SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
Commission File # 000-31663
AMERICAN CAPITAL PARTNERS LIMITED, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
88-0440536
(IRS Employer Identification Number)
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)
Check whether issuer (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
As of August 15, 2005, there were 11,483,980 shares of the registrant's common
stock outstanding.
1
AMERICAN CAPITAL PARTNERS LIMITED, INC.
FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 2005
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page
- --------------------------------
Item 1. Financial Statements: 3
(a) Balance Sheets as of June 30, 2005. 3
(b) Statements of Operations For the Three and Six Months Ended
June 30, 2005 and 2004. 4
(c) Statements of Cash Flows For the Six Months Ended June 30,
2005 and 2004. 5
(d) Notes to Financial Statements. 6
Item 2. Management's Discussion and Analysis or Plan of Operation. 14
Item 3. Controls and Procedures. 17
PART II OTHER INFORMATION
- ----------------------------
Item 1. Legal Proceedings. 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 18
Item 3. Defaults Upon Senior Securities. 18
Item 4. Submission of Matters to a Vote of Security Holders. 18
Item 5. Other Information. 18
Item 6. Exhibits and Reports on Form 8-K. 18
Signatures. 19
2
PART I FINANCIAL INFORMATION
AMERICAN CAPITAL PARTNERS LIMITED, INC.
CONDENSED BALANCE SHEET
June 30,
2005
------------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 99,520
Investments - current:
Available for sale securities equities at fair market value 8,531
------------------
Total Current Assets 108,051
Investments - non-current:
Available for sale securities equities at fair market value 216,449
Furniture and equipment, net 11,144
------------------
Total Assets $ 335,644
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 39,297
Accrued expenses 117,241
------------------
Total Current Liabilities 156,538
CONVERTIBLE DEBT, NET 30,870
------------------
Total Liabilities 187,408
------------------
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 (102,940)
Accumulated other comprehensive income 198,615
------------------
Total Shareholders' Equity 148,236
------------------
Total Liabilities and Shareholders' Equity $ 335,644
==================
The accompanying notes are an integral part of these
consolidated financial statements.
3
AMERICAN CAPITAL PARTNERS LIMITED, INC.
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
-------------- -------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES $ 210,625 $ 177,661 $ 294,699 $ 279,448
Operating Expenses:
General and administrative 39,111 144,241 65,645 201,892
Compensation 68,725 - 120,061 -
Directors fees 12,354 - 27,572 -
Professional fees 17,000 23,459 33,633 53,741
-------------- -------------- -------------- --------------
Total Operating Expenses 137,190 167,700 246,911 255,633
-------------- -------------- -------------- --------------
Income (loss) from operations 73,435 9,961 47,788 23,815
OTHER EXPENSES
Interest expense 2,000 7,000 4,000 14,000
-------------- -------------- -------------- --------------
Income (loss) before provision for income
taxes 71,435 2,961 43,788 9,815
Income tax expense - - - -
-------------- -------------- -------------- --------------
NET INCOME (LOSS) $ 71,435 $ 2,961 $ 43,788 $ 9,815
============== ============== ============== ==============
Comprehensive income (loss)
Unrealized loss on available for sale
securities, net (6,970) - (68,642) -
-------------- -------------- -------------- --------------
Total Comprehensive Income (Loss) $ 64,465 $ 2,961 $ (24,854) $ 9,815
============== ============== ============== ==============
Net loss per share - basic and diluted $ 0.01 $ 0.03 $ 0.01 $ 0.09
============== ============== ============== ==============
Weighted average number of shares
outstanding - basic and diluted 5,686,402 111,393 5,686,402 111,393
============== ============== ============== ==============
The accompanying notes are an integral part of these
consolidated financial statements.
4
AMERICAN CAPITAL PARTNERS LIMITED, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2005 2004
-----------------------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 43,788 $ 9,815
Adjustments to reconcile net loss to net cash provided (used)
by operating activities:
Depreciation expense 800 -
Amortization of discount on convertible debt 10,000 10,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued expenses (133,373) 15,893
---------------- ----------------
Net cash provided by (used in) operating activities (78,785) 35,708
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of available-for-sale securities 107,163 -
Purchases of furniture and equipment (4,242) (4,866)
---------------- ----------------
Net cash used in investing activities 102,921 (4,866)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 11,373 -
---------------- ----------------
Net cash provided by financing activities 11,373 -
---------------- ----------------
Net increase in cash 35,509 30,842
Cash - Beginning of period 64,011 38,322
---------------- ----------------
Cash - End of period $ 99,520 $ 69,164
================ ================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized loss on available for sale securities, net (68,642) -
---------------- ----------------
Total non-cash investing and financing activities $ (68,642) $ -
================ ================
The accompanying notes are an integral part of these
consolidated financial statements.
5
AMERICAN CAPITAL PARTNERS LIMITED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The accompanying financial statements for the interim
periods are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
periods presented. These financial statements should be read in conjunction with
the Company's financial statements for the years ended December 31, 2004 and
2003 and notes thereto contained in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2004 as filed with the SEC . The results of
operations for the three months ended June 30, 2005 are not necessarily
indicative of the results for the full fiscal year ending December 31, 2005.
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.
Principals of Consolidation:
- ----------------------------
The accompanying financial statements are prepared in accordance with the
guidance in the AICPA's Audit and Accounting Guide, "Audits of Investment
Companies" since the Company elected to be regulated as a Business Development
Company ("BDC") effective December 2004.
In accordance with SEC rules and regulations for BDC's, the Company does not
consolidate or use the equity method to account for its controlling investment
in Online Enterprises, Inc. Rather, the Company's investment in such entity is
reported at fair value, and the fluctuation in such fair value is reflected as
an unrealized gain on investment in the accompanying statement of operations.
On December 6, 2004, the Company filed form N-54A with the Securities and
Exchange Commission to become a BDC pursuant to Section 54 of the Investment
Company Act of 1940. As a result of its new status, the Company will now operate
as an investment holding company and plans to build an investment portfolio and
enhance the Company's shareholder value. 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 does not intend to
limit its potential acquisitions to just one line of business or industry, as
the 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 Investment Company Act of 1940.
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.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statement and the reported amounts of revenues and
expenses during the reporting period. Estimates that are critical to the
accompanying financial statements arise from the determination of the fair value
of the Company's investment. Because such determination involves subjective
judgment, it is at least reasonably possible that the Company's estimates could
change in the near term with respect to this matter.
6
AMERICAN CAPITAL PARTNERS LIMITED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
Valuation of Investments
- ------------------------
As required by ASR 118, the investment committee of the company is required to
assign a fair value to all investments. To comply with Section 2(a) (41) of the
Investment Company Act and Rule 2a-4 under the Investment Company Act, it is
incumbent upon the board of directors to satisfy themselves that all appropriate
factors relevant to the value of securities for which market quotations are not
readily available have been considered and to determine the method of arriving
at the fair value of each such security. To the extent considered necessary, the
board may appoint persons to assist them in the determination of such value, and
to make the actual calculations pursuant to the board's direction. The board
must also, consistent with this responsibility, continuously review the
appropriateness of the method used in valuing each issue of security in the
company's portfolio. The directors must recognize their responsibilities in this
matter and whenever technical assistance is requested from individuals who are
not directors, the findings of such intervals must be carefully reviewed by the
directors in order to satisfy themselves that the resulting valuations are fair.
No single standard for determining "fair value...in good faith" can be laid
down, since fair value depends upon the circumstances of each individual case.
As a general principle, the current "fair value" of an issue of securities being
valued by the board of directors would appear to be the amount which the owner
might reasonably expect to receive for them upon their current sale. Methods
which are in accord with this principle may, for example, be based on a multiple
of earnings, or a discount from market of a similar freely traded security, or
yield to maturity with respect to debt issues, or a combination of these and
other methods. Some of the general factors which the directors should consider
in determining a valuation method for an individual issue of securities include:
1) the fundamental analytical data relating to the investment, 2) the nature and
duration of restrictions on disposition of the securities, and 3) an evaluation
of the forces which influence the market in which these securities are purchased
and sold. Among the more specific factors which are to be considered are: type
of security, financial statements, cost at date of purchase, size of holding,
discount from market value of unrestricted securities of the same class at time
of purchase, special reports prepared by analysis, information as to any
transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the securities, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
The board has arrived at the following valuation method for its investments.
Where there is not a readily available source for determining the market value
of any investment, either because the investment is not publicly traded, or is
thinly traded, or in absence of a recent appraisal, the value of the investment
shall be based on the following criteria:
1. Total amount of the Company's actual investment ("AI"). This amount shall
include all loans, purchase price of securities, and fair value of securities
given at the time of exchange.
2. Total revenues for the preceding twelve months ("R").
3. Earnings before interest, taxes and depreciation ("EBITD")
4. Estimate of likely sale price of investment ("ESP")
5. Net assets of investment ("NA")
6. Likelihood of investment generating positive returns (going concern)
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.
7
AMERICAN CAPITAL PARTNERS LIMITED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
Revenue Recognition
- -------------------
The Company recognizes revenues in accordance with the guidance in the
Securities and Exchange Commission Staff Accounting Bulletin 104. Revenue is
recognized when persuasive evidence of an arrangement exists, as services are
provided over the term of a service contract, and when collection of the fixed
or determinable selling price is reasonable assured. The Company follows EITF
00-8 "Accounting by a Grantee for an Equity Instrument to be Received in
Conjunction with Providing Goods or Services" when determining the measurement
date to value securities received for services.
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
Comprehensive Income (Loss)
- ---------------------------
Comprehensive income (loss) includes net income (loss) as currently reported by
the Company adjusted for other comprehensive gains (losses). Other comprehensive
gains (losses) for the Company consists of unrealized gains (losses) related to
the Company's equity securities accounted for as available-for-sale with changes
in fair value recorded through stockholders' equity.
8
ITEM 2: MANAGEMENTS 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.
GENERAL
American Capital Partners Limited, Inc. is located 319 Clematis Street, Suite
211, West Palm Beach, Florida, 33401. The Company is a publicly trade company
currently listed on the OTC Pink Sheets under the symbol APRJ. The company's
web site is www.acpbdc.com.
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.
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.
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.
9
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2005
TO THREE MONTHS ENDED JUNE 30, 2004
Gross Revenues and Costs of Operations
- --------------------------------------
Gross Revenues. Gross Revenues increased from $177,661 for the three month
period ended June 30, 2004 to $210,625 for the period ended June 30, 2005. The
increase is primarily due to our transition into a business development
corporation.
Operating expenses: Operating expenses decreased from $167,700 for the period
ended June 30, 2004 to $137,190 for the period ended June 30, 2005. The increase
is primarily due to decreased operating costs as we transition into a business
development corporation.
Net Income/(Loss): Net income increased from $2,961 for the period ended June
30, 2004 to net income of $71,435 for the period ended June 30, 2005, an
increase of $68,474.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2005
TO SIX MONTHS ENDED JUNE 30, 2004
Gross Revenues and Costs of Operations
- --------------------------------------
Gross Revenues. Gross Revenues increased from $279,448 for the period ended June
30, 2004 to $294,699 for the period ended June 30, 2005.
Operating expenses: Operating expenses decreased from $255,633 for the period
ended June 30, 2004 to $246,911 for the period ended June 30, 2005. There was
decrease in operating costs as we transition into a business development
corporation.
Net Income/(Loss): Net income of increased from $9,815 for the period ended June
30, 2004 to net income of $43,788 for the period ended June 30, 2005, an
increase of $33,973, primarily due to our investments in securities.
Current Assets and Liabilities
- ------------------------------
At June 30, 2005, we had cash of $99,520 and total assets of $335,644. We
anticipate increasing our assets as we transition into a business development
corporation.
At June 30, 2005, we had total liabilities of $187,408, consisting primarily of
accrued expenses of $117,241. We had a net working capital deficit of $48,487.
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.
10
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, 2004, 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
- -----------------------------
The Company had no off balance sheet arrangements.
ITEM 3: EVALUATION OF DISCLOSURE 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 June 30, 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 June 30, 2005.
11
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
No legal proceedings were initiated in this quarter.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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
(a) Exhibits:
31.1 Certification Statement of the Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification Statement of the Principal Financial and Accounting
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification Statement of the Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Statement of the Principal Financial and Accounting
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN CAPITAL PARTNERS LIMITED, INC.
By: /s/ C. Frank Speight Date: August 15, 2005
-------------------------------
C. Frank Speight,
Director and
Principal Executive Officer
By: /s/ Timothy Ellis Date: August 15, 2005
-------------------------------
Timothy Ellis,
Director and
Principal Financial and
Accounting Officer
13