U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-QSB
________________
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-31663
AMERICAN CAPITAL PARTNERS LIMITED, INC.
(Name of small business issuer in its charter)
Nevada 88-0440536
(State or other jurisdiction (I.R.S.Employer
of incorporation) Identification No.)
319 Clematis Street, Suite 211, West Palm Beach, FL 33401
(Address of principal executive offices)(Zip Code)
(561) 366-9211
(Registrant's telephone no., including area code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value per share
(Title of Class)
Check whether the issuer: (i) 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 (ii) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
As of May 23, 2005, there were 111,393 shares of the registrant's common stock
outstanding.
AMERICAN CAPITAL PARTNERS LIMITED, INC.
Part I. Financial Information Page
Item 1. Condensed Consolidated Financial Statements and Notes to
Consolidated Financial Statements
(a) Consolidated Balance Sheet for the Three Months Ended
March 31, 2005 (unaudited) 3
(b) Condensed Statements of Operations for the Three Months Ended
March 31, 2005 and 2004 (unaudited) 4
(c) Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2005 and 2004 (unaudited) 5
(d) Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Controls and Procedures 15
Part II. Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 18
PART I FINANCIAL INFORMATION
General
The accompanying reviewed financial statements have been prepared in
accordance with the instructions to Form 10-QSB. Therefore, they do not include
all information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flow, and stockholders' equity in
conformity with generally accepted accounting principles. Except as disclosed
herein, there has been no material change in the information disclosed in the
notes to the financial statements included in the company's annual report on
Form 10-KSB for the year ended December 31, 2004. In the opinion of management,
all adjustments considered necessary for a fair presentation of the results of
operations and financial position have been included and all such adjustments
are of a normal recurring nature. Operating results for the quarter ended March
31, 2005 are not necessarily indicative of the results that can be expected for
the year ended December 31, 2005.
AMERICAN CAPITAL PARTNERS LIMITED, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
TABLE OF CONTENTS
Page
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statements of Cash Flows 4
Notes to the Condensed Consolidated Financial Statements 5-6
AMERICAN CAPITAL PARTNERS LIMITED, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
March 31,
2005
---------------
(Unaudited)
ASSETS
Current
Assets:
Cash and cash equivalents $ 17,027
Investments - current:
Available for sale securities
equities at fair market value 10,110
---------------
Total Current Assets 27,137
Investments - non-current:
Available for sale securities
equities at fair market value 246,849
Furniture and equipment, net 7,248
---------------
Total Assets $ 281,234
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 26,773
Accrued expenses 139,820
---------------
Total Current Liabilities 166,593
CONVERTIBLE DEBT, NET 25,870
---------------
Total Liabilities 192,463
---------------
COMMITMENTS AND CONTINGENCIES (See Note 8)
Shareholders' Equity:
Common stock, $.001 par value, 150,000,000 shares
authorized; 11,483,980 shares issued and outstanding 11,484
Additional paid-in capital 41,077
Accumulated deficit (169,375)
Accumulated other comprehensive income 205,585
---------------
Total Shareholders' Equity 88,771
---------------
Total Liabilities and Shareholders' Equity $ 281,234
===============
AMERICAN CAPITAL PARTNERS LIMITED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
2005 2004
--------------- ---------------
(Unaudited) (Unaudited)
REVENUES $ 84,074 $ 101,787
Operating Expenses:
General and administrative 21,534 87,933
Compensation 51,336 -
Directors fees 15,218 -
Professional fees 16,633 -
--------------- ---------------
Total Operating Expenses 104,721 87,933
--------------- ---------------
Income (loss) from operations (20,647) 13,854
OTHER EXPENSES
Interest expense 2,000 7,000
--------------- ---------------
Income (loss) before provision for income taxes (22,647) 6,854
Income tax expense - -
--------------- ---------------
NET INCOME (LOSS) $ (22,647) $ 6,854
=============== ===============
Comprehensive income (loss)
Unrealized loss on available for sale
securities, net (61,672) -
--------------- ---------------
Total Comprehensive Income (Loss) $ (84,319) $ 6,854
=============== ===============
Net loss per share - basic and diluted $ (0.00) $ 0.06
=============== ===============
Weighted average number of shares
outstanding - basic and diluted 5,686,402 111,393
=============== ===============
AMERICAN CAPITAL PARTNERS LIMITED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
2005 2004
--------------- ---------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (22,647) $ 6,854
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Common stock issued for services 11,373 -
Depreciation expense 454 -
Amortization of discount on convertible
debt 5,000 5,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable
and accrued expenses (123,318) 5,000
--------------- ---------------
Net cash provided by (used in) operating
activities (129,138) 16,854
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of available-for-sale securities 3,195 -
Purchases of furniture and equipment - (1,796)
--------------- ---------------
Net cash used in investing activities 3,195 (1,796)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 78,959 -
--------------- ---------------
Net cash provided by financing activities 78,959 -
--------------- ---------------
Net increase in cash (46,984) 15,058
Cash - Beginning of period 64,011 38,322
--------------- ---------------
Cash - End of period $ 17,027 $ 53,380
=============== ===============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized loss on available for sale
securities, net 61,672 -
--------------- ---------------
Total non-cash investing and financing
activities $ 61,672 $ -
=============== ===============
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ - $ -
=============== ===============
Cash paid for income taxes $ - $ -
=============== ===============
AMERICAN CAPITAL PARTNERS LIMITED, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Effective on January 16, 2004, the Company filed amended Articles of
Incorporation with the State of Nevada to change its name to American Capital
Partners Limited, Inc. The Company is authorized to issue 150,000,000 shares of
common stock at a par value of $0.001 per share.
In December 2004, the Company filed a Form N-54 with the Securities and Exchange
Commission ("SEC") to be regulated as a Business Development Company ("BDC")
pursuant to the provisions of section 54(a) of the Investment Company Act of
1940 ("the Act"), to be subject to the provisions of section 55 through 65 of
the Act. The Company has determined that its operating model best approximates
that of an investment company and intends to make investments into developing
businesses As a BDC, the Company will be structured in a manner more consistent
with its current business strategy. As a result, the Company is positioned to
raise capital in a more efficient manner and to develop and expand its business
interests. The Company believes that potential acquisitions, in total, will
enhance value to stockholders through capital appreciation and payments of
dividends to the Company by its investee companies.
BDC regulation was created in 1980 by Congress to encourage the flow of public
equity capital to small businesses in the United States. BDC's, like all mutual
funds and closed-end funds, are regulated by the Act. BDC's report to
stockholders like traditional operating companies and file regular quarterly and
annual reports with the Securities and Exchange Commission. BDC's are required
to make available significant managerial assistance to their portfolio
companies.
Principals of Consolidation:
- ----------------------------
The consolidated financial statements include the accounts of the Corporation
and its wholly owned subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
- ----------------------------
The interim financial statements presented herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. The interim financial statements should be read in
conjunction with the Company's annual financial statements, notes and accounting
policies included in the Company's annual report on Form 10-KSB for the year
ended December 31, 2004 as filed with the SEC. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) which are
necessary to provide a fair presentation of financial position as of March 31,
2005 and the related operating results and cash flows for the interim period
presented have been made. The results of operations, for the period presented
are not necessarily indicative of the results to be expected for the year.
Use of Estimates
- ----------------
Use of estimates and assumptions by management is required in the preparation of
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates and assumptions.
Earnings Per Share
- ------------------
Basic earnings per share ("EPS") is computed by dividing earnings available to
common shareholders by the weighted-average number of common shares outstanding
for the period as required by the Financial Accounting Standards Board (FASB)
under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Shares". Diluted EPS reflects the potential dilution of securities that could
share in the earnings.
Revenue Recognition
- -------------------
Revenues from the current and future activities as a Business Development
Company which may include investment income such as interest income and
dividends, and realized or unrealized gains and losses on investments will be
recognized in accordance with the AICPA's Audit and Accounting Guide, "Audits of
Investment Companies".
NOTE 3 - INVESTMENTS
Investments in securities of unaffiliated issuers represent holdings of less
than 5% of the issuer's voting common stock.
Investments in securities or other than securities of privately held entities
are initially recorded at their original cost as of the date the Company
obtained an enforceable right to demand the securities or other investment
purchased and incurred an enforceable obligation to pay the investment price.
For financial statement purposes, investments are recorded at their fair value.
Realized gains (losses) from the sale of investments are reflected in operations
during the period incurred.
NOTE 4 - INCOME TAXES
At March 31, 2005, there are no items that give rise to deferred income taxes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, regarding future events or the future financial performance of
the Company that involve risks and uncertainties. Certain statements included in
this Form 10-QSB, including, without limitation, statements related to
anticipated cash flow sources and uses, and words including but not limited to
"anticipates", "believes", "plans", "expects", "future" and similar statements
or expressions, identify forward looking statements. Any forward-looking
statements herein are subject to certain risks and uncertainties in the
Company's business, including but not limited to, difficulties of hiring or
retaining key personnel and any changes in current accounting rules, all of
which may be beyond the control of the Company. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth therein.
Management's Discussion and Analysis of Consolidated Results of Financial
Condition and Results of Operations ("MD&A") should be read in conjunction with
the consolidated financial statements included herein. Further, this quarterly
report on Form 10-QSB should be read in conjunction with the Company's
Consolidated Financial Statements and Notes to Consolidated Financial Statements
included in its 2004 Annual Report on Form 10-KSB. In addition, you are urged to
read this report in conjunction with the risk factors described herein.
American Capital Partners Limited, Inc. is a Nevada Corporation formed on
October 29, 1999 under the name American IR Technology, Inc. On November 18,
2002, the Company changed its name to American Product Corp. On January 16,
2004, the Company changed its name to American Capital Partners Limited, Inc.
The Company is a publicly trade company currently listed on the OTC Pink Sheets
under the symbol APRJ.
Until September of 2002, American Products manufactured and marketed consumer
electronic products that targeted the home health and safety markets. However,
sales from these products were not sufficient to enable the company to continue
operations and the Company ceased manufacturing and marketing consumer
electronic products in September, 2002 and operated as a development stage
company, while formulating a plan to improve it financial position.
OVERVIEW
In the first step of the plan, the Company acquired American Capital Partners
Limited, Inc. ("ACP"), a development stage company with the expertise to enable
the company to become a Business Development Company ("BDC") as outlined in the
Investment Company Act of 1940, as amended (the "1940 Act"). The Company will
operate as a closed end mutual fund. The investment objective of the Fund is to
provide its shareholders with current income and long-term capital appreciation
by investing primarily in privately placed securities of small public companies.
The Company notified the Securities and Exchange Commission that it elects,
pursuant to the provisions of section 54(a) of the Investment Company Act of
1940, to be subject to the provisions of sections 55 through 65 of the
Investment Company Act of 1940 and accordingly, the Company is BDC.
In 1980, Congress enacted the Small Business Investment Incentive Act, which
created the framework for Business Development Companies from the initial
provisions of the Investment Company Act of 1940. The Small Business Investment
Incentive Act established a new type of investment company specifically
identified as a Business Development Company as a way to encourage financial
institutions and other major investors to provide a new source of capital for
small developing businesses.
These companies are publicly traded closed-end funds that make investments in
private companies or thinly traded public companies through the use of senior
debt, mezzanine finance, and equity funding. BDC's use equity capital provide by
public shareholders and financial institutions and debt capital from various
sources to make these investments, with a goal of providing to stockholders a
total return of capital appreciation and a solid dividend yield.
A BDC:
I. is a closed-end management company that generally makes 70% or more of its
investments in "Eligible Portfolio Companies" and "cash items" pending
other investment. Under the regulations established by the Securities and
Exchange Commission (the "SEC") under the 1940 Act, only certain companies
may qualify as "Eligible Portfolio Companies."
II. To be an "Eligible Portfolio Company," the Company must satisfy the
following:
A. It must be organized under the laws of, and has its principal place of
business in, any state or states;
B. Is neither an investment company as defined in Section 3 (other than a
small business investment company which is licensed by the Small
Business Administration to operate under the Small Business Investment
Act of 1958 and which is a wholly-owned subsidiary of the business
development company) nor a company which would be an investment
company except for the exclusion from the definition of investment
company in Section 3(c); and
C. Satisfies one of the following:
(a) it does not have any class of securities with respect to which a
member of a national securities exchange, broker, or dealer may
extend or maintain credit to or for a customer pursuant to rules
or regulations adopted by the Board of Governors of the Federal
Reserve System under Section 7 of the Securities Exchange Act of
1934;
(b) it is controlled by a business development company, either alone
or as part of a group together, and such business development
company in fact exercises a controlling influence over the
management or policies of such eligible portfolio company and, as
a result of such control, has an affiliated person who is a
director of such eligible portfolio company;
(c) it has total assets of not more than $4,000,000, and capital and
surplus (shareholders' equity less retained earnings) of not less
than $2,000,000, except that the Commission may adjust such
amounts by rule, regulation, or order to reflect changes in one
or more generally accepted indices or other indicators for small
businesses; or
it meets such other criteria as the Commission may, by rule, establish as
consistent with the public interest, the protection of investors, and the
Critical accounting policies and estimates
Our discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of financial statements in accordance with generally accepted
accounting principles in the United States requires application of management's
subjective judgments, often requiring the need to make estimates about the
effect of matters that are inherently uncertain and may change in the subsequent
periods. Our actual results may differ substantially from these estimates under
different assumptions or conditions. While our significant accounting policies
are described in more detail in the notes to consolidated financial statements
included in the Form 10-QSB, we believe that the following accounting policies
require the application of significant judgments and estimates.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2005
TO THREE MONTHS ENDED MARCH 31, 2004
Gross Revenues and Costs of Operations
- --------------------------------------
Gross Revenues. Gross Revenues decreased from $101,787 for the period ended
March 31, 2004 to $84,074 for the period ended March 31, 2005. The decrease is
primarily due to our transition into a business development corporation.
General and administrative expenses. General and administrative expenses
decreased from $87,933 for the period ended March 31, 2004 to $21,834 for the
period ended March 31, 2005. The increase is primarily due to decreased
operating costs as we transition into a business development corporation.
Net Loss. Net loss decreased from a profit of $6,854 for the period ended March
31, 2004 to net loss of ($22,647) for the period ended March 31, 2005. The
decrease is primarily due to our transition into a business development
corporation.
Current Assets and Liabilities
- ------------------------------
At March 31, 2005, we had cash of $17,027 and total assets of $27,137. We
anticipate increasing our assets as we transition into a business development
corporation.
At March 31, 2005, we had total liabilities of $192,463, consisting primarily of
accrued expenses of $139,820. We anticipate increasing our liabilities as we
transition into a business development corporation.
PLAN OF OPERATIONS
The Company acquired American Capital Partners Limited, Inc. ("ACP"), a
development stage company with the expertise to enable the company to become a
Business Development Company ("BDC") as outlined in the Investment Company Act
of 1940, as amended (the "1940 Act"). The Company will operate as a closed end
mutual fund. The investment objective of the Fund is to provide its shareholders
with current income and long-term capital appreciation by investing primarily in
privately placed securities of small public companies. The Company notified the
Securities and Exchange Commission that it elects, pursuant to the provisions of
section 54(a) of the Investment Company Act of 1940, to be subject to the
provisions of sections 55 through 65 of the Investment Company Act of 1940 and
accordingly, the Company is BDC.
Management intends to seek out and pursue private companies or thinly traded
public companies and provide financing to such entities through the use of
senior debt, mezzanine finance and equity finance which, management anticipates
that it will result in capital appreciation and a solid dividend yield for the
Company. Management does not intend to target any particular industry but,
rather, intends to judge any opportunity on its individual merits.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and other working capital requirements
principally from its investments in securities. The Company has elected to be
treated as a Business Development Company under the Small Business Incentive Act
of 1980, which modified the 1940 Act and intends to raise capital and make
investments in accordance with the requirements of a Business Development
Company. Capital will be required for the first and second quarter of fiscal
2005 for the Company to continue to satisfy its cash requirements and maintain a
business plan focusing on raising the capital needed to make investments. The
Company expects to raise additional capital but no assurances can be given that
any capital will be raised or investments made subsequent to any capital raise
will generate profits. The notes in the audited financial statements at and for
the year ended December 31, 2005, contain an explanatory paragraph raising doubt
of the Company's ability to continue as a going concern. Note 2 to the unaudited
financial statements at and for the year ended December 31, 2004 describe the
conditions which raise this doubt and management's plans.
OFF BALANCE SHEET ARRANGEMENT
During the year ended December 31, 2004, the Company had no off balance sheet
arrangements.
ACCOUNTING POLICIES SUBJECT TO ESTIMATION AND JUDGMENT
Management's Discussion and Analysis of Financial Condition and Results of
Operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. When preparing our financial statements, we make estimates and
judgments that affect the reported amounts on our balance sheets and income
statements, and our related disclosure about contingent assets and liabilities.
We continually evaluate our estimates, including those related to revenue,
allowance for doubtful accounts, reserves for income taxes, and litigation. We
base our estimates on historical experience and on various other assumptions,
which we believe to be reasonable in order to form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily ascertained from other sources. Actual results may deviate from these
estimates if alternative assumptions or condition are used.
ITEM 3. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Principal Financial
Officer, of the effectiveness of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
as of the end of the period covered by this report. Based on that evaluation,
our Chief Executive Officer and Principal Financial Officer have concluded that
our disclosure controls and procedures as of March 31, 2005 were effective to
ensure that information required to be disclosed by us in reports that we file
or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
Changes in Internal Controls
There have been no material changes in our internal controls over financial
reporting or in other factors that could materially affect, or are reasonably
likely to affect, our internal controls over financial reporting during the
quarter ended March 31, 2005.
PART II OTHER INFORMATION
-------------------------
Item 1. Legal Proceedings
No legal proceedings were initiated in this quarter.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act.
31.2 Certification of Principal Financial and Accounting Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act.
32.2 Certification of Principal Financial and Accounting Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act.
B. Reports on Form 8-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Ottawa, Canada, on May
23, 2005.
AMERICAN CAPITAL PARTNERS LIMITED, INC.
By: /s/ C. Frank Speight
-------------------------------
C. Frank Speight, Principal
Executive Officer and Director
Date: May 23, 2005
By: /s/ Tim Ellis
-------------------------------
Tim Ellis
Principal Accounting Officer
Date: May 23, 2005