $6,801,094 a year ago.
At December 31, 1995, working capital amounted to $3,800,536,
as opposed to $106,872 on December 31, 1994. Current assets at
year's end included high cash balances representing customers'
prepayments, as a direct consequence of the expansion of
business. The Company obtained the necessary funding to
finance its expansion through the private placement during the
year with European investors pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended, of a
total of 2,404,775 shares of its preferred stock which, after
deduction of related expenses yielded $6,139,878 for the
Company. During 1994 the Company obtained additional financing
in a similar fashion through placement of an aggregate of
1,688,146 shares of its preferred stock, for net receipts of
$3,578,378. These fund inflows helped offset cash flow
deficits from operations, primarily due to the losses incurred
in both years.
Fiscal Year 1994 Compared to Fiscal Year 1993
During 1994 the Corporation's revenues of $18,900,827 were all
derived from PC-AG's securities brokerage activities in
Germany as compared to PC-AG's revenues of $16,603,901 in
1993. There were no revenues from real estate operations in
either 1994 or 1993. The Company in 1994 achieved gross
profits of 4,450,197 or 23.5% of revenues as opposed to
$2,875,055 or 17.3% of revenues in 1993. In spite of the
increase in revenues and the increase in the gross profits in
both absolute and relative terms, the net loss in 1994 was
only marginally less than in 1993 - i.e. $2,384,373 as
compared to $2,457,631.
During the year ended December 31, 1994, the Corporation
experienced a net outflow of cash from operations in the
amount of $2,408,770 compared to a deficit of $1,562,856 in
1993. The deficit in 1994 was almost entirely due to the
losses experienced during the year which accounted for
approximately 96% of that amount. The negative cash flow from
operations was offset through new funding from financing
activities which produced $2,818,498 in 1994 and $1,654,161 in
1993.
Most of the cash flow from financing activities during both
years represented proceeds derived from the private placement
of the Corporation's Common and Preferred Shares with German
investors pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Corporation's Financial Statements 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
Changes in Registrant's Certifying Accountant.
(a)
304(a)(1)(i): Neil James & Associates, P.C., Registrant's former
independent accountant previously engaged as the principal accountant to audit
the Registrant's financial statements, was dismissed on December 18, 1995.
(a)(1)(ii): Mr. Neil James & Associates, P.C. did not issue any
reports on the Registrant's financial statements for the past two
fiscal years.
(a)(1)(iii): The Registrant's Board of Directors recommended
and approved the hiring of Rosenberg Rich Baker Berman & Company
Certified Public Accountants, 380 Foothill Road, Bridgewater, New
Jersey as the Registrant's principal independent accountant and to
dismiss Neil James & Associates, P.C.
(a)(1)(iv)(A): Registrant is unaware of any disagreements
between Registrant and Neil James & Associates, P.C. on any matter
of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
(a)(1)(iv)(B)(1),(2) and (3): Not applicable.
(a)(1)(iv)(C): Not applicable.
(a)(1)(iv)(D): Not applicable.
(a)(1)(iv)(E): Registrant authorized its former accountant, Neil James
& Associates, P.C., to respond fully to inquiries of Rosenberg Rich Baker Berman
& Company, its successor accountant, concerning the subject matter of each and
every disagreement or event, if any, known by Registrant's former accountant.
(a)(2): Registrant's new independent auditors are Rosenberg Rich Baker
Berman & Company who were engaged on December 15, 1995.
(a)(2)(i): Registrant's management engaged in general business
conversation with its new accountant, who did not, during such conversations,
render any advice to Registrant, oral or written, which was an important factor
considered by Registrant in reaching any accounting, auditing or financial
reporting issue decisions.
(a)(2)(ii): Registrant's management did not consult its new accountant
regarding any matter that was the subject of a disagreement or event referred to
in (a)(1)(iv) above since Registrant is unaware and has no knowledge of any such
disagreement or event.
(a)(2)(ii)(A),(B), and (C): Not applicable.
(a)(2)(ii)(D): Registrant has requested its new accountant to review
the disclosure required by this Item before it is filed with the Securities and
Exchange Commission and has been provided the opportunity to furnish Registrant
with a letter addressed to the Commission containing any new information,
clarification of Registrant's expression of its views, or the respects in which
it does not agree with the statements made in response to this Item.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The names and ages of all directors and executive officers of the Corporation
are as follows:
Name Position Term(s) of Office
---- -------- -----------------
Volker Montag, Age 44 President, Chief Financial Officer July 22, 1991 to Present
and Director
Roland Schoneberg, Age 40 Secretary, Vice President and Director November 1, 1995 to Present
There are no family relationships among the Corporation's Officers and
Directors.
All Directors of the Corporation 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 Corporation'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 Corporation in July 1992.) From 1988 to 1990, Mr.
Montag was the Managing Director of Opti-Wert Interest, AG (now, Prime Core AG
of Zug, Switzerland), a Swiss brokerage company, which is a wholly owned
subsidiary of the Corporation.
Roland Schoneberg - Mr. Schoneberg was born in Germany and
currently lives in Cologne, Germany. He has been serving as
director of the Company since November 1995.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and directors and beneficial owners of more than 10% of any
class of equity securities of the Company registered pursuant to Section 12 of
the 1934 Act to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors, and beneficial owners
of more than 10 percent of any class of equity securities of the Company
registered under the 1934 Act are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms filed.
Based solely on the review of the certified list of shareholders provided by the
Company's transfer agent and on the review of the Exchange Act forms furnished
to the Company, the Company believes that the following reporting delinquencies
occurred during the Company's fiscal year ended December 31, 1996:
Section 16(a) Reporting Delinquencies
Forms 3, Initial Statement of Beneficial Ownership of Securities, Forms 4,
Statement of Changes of Beneficial Ownership of Securities, and Forms 5, Annual
Statement of Changes in Beneficial Ownership, due from directors Volker Montag
and Roland Schoeneberg showing their ownership interest in the Corporation's
common shares and as reflected in Item 12, below, have not been filed as of the
date of this Report.
ITEM 11: EXECUTIVE COMPENSATION
No compensation was paid directly to the officers and
directors of the Corporation over the last fiscal year. The
Corporation does, however, reimburse its officers and
directors for any and all out of pocket expenses incurred
relating to the business of the Corporation. Also, the
Corporation pays its German affiliate, Prime Core Makler GmbH,
significant brokerage fees and substantial administrative
charges for providing the facilities and infrastructure for
the Corporation's network of brokers. Mssrs. Volker Montag and
Roland Schoeneberg, the officers and directors of the
Corporation, indirectly own all of the interest in Prime Core
Makler GmbH through another corporation, Secure Securities,
Ltd. In addition, the current officers and directors are also
compensated as brokers: see Item 13, Certain Relationships and
Related Transactions, below.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of December 31, 1996, there were 10,300,322 Common Shares
outstanding. The following tabulates holdings of shares of the
Corporation by each person who, subject to the above, at the
date of this Memorandum, 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
Corporation individually and as a group.
Title Name and Address of Amount and Nature of Percent
of Class Beneficial Owner Beneficial Ownership of Class
- -------- ---------------- -------------------- --------
Common Secure Securities, Ltd.
Stock c/o Hugo Winkler
665 Finchley Road
London, UK 260,240* 2.53%
Visa International, PLC
c/o Hugo Winkler
665 Finchley Road
London, UK 91,463* 0.89%
Volker Montag
c/o Prime Core AG
Industriel Str. 9
Postfach 6300 ZUB
Switzerland 351,703* 3.41%
Roland Schoneberg
c/o Prime Core AG
Industriel Str. 9
Postfach 6300 ZUB
Switzerland 351,703* 3.41%
All Directors and Officers
as a Group 351,703* 3.41%
*Messrs. Volker Montag and Roland Schoneberg are the only shareholders of
Secure Securities, Ltd. and Visa International, PLC.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Commissions to Affiliate. Secure Securities, Ltd., a
shareholder of the Corporation, owned and controlled by
Messrs. Volker Montag and Roland Schoneberg, owns a German
company, Prime Core Makler GmbH, having its principal offices
located in Dusseldorf, Germany (formerly known as Telecom
GmbH). Prime Core Makler GmbH provides all of the
administrative services to Prime Core AG, the Corporation's
wholly owned subsidiary ("PC-AG"), for its securities
brokerage business. During fiscal years 1996, 1995 and 1994,
PC-AG paid Prime Core Makler GmbH $5,659.749, $4,643,639 and
$2,731,982 respectively, for their administrative services.
Prime Core Makler GmbH also pays all of PC-AG's brokerage
commissions arising out of PC-AG sales to its customers, due
to non-affiliated third parties which amounted to $7,026,135
in 1996, $5,757,210 in 1995, and $2,554,161 in 1994.
(b) Loan to Officer and Director. During 1993, OWI-AG (now,
PC-AG) made a loan in the amount of $141,750 to Mr. Volker
Montag, an officer and director of the Company. The loan's
outstanding principal balance accrues interest at the rate of
five (5%) percent, per annum, and payments in the amount of
$7,020 are due quarterly.
(C) Payments to Officer. The Company advanced funds to its
officers and directors and, in certain instances, to entities
in which they have ownership interests. Such advances
amounting to $4,663,107, $1,638,433, and $522,561 at December
31, 1996, 1995, and 1994, respectively, are unsecured, and in
certain instances were non-interest bearing obligations
without a stated due date. With respect to a certain amount of
these loans, the officers and directors have executed
revolving credit agreements and delivered promissory notes to
the Corporation: see "Documents recently Executed", below.
Management has established allowances against the above
advances for uncollectibility amounting to $2,816,940,
$300,000, and $0 for the fiscal years ended December 31, 1996,
1995 and 1994, respectively.
(d) Documents recently executed.
1. December 12, 1997: Revolving Credit Agreement By and
Between Montag and Finca pursuant to which the
Company permits Montag to borrow up to $500,000;
Montag signing personal note, promising to pay annual
interest at 5% and to pay off debt on or before
December 12, 1999: see Exhibit 10.1.
Outstanding balance at date is $330,859
2. December 12, 1997: Revolving Credit Agreement By and
Between Schoeneberg and Finca pursuant to which the
Company permits Schoeneberg to borrow up to $500,000;
Schoeneberg signing personal note, promising to pay
annual interest at 5% and to pay off debt on or
before December 12, 1999: see Exhibit 10.2
Outstanding balance at date is $330,859.
3. December 12, 1997: Revolving Credit Agreement By and
Between Prime Core Holding AG, a corporation owned by
Messrs. Montag and Schoeneberg and Finca Consulting,
Inc. Pursuant to which Finca permits Prime Core to
borrow up to DM4,000,000; Prime Core signed a
corporate note, promising to pay annual interest at
5% and to pay off debt on or before December 12,
1999. In conjunction therewith, Messrs. Montag and
Schoeneberg further executed an "Unlimited Continuing
Guaranty Agreement", pursuant to which Messrs.Montag
and Schoeneberg personally guaranteed the repayment
to Finca of the debt of Prime Core Holding, AG: see
Exhibit 10.3 .
4. December 15, 1997: Letter of Intent signed between
Finca Consulting, Inc. And Prime Core Holding, Inc.,
a Delaware corporation owned by Messrs. Montag and
Schoeneberg, pursuant to which Finca will merge with
and into Prime Core Holding, Inc. on a share exchange
basis, one share of Prime Core Holding, Inc. for one
Finca common share, reincorporating the surviving
company under the laws of Delaware, which shall
become the surviving reporting company under the
Securities Exchange Act of 1934, as amended, which
transactions are subject to regulatory approval and
the affirmative vote of shareholders owning a
majority of Finca's outstanding common shares: see
Exhibit 10.4 .
5. April 1, 1997: Broker agreement by and between
Dr.Roland Schoeneberg and Prime Core AG pursuant to
which Prime Core pays to Dr.Schoeneberg DM65,000 per
month in draw payments against commissions accrued on
the solicitation of contracts for the purchase or
sale of securities by potential clients for Prime
Core AG. Volker Montag has an identical agreement:see
Exhibit 10.5 .
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, 1996.
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.
Date: December 23, 1997 /S/ Volker Montag
-------------- ----------------------
By: Volker Montag
President
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 December 23, 1997
- ------------------------------------- ------------------
Volker Montag, President
and Director
/S/Roland Schoeneberg December 23, 1997
- ------------------------------------- ------------------
Roland Schoeneberg, Secretary
and Director
EXHIBIT INDEX
(A) Financial Statements and Notes to Financial Statements
(3)(i) Articles of Incorporation 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) By Laws 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, Inc., with copy of promissory note and
guaranty of Mssrs. 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.
(16) Documentation regarding change in certifying accountant
incorporated by reference to Form 8-K filed in February, 1993
and Form 8-K filed in December 1995.
(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 (formerly Opti-Wert-Interest AG)
- is a corporation formed under the
laws of the Country of Switzerland
and conducts its retail securities
and options business in Germany.
(23) Independent Auditors' Consent - attached to Exhibit A
(27) Financial Data Schedule - attached to Exhibit A
EXHIBIT A
Finca Consulting, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 1996, 1995 and 1994
Finca Consulting, Inc. and Subsidiaries
Index to the Consolidated Financial Statements
December 31, 1996, 1995 and 1994
Independent Auditors' Report on the Financial Statements........................
Financial Statements
Consolidated Balance Sheets................................................
Consolidated Statements of Operations......................................
Consolidated Statements of Changes in Stockholders' Equity.................
Consolidated Statements of Cash Flows......................................
Notes to the Consolidated Financial Statements.............................
Independent Auditors' Report
Rosenberg Rich Baker Berman & Company
380 Foothill Road
Bridgewater, New Jersey 08807
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, 1996, 1995 and 1994, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion 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 provides 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, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statementshave 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, 1996 the Company has
experienced net losses and has experienced 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 financial statements. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or classification of liabilities that might be necessary
should the Company be unable to continue in operation.
/s/Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
November 20, 1997, except for Note 10 which is dated December 15, 1997.
Finca Consulting, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31,
------------------------------------------------------
1996 1995 1994
------------ ------------ ------------
Assets
Current Assets
Cash and cash equivalents ........................................ $ 4,928,557 $ 6,004,844 $ 997,218
Other current assets ............................................. 111,245 248,237 75,612
------------ ------------ ------------
Total Current Assets ........................................ 5,039,802 6,253,081 1,072,830
------------ ------------ ------------
Property and Equipment .............................................. 629,826 604,108 649,523
------------ ------------ ------------
Other Assets
Receivables due from related parties ............................. 1,846,167 1,338,433 522,561
Other assets ..................................................... 251,875 164,564 162,186
------------ ------------ ------------
Total Other Assets .......................................... 2,098,042 1,502,997 684,747
------------ ------------ ------------
Total Assets ................................................ 7,767,670 8,360,186 2,407,100
============ ============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses ............................ 283,249 384,885 279,491
Customer credit balances ......................................... 3,023,484 2,067,660 833,374
------------ ------------ ------------
Total Current Liabilities ................................... 3,306,733 2,452,545 1,112,865
------------ ------------ ------------
Minority Interest in Subsidiary ..................................... 45,632 45,632 45,632
------------ ------------ ------------
Stockholders' Equity
Common stock, $.01 par value, 20,000,000 shares
authorized, 10,300,322, 2,146,633 and 2,146,633
shares issued and outstanding, respectively ...................... 103,003 21,466 21,466
Preferred stock; $.00001 par value, 20,000,000 shares
authorized, 0, 4,109,226 and 1,704,451 shares issued
and outstanding, respectively .................................... -- 41 17
Capital in excess of par value ................................... 13,510,301 13,724,083 7,927,857
Accumulated deficit .............................................. (9,203,652) (8,020,268) (6,813,246)
Cumulative translation adjustment ................................ 5,653 139,445 114,408
Treasury stock, 0, 275,812 and 189,899 common
shares ........................................................... -- (2,758) (1,899)
------------ ------------ ------------
Total Stockholders' Equity .................................. 4,415,305 5,862,009 1,248,603
------------ ------------ ------------
Total Liabilities and Stockholders' Equity .................. $ 7,767,670 $ 8,360,186 $ 2,407,100
============ ============ ============
See notes to the consolidated financial statements.
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Operations
Year Ended December 31,
----------------------------------------------------------
1996 1995 1994
------------ ------------ ------------
Revenues ...................................................... $ 86,163,171 $ 49,409,821 $ 18,900,827
Cost of shares and options .................................... 68,525,189 37,695,202 14,450,630
------------ ------------ ------------
Gross Profit .................................................. 17,637,982 11,714,619 4,450,197
Selling, general and administrative expenses .................. 20,476,324 13,012,547 6,801,094
------------ ------------ ------------
(Loss) From Operations ........................................ (2,838,342) (1,297,928) (2,350,897)
------------ ------------ ------------
Other Income (Expense)
Interest income ............................................ 292,050 90,906 --
Loss on disposition of subsidiary .......................... (470,217) -- (33,476)
------------ ------------ ------------
Total Other Income (Expense) .......................... (178,167) 90,906 (33,476)
------------ ------------ ------------
(Loss) Before provision for Income Taxes ...................... (3,016,509) (1,207,022) (2,384,373)
Provision for Income Taxes .................................... -- -- --
------------ ------------ ------------
Net Income (Loss) ............................................. (3,016,509) (1,207,022) (2,384,373)
============ ============ ============
Net Income (Loss) Per Share ................................... $ (0.48) $ (0.56) $ (1.11)
============ ============ ============
Weighted Average Number of Common Shares ......................
Outstanding 6,223,477 2,146,633 2,146,633
============ ============ ============
See notes to the consolidated financial statements.
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Year Ended December 31, 1996
Preferred Stock Common Stock
-------------------------- ----------------------------
Capital
in Excess
Par Par of Par
Shares Value Shares Value Value
-------------- -------- -------------- ----------- ---------------
Balance - December 31, 1995 4,109,226 $ 41 2,146,633 $ 21,466 $ 13,724,083
Adjustment for accumulated
deficit of former subsidiary - - - - -
Adjustment to correct Treasury
stock - - - - (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 - - - - -
Net (Loss) for the year ended
December 31, 1996 - - - - -
-------------- -------- -------------- ----------- ---------------
Balance - December 31, 1996 - $ - 10,300,322 $ 103,003 $ 13,510,301
============== ======== ============== =========== ===============
Treasury Stock
-------------------------------
Retained
Earnings Cumulative
Par (Accumulated Translation
Shares Value Deficit) Adjustment
--------------- ------------ ---------------- ---------------
Balance - December 31, 1995 (275,812) $ (2,758) $ (8,020,268) $ 139,445
Adjustment for accumulated
deficit of former subsidiary - - 1,833,125 -
Adjustment to correct Treasury
stock 275,812 2,758 - -
Redemption of preferred shares - - - -
Conversion of preferred shares
into common shares - - - -
Foreign currency translation loss - - - (133,792)
Net (Loss) for the year ended
December 31, 1996 - - (3,016,509) -
--------------- ------------ ---------------- ---------------
Balance - December 31, 1996 - $ - $ (9,203,652) $ 5,653
=============== ============ ================ ===============
See notes to the consolidated financial statements.
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Year Ended December 31, 1995
Preferred Stock Common Stock
------------------------- ---------------------------
Capital
in Excess
Par Par of Par
Shares Value Shares Value Value
------------- -------- ------------- --------- ---------------
Balance - December 31, 1994 1,704,451 $ 17 2,146,633 $ 21,466 $ 7,927,857
Acquisition of treasury stock - - - - (343,652)
Issuance of preferred stock, less
offering costs of $2,110,400 2,404,775 24 - - 6,139,878
Foreign currency translation gain - - - - -
Net (Loss) for the year ended
December 31, 1995 - - - - -
------------- -------- ------------- --------- ---------------
Balance - December 31, 1995 4,109,226 $ 41 2,146,633 $ 21,466 $ 13,724,083
============= ======== ============= ========= ===============
Treasury Stock
----------------------------
Retained
Earnings Cumulative
Par (Accumulated Translation
Shares Value Deficit) Adjustment
------------- ----------- ----------------- ----------------
Balance - December 31, 1994 (189,899) $ (1,899) $ (6,813,246) $ 114,408
Acquisition of treasury stock (85,913) (859) - -
Issuance of preferred stock, less
offering costs of $2,110,400 - - - -
Foreign currency translation gain - - - 25,037
Net (Loss) for the year ended
December 31, 1995 - - (1,207,022) -
------------- ----------- ----------------- ----------------
Balance - December 31, 1995 (275,812) $ (2,758) $ (8,020,268) $ 139,445
============= =========== ================= ================
See notes to the consolidated financial statements.
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Year Ended December 31, 1994
Preferred Stock Common Stock
------------------------- ---------------------------
Capital
in Excess
Par Par of Par
Shares Value Shares Value Value
------------- -------- ------------- --------- ---------------
Balance - December 31, 1993 16,305 $ 1 2,146,633 $ 21,466 $ 5,107,476
Acquisition of treasury stock - - - - (757,981)
Issuance of preferred stock, less
offering costs of $1,841,260 1,688,146 16 - - 3,578,362
Foreign currency translation gain - - - - -
Net (Loss) for the year ended
December 31, 1994 - - - - -
------------- -------- ------------- --------- ---------------
Balance - December 31, 1994 1,704,451 $ 17 2,146,633 $ 21,466 $ 7,927,857
============= ======== ============= ========= ===============
Treasury Stock
---------------------------
Retained
Earnings Cumulative
Par (Accumulated Translation
Shares Value Deficit) Adjustment
------------- ---------- ------------------ ---------------
Balance - December 31, 1993 - $ - $ (4,428,873) $ (71,249)
Acquisition of treasury stock (189,899) (1,899) - -
Issuance of preferred stock, less
offering costs of $1,841,260 - - - -
Foreign currency translation gain - - - 185,657
Net (Loss) for the year ended
December 31, 1994 - - (2,384,373) -
------------- ---------- ------------------ ---------------
Balance - December 31, 1994 (189,899) $ (1,899) $ (6,813,246) $ 114,408
============= ========== ================== ===============
See notes to the consolidated financial statements.
Finca Consulting, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended December 31,
------------------------------------------------
1996 1995 1994
----------- ----------- -----------
Cash Flows From Operating Activities
Net (Loss) ................................................................... $(3,016,509) $(1,207,022) $(2,384,373)
Adjustments to Reconcile Net (Loss) to Net Cash (Used in)
Operating Activities:
Depreciation ............................................................ 87,686 51,736 70,412
(Increase) Decrease in other current assets ............................. 136,992 (172,625) (21,475)
(Increase) Decrease in receivables due from related parties ............. 1,325,391 (815,872) (228,630)
(Increase) Decrease in other assets ..................................... (87,311) (2,378) 184,860
Increase (Decrease) in accounts payable and accrued expenses ............ (101,636) 105,394 63,774
Increase (Decrease) in customer credit balances ......................... 955,824 1,234,286 (93,338)
----------- ----------- -----------
Net Cash (Used in) Operating Activities ............................. (699,563) (806,481) (2,408,770)
----------- ----------- -----------
Cash Flows From Investing Activities
(Purchase) disposition of property and equipment ........................ (113,404) (6,321) 50,132
----------- ----------- -----------
Net Cash (Used in) Investing Activities ............................. (113,404) (6,321) 50,132
----------- ----------- -----------
Cash Flows From Financing Activities
Issuance of preferred shares ............................................ -- 6,139,902 3,578,378
Redemption of preferred shares .......................................... (129,528) -- --
Acquisition of treasury shares .......................................... -- (344,511) (759,880)
----------- ----------- -----------
Net Cash Provided by (Used in) Financing Activities ................. (129,528) 5,795,391 2,818,498
----------- ----------- -----------
Effect of Exchange Rate Changes on Cash ...................................... (133,792) 25,037 185,657
----------- ----------- -----------
Net Increase (Decrease) in Cash .............................................. (1,076,287) 5,007,626 645,517
Cash and cash equivalents at Beginning of Year ............................... 6,004,844 997,218 351,701
----------- ----------- -----------
Cash and cash equivalents at End of Year ..................................... $ 4,928,557 $ 6,004,844 $ 997,218
=========== =========== ===========
See notes to the consolidated financial statements.
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 $3,016,509 in 1996,
$1,207,022 in 1995 and $2,384,373 in 1994. Additionally, the
Company generated negative cash flows from operations of
$699,563, $806,481 and $2,408,770 in 1996, 1995 and 1994.
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 as well as to effect a reduction of administrative
expenses.
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 in 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.
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 1 - THE COMPANY AND 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
The Company recognizes income taxes according to SFAS No. 109.
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.
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 1996, 1995, and 1994 10,300,332, 2,146,633 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,
----------------------------------
1996 1995 1994
--------- --------- ---------
Land ......................................... $ 115,560 $ 115,563 $ 115,563
Buildings .................................... 462,257 492,254 492,254
Office furniture and equipment ............... 364,486 286,783 280,462
--------- --------- ---------
Subtotal ................................ 942,303 894,600 888,279
Less accumulated depreciation and amortization 312,477 (290,492) (238,756)
--------- --------- ---------
Total ................................... $ 629,826 $ 604,108 $ 649,523
========= ========= =========
Depreciation expense charged to operations was $87,686 in 1996,
$51,736 in 1995 and $70,412 in 1994.
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 3 - RELATED PARTY TRANSACTIONS
(1) The Company advances from time to time, funds to certain
officers and directors of the Company and 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) amounting to
$4,663,107 at December 31, 1996, $1,638,433 at December
31, 1995 and $522,561 at December 31, 1994 are
non-interest bearing unsecured obligations without a
stated due date. Management has established allowances for
uncollectibility amounting to $2,816,940, $300,000 and $0
respectively.
(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 $5,659,749 in 1996,
$4,643,639 in 1995 and $2,731,982 in 1994. Additionally,
Prime Core Makler GmbH pays brokerage fees on behalf of
the Company which amounted to $7,026,135 in 1996,
$5,757,210 in 1995 and $2,552,161 in 1994.
(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
proportionate costs of the offering, consisting of
allocable selling, general and administrative expenses
amounted to $1,841,260 and $2,110,400 have been charged
against such proceeds.
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 it's
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 April 2,
1996 which consist of a net loss of $262,594 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 8,153,689 common shares pursuant to the terms of the
Company's preferred share certificates.
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 6 - INCOME TAXES
As of December 31, 1996, 1995 and 1994 the Company has U.S. net
operating loss carryforward of approximately $1,000,000,
substantially all of which expires by 2003. 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 certain office space and certain office
equipment 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, 1996. The schedule is as follows:
Year Ending December 31,
1997 $ 127,329
1998 116,654
1999 116,654
2000 116,654
2001 29,831
2002 and thereafter -
Aggregate expense pursuant to operating leases amounted to $117,195
in 1996, $116,695 in 1995 and $179,264 in 1994.
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.
Finca Consulting, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
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 Company conducts no current business activities and has no
identifiable assets in the United States.
NOTE 10 - SUBSEQUENT EVENTS
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.
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.