SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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 9,925,968 shares of Common Stock, $.01 par value,
issued and outstanding at June 30, 2000.
-1-
EAGLE CAPITAL INTERNATIONAL, LTD.
INDEX
PART I. AMENDED CONSOLIDATED FINANCIAL INFORMATION
Item 1. Amended Consolidated Financial Statements
Amended Balance Sheets - June 30, 2000 (Unaudited) and
December 31, 1999
Amended Statements of Operations - For the three and
six months ended June 30, 2000 and 1999 (Unaudited).
Amended Statements of Cash Flows - Six months ended
June 30, 2000 and 1999 (Unaudited).
Notes to Amended 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. Amended Consolidated Financial Statements
-----------------------------------------
-3-
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
----------- ------------
(Unaudited) (Audited)
As Amended
CURRENT ASSETS:
Cash $ 754,862 $ 20,326
Advan
ces to Bullhide 51,250 -
Advances to
Business Dimensions 6,000 -
Employee advances 3,528 -
----------- ----------
TOTAL CURRENT ASSETS 815,640 20,326
----------- ----------
FIXED ASSETS -
Mobile Block Plant #1 550,612 -
Mobile Block Plant #2 255,000 -
Fixed Block Plant 130,000 -
Mobile SB Machine (India) 218,500 185,100
Other 2,857 -
----------- ----------
TOTAL FIXED ASSETS 1,156,969 185,100
----------- ----------
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 $140,000 at June 30,
2000) 5,460,000 5,600,000
Purchased goodwill in
CT Great Wall of China
(net of accumulated
amortization of $23,305
at June 30, 2000) 1,841,063 -
China joint venture 550,382 -
License Rights (net of
accumulated amortization
of $2,125 at June 30,
2000) 92,875 90,000
----------- ----------
TOTAL OTHER ASSETS 8,345,683 9,593,648
----------- ----------
TOTAL ASSETS $10,318,292 $9,799,074
=========== ==========
See notes to amended financial statements.
-4-
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
As Amended
CURRENT LIABILITIES:
Accounts payable $ 146,033 $ 94,173
Advances from officer 862,990 5,860
Commitments payable to
unconsolidated subsidiaries - 149,500
Deferred revenue 750,000 -
Other short term notes payable 2,575,000 475,000
----------- ----------
TOTAL CURRENT LIABILITIES 4,334,023 724,533
----------- ----------
SHAREHOLDERS' EQUITY:
Preferred Stock A, $.001
par value, 10,000,000 shares
authorized, 967,400 and
1,080,600 shares issued
and outstanding at
June 30, 2000 and
December 31, 1999 967 1,081
Preferred Stock B, $.001
par value, 10,000,000 shares
authorized, 605,531 and 856,021
shares issued and outstanding
at June 30, 2000 and
December 31, 1999 606 856
Common Stock, $.001 par value,
70,000,000 shares authorized,
9,925,968 and 7,103,228 shares
issued and outstanding
at June 30, 2000 and
December 31, 1999 9,926 7,103
Additional paid in capital 13,817,214 13,202,755
Deficit accumulated prior to
January 1, 1998 (708,682) (708,682)
Deficit accumulated during
development stage (from
January 1, 1998) (7,135,762) (3,428,572)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 5,984,269 9,074,541
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,318,292 $ 9,799,074
=========== ===========
See notes to amended financial statements.
-5-
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
As Amended As Amended
TOTAL REVENUES $ -0- $ -0- $ -0- $ -0-
GENERAL AND ADMINISTRATIVE
EXPENSES:
Accounting 26,347 8,451 26,347 16,903
Advertising/marketing 26,575 7,005 31,575 14,010
Amortization 165,430 - 165,430 -
Bank charges 1,979 - 2,769 -
Common stock for services 220,750 472,100 220,750 944,200
Consulting fees 20,790 28,910 29,790 57,820
Contributions - - 5,000 -
Contract labor 15,061 - 15,061 -
Employee costs 74,531 - 74,531 -
Financing fees 67,241 - 152,241 -
Impairment of goodwill 1,714,387 - 1,714,387 -
Legal fees 54,892 33,397 79,922 66,794
Lone Wolf settlement - - 1,000,000 -
Management Fees 30,085 32,500 40,085 65,000
Miscellaneous 2,058 - 2,178 -
Office 5,064 19,271 5,402 38,542
Postage and freight 20,849 - 20,849 -
Rent 13,906 27,710 47,414 55,420
Taxes and licenses 455 - 455 -
Telephone 11,620 - 11,620 -
Travel 58,223 12,108 61,384 24,211
----------- ----------- ----------- -----------
TOTAL EXPENSES 2,530,243 641,452 3,707,190 1,282,900
PROVISION FOR INCOME TAXES - - - -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $(2,530,243) $ (641,452) $(3,707,190) $(1,282,900)
=========== =========== ===========
-6-
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (Cont'd)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
As Amended As Amended
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
- Basic 8,765,128 4,388,528 8,084,693 4,588,128
- Diluted 8,765,128 4,388,528 8,084,693 4,588,128
NET LOSS PER COMMON SHARE:
- Basic $ (.29) $ (.15) $ (.46) $ (.28)
----------- ----------- ----------- ----------
- Diluted $ (.29) $ (.15) $ (.46) $ (.28)
=========== =========== =========== ==========
See notes to amended financial statements.
-7-
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30, June 30,
2000 1999
---------- ----------
As Amended
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(3,707,190) $(1,282,900)
Impairment of goodwill 1,714,387 -
Amortization 165,430 -
Stock issued for services 220,750 944,200
Net change in operating assets
and liabilities:
Prepaid expenses and advances (60,778) -
Commitments payable to
unconsolidated subsidiaries (110,500) -
Note payable - Lone Wolf 1,000,000 -
Deferred revenue 750,000
Accounts payable 42,860 40,129
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATIONS 14,959 (298,571)
----------- -----------
CASH USED IN INVESTING
ACTIVITIES:
Deposits on equipment - (73,000)
Investment in subsidiaries
net of cash acquired (477,913) (339,541)
Investment in license rights (5,000) (60,000)
Purchase of property and
equipment (869,012) -
----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (1,351,925) (472,541)
----------- -----------
CASH PROVIDED BY FINANCING
ACTIVITIES:
Advances from officer 649,002 -
Short term loans 1,350,000 -
Cash for sale of stock 72,500 852,500
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,071,502 852,500
NET INCREASE IN CASH 734,536 81,388
CASH AT BEGINNING OF PERIOD 20,326 48
----------- -----------
CASH AT END OF PERIOD $ 754,862 $ 81,436
=========== ===========
See notes to amended financial statements.
-8-
EAGLE CAPITAL INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
1. During the six months ended June 30, 2000, the Company's ownership
interest in CT Great Wall of China, CT Mexico and CT India
increase to 100%, 100%, and 70%, respectively. In connection
therewith, the following accounting has been recorded as of June
30, 2000, and for the six 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
June 30, 2000 $ 2,262,936 $ 681,830 $ 1,150,800
=========== ============ ===========
The following represents the accounting recorded as of June 30,
2000, to consolidate the three subsidiaries:
CT Great Wall CT CT
of China Mexico India
------------- ------------- -----------
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 six months ended June 30, 2000, the Company issued
250,000 shares of common stock in exchange for the forgiveness of
a $250,000 note payable owed by the Company to an officer and
shareholder.
-9-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 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.
Amended June 30, 2000 Balance Sheet and Statements of
Operations for the Three and Six Months Then Ended
-----------------------------------------------------
The accompanying financial statements have been amended to
reflect various adjustments as of June 30, 2000, and for the
three and six month then ended. The following represents the
accounts adjusted which changed the net loss reported:
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
Amended Prior Change Amended Prior Change
---------- --------- ----------- ---------- ---------- -----------
Revenues $ -0- $ 750,000 $ (750,000) $ -0- $ 750,000 $ (750,000)
Impairment of goodwill 1,714,387 -0- (1,714,387) 1,714,387 -0- (1,714,387)
Amortization 165,430 -0- (165,430) 165,430 -0- (165,430)
Bank Charges 1,979 1,950 (29) 2,769 2,740 (29)
Various 145 -0- (145) 145 -0- (145)
----------- -----------
Increase in net loss (2,629,991) (2,629,991)
Net income (loss) as
originally reported 99,748 (1,077,199)
----------- -----------
Net loss as amended $(2,530,243) $(3,707,190)
=========== ===========
</TABLE
Revenues - During the quarter ended June 30, 2000, the
Company received $750,000 from an Indian company in exchange
for the Company 's agreement to deliver a total
-10-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
NOTE 1 - THE COMPANY (Cont'd)
-----------
of 750,000 block to the Indian company. The Company recorded
the $750,000 as revenue during the quarter ended June 30,
2000, and now is amending the financial statements for the
three and six months ended June 30, 2000, to record the
$750,000 as a current liability (deferred revenue) as of June
30, 2000. The revenue will be recorded as block is
delivered, anticipated to be delivered in full by December
31, 2000.
Impairment of Goodwill - The Company is amending its
financial statements for the three and six months ended June
30, 2000, to record impairment of goodwill in the amount of
$1,714,387 during the quarter ended June 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 quarter ended June 30,
2000.
Amortization - The Company is amending its financial
statements for the three and six months ended June 30, 2000,
to record amortization expense of $165,430 for the quarter
ended June 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 $140,000 for the quarter ended June
30, 2000. Amortization expense for the quarter ended June
30, 2000 also includes amortization of goodwill in the amount
-11-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
of $23,305 for the Company's investment in CT Great Wall of
China (See Note 2) and $2,125 for licenses amortized over 20
years.
NOTE 1 - THE COMPANY (Cont'd)
-----------
The following represents the balance sheet accounts adjusted
on the amended June 30, 2000 balance sheet:
Amended Prior Change
----------- ---------- -----------
Cash $ 754,862 $ 755,036 $ (174)
Investment in IMSI 5,460,000 5,600,000 (140,000)
Purchased goodwill 1,841,063 3,578,755 (1,737,692)
License rights 92,875 95,000 (2,125)
Deferred revenue (750,000) -0- (750,000)
Retained earnings (7,135,762) (4,505,771) 2,629,991
----------- ---------- ----------
$ -0-
==========
Cash - Reflects various expenses in the total amount of $174
recorded during the three months ended June 30, 2000 as
amended.
Investment in IMSI - Reflects amortization in the amount of
$140,000 recorded during the three months ended June 30,
2000, as amended.
Purchased Goodwill - Reflects impairment of goodwill in the
amount of $1,714,387 and amortization of goodwill in the
amount of $23,305 recorded during the three months ended June
30, 2000, as amended.
License Rights - Reflects amortization of $2,125 recorded
during the three months ended June 30, 2000, as amended.
Deferred Revenue - Reflects cash received of $750,000 as a
current liability (deferred revenue) as of June 30, 2000, as
amended. The revenue will be recorded as block is delivered,
anticipated to be delivered in full by December 31, 2000.
Retained Earnings - Reflects the increase in net loss as
amended for the three months ended June 30, 2000.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
-12-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
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
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
--------------------------------------------------
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 June 30, 2000 and for the
three 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 six
months ended June 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%. 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
-13-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
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 verbal 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
------------------------------------------
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
=========== ========== ===========
The recorded goodwill in CT Mexico and CT India totaling
$1,714,387 was expensed as of June 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 being recorded for the quarter ended June
30, 2000 (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.
-14-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
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 June 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 six months ended June 30, 2000, the Company has not
adjusted its purchase price for equity based accounting for
the six months ended June 30, 2000.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
------------------------------------------
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 June 30, 2000, the Company has
recorded amortization expense of $140,000 for the six 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.
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 June 30, 2000:
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 (113,200) (114) - - 283,000 283 (169)
Conversion of Preferred B - - (279,957) (279) 1,331,740 1,332 (1,053)
Common sold for cash - - - - 75,000 75 72,425
Issuance of Preferred B - - 29,467 29 - - 73,639
Issuance for Services - - - - 883,000 883 219,867
Note payable conversion - - - - 250,000 250 249,750
--------- -------- --------- ------- ---------- --------- -------
Balance - June 30, 2000 967,400 $ 967 605,531 $ 606 9,925,968 $ 9,926 $13,817,214
========= ======== ========= ======== ==========
-15-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
During the three months ended June 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, 883,000
shares of Common Stock valued at $.25 per share were issued
for services received during the quarter ended June 30, 2000.
Of the 883,000 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), 150,000 for financial consulting
services and 285,000 for general consulting services.
NOTE 3 - STOCKHOLDERS' EQUITY (Cont'd)
--------------------
Net Loss Per Common Share - The Company computes net loss per
common share under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share.
Accordingly, net 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 diluted computation 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
of 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 - SHORT-TERM LOANS
----------------
Other short term notes payable consisted of the following at
June 30, 2000 and December 31, 1999:
-16-
EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
June 30, December 31,
2000 1999
---------- ------------
$850,000 in convertible notes
due February, 2001, including
interest at 15%, convertible,
at the option of the note-
holder, 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) 1,000,000 -
Advances payable due at various
dates plus interest at 15%
(See Note 5) 725,000 475,000
---------- -------------
TOTAL $2,575,000 $ 475,000
========== =============
NOTE 4 - SHORT-TERM LOANS (Cont'd)
----------------
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:
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 June 30, 2000
totaling $862,990.
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EAGLE CAPITAL INERNATIONAL, INC.
NOTES TO AMENDED CONSOLIDATED FINANCIAL STATEMENTS
(JUNE 30, 2000)
The Company's Director, Robert Kornahrens, made a short term
loan to the Company during the period ending June 30, 2000,
totaling $500,000 (see Note 4).
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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 June 30, 2000, the Company had total assets of $10,318,292, as
compared to total assets of $9,799,074 at December 31, 1999; current
liabilities and total liabilities of $4,334,023 at June 30, 2000, as
compared to current liabilities and total liabilities of $724,533 at
December 31, 1999; and stockholders' equity at June 30, 2000 of
$5,984,269, as compared to $9,074,541 at December 31, 1999. The
decrease in stockholders' equity was primarily due to the recording
during the six months ended June 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. 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 $165,430 principally from the
amortization of the Company's investment in IMSI during the six months
ended June 30, 2000.
Liquidity and Capital Resources
As of June 30, 2000, the Company's cash totaled $754,862 as
compared to $20,326 at December 31, 1999. Net cash provided by (used in)
operations was $14,959 compared to $(298,571) 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
third quarter of 2000, but it is also anticipated that such expenditures
will be paid from then existing revenues.
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.
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Results of Operations
Sales for the three and six months ended June 30, 2000 were $-0-
compared with sales of $0 in the same periods of 1999. Based upon
current contracts, the Company expects sales of $2.167 million for third
quarter 2000. The Company experienced a net loss of $2,530,243 for the
quarter ended June 30, 2000, and a net loss of $3,707,190 for the six
months ended June 30, 2000 compared to a net loss of $641,452 and
$1,282,900 for the same periods of 1999. Net loss recorded for the six
months ended June 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
$165,430 principally from the amortization of the Company's investment
in IMSI during the six months ended June 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.
-20-
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
On April 25, 2000, proxies were submitted by a majority of
the shareholders of Eagle Capital International, Ltd.
approving a change of the Company name to Eagle Building
Technologies, Ltd. It is anticipated that the name change
will take effect in the third quarter of 2000.
Item 5. OTHER INFORMATION
On May 26, 2000, Richard W. Lahey resigned as a Director and
Treasurer of the company. Mr. Lahey left to pursue other
business ventures and still works closely with the Company
and remains a large shareholder.
On June 2, 2000, the Company appointed Donald Pollock as a
Director and Corporate Treasurer.
On June 2, 2000, the Company appointed Robert Kornahrens as
a Director.
On August 1, 2000, the Company appointed Wilfred C. Mango,
Jr. as Chief Operating Officer.
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.
-21-
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 20, 2000 By:/S/ Anthony D'Amato
--------------------------
Anthony D'Amato, President
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