SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
------------------
Commission File Number: 0-26322
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EAGLE CAPITAL INTERNATIONAL, LTD.
- -----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 88-0303769
- ------------------------ -----------------------
(State of Incorporation) (IRS Employer I.D. No.)
1900 Corporate Blvd., 4th Floor, East Tower, Boca Raton, FL 33431
- -----------------------------------------------------------------
(Address of principal executive offices )
(561) 988-2550
------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the Issuer: (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports); and (2) has been subject to such filing requirements for the
past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
There were 11,938,686 shares of Common Stock, $.01 par value,
issued and outstanding at September 30, 2000.
EAGLE CAPITAL INTERNATIONAL, LTD.
INDEX
PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets - September 30, 2000 (Unaudited) and
December 31, 1999
Statements of Operations - For the three and nine
months ended September 30, 2000 and 1999 (Unaudited).
Statements of Cash Flows - Nine months ended September
30, 2000 and 1999 (Unaudited).
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security-Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
EAGLE CAPITAL INTERNATIONAL, LTD.
PART I - FINANCIAL INFORMATION
Item I. Consolidated Financial Statements
---------------------------------
3
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------- ------------
CURRENT ASSETS:
Cash $ 2,361,416 $ 20,326
Advances to Bullhide 70,900 -
Advances to
Business Dimensions 14,000 -
Other advances 27,581 -
----------- -----------
TOTAL CURRENT ASSETS 2,473,897 20,326
----------- -----------
FIXED ASSETS -
Mobile Block Plant #1 608,112 -
Mobile Block Plant #2 255,000 -
Fixed Block Plant 130,000 -
Mobile SB Machine (India) 218,500 185,100
Other 27,439 -
----------- -----------
TOTAL FIXED ASSETS 1,239,051 185,100
----------- -----------
OTHER ASSETS -
Equipment Deposits 200,000 300,000
Investments:
Bullhide 201,363 -
Great Wall/China - 1,771,018
C.T. India - 1,150,800
C.T. Mexico - 681,830
I.M.S.I. (net of
accumulated amortization
of $210,000 at September
30, 2000) 5,390,000 5,600,000
Purchased goodwill in
CT Great Wall of China
(net of accumulated
amortization of $46,609
at September 30, 2000) 1,817,759 -
China joint venture 557,632 -
License Rights (net of
accumulated amortization
of $3,188 at September
30, 2000) 91,812 90,000
----------- -----------
TOTAL OTHER ASSETS 8,258,566 9,593,648
----------- -----------
TOTAL ASSETS $11,971,514 $ 9,799,074
=========== ===========
See notes to financial statements.
4
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------- ------------
CURRENT LIABILITIES:
Accounts payable $ 1,051,867 $ 94,173
Advances from officer 1,237,170 5,860
Commitments payable to
unconsolidated subsidiaries - 149,500
Deferred revenue 100,000 -
Other short term notes payable 2,880,000 475,000
------------- ------------
TOTAL CURRENT LIABILITIES 5,269,037 724,533
------------- ------------
SHAREHOLDERS' EQUITY:
Preferred Stock A, $.001
par value, 10,000,000 shares
authorized, 897,400 and
1,080,600 shares issued
and outstanding at
September 30, 2000 and
December 31, 1999 897 1,081
Preferred Stock B, $.001
par value, 10,000,000 shares
authorized, 565,846 and 856,021
shares issued and outstanding
at September 30, 2000 and
December 31, 1999 566 856
Common Stock, $.001 par value,
70,000,000 shares authorized,
11,938,686 and 7,103,228 shares
issued and outstanding
at September 30, 2000 and
December 31, 1999 11,938 7,103
Additional paid in capital 14,213,029 13,202,755
Deficit accumulated prior to
January 1, 1998 (708,682) (708,682)
Deficit accumulated during
development stage (from
January 1, 1998) (6,815,271) (3,428,572)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 6,702,477 9,074,541
------------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 11,971,514 $ 9,799,074
============= ============
See notes to financial statements.
5
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine months Ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
SALES $ 2,166,667 $ -0- $ 2,166,667 $ -0-
COST OF SALES 766,453 -0- 766,453 -0-
----------- ----------- ----------- -----------
GROSS PROFIT 1,400,214 -0- 1,400,214 -0-
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Accounting 176 3,000 26,766 38,805
Advertising/marketing 1,558 12,500 28,134 25,625
Amortization 94,367 - 259,797 -
Bank charges 1,825 488 4,593 801
Commission 151,667 - 151,667 -
Common stock for services 347,717 - 568,467 -
Consulting fees 106,351 24,400 141,141 897,040
Contract labor 26,379 - 40,440 -
Financing fees 43,600 - 222,600 106,500
Freight - - 20,407 -
Legal fees 62,541 31,000 142,221 88,179
Lone Wolf settlement - - 1,000,000 -
Management Fees - - 40,085 -
Miscellaneous 3,021 4,771 5,339 30,566
Office 5,055 4,330 11,214 37,644
Other Professional Fees 14,125 - 15,125 -
Payroll and Taxes 1,407 - 75,938 -
Rent 29,830 3,390 50,243 8,690
Royalties 71,714 - 71,714 -
Telephone 14,424 2,060 26,044 8,590
Travel 42,723 7,925 104,107 23,984
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 1,018,480 93,864 3,006,042 1,266,424
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 381,734 (93,864) (1,605,828) (1,266,424)
----------- ----------- ----------- -----------
6
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (Cont'd)
(Unaudited)
Three Months Ended Nine months Ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
NON-OPERATING COSTS:
Impairment of goodwill $ - $ - $ 1,714,387 $ -
Interest Expense 33,414 - 33,656 504
Loss on Sale of Securities 27,828 - 27,828 -
Contributions - - 5,000
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 320,492 $ (93,864) $(3,386,699) $(1,266,928)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
- Basic 10,912,738 3,142,118 8,625,446 2,458,940
- Diluted 17,199,958 3,142,118 8,625,446 2,458,940
NET INCOME (LOSS) PER
COMMON SHARE:
- Basic $ .03 $ (.03) $ (.39) $ (.52)
----------- ----------- ----------- -----------
- Diluted $ .02 $ (.03) $ (.39) $ (.52)
----------- ----------- ----------- -----------
See notes to financial statements.
7
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months Ended
September 30, September 30,
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(3,386,699) $(1,266,928)
Impairment of goodwill 1,714,387 -
Amortization 259,797 -
Stock issued for services 568,467 688,400
Net change in operating assets
and liabilities:
Advances (112,481) -
Commitments payable to
unconsolidated subsidiaries (110,500) -
Note payable - Lone Wolf 1,000,000 -
Deferred revenue 100,000
Accounts payable 948,694 138,157
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATIONS 981,665 (440,371)
----------- -----------
CASH USED IN INVESTING
ACTIVITIES:
Deposits on equipment - (162,000)
Investment in subsidiaries
(net of cash acquired) (485,163) (210,500)
Investment in license rights (5,000) -
Purchase of property and
equipment (951,094) -
----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (1,441,257) (372,500)
----------- -----------
CASH PROVIDED BY FINANCING
ACTIVITIES:
Advances from officer 1,023,182 -
Increase in Other Short
Term Notes Payable 1,705,000 -
Cash for sale of stock 72,500 1,033,923
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,800,682 1,033,923
----------- -----------
NET INCREASE IN CASH 2,341,090 221,052
CASH AT BEGINNING OF PERIOD 20,326 48
----------- -----------
CASH AT END OF PERIOD $ 2,361,416 $ 221,100
=========== ===========
See notes to financial statements.
8
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SUPPLEMENTAL CASH FLOW INFORMATION
Nine Months Ended
September 30,
2000 1999
---------- -----------
Cash paid for the period for:
Interest $ 33,656 $ 504
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
1. During the nine months ended September 30, 2000, the Company's
ownership interest in CT Great Wall of China, CT Mexico and CT India
increased to 100%, 100%, and 70%, respectively. In connection
therewith, the following accounting has been recorded as of
September 30, 2000, and for the nine months then ended:
CT Great Wall CT CT
of China Mexico India
------------- ----------- -----------
Carrying value of investments
as of December 31, 1999 $ 1,771,018 $ 681,830 $ 1,150,800
Issuance of 29,467 shares of
Preferred B Stock 73,668 - -
Cash advances 418,250 - -
----------- ----------- -----------
Carrying value of investments
as of September 30, 2000 $ 2,262,936 $ 681,830 $ 1,150,800
=========== =========== ===========
The following represents the accounting recorded as of September 30,
2000, to consolidate the three subsidiaries:
CT Great Wall CT CT
of China Mexico India
------------- ----------- -----------
CT Great Wall CT
Goodwill $ 1,864,368 $ 625,837 $ 1,088,550
Equipment 2,857 - -
China Joint Venture 550,382 - -
Accounts payable (9,000) - -
Advances from officer (175,000) (30,028) (3,100)
Eliminate inter-company payable - 12,000 27,000
Other 29,329 74,021 38,350
------------- ----------- -----------
$ 2,262,936 $ 681,830 $ 1,150,800
============= =========== ===========
2. During the nine months ended September 30, 2000, the Company issued
300,000 shares of common stock in exchange for the forgiveness of
a $300,000 note payable owed by the Company to an officer and
shareholder.
9
EAGLE CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 2000)
NOTE 1 - THE COMPANY
-----------
Eagle Capital International, Ltd. and its wholly-owned and
majority owned subsidiaries ("the "Company") is a Nevada
corporation in the business of the manufacture, distribution
and application of technologically advanced building products
through a series of licensing agreements with Integrated
Masonry Systems International, Inc. ("IMSI"), a Nevada
corporation, and through license and distribution rights of
other technologically advanced building products.
In March 2000, the Company acquired approximately 44% of
Bullhide Liner Corporation ("Bullhide") in exchange for
approximately $200,000. Bullhide has patented technologies
and methods which management believes will compliment the
Company's international plans.
On April 25, 2000, proxies were submitted by a majority of the
shareholders of the Company approving a change of the
Company's name to Eagle Building Technologies, Ltd. It is
anticipated that the name change will take effect in the
fourth quarter of 2000.
Impairment of Goodwill - The Company recorded impairment of
goodwill in the amount of $1,714,387 during the nine months
ended September 30, 2000. The goodwill was purchased in
connection with the acquisition of CT Mexico and CT India.
Such acquisitions were made in order to acquire the licenses
to the IMSI building block system in Mexico and India.
Subsequent to such acquisitions, the current management of the
Company discovered that such licenses were not perfected which
forced the Company to acquire the license rights directly from
IMSI under an agreement which requires the Company to pay IMSI
a 4.5% royalty on all sales with a minimum royalty required.
In addition, it also became apparent that CT Mexico and CT
India had not entered into relationships which would result in
sales through such subsidiaries. As a result, the Company has
determined the purchased goodwill in CT Mexico and CT India is
of no value to the Company and has recorded a loss in the
amount of $1,714,387 during the nine months ended September
30, 2000.
10
EAGLE CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 2000)
NOTE 1 - THE COMPANY (Cont'd)
-----------
Amortization - The Company recorded amortization expense of
$259,797 for the nine months ended September 30, 2000. During
the year ended December 31, 1999, the Company purchased a 38%
interest in IMSI. The sole asset of IMSI is the patent to the
IMSI Building Block System. The Company has determined to
write-off its investment in IMSI over 20 years and has
recorded amortization expense of $210,000 for the nine months
ended September 30, 2000. Amortization expense for the nine
months ended September 30, 2000 also includes amortization
of goodwill in the amount of $46,610 for the Company's
investment in CT Great Wall of China (See Note 2) and $3,187
for licenses amortized over 20 years.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Presentation - The accompanying unaudited
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with instructions to Form
10-Q and Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(which include only normal recurring adjustments) considered
necessary for a fair presentation have been included. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
annual report on Form 10-KSB for the year ended December 31,
1999.
In order to maintain consistency and comparability between
periods presented, certain amounts have been reclassified
from the previously reported financial statements in order
to conform with the financial statement presentation of the
current period.
Principles of Consolidation - As of September 30, 2000 and for
the three and nine months then ended, the accompanying
financial statements included the accounts of Eagle Capital
International, Ltd, and its wholly-owned subsidiaries, CT
Great Wall of China and CT Mexico and its majority owned (70%)
subsidiary, CT India. All intercompany accounts and
transactions are eliminated in consolidation. During the nine
months ended September 30, 2000, the Company's ownership
interest in CT Great Wall of China increased from 49% to 100%,
in CT Mexico from 49% to 100% and in CT India from 40% to 70%.
11
EAGLE CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 2000)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
------------------------------------------
The principal reason for such increases was the result of a verbal
renegotiation of the percentage purchased in 1999. The
renegotiation required the shareholders in CT Great Wall of
China, CT Mexico and CT India to surrender shares in such
companies until the Company's ownership increased to 100% in
CT Great Wall of China, 100% in Ct Mexico and 70% in CT India.
The shares were surrendered through approximately April 2000
when it was determined that the terms of the verbal
renegotiations were complete. As such, the Company for
financial statement purposes considered itself to exercise
control as of April 2000 and has begun to consolidated such
subsidiaries beginning April 1, 2000.
The renegotiation of the percentage originally purchased in CT
Great Wall of China, CT Mexico and CT India was agreed to
after the current management of the Company discovered that
the three companies had not perfected their various license
agreements in the IMSI building Block System with IMSI. As a
result, the Company acquired such licenses directly from IMSI
in exchange for a 4.5% royalty on all sales payable to IMSI
with minimum royalties required under the agreement.
Upon changing from the equity method of accounting to
consolidating CT Great Wall of China, CT Mexico and CT India
as of April 1, 2000, the following was recorded as of April 1,
2000:
CT Great Wall CT CT
of China Mexico India
------------- ----------- -----------
Equipment $ 2,857 $ - $ -
China Joint Venture 550,382 - -
Other net current assets
(liabilities) (154,671) 55,993 62,250
------------- ----------- -----------
Total 398,568 55,993 62,250
Recorded purchase price 2,262,936 681,830 1,150,800
------------- ----------- -----------
Recorded goodwill $ 1,864,368 $ 625,837 $ 1,088,550
============= =========== ===========
12
EAGLE CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 2000)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
------------------------------------------
The recorded goodwill in CT Mexico and CT India totaling
$1,714,387 was expensed as of September 30, 2000 as impairment
of goodwill (see Note 1). Recorded goodwill in CT Great Wall
of China is being amortized over 20 years beginning April 1,
2000, with $23,305 and $46,610 being recorded for the quarter
and nine months ended September 30, 2000, respectively (see
Note 1).
Organizational Costs - The Company has adopted statement of
Position (SOP) No. 98-5, Reporting on the Costs of Start-up
Activities. In accordance with SOP No. 98-5, the Company has
expensed all organizational costs.
Cash and Cash Equivalents - For purposes of the statements of
cash flows, the Company considers investments with an original
maturity of less than three months to be cash equivalents.
Investments in Unconsolidated Subsidiaries - As of September
30, 2000, the Company's investments in Bullhide (44%) and IMSI
(38%) were accounted for under the equity method of
accounting. As both companies operations were minimal during
the nine months ended September 30, 2000, the Company has not
adjusted its purchase price for equity based accounting for
the nine months ended September 30, 2000.
The sole asset of IMSI is the patent to the IMSI Building
Block System. The Company has determined to write off its
investment in IMSI over 20 years to reflect the amortization
of the Company's investment in IMSI and its underlying sole
asset of the patent. Through September 30, 2000, the Company
has recorded amortization expense of $210,000 for the nine
months then ended.
Revenue Recognition - The Company records revenue from the
sale of block as a percentage of the total contract price
based upon block finished and delivered relative to the total
block to be delivered under the contract.
13
EAGLE CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 2000)
Accounting Method - The Company's financial statements are
prepared using the accrual method of accounting. The Company
has elected a December 31 year-end.
NOTE 3 - STOCKHOLDERS' EQUITY
--------------------
Changes in Stockholders' Equity - The following represents the
changes in stockholders' equity from January 1, 2000 through
September 30, 2000:
NOTE 3 - STOCKHOLDERS' EQUITY (Cont'd)
--------------------
Additional
Preferred A Preferred B Common Paid In
Shares Amount Shares Amount Shares Amount Capital
--------- -------- -------- -------- --------- -------- -----------
Balance - Jan. 1, 2000 1,080,600 $ 1,081 856,021 $ 856 7,103,228 $ 7,103 $13,202,755
Conversion of Preferred A (183,200) (184) - - 458,000 458 (274)
Conversion of Preferred B - - (319,642) (319) 1,728,590 1,729 (1,410)
Common sold for cash - - - - 75,000 75 72,425
Issuance of Preferred B - - 29,467 29 - - 73,639
Issuance for Services - - - - 1,280,500 1,280 318,845
Issuance for Interest - - - - 993,368 993 247,349
Note payable conversion - - - - 300,000 300 299,700
--------- -------- -------- -------- ---------- -------- -----------
Balance
- September 30, 2000 897,400 $ 897 565,846 $ 566 11,938,686 $11,938 $14,213,029
========= ======== ======== ======== ========== ======= ===========
During the nine months ended September 30, 2000, the Company
issued an additional 29,467 shares of Preferred B for its
investment in CT Great Wall of China. Such issuance increased
its investment in CT Great Wall of China by $73,668 or $.25
per common equivalent share (Preferred B Converts 1-to-10
common shares of the Company). In addition, 1,280,500 shares
of Common Stock valued at $.25 per share were issued for
services received during the nine months ended September 30,
2000. Of the 1,280,500 shares, 448,000 shares were issued to
the Company's President and CEO for services (of which 198,000
shares were issued in lieu of cash salary of $198,000 under an
employment contract), 210,000 for financial consulting
services, 572,500 for general consulting services, and 50,000
shares for legal services.
Net Income (Loss)_Per Common Share - The Company computes net
income (loss) per common share under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 128,
14
EAGLE CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 2000)
NOTE 3 - STOCKHOLDERS' EQUITY (Cont'd)
--------------------
Earnings Per Share. Accordingly, net income (loss) per common
share is computed under the basic and diluted methods which
uses the weighted average number of common shares outstanding.
Conversion of Preferred A and Preferred B stock into common
stock is not included in the three and nine months ended
September 1999, nor the nine months ended September 30, 2000
diluted computations as the conversion would be anti-dilutive.
Class A Preferred - The Company has authorized 10,000,000
shares of Class A preferred stock (Class A), which may be
converted into 2.5 shares of common stock for each share o
Class A held. Class A also has cumulative dividend and
liquidation preferential rights over all other classes
of stock, with dividend rights equal to 20% of net
income commencing with the year ended December 31, 1998.
Class B Preferred - The Company has authorized 10,000,000
shares of Class B preferred stock (Class B) which may be
converted into 10 shares of common stock for each share of
Class B held. Class B does not have preferential cumulative
dividend or liquidation rights.
NOTE 4 - NOTES PAYABLE
-------------
Other short term notes payable consisted of the following at
September 30, 2000 and December 31, 1999:
June 30, December 31,
2000 1999
----------- ------------
$850,000 in convertible notes
due February, 2001, including
interest at 15%, convertible,
at the option of the
noteholder, into common stock
at the then current market
bid price. $ 850,000 $ -
Lone Wolf non-interest bearing
note payable due July 31, 2000
(see below) 900,000 -
15
EAGLE CAPITAL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 2000)
Contd...
June 30, December 31,
2000 1999
----------- ------------
Advances payable due at various
dates plus interest at 15%
(See Note 5) 1,130,000 475,000
----------- ------------
TOTAL $ 2,880,000 $ 475,000
=========== ============
On August 31, 2000, the Company amended its $1,000,000 note
payable with Lone Wolf reflected above. The note requires
principal and interest payments as follows:
NOTE 4 - NOTES PAYABLE (Cont'd)
-------------
Principal Interest
----------- ----------
September 4, 2000 $ 100,000 $ -
October 1, 2000 50,000 18,750
November 1, 2000 50,000 8,500
December 1, 2000 50,000 8,000
January 1, 2001 50,000 7,500
February 1, 2001 50,000 7,000
March 1, 2001 50,000 6,500
April 1, 2001 50,000 6,000
May 1, 2001 50,000 5,500
June 1, 2001 50,000 5,000
July 1, 2000 50,000 4,500
August 1, 2001 400,000 4,000
---------- ---------
TOTALS $1,000,000 $ 81,250
========== =========
NOTE 5 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The Company's President and Chief Executive Officer, Anthony
D'Amato, has made certain short term loans to the Company from
time to time during the period ending September 30, 2000
totaling $1,237,170
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The analysis of the Company's financial condition, liquidity,
capital resources and results of operations should be viewed in
conjunction with the accompanying financial statements including the
notes thereto.
Financial Condition
At September 30, 2000, the Company had total assets of $11,971,514,
as compared to total assets of $9,799,074 at December 31, 1999; current
liabilities and total liabilities of $5,269,037 at September 30, 2000,
as compared to current liabilities and total liabilities of $724,533 at
December 31, 1999; and stockholders' equity at September 30, 2000 of
$6,702,477, as compared to $9,074,541 at December 31, 1999. The decrease
in stockholders' equity was primarily due to the recording during the
nine months ended September 30, 2000 of a $1,000,000 note payable and
related expense thereon to Lone Wolf in exchange for the cancellation of
an earlier purchase commitment the Company had entered into with Lone
Wolf. Current management continues to investigate the facts and
circumstances surrounding the original purchase commitment of the
Company. In addition, the Company recorded impairment of goodwill of
$1,714,387 for the write down of goodwill in CT Mexico and CT India and
amortization expense of $259,797 principally from the amortization of the
Company's investment in IMSI during the nine months ended September 30,
2000.
Liquidity and Capital Resources
As of September 30, 2000, the Company's cash totaled $2,361,416 as
compared to $20,326 at December 31, 1999. Net cash provided by (used in)
operations was $981,665 compared to $(440,371) in the same quarter of
1999. The ability of the Company to generate cash flow in excess of its
operating requirements depends in the short term on the performance of
its operations in India, China and Mexico. Management believes based upon
current results that the Company will be able to fund its operations
entirely from revenue by the second quarter of 2001. The Company may
require additional financing to fund existing operations until sufficient
revenues are generated. The Company may raise capital from the sale of
its securities from investors; however, in the interim certain directors
and officers of the Company will advance funds sufficient to meet
operational expenses. The timing and amount of the Company's additional
financing needs will depend, inter alia, upon the revenues generated by
the Company. It is anticipated that product development expenditures will
be significantly increased during the fourth quarter of 2000, but it is
also anticipated that such expenditures will be paid from then existing
revenues.
17
The Company has no present additional commitment that is likely to
result in its liquidity increasing or decreasing in any significant way.
In addition, the Company knows of no trend, additional demand, event or
uncertainty that will result in, or that are reasonably likely to result
in the Company's liquidity increasing or decreasing in any material way.
Results of Operations
Sales for the three and nine months ended September 30, 2000 were
$2,166,667 compared with sales of $-0- in the same periods of 1999. The
Company recorded net income of $320,492 for the quarter ended September
30, 2000, and a net loss of $3,386,699 for the nine months ended
September 30, 2000 compared to a net loss of $93,864 and $1,266,928 for
the same periods of 1999. Net loss recorded for the nine months ended
September 30, 2000, is primarily due to the recording of a $1,000,000
note payable and related $1,000,000 expense to Lone Wolf in exchange for
the cancellation by Lone Wolf of an earlier purchase commitment entered
into by the Company with Lone Wolf. In addition, the Company recorded
impairment of goodwill of $1,714,387 for the write-down of goodwill in
CT Mexico and CT India and amortization expense of $259,797 principally
from the amortization of the Company's investment in IMSI during the nine
months ended September 30, 2000.
FORWARD LOOKING STATEMENTS
Statements made in this Management's Discussion and Analysis and
elsewhere in this Annual Report that state the Company's or management's
intentions, hopes, beliefs, expectations or predictions of the future
contain forward looking statements. Such forward looking statements
include, without limitation, statements regarding the Company's planned
capital expenditure requirements, cash and working capital requirements,
the Company's expectations regarding the adequacy of current financing
arrangements, product demand and market growth, other statements
regarding future plans and strategies, anticipated events or trends, and
similar expressions concerning matters that are not historical facts. It
should be noted that the Company's actual results could differ materially
from those contained in such forward looking statements mentioned above
due to adverse changes in any number of factors that affect the Company's
business including, without limitation, risks associated with investing
in and the marketing of IMSI's Wall System, risks concerning the
protection of IMSI's patents, reliance upon distributors, regulatory
risks, risks of expansion, product liability and other risks described
herein.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On July 21, 1999, the Company was named as a defendant in a
derivative action filed on behalf of the shareholders of IMSI,
Inc. The Company was one of multiple defendants named in the
suit filed in the Third Judicial District Court for Salt Lake
City, Utah. On March 3, 2000 the parties signed a binding
settlement agreement which was approved by the Court on
September 21, 2000.
Item 2. CHANGE IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(c) There are no exhibits required to be filed for the
period covered by this Report.
(d) There were no reports on Form 8-K filed for the period
covered by this Report.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EAGLE CAPITAL INTERNATIONAL, LTD.
November 21, 2000 By:___/s/Anthony D'Amato_________
Anthony D'Amato, President
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