10-K 1 g75196e10-k.txt FIRST CAPITAL RESOURCES.COM, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to________ Commission File No. 33-55254-28 FIRST CAPITAL RESOURCES.COM, INC. (Exact name of Registrant as specified in its charter) NEVADA 87-0438641 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 4500 140th Ave. N. Ste. 220 Clearwater, Florida 33762 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (727) 536-5966 Securities registered pursuant to Section 12 (b) of the Act: NONE Securities registered pursuant to Section 12 (g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 28, 2001, was $0 based on their being no bid or ask price as reported by the OTC electronic bulletin board on that date or within 60 days prior to the date of filing. As of March 27, 2002, there were 10,770,000 shares of Common Stock, $.001 par value, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE There is no annual report, proxy statement or prospectus to incorporate by reference. ITEM 1. Description of Business. First Capital Resources.com, Inc. (the "Company" or the "Registrant") is a Nevada corporation, having first been incorporated under the name Jackal Industries, Inc., pursuant to the laws of Utah on April 16, 1986, and subsequently reorganized under the laws of Nevada on December 30, 1993. On April 1, 1999, FACT South, LLC, a limited liability company ("Fact South") sold a 100% interest in its three Subsidiaries, Carnet, Inc. ("Carnet"), Southeast Dealer Acceptance, Inc. ("SEDA"), and Affordable Dealer Services, Inc. ("Affordable"), to Jackal Industries in exchange for 10,000,000 shares of the Company, resulting in FACT South, LLC, owning approximately 91% of the outstanding shares of the Company. The Company's name was changed to First Capital Resources.com, Inc., on April 13, 1999. On December 27, 2000, Fact South LLC transferred its 10,000,000 shares in the Company to First American Capital Trust ("FACT"), Fact South's controlling member, as partial satisfaction of debt owing to FACT. On December 27, 2000 the Company transferred stock in SEDA and Carnet to FACT in exchange for $1,255,000 that was applied to reduce the intercompany loan owing to FACT. This left the Company with Affordable as its sole subsidiary. The Company, through its wholly owned subsidiaries, Affordable, was involved in the automobile finance and lending business. Affordable is a commercial finance company that, since its inception on October 21, 1998, has been in the business of inventory-based lending to used car dealerships throughout southeastern Florida. Affordable ceased any future financing in October of 2000 and has only been collecting outstanding receivable balances. SEDA, since its inception on January 20, 1999, engaged in the business of purchasing and servicing sub-prime automobile finance loans primarily in southeastern Florida. The loans are primarily on used vehicles to borrowers that would not be expected to qualify for traditional financing provided by commercial banks or automobile manufacturers usual finance companies. As was previously mentioned, SEDA was sold in December of 2000 to FACT. Carnet, Inc. was a used car dealer operating in southeast Florida, which received its funding from Affordable. In July of 1999, the bulk of the operations of Carnet were sold to a third party and Affordable and SEDA purchased the remaining cars and loans. Carnet ceased all operations in August 1999. The Company was transferred to FACT in December of 2000. During 2000 and 2001, the Company had no employees. Certain employees of the Company's majority shareholder, FACT, provided services to the Company, as needed. FACT began charging the Company $6,000 per month plus a servicing fee of $30 for each retail contract beginning in February 2000. This fee covers the use of FACT's offices and related office costs as well as the use of its employees whose duties include general administration, collections and accounting. This arrangement was changed to $4,500 per month starting on October 1, 2000 plus $30 per retail loan account. Due to the sale of SEDA, the ongoing fees changed to $4,500 per month commencing January 1, 2001. During 2001, the management fee was discontinued as is discussed further in this report. The Company is not aware of any existing or probable governmental regulation that will have a material effect on its business. The Company incurred no material costs or effects due to compliance with any environmental laws. ITEM 2. Properties. The Company had no leases during the year. The Company maintains its offices in those of its majority shareholder in Clearwater, Florida. It currently pays no rent for this space. ITEM 3. Legal Proceedings. The Company is not a party to any material legal proceeding or litigation which would impact the operations of the Company and knows of no material legal proceedings, judgments entered, legal actions or litigation, contemplated or threatened, which would impair the operations of the Company in the future. The Company has commenced certain actions to recover amounts owed to it that have been fully provided for in the financial statements, in particular an attempt to recover a $1,000,000 loan to a private entity. The success or outcome of this action is not known and there is no certainty of any success in these efforts. The Company's major shareholder, First American Capital Trust ("FACT") filed a voluntary petition for relief from creditors under Chapter XI of the United States Bankruptcy Code in September 1999. The creditors of FACT and the Bankruptcy Court approved a Plan of Reorganization in November 2000. The Plan called for the transfer of all of FACT's assets, including the 10,000,000 shares of the Company and the amount the Company owed to FACT at that time of approximately $4,200,000, to a new entity, the First American Capital Liquidating Trust ("FACLT"). This transfer was completed January 1, 2001. The Plan and subsequent Court approved Orders provide the Company with the flexibility to transfer some or all of its remaining assets to FACLT against the remaining debt outstanding. To the extent that the debt is not fully repaid, up to an additional 4,000,000 shares in the Company may be issued to FACLT to satisfy any remaining debt. The Company is looking for a way to enhance shareholder value. The Company may leave certain assets in the Company if an appropriate merger or acquisition candidate can be located, or it may liquidate by selling all of its assets and then sell the Company as is without any assets or liabilities. This process is ongoing and no final decision has been made. ITEM 4. Submission of Matters to a Vote of Security Holders. No matter was submitted to the Company's security holders for a vote during the fourth quarter of the fiscal year ended December 31, 2001. PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters. a) The following table shows the high and low bid prices for the Company's common stock as reported by the NASD electronic bulletin board (Bulletin Board - symbol "FCRS"), for the period commencing January 1, 2000, to December 31, 2001. Such prices reflect inter-dealer prices, may not represent actual transactions and do not include retail markup, markdown or commissions. Year Quarter $ High $ Low ---- ------- ------ ----- 2001 4th -- -- 3rd -- -- 2nd -- -- 1st -- -- 2000 4th 0.50 0.50 3rd -- -- 2nd -- -- 1st -- --
As of February 28, 2002, there were 705 record holders of the Company's common stock. The Company has not previously declared or paid any dividends on its common stock and does not anticipate declaring any dividends in the foreseeable future. ITEM 6. Selected Financial Data. SUMMARY INCOME STATEMENT
Year Ended Year Ended 12/31/01 12/31/00 ------------------------------------------------------------------------------------------------------ Interest, fees and discount accretion income $ 121,756 218,841 Interest Expense (347,829) (533,858) ------------------------------------------------------------------------------------------------------ Net Interest income (loss) before provision for credit Losses on finance receivables (226,073) (315,017) Provision for credit losses on finance receivables (43,567) (46,909) ------------------------------------------------------------------------------------------------------ Net interest loss after provision for credit losses (269,640) (361,926) Other Income 156,500 999,882 Other Expenses (139,385) (662,112) ------------------------------------------------------------------------------------------------------ Loss from Continuing Operations (252,525) (24,156) Income Tax Benefit -- -- Loss from Continuing Operations (252,525) (24,156) Gain (Loss) from Discontinued Operations -- 24,371 ------------------------------------------------------------------------------------------------------ Net Gain (Loss) (252,525) 215 Weighted Average Shares Outstanding 10,770,000 11,079,167 Net Loss per share from continuing operations (0.02) 0.00 Net Loss per share from discontinued operations 0.00 0.00 ------------------------------------------------------------------------------------------------------ Net Loss per share (0.02) 0.00
SELECTED BALANCES AT YEAR END Total Assets 928,062 2,010,119 Total gross finance receivables 24,420 332,164 Due to Parent Company 3,384,718 4,206,889 Note Payable -- -- ----------------------------------------------------------------------------------------------------- Total Stockholders Deficit (2,474,544) (2,222,019) SELECTED RATIOS Net Income (Loss) to average total assets 27.2% 0.00% Net Loss to average deficiency in assets 10.7% 0.00% Total deficiency in assets to total assets 266.64% 110.55%
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. RESULTS FROM OPERATIONS A loss from operations in the amount of $252,525 was recorded for the year ended December 31, 2001. There was no loss from discontinued operations in 2001. This compares with net income for the year ended December 31,2000 of $215 comprising a net loss from operations of $24,156 and a gain from Discontinued Operations of $24,371. Revenues Net Interest expense for the year ended December 31, 2001, was $226,073 as compared to net interest expense of $315,017 for the same period last year. Interest revenues in 2001 were derived from floor plan financing loans made to used automobile dealers and interest earned on overnight bank deposits and certificates of deposit. Interest revenues in 2000 were generated from interest earned from sub-prime auto loans to retail customers by its SEDA subsidiary, Floor Plan Financing Loans and interest earned on bank deposits. Even though interest revenues were lower in 2001 due to the reasons above, net interest expense was lower due to the significant reduction in interest expense on the FACLT intercompany loan during 2001. Interest expense on the loan to FACLT was reduced from $533,858 to $347,829. Net interest revenues for the year 2002 should be lower than during the year 2001. Effective October 2000, the Company no longer advanced floor plan financing loans. The Company has collected almost all outstanding floor plan loans, thereby reducing the principal balance of loans outstanding. It is estimated that the principal value of floor plans outstanding by the end of the year will be near zero. Additionally as the Company pays down the debt owing to FACLT, it will have less cash on hand to earn interest revenues thereby reducing interest revenues even further in 2002. This will be somewhat offset by lower interest expense in 2002 as the intercompany loan to FACLT is reduced further. The Company derived other revenues of approximately $156,500 during the year 2001 as compared to $999,882 during fiscal 2000. During 2001 other revenues came primarily from collections on receivables that had been fully provided in the accounts, litigated and ultimately collected from the defendants. During 2000 other revenues came primarily from equity earnings of Subsidiary that were sold at the end of the fiscal period in the amount of $551,233, a gain on the sale of the same Subsidiary of $262,545 and other interest income of $175,104. Based on the current status of the Company it does not expect significant other revenues in the upcoming year however it is possible that the Company may still collect on certain assets that have been fully provided for on the financial statements. If the Company is sold or an acquisition is completed revenues would be impacted accordingly. The Company had a gain from discontinued operations in 2000 in the amount of $24,371 resulting from an equity gain on the sale of discontinued Subsidiary sold. The Company had no loss from discontinued operations during fiscal 2001. There are not expected to be losses from discontinued operations again in fiscal 2002 unless ADS is sold as part of an overall restructuring of the Company. All Subsidiary other than Affordable have been sold. It is expected that the Company will not have the ability to satisfy its outstanding indebtedness to FACLT unless the Company is permitted by FACLT to issue shares in satisfaction of any debt should it remain after all assets have been sold or collected. Operating and Other Expenses Operating and Other expenses ("Operating") for the year ended December 31, 2001, were $139,385 as compared to $662,112 for the previous fiscal year. During 2001, these consisted primarily of general and administrative expenses whereas general and administrative expenses were $396,750 during fiscal 2000. During fiscal 2000 the Company also recorded a writedown on the collection of receivables from Carnet and FC Holdings in the amount of $277,121 on the sale of these companies to FACLT. During fiscal year 2001, $43,567 was reserved against non-performing assets as the Company had reserved against primarily all of the Company's non-performing assets in previous years including $46,909 during December 31, 2000. The Company incurred $347,829 in interest expense on its debt to FACLT during the year. This was expensed but was not paid and was accrued along with the outstanding debt. The corresponding amount for 2000 was $533,858. Interest was accrued for the entire year in 2000. Interest expense was lower in 2001 than in 2000 due to the lower amount of debt outstanding to FACLT throughout 2001 as compared to fiscal 2000. The Company anticipates that interest expense will likely be lower in 2002 as debt will be paid down throughout the year and ultimately paid off either through asset sales and collections or as noted before, issuance of additional shares to FACLT. The Company has not paid any officers or employees in 2001 or 2000. The Company closed its office in Oakland Park Florida in March of 2000. As previously mentioned, the Company is not currently paying any officers or directors and it has no employees. The company's operations are currently being run out of its controlling shareholder's office in Clearwater, Florida. Its controlling shareholder, FACLT, charged the Company approximately $13,000 per month during fiscal 2000 to service all of its operations, including the servicing of the retail loan portfolio and the floor plan portfolio. At the end of fiscal 2000, SEDA was sold and the business level for ADS declined throughout the year 2001. Accordingly monthly management fees declined throughout the year totaling $25,500 for the entire 2001 year. This monthly fee includes the cost of an office and related office costs and services by FACLT employees on behalf of the Company. LIQUIDITY AND CAPITAL RESOURCES The predecessor to the Company's major shareholder, FACT, filed for relief from creditors under Chapter XI of the United States Bankruptcy Code in September 1999. FACT was the Company's primary financing source in fiscal 1999. Additionally, loans are currently outstanding from the Company to FACLT (the successor to FACT) in the amount of $3,384,718. In November 2000, the creditors of FACT and the Bankruptcy Court approved a Plan of Reorganization for FACT. The plan and other subsequent orders approved by the court allow FACT the flexibility to cause the Company to either sell all of its assets and repay its debt, to the extent it is able, to FACT, or to allow the Company to retain certain assets in connection with pursuing a suitable acquisition candidate. Any debt not extinguished by the sale of the Company's assets may be converted by FACLT into up to an additional 4,000,000 shares of the Company. The Company currently has finance receivables of $24,420, as compared to $332,164 last year. The receivables at December 31, 2001 consist solely of floor plan receivables and are net of a credit reserve of $109,242. The decrease is due to the aggressive collection of Floor Plan Receivables. All Floor Plan receivables have been collected except for one active account. The remaining receivables have been collected to the extent possible and a provision has been made for the remaining balance. After October 1, 2000 no new Floor Plan loans were made. The Company has received all of its funding from FACT. To date it has received total funding of $6,930,832. At December 31, 2001, the Company owes FACT $3,384,718 as compared to $4,206,889 at December 31, 2000. Subsequent to December 31, 2001, an additional $300,000 payment was made against the loan, reducing the balance to approximately $3,084,718. The Company has a deficiency in assets consisting of paid-in capital and common stock of $1,962,208 and a deficit of $4,436,752. Equity will continue to decline in the first six months of fiscal 2002 as a result of the interest expense on the intercompany loan to FACLT. Any further increases or decreases in equity are dependent upon, among other things, what actions the Company takes with respect to any remaining debt being converted to equity, the acquisition of or combination with an ongoing business or the outright sale of the Company and whatever plans the new owners may have for the Company. ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk. NONE ITEM 8. Financial Statements and Supplementary Data. The financial statements of the Company and related notes, together with the report of Kaufman, Rossin & Co., are set forth in Part IV beginning at page F-1 of this report. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. During the year ended December 31, 2001, there were no disagreements with the Company's accountants on accounting and financial disclosure practices. ITEM 10. Directors and Executive Officers of the Registrant. The following table shows the positions held by the Company's officers and directors. The directors were appointed and will serve until the next annual meeting of the Company's stockholders, and until their successors have been elected and have qualified. The officers were appointed to their positions, and continue in such positions, at the discretion of the directors.
Name Age Position Director Since -------------------------------------------------------------------------------------------- Derri Davisson 44 President and Director October 27, 1999
Derri Davisson has been President and a Director since October 27, 1999. She has also been Vice President, Operations, of First American Capital Trust, the Company's majority stockholder, since December 1998, and Co-Trustee of the Trust since September 1999. Prior to that she was the Corporate Paralegal and Systems Manager for First American Capital Trust. Beneficial Ownership Compliance Reporting FACT South, LLC, First American Capital Trust ("FACT"), and Derri Davisson, as Trustee of FACT and director of the Company, filed Form 3s regarding their respective beneficial ownership in and status as director with the Company during 2000, but such filings were not on a timely basis pursuant to Section 16(a) of the Exchange Act. Stephen Miller, a former director of the Company, did not file a Form 3 or Form 5 with respect to his position as a director with the Company. ITEM 11. Executive Compensation. The Company has made no arrangements for the remuneration of its existing officers and directors, except that they will be entitled to receive reimbursement for actual, demonstrable out-of-pocket expenses, including travel expenses, if any, made on the Company's behalf. There are no agreements or understandings with respect to the amount or remuneration that officers and directors are expected to receive in the future. Management performed minimal services and takes no salaries from the Company and does not anticipate receiving any salaries in the foreseeable future.
Name and Principal Position Year Salary Bonus Other -------------------------------------------------------------------------- Derri Davisson (President-Director since October 27, 1999) 2001 -- -- --
ITEM 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth, as of December 31,2001, information regarding the beneficial ownership of shares by each person known by the Company to own five percent or more of the outstanding shares, by each of the directors and executive officers and by the executive officers and directors as a group.
Name and address Number of Shares of Title of class beneficial owner (1) Beneficially Owned % Ownership -------------------------------------------------------------------------------------------- Common Stock Derri Davisson(2) 10,000,000 92.85% Common Stock First American Capital (2) 10,000,000 92.85% Liquidating Trust Common Stock Sole Officer and (3) 10,000,000 92.85% Director as a Group
(1) Unless otherwise indicated, the address of each person is that of the Registrant at 4500 140th Ave. N., Suite 220, Clearwater, Florida 33762. (2) Ms. Davisson is the sole director and President of the Company. First American Capital Liquidating Trust, for which Ms. Davisson is the sole trustee, is the holder of a majority of the voting securities of the Company. First American Liquidating Trust acquired all of the assets of FACT effective January 1, 2001. (3) See notes (1) and (2). ITEM 13. Certain Relationships and Related Transactions. On December 27, 2000, the Company transferred 100% of the stock in SEDA, Carnet, and FC Holdings to FACT to offset part of the debt that was outstanding from the Company to FACT. FACT approved the transfer as the majority holder of the Company's stock and pursuant to the approved Plan of Reorganization for FACT. The stock was transferred for $1,255,000 to FACT resulting in a reduction of debt owing to FACT of an equal amount. The stock was valued based on a fair market assessment of the underlying assets and liabilities of the three Subsidiaries. Carnet and FC Holdings had no assets or liabilities at the time of sale. The value of the sale was attributable to SEDA and was based on the value of its retail automobile portfolio, other loan receivables and cash, net of the amount it owed itself to FACT. No officer, director, nominee for election as a director, or associate or such officer, director or nominee is or has been in debt to the Company during the last fiscal year. PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Financial Statements and Financial Statement Schedules. Financial Statements - December 31, 2001 and 2000. FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001 AND 2000 CONTENTS
Page ---------------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT F - 1 CONSOLIDATED FINANCIAL STATEMENTS Balance Sheet F - 2 Statements of Operations F - 3 - F - 4 Statements of Changes in Deficiency in Assets F - 5 Statements of Cash Flows F - 6 - F - 7 Notes to Financial Statements F - 8 - F - 17
INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders First Capital Resources.Com, Inc. Clearwater, Florida We have audited the accompanying consolidated balance sheet of First Capital Resources.Com, Inc. and Subsidiary as of December 31, 2001, and the related consolidated statements of operations, changes in deficiency in assets and cash flows for each of the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Capital Resources.Com, Inc. and Subsidiary as of December 31, 2001, and the results of their operations and their cash flows for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company has a substantial deficiency in assets. This factor raises substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. KAUFMAN, ROSSIN & CO. Miami, Florida March 19, 2002 FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 ============================================================================== ASSETS ============================================================================== FINANCE RECEIVABLES (NOTE 5) $ 24,420 CASH 903,642 LOANS RECEIVABLE (NOTE 6) -- PROPERTY AND EQUIPMENT (NOTE 7) -- ------------------------------------------------------------------------------ TOTAL ASSETS $ 928,062 ============================================================================== LIABILITIES AND DEFICIENCY IN ASSETS ============================================================================== LIABILITIES ============================================================================== Accounts payable and other liabilities $ 17,888 Due to Parent (Note 8) 3,384,718 ------------------------------------------------------------------------------ Total liabilities 3,402,606 ------------------------------------------------------------------------------ LEASE COMMITMENTS AND CONTINGENCIES (NOTE 11) DEFICIENCY IN ASSETS Common stock, $0.001 par value; 100,000,000 shares authorized, 10,770,000 issued and outstanding 10,770 Additional paid-in capital 1,951,438 Deficit (4,436,752) ------------------------------------------------------------------------------ Total deficiency in assets (2,474,544) ------------------------------------------------------------------------------ TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $ 928,062 ==============================================================================
FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2001 AND 2000
=============================================================================================================== 2001 2000 =============================================================================================================== INTEREST Interest, fees and discount accretion income $ 121,756 $ 218,841 Interest expense (347,829) (533,858) --------------------------------------------------------------------------------------------------------------- Net interest expense (226,073) (315,017) PROVISION FOR CREDIT LOSSES ON FINANCE RECEIVABLES (43,567) (46,909) --------------------------------------------------------------------------------------------------------------- NET INTEREST LOSS AFTER PROVISION FOR CREDIT LOSSES (269,640) (361,926) --------------------------------------------------------------------------------------------------------------- OTHER INCOME Equity earnings of Subsidiary sold (Note 9) -- 551,233 Gain on sale of Subsidiary (Note 9) -- 262,545 Other interest income -- 175,104 Bad debt recoveries 156,500 11,000 --------------------------------------------------------------------------------------------------------------- Total other income 156,500 999,882 --------------------------------------------------------------------------------------------------------------- OPERATING AND OTHER EXPENSES Provision for credit losses on loans to former Subsidiary and unrealizable prepaid compensation (Notes 6 and 8) -- 277,121 Gain on disposals and impairment of property and equipment -- (11,759) Consulting services -- 232,260 Cost of repossessions -- 16,785 Professional fees 96,322 37,353 Other operating expenses 43,063 110,352 --------------------------------------------------------------------------------------------------------------- Total operating and other expenses 139,385 662,112 --------------------------------------------------------------------------------------------------------------- LOSS FROM CONTINUING OPERATIONS (252,525) (24,156) --------------------------------------------------------------------------------------------------------------- DISCONTINUED OPERATIONS (NOTE 4) Gain on disposal of retail car lot and telemarketing division, net of income tax benefit of $0 -- 24,371 --------------------------------------------------------------------------------------------------------------- Gain from discontinued operations -- 24,371 --------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (252,525) $ 215 ===============================================================================================================
See accompanying notes. FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) YEARS ENDED DECEMBER 31, 2001 AND 2000
================================================================================ 2001 2000 ================================================================================ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,770,000 11,079,167 ================================================================================ NET INCOME (LOSS) PER SHARE: From continuing operations $ (0.02) $ (0.00) From discontinued operations 0.00 0.00 -------------------------------------------------------------------------------- Total income (loss) per share $ (0.02) $ 0.00 ================================================================================
See accompanying notes. FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY IN ASSETS YEARS ENDED DECEMBER 31, 2001 AND 2000
=================================================================================================================================== Additional Number Common Paid-in of shares Stock Capital Deficit Total =================================================================================================================================== Balance at December 31, 2000 11,300,000 11,300 1,950,908 (4,184,442) (2,222,234) Cancellation of previously issued shares (530,000) (530) 530 -- -- Net income -- -- -- 215 215 ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 10,770,000 $ 10,770 $1,951,438 $(4,184,227) $(2,222,019) Net Loss -- -- -- (252,525) (252,525) ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2001 10,770,000 $ 10,770 $1,951,438 $(4,436,752) $(2,474,544) ===================================================================================================================================
FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001 AND 2000
========================================================================================================================= 2001 2000 ========================================================================================================================= CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (252,525) $ 215 ------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation -- 11,507 Increase in due to parent due to interest expense 347,829 533,858 Provision for credit losses on finance receivables 43,567 46,909 Loss on disposal of property and equipment -- 1,517 Gain on disposal of real estate held for sale -- (13,276) Gain on disposal of Subsidiary sold -- (262,545) Decrease in other assets -- 73,274 (Decrease) in accounts payable (7,361) (143,406) ------------------------------------------------------------------------------------------------------------------------- Total adjustments 384,035 247,838 ------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 131,510 248,053 ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of office equipment -- 7,426 Proceeds from the repayment of finance contracts 264,177 1,034,371 Increase in floor plan receivables -- 157,695 ------------------------------------------------------------------------------------------------------------------------- Net cash provided by investing activities 264,177 1,199,492 ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) in due to Parent (1,170,000) (361,501) Principal paydowns on note payable -- (4,604) ------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (1,170,000) (366,105) ------------------------------------------------------------------------------------------------------------------------- NET (DECREASE) INCREASE IN CASH (774,313) 1,081,440 CASH - BEGINNING OF YEAR 1,677,955 596,515 ------------------------------------------------------------------------------------------------------------------------- CASH - END OF YEAR $ 903,642 $ 1,677,955 =========================================================================================================================
See accompanying notes. FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued) YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000 ========================================================================================================================= Supplemental Disclosures of Non-Cash Transactions: ------------------------------------------------------------------------------------------------------------------------- Relinquishment of certain real property and related note payable $ -- $ 171,000 ========================================================================================================================= Cancellation of previously issued shares $ -- $ 530 ========================================================================================================================= Partial repayment of due to parent in connection with the sale of Subsidiary (Note 9) $ -- $1,254,300 =========================================================================================================================
FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include the accounts of First Capital Resources.Com, Inc. and its Subsidiary (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. BUSINESS ACTIVITY The Company operated as a commercial finance company providing fee based floor plan lending to pre-owned automobile dealerships throughout South Florida. Effective October 1, 2000, the Company terminated new funding on all floor plan agreements. The Company also operated as a consumer finance company specializing in the purchase and servicing of sub-prime automobile loans, which was sold to the Parent during 2000 (Note 9). For the year ended December 31, 2001 and 2000 all interest and fee income pertained to floor plan lending activities. Although not its principal business activity, the Company has provided inventory control services and other non-traditional funding services, principally unsecured lending to a certain yacht brokerage company and unsecured lending to certain of its dealership customers. CONCENTRATIONS Only one customer accounts for the balance in year end receivables. The Company provided floor plan financing to, and acquired finance contracts from a network of automobile dealers located primarily in South Florida. Substantially all underlying borrowers are also located in this geographic area. Exposure to losses on contracts varies by borrower. The Company monitors exposure to credit losses and maintains allowances for anticipated losses, which management considers to be appropriate under the circumstances. The Company, from time to time, maintains deposits with financial institutions in excess of federally insured limits. USE OF ESTIMATES The accounting and reporting policies of the Company are in conformity with accounting principles generally accepted in the United States of America and general practices within the finance industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates. The allowance for credit losses is an estimate that is established through charges to earnings. Loans that are determined to be uncollectible are charged against the reserve and any subsequent recoveries are credited to other income. The allowance for credit losses is maintained at an amount considered by management to be adequate to absorb potential credit losses based upon an evaluation of known and inherent risks in the portfolios. Management's periodic evaluation takes into consideration both the timing and severity of losses experienced by both the Company and the industry. Future adjustments to the reserve may be necessary if conditions differ substantially from the assumptions used in making the evaluation. Given the nature of lending activities, it is reasonably possible the Company's estimate of the allowance for credit losses could materially change in the near future. NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The reserve for uncollectible loans receivable is an estimate that was established through charges to earnings upon evaluation of the outstanding loans receivable at December 31, 2001. Management's judgement in determining the adequacy of this reserve was based upon several factors which include, but are not limited to, the nature of the loans receivable, the availability of collateral, the financial strength of each respective debtor, and the ability of the Company to effectuate collection of the loans receivable. It is reasonably possible the Company's estimate of the reserve for non-collectible loans receivable could materially change in the near future. Realization of the deferred tax asset is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Management believes, based upon the short operating period of the Company and the bankruptcy of the 92.85% Parent of the Company (Note 3), among other things, the uncertainty of generating taxable income is such that it is more likely than not that none of the deferred tax asset will be realized, and accordingly has established a valuation allowance of $727,000 fully offsetting this asset. It is reasonably possible the Company's estimate of realizability of the deferred tax asset could materially change in the near term. REVENUE RECOGNITION Interest income on fee based floor plan lending consists principally of administration and floor fee income earned on short duration (less than 30 day) advances to dealerships. Typically, these fees are received in advance, are non-refundable and are recognized upon receipt. FLOOR PLAN RECEIVABLES According to floor plan financing agreements, amounts advanced to dealerships on floor plan receivables are collateralized by each dealerships' automobile inventory and dealer bonds; however, in substantially all cases where dealerships have defaulted on repayment, the Company has not been successful in effectuating collection through repossession or execution on bonds. IMPAIRMENT OF LOANS The Company has adopted Financial Accounting Standards Board Statement of Financial Accounting Standards ("SFAS") No. 114, Accounting by Creditors for Impairment of a Loan. This standard addresses the accounting for the impairment of certain loans when it is probable that all amounts due pursuant to the contractual terms of the loan will not be collected. Under the provisions of this standard a loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Individually identified impaired loans are measured based on the present value of payments expected to be received, using the historical effective loan rate as the discount rate. Alternatively, measurement may also be based on observable market prices, or for loans that are solely dependent on the collateral for repayment, measurement may be based on the fair value of the collateral. Loans that are to be foreclosed are measured based on the fair value of the collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a component of the allowance for loan losses. Changes to the valuation allowance are recorded as a component of the provision for loan losses. NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed principally on the straight-line method over the estimated useful lives of the assets as follows: Equipment 3 - 5 years Expenditures for major betterments and additions are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets are charged to expense currently. IMPAIRMENT OF LONG-LIVED ASSETS Statement of Financial Accounting Standards No. 121 "Impairment of Long-Lived Assets and Assets to be Disposed of", requires that long-lived assets and certain identifiable intangibles that are used in operations be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets might not be recoverable. INCOME TAXES Deferred income taxes are provided for the estimated tax effect of temporary differences between financial and taxable income. These differences result primarily due to depreciation and net operating loss carryforwards. The effective tax rate differed from maximum statutory rates due primarily to the change in the valuation allowance. NET LOSS PER SHARE The Company applies Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). Net loss per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the reported periods. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of cash, accounts payable and other liabilities and notes payable approximate their fair values due to the short maturity of these instruments. The fair value of loans receivable is determined by calculating the present value of each loan by a current market rate of interest for a similar loan as compared to the stated rate of interest. The difference between fair value and carrying value is not deemed to be significant. Due to parent is due upon demand and its fair value approximates its carrying value. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AND INTERPRETATIONS. In June 2001, the Financial Accounting Standards Board ("FASB") issued two new pronouncements: Statement of Financial Accounting Standards ("SFAS") No 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 is effective as follows: a) use of the pooling-of-interest method is prohibited for business combinations initiated after June 30, 2001; and b) the provisions of SFAS 141 apply to all business combinations accounted for by the purchase method that are completed after June 30, 2001 (that is, the date of the acquisition is July 2001 or later). There are also transition provisions that apply to business combinations completed before July 1, 2001, that were accounted for by the purchase method. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 for all goodwill and other intangible assets recognized in an entity's statement of financial position at that date, regardless of when those assets were initially recognized. SFAS No. 142 specifies that goodwill and some intangible assets will no longer be amortized but instead will be subject to periodic impairment testing. Adopting SFAS Nos. 141 and 142 are not expected to have a material impact on the Company's financial statements. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost should be allocated to expense using a systematic and rational method over its useful life. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. It supersedes, with exceptions, SFAS No 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and is effective for fiscal years beginning after December 15, 2001. Adopting SFAS Nos. 143 and 144 are not expected to have a material impact on the Company's financial statements. NOTE 2. RECAPITALIZATION Prior to April 1, 1999, the Company acted as a public shell company, with no significant operations, assets or liabilities. On April 1, 1999, pursuant to a Stock Purchase Agreement, FACT South, LLC, a Florida limited liability corporation ("FACT South"), acquired 10,000,000 shares (82.50%) of the Company's common stock in exchange for all of the issued and outstanding shares of capital stock of Affordable Dealer Services, Inc. (Affordable), Southeast Acceptance, Inc. (Southeast) and Carnet, Inc. (Carnet). First American Capital Trust (FACT), a Florida business trust is a 92% member in FACT South. Subsequent to this reverse merger transaction, FACT held effective beneficial ownership of 81.42% of the common stock of the Company and is considered to be the Parent. This merger was treated for accounting purposes as a capital transaction equivalent to the issuance of stock by the Company for the net monetary assets of the public shell, accompanied by a recapitalization. On December 27, 2000, FACT South entered into a compromise agreement with FACT pursuant to which FACT South satisfied and retired a portion of the indebtedness owed by FACT South to FACT by transferring all its assets to FACT. FACT South's primary asset was 10,000,000 shares of stock in the registrant, accounting for approximately 92.85% of the issued and outstanding stock of the registrant. NOTE 3. GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has a substantial deficiency in assets. It is reasonably possible that FACT, the principal source of liquidity for the Company, may not provide additional capital to the Company and/or may demand repayment of the amount due to Parent. Should such demand be made, the Company would not have the ability to repay such amount. In November of 2000, the creditors of Parent and the Bankruptcy Court approved a Plan of Reorganization. The Plan calls for the transfer of all of Parent's assets, including the 10,000,000 shares of the Company and the amount the Company owes to Parent at December 31st of approximately $4,200,000, to a new entity, the First American Capital Liquidating Trust ("FACLT"). This transfer was completed January 1, 2001. The Plan and subsequent Court approved Orders provide the Company with the flexibility to sell some or all of its remaining assets to FACLT against the remaining debt outstanding. To the extent that the debt is not fully repaid, up to an additional 4,000,000 shares in the Company may be issued to FACLT to satisfy any remaining debt. The Company may leave certain assets in the Company if an appropriate merger or acquisition candidate can be located or it may sell all of the assets and sell the Company as is without any assets or liabilities. No final decision has been made. NOTE 4. DISCONTINUED OPERATIONS During 1999, the Company discontinued the operations of two separate segments of its business. One, operating under the name American Marketing of South Florida (American), was a telemarketing business, the other, operating under the name Carnet, was a used car dealership. During 2000, Carnet and American were sold to the Parent (See Note 9). NOTE 4. DISCONTINUED OPERATIONS (CONTINUED) AMERICAN On July 1, 1999, the Company agreed to acquire the operations and substantially all of the operating assets of American in exchange for $100,000 cash and 82,500 shares of the Company's common stock. For several months, the Company funded losses of American while trying to restructure the management and operations of American. The Company was not successful in achieving profits and on December 30, 1999 (Measurement Date) American's operations were discontinued. For the period from January 1, 2000 through the date American was sold to the Parent, American's operations were as follows:
2001 2000 ====================================================== Revenues -- $ 48,731 Operating expenses -- (8,197) ------------------------------------------------------ Net income -- $ 40,534 ======================================================
CARNET Effective July 5, 1999, the Company sold the operations and certain assets of Carnet to an unrelated third party (the Acquirer) in exchange for an $80,000 note receivable. The assets were sold at the Company's book value and, accordingly, no gain or loss was recognized on the transaction. The $80,000 note receivable was to bear interest at 10% and called for monthly interest only payments of $2,029 for the first year and monthly principal and interest payments of $2,029 over the next 48 months. Shortly after this sale, the Acquirer defaulted on the note and the Company has recovered automobile inventory with a value of $36,547. Accordingly, the Company has established a reserve of $43,453 against this note and charged off that amount to the provision for credit losses on loans receivable and prepaid compensation in the accompanying statement of operations. For the period from January 1, 2000 to the date Carnet was sold to the Parent, Carnet's operations resulted in the following:
2001 2000 =============================================== Revenues $ -- $ -- Operating expenses -- (16,163) ----------------------------------------------- Net loss $ -- $(16,163) ===============================================
NOTE 5. FINANCE RECEIVABLES Finance receivables at December 31, 2001 consisted of the following: =============================================== Floor plan finance receivables $ 133,662 Allowance for credit losses (109,242) ----------------------------------------------- Finance receivables, net $ 24,420 ===============================================
Changes in the allowance for credit losses were as follows: ============================================= Balance - January 1, 2001 $ 65,675 Provisions charged to operations 43,567 Finance contracts charged off -- --------------------------------------------- Balance - December 31, 2001 $109,242 =============================================
NOTE 6. LOANS RECEIVABLE Loans receivable at December 31, 2001 consisted of the following: 10% unsecured note receivable due from a yacht brokerage company, interest due monthly, principal due September 2002 1,000,000 Non-interest bearing loans receivable from a former officer, unsecured, due on demand 60,122 10% loan receivable from a former officer's wife, unsecured, due on demand 58,000 10% receivable due from the acquirer of Carnet, unsecured 43,453 18% advances receivable from a pre-owned automobile dealership, unsecured 11,725 ----------------------------------------------------------------------------------- Loans receivable, fully reserved 1,173,300 Less allowance for losses on loans receivable (1,173,300) ----------------------------------------------------------------------------------- $ -- ===================================================================================
NOTE 7. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2001 consisted of the following: ==================================================== Equipment $ 15,616 Less accumulated depreciation (15,616) ---------------------------------------------------- $ -- ====================================================
Depreciation expense amounted to $0 and $11,507 for the years ended December 31, 2001 and 2000, respectively. NOTE 8. RELATED PARTY TRANSACTIONS FUNDING Since the inception of the Company's operating Subsidiary, the Company has received substantial funding from FACT. As of December 31, 2001, approximately $9,148,000 has been infused by FACT into the Company, either through advances or capital contributions. Of this amount, the Company has recorded cash disbursements of approximately $2,715,000 as repayments of advances from FACT. However, these amounts were not returned to FACT, but were actually paid to an individual who is the former CEO and President of the Company and a former Trustee of FACT, at the direction of this individual. FACT is currently seeking repayments of these amounts from this individual. Effective January 1, 1999, advances due to FACT of $1,047,752 were contributed to capital. At December 31, 2001 advances due to FACLT aggregated $3,384,718 and are reflected as Due to Parent. These advances are interest bearing at 9.75% per annum; both principal and accrued interest are due upon demand. PREPAID COMPENSATION During 1999, the Company paid $292,096 of compensation to former officers in advance of services rendered. As the Company no longer employs all these individuals, the Company intends to pursue collection of all unearned amounts. During 2001, the Company collected $115,000 in full settlement of these claims. No further amount is provided in the accounts. MANAGEMENT FEES The Company pays the Parent management fees that represent reimbursement for the use of the Parent's office facilities, employees and supplies. Management fees amounted to $25,500 and $63,100 for 2001 and 2000, respectively which are included in the other operating expenses in the consolidated of operations. NOTE 9. DIVESTITURE On December 27, 2000, the board of directors of the Company approved the partial repayment of certain indebtedness in the amount of $1,254,300 to the Parent by transferring 100% of the issued and outstanding stock of certain assets to the Parent. The transfer included the Company's shares of three wholly owned Subsidiary, Southeast Dealer Acceptance, Inc. ("SEDA"), Carnet, Inc. ("Carnet") and FC Holdings, Inc. ("FCH"). As a result of this transaction the Company recognized a gain of approximately $263,000, which is included as a component of other income in the consolidated statement of operations. NOTE 10. INCOME TAXES The components of the income tax benefit for the years ended December 31, 2001 and 2000 are as follows:
2001 2000 ==================================================== Deferred benefit $(95,000) $ -- Change in valuation allowance 95,000 -- ---------------------------------------------------- Income taxes $ -- $ -- ====================================================
The differences between the income tax benefit and the amount computed by applying the federal statutory income tax rate of 34% to loss from continuing operations and loss from discontinued operations are as follows:
2001 2000 ======================================================================== Tax benefit at U.S. statutory rates $(85,859) $ -- State income tax benefit (9,141) -- Change in valuation allowance 95,000 -- ------------------------------------------------------------------------ Income tax benefit $ -- $ -- ========================================================================
At December 31, 2001, the Company had deferred tax assets of approximately $756,000, principally from net operating loss carryforwards and allowances for credit losses. The deferred tax assets are offset by a valuation allowance in the same amount. Deferred tax assets, net of a valuation allowance, are recorded when management believes it is more likely than not that tax benefits will be realized. The change in the valuation allowance was based upon the consistent application of management's valuation procedures and current circumstances surrounding its future realization. The Company and its Subsidiary file consolidated income tax returns. As of December 31, 2001, the Company had consolidated net operating loss carryforwards of approximately $1,893,000 that will begin to expire in 2019. NOTE 11. LEASE COMMITMENTS AND CONTINGENCIES LEASES The Company leased its office and warehouse facilities under two separate non-cancelable operating leases. During 2000, the Company negotiated with its landlord to cancel the remaining terms of these leases, as it is no longer operating at any of these facilities. The Company's premises are located at the Parent's office facilities. Total rent expense amounted to $0 and $43,815 in 2001 and 2000, respectively. LITIGATION The Company is involved in various legal proceedings arising in the ordinary course of business. While it is not feasible to predict or determine the outcome of these proceedings, in the opinion of management, based on a review with legal counsel, any losses that may result from such legal proceedings are not expected to have a material adverse impact on the consolidated financial position and results of operations of the Company. NOTE 12. COMMON STOCK Effective August 1, 2000, the Company, with the consent of the board of directors cancelled 530,000 previously issued shares due to nonpayment. Reports on Form 8-K. A Report on Form 8-K was filed on January 26, 2001. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST CAPITAL RESOURCES.COM, INC. Date: March 31, 2001 By: /S/ Derri Davisson -------------------------------------- Derri Davisson, President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 31, 2001 By: /S/ Derri Davisson -------------------------------------- Derri Davisson, President and Director