ITEM 1: BUSINESS
(a) General Development of Business
The Corporation was incorporated in Colorado on October 25, 1988 for the purpose of acquiring or completing a merger with another company. Effective July 22, 1991, the Company entered into a common stock exchange agreement with Finca Consulting Costa Brava, S.A. whereby the Company transferred essentially 100% of its net assets to Finca Consulting Costa Brava, S.A. As a result of the merger, Finca Consulting Costa Brava, S.A. remained as the sole ongoing entity for accounting purposes. Finca Consulting Costa Brava, S.A. is located in and was incorporated in Spain on June 14, 1989 and its principal business is acting as a real estate broker for sales of Spanish properties, mainly holiday homes.
Subsequent to the aforementioned July 22, 1991 merger, the Corporation generated capital through an offering of preferred stock in Europe and in September 1991 formed an additional wholly-owned subsidiary, Finca Consulting Limited, incorporated in the United Kingdom. Finca Consulting Limited was formed to assist Finca Consulting Costa Brava, S.A. in the marketing and sales of Spanish properties.
In January 1991, the Corporation formed another new wholly-owned subsidiary, Finca Consulting GmbH, incorporated in Germany. Finca Consulting GmbH was formed to engage in the buying, selling and administration of Spanish real estate.
In May, 1992, the Company commenced an offering of its Common Shares in Europe.
In July 1992, the corporation entered into and consummated a common stock exchange agreement with King National Corporation, a U.S. corporation, whereby the sole transferable asset was a 100% ownership interest of Opti-Wert-Interest AG ("OWI-AG") a Switzerland corporation. OWI-AG is principally engaged in the buying and selling of marketable securities and options on behalf of its customers in Germany via a network of independent brokers. The sale of securities, including futures options contracts are subject to regulation in Germany by the Banking Supervisory Authority.
On October 1, 1992, Finca Consulting Limited acquired three additional companies incorporated in the United Kingdom, each of which are engaged as real estate agencies.
The Corporation is currently subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. The Corporation has the authority to issue an aggregate of Twenty Million (20,000,000) common shares, par value $.01 and Twenty Million (20,000,000) preferred shares, $.00001 par value.
As of December 31, 1994, there were outstanding 2,146,633 Common Shares and 1,704,451 Preferred Shares.
The Corporation did not acquire or dispose of any material amount of assets during the fiscal year ended December 31, 1994.
(b) Financial Information About Industry Segments.
The Corporation operates in two business segments, acting as a real estate broker for sales and rentals of properties in Europe and, through its subsidiary, OWI-AG, the buying and selling of marketable securities and options on behalf of OWI-AG's customers in Germany. The Company did not realize any revenues from its real estate business during 1994 and 1993.
The Corporation operates primarily in Europe. Information regarding each geographic area on an unconsolidated basis for 1994 and 1993 is as follows:
(c) Narrative Description of Business
The Corporation and its subsidiaries operate in two segments, acting as a real estate broker for sales and rentals of properties in Europe and the buying and selling of marketable securities and options on behalf of its customers in Germany through its subsidiary, Opti-Wert-Interest AG, a Swiss corporation ("OWI-AG").
Historically, the Company operated solely in the European real estate market. However, since its acquisition of OWI-AG, in July, 1992, the Company has focused its business operation chiefly in the buying and selling of equities and options on behalf of German customers.
The Corporation and its subsidiaries derived revenues from its real estate operations in the approximate amount of $36,369 in 1992. No revenues were earned from this business segment in fiscal 1994 or 1993. The Corporation and its subsidiaries generated revenues from its securities brokerage operations of $18,900,827 in 1994 and $16,603,901 in 1993.
Neither industry segment in which the Corporation does business is seasonal. The Corporation is not dependent upon a single customer or a few customers. Accordingly, the loss of any one or more of such customers would not have a material adverse effect on either industry segment.
In its securities brokerage operations, the Corporation competes with established companies, private investors, limited partnerships and other entities (many of which may possess substantially greater resources than the Corporation) in connection with its brokerage business securities and options brokerage business. A majority of the companies with which the Corporation competes are substantially larger, have more substantial histories, backgrounds, experience and records of successful operations, greater financial, technical, marketing and other resources, more employees and more extensive facilities than the Corporation now has, or will have in the foreseeable future. It is also likely that other competitors will emerge in the near future. The Corporation competes with these entities on the basis of service and sales commissions.
The Corporation and its subsidiaries employ no full time persons and no part time persons in its real estate operations and 18 full time persons and no part time persons in its securities brokerage operations.
(d) Financial information about foreign and domestic operations and export sales.
ITEM 2:
ITEM 2: Properties
Real Estate Operations.
During 1994, the Corporation's executive offices were located at 665 Finchley Road, London NW2 2HN Telephone No. 011-44-71-431-4529. They have since been relocated to 106 Koenigsallee, 40215 Duesseldorf, Germany. The Corporation leases 1,000 square feet in office and showroom space in Play de Aro, Spain under a five year lease which commenced February 1991. The lease is cancelable with a 90 day notice and provides for annual rent increases based on a price index. the Corporation paid rents of $29,888 and $32,103 for the years 1994 and 1993, respectively.
In January 1993, the Company leased the Spanish property, consisting of a residential dwelling located in Gerona, Spain to Volker Montag, an officer and director of the Company. The term of the lease is for a period of five years commencing January 1, 1993 and requires payment of $1,000 rent per month for each of the ensuing sixty months.
Securities Operations.
In January 1992, the Corporation entered into a lease agreement for 9,600 square feet of office space in Dusseldorf, Germany. The lease required a deposit of $37,345 and requires monthly rental payments of $12,448 through December 1996. The monthly rent may be increased based on a price index and the lease provides for a five year renewal option. The Corporation (by virtue of its acquisition of King National Corporation) leases 13,700 square feet in office space in Zug, Switzerland, as well as automobiles and office equipment under operating leases. The Corporation paid $90,702 for the year ended December 31, 1994 and $84,546 for the year ended December 31, 1993.
ITEM 3:
ITEM 3: LEGAL PROCEEDINGS
Many aspects of the Company's business involve risks of liability. The Company has been named as a defendant in civil actions arising in the ordinary course of business out its activities in securities and futures options contracts. In the opinion of management of the Company, however, the Company is not involved in any litigation or legal proceedings that would have a material effect upon its financial condition.
ITEM 4:
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the fourth quarter of this fiscal period.
PART II
ITEM 5:
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a)(1)(i) The Corporation is not currently trading on the over-the- counter "Pink Sheet" market or on any exchange.
(b) As of December 31, 1994 there were approximately 1102 shareholders of record for the Common Stock.
(c) the Corporation has not declared or paid any cash dividends.
ITEM 6:
ITEM 6: SELECTED FINANCIAL DATA
The selected financial information presented below under the captions "Statement of Operations" and "Balance Sheet" for the years ended December 31, 1994, 1993, 1992, 1991 and 1990 is derived from the financial statements of the Corporation and should be read in conjunction with the financial statements and notes thereto.
Statement of Operations
ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter Ended December 31, 1994
The Corporation's wholly owned Swiss subsidiary, Opti-Wert-Interest, AG ("OWI-AG"), continues to be the sole source of revenue for the Corporation. OWI-AG operates a securities brokerage business in Germany, utilizing commissioned sales brokers to sell equity stocks and options to its customers in Germany.
For the quarter ended December 31, 1994 the Corporation had revenues of $3,205,908, resulting in a net loss of $1,065,522. This loss was substantially due to a very low gross margin, as a consequence of unfavorable price movements in the securities purchased in the course of the Company's trading business, and, to a lesser degree, selling, general, and administrative expenses of $1,240,365, incurred for the quarter.
Year Ended December 31, 1994
For the year ended December 31, 1994, the Corporation had gross revenues of $18,900,827, generated exclusively by its subsidiary OWI-AG through its securities brokerage business in Germany. For the year ended December 31, 1994, the Corporation experienced a net loss of $2,384,373 due principally to the high operating expenses and sales commissions incurred by OWI-AG. OWI-AG utilizes the administrative services of a German affiliate, Telecom GmbH, which provides the infrastructure and facilities for the Company's network of brokers, in its equity securities and options business. During fiscal year 1994, the Corporation, through OWI-AG, paid Telecom GmbH $2,731,982 for these administrative services and $2,552,161 in brokerage fees: see, Note 3 to Consolidated Financial Statements annexed hereto as Exhibit A.
Fiscal Year 1994 Compared to Fiscal Year 1993
During 1994 the Corporation's revenues of $18,900,827 were all derived from OWI-AG's securities brokerage activities in Germany as compared to OWI-AG's revenues of $16,603,901 in 1993. There were no revenues from real estate operations in either 1994 or 1993. The Company in 1994 achieved gross profits of 4,450,197 or 23.5% of revenues as opposed to $2,875,055 or 17.3% of revenues in 1993. In spite of the increase in revenues and the increase in the gross profits in both absolute and relative terms, the net loss in 1994 was only marginally less than in 1993 -i.e. $2,384,373 as compared to $2,457,631.
During the year ended December 31, 1994, the Corporation experienced a net outflow of cash from operations in the amount of $2,408,770 compared to a deficit of $1,562,856 in 1993. The deficit in 1994 was almost entirely due to the losses experienced during the year which accounted for approximately 96% of that amount. The negative cash flow from operations was offset through new funding from financing activities which produced $2,818,498 in 1994 and $1,634,566 in 1993.
Most of the cash flow from financing activities during both years represented proceeds derived from the private placement of the Corporation's Common and Preferred Shares with European investors pursuant to Regulation S promulgated under the Securities Act of 1933, as amended: see, Consolidated Statements of Changes in Stockholders' Equity annexed hereto as Exhibit A.
Fiscal Year 1993 Compared to Fiscal Year 1992
On July 15, 1992, the Corporation acquired Opti-Wert-Interest AG ("OWI-AG"). During fiscal 1992 and prior to the OWI-AG Acquisition, the Corporation derived its revenues from its real estate sales and rental operations of holiday residential units in Spain: this real estate business produced no revenues during fiscal year 1993, as compared to revenues of $36,369 during fiscal year 1992.
During 1993, the Corporation's revenues of $16,603,901 were all derived from OWI-AG's securities brokerage activities in Germany as compared to 1992, which showed revenues of $2,656,076 attributable to OWI-AG and revenues of $36,369 from its Spain-based real estate operations. During 1993, the Corporation sustained a loss of $2,457,631, as compared to a loss of $1,786,637 in fiscal year 1992. The OWI-AG Acquisition resulted in a material increase in selling, general and administrative expenses which totaled $5,314,366 in 1993 as compared to $2,782,421 in 1992.
ITEM 8:
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Corporation's Financial Statement and Notes to Financial Statements are attached hereto as Exhibit A and incorporated herein by reference.
ITEM 9:
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Changes in Registrant's Certifying Accountant.
(a) 304(a)(1)(i): Neil James & Associates, P.C., Registrant's former independent accountant previously engaged as the principal accountant to audit the Registrant's financial statements, was dismissed on December 18, 1995.
(a)(1)(ii): Mr. Neil James & Associates, P.C. did not issue any reports on the Registrant's financial statements for the past two fiscal years.
(a)(1)(iii): The Registrant's Board of Directors recommended and approved the hiring of Rosenberg Rich Baker Berman & Company Certified Public Accountants, 380 Foothill Road, Bridgewater, New Jersey as the Registrant's principal independent accountant and to dismiss Neil James & Associates, P.C.
(a)(1)(iv)(A): Registrant is unaware of any disagreements between Registrant and Neil James & Associates, P.C. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
(a)(1)(iv)(B)(1),(2) and (3): Not applicable.
(a)(1)(iv)(C): Not applicable.
(a)(1)(iv)(D): Not applicable.
(a)(1)(iv)(E): Registrant authorized its former accountant, Neil James & Associates, P.C., to respond fully to inquiries of Rosenberg Rich Baker Berman & Company, its successor accountant, concerning the subject matter of each and every disagreement or event, if any, known by Registrant's former accountant.
(a)(2): Registrant's new independent auditors are Rosenberg Rich Baker Berman & Company who were engaged on December 15, 1995.
(a)(2)(i): Registrant's management engaged in general business conversation with its new accountant, who did not, during such conversations, render any advice to Registrant, oral or written, which was an important factor considered by Registrant in reaching any accounting, auditing or financial reporting issue decisions.
(a)(2)(ii): Registrant's management did not consult its new accountant regarding any matter that was the subject of a disagreement or event referred to in (a)(1)(iv) above since Registrant is unaware and has no knowledge of any such disagreement or event.
(a)(2)(ii)(A),(B), and (C): Not applicable.
(a)(2)(ii)(D): Registrant has requested its new accountant to review the disclosure required by this Item before it is filed with the Securities and Exchange Commission and has been provided the opportunity to furnish Registrant with a letter addressed to the Commission containing any new information, clarification of Registrant's expression of its views, or the respects in which it does not agree with the statements made in response to this Item. PART III
ITEM 10:
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The names and ages of all directors and executive officers of the Corporation are as follows:
There are no family relationships among the Corporation's Officers and Directors.
All Directors of the Corporation hold office until the next annual meeting of the shareholders and until successors have been elected and qualified. Executive Officers of the Company are appointed by the Board of Directors at the annual meeting of the Corporation's Directors and hold office for a term of one year or until they resign or are removed from office.
Resumes:
Volker Montag - Mr. Montag was born in Essen, Germany and makes his home in Weeze, Germany. From 1990 he has been an officer and Director of King National Corporation (acquired by the Corporation in July 1992.) From 1988 to 1990, Mr. Montag was the Managing Director of Opti-Wert Interest, AG, Switzerland, a Swiss brokerage company, which is a wholly owned subsidiary of the Corporation. He was also associated with VISA Enterprise PLC, London, United Kingdom.
Hugo Winkler - Mr. Winkler was born in Switzerland and currently makes his home in London. Mr. Winkler is an international business consultant and holds directorships in seventeen companies throughout the world. He is the founder and Managing Director of Hugo Winkler & Co., Ltd., a managing consulting company located in London since the early 1980s. Mr. Winkler also has extensive holdings in Southeast Asia, including Singapore and Malaysia. Mr. Winkler is a Qualified Business Administrator from Kaukfmaennischer Verein Zurich, Switzerland in 1974. He is a member of the United Kingdom Institute of Directors in London. Mr. Winkler resigned as Director effective November 1, 1995.
Norani Mohammad Zin - Mr. Zin was born in Malaysia and currently makes is home in Maui, Malaysia. Since 1981, Mr. Zin has been the General Manager of Hugo Winkler & Co., Ltd. in Singapore. Mr. Zin resigned as Director effective November 1, 1995.
Roland Schoneberg - Mr. Schoneberg was born in Germany and currently lives in Koln, Germany. He is member of the board of Telecom GmbH, an affiliate of the Company. He served as director of the Company since November 1995.
ITEM 11:
ITEM 11: EXECUTIVE COMPENSATION
No compensation was paid to the officers and directors of the Corporation over the last fiscal year. The Corporation has reimbursed and will continue to reimburse its officers and directors for any and all out of pocket expenses incurred relating to the business of the Corporation. In addition, it is not expected that the officers and directors of the Corporation will begin drawing salary until such time as the business operations of the Corporation can substantiate the same. However, in the event any officer and/or director performs extraordinary services on behalf of the Corporation, it is the position of the Board of Directors to reward such services by issuance of a bonus to such person(s).
ITEM 12:
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1994, there were 2,146,633 Common Shares outstanding. The following tabulates holdings of shares of the Corporation by each person who, subject to the above, at the date of this Memorandum, holds of record or is known by Management to own beneficially more than 5.0% of the Common Shares and, in addition, by all directors and officers of the Corporation individually and as a group. There were 1,704,451 Preferred Shares outstanding issued to individuals who are neither officers or directors.
Title of Name and Address of Amount and Nature of Percent of Class Beneficial Owner Beneficial Ownership Class - -------- ---------------- -------------------- -----
Common Secure Securities, Ltd. Stock c/o Hugo Winkler 665 Finchley Road London, UK 260,240* 12.12%
Visa International, PLC c/o Hugo Winkler 665 Finchley Road London, UK 88,843* 4.14%
Bernd Nagel Hessenweg 10 A D-4422 Ahaus Germany 132,200 6.16%
Volker Montag c/o Opti-Wert-Interest Industriel Str. 9 Postfach 6300 ZUB Switzerland 349,083* 16.26%
Hugo Winkler 665 Finchley Road London, UK 0 0%
Norani Mohammad Zin 665 Finchley Road London, UK 0 0%
Roland Schoneberg c/o Opti-Wert-Interest Industriel Str. 9 Postfach 6300 ZUB Switzerland 349,083* 16.26%
All Directors and Officers as a Group 349,083* 16.26% - ---------------
*Messrs. Volker Montag and Roland Schoneberg are majority shareholders of Secure Securities, Ltd. and Visa International, PLC.
ITEM 13:
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Commissions to Affiliate. Secure Securities, Ltd., a shareholder of the Corporation, controlled by Messrs. Volker Montag and Roland Schoneberg, owns a German company, Telecom GmbH, having its principal offices located in Dusseldorf, Germany ("Telecom"). Telecom provides all of the administrative services to Opti-Wert-Interest AG, the Corporation's wholly owned subsidiary ("OWI-AG"), for its securities brokerage business which include all commission charges. During fiscal years 1994 and 1993, OWI-AG paid Telecom $2,731,982 and $1,703,792 respectively, for their administrative services. Telecom also pays all of OWI-AG's brokerage commissions arising out of OWI-AG sales to its customers, due to non-affiliated third parties which amounted to $2,552,161 in 1994 and $1,891,704 in 1993.
(b) Loan to Officer and Director. During 1993, OWI-AG made a loan in the amount of $141,750 to Mr. Volker Montag, an officer and director of the Company. The loan's outstanding principal balance accrues interest at the rate of five (5%) percent, per annum, and payments in the amount of $7,020 are due quarterly.
(c) Payments to Officer. The Company advances, from time-to-time, funds to a shareholder and officer of the Company and to entities in which he has a controlling interest. Such advances amounting to $375,654 and $293,931 at December 31, 1994 and 1993 are unsecured, non-interest bearing and payable upon demand.
(d) Office space to Subsidiary. Finca Consulting Limited, a wholly-owned subsidiary of the Corporation is provided, free of charge, office spacein London, England in the business office of an officer and director.
PART IV
ITEM 14:
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The response to this portion of Item 14 is included as a separate section, Exhibit A, attached hereto and incorporated herein by reference.
(a)(2) Financial Statements Schedules All schedules are omitted since the required information is not applicable or of insufficient materiality.
(a)(3) Exhibits
The Exhibits that are filed with this report or that are incorporated by reference are set forth in the Exhibit Index.
(b) Reports on form 8-K
There were no reports filed on Form 8-K during the quarter ended December 31, 1994.
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.
FINCA CONSULTING, INC.
Date: December 20, 1997 By: /s/Volker Montag ---------------- Volker Montag President And Chief Financial Officer
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.
Name Date ---- ----
/s/Volker Montag December 20, 1997 - ---------------- Volker Montag, President and Director
/s/Roland Schoeneberg December 20, 1997 - --------------------- Roland Schoeneberg, Secretary and Director
EXHIBIT INDEX
(2) Agreement and Plan of Reorganization between the Corporation and King National Corporation dated July 1992 incorporated by reference to Form 8-K.
(3)(i) Articles of Incorporation incorporated by reference to Form S-18 filed October 17, 1989. Articles of Amendment to Articles of Incorporation incorporated by reference to the Exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1991 filed on June 4, 1992.
(3)(ii) By Laws incorporated by reference to Form S-18 filed October 17, 1989.
(13) Quarterly report incorporated by Reference to Quarterly Report on Form 10-Q for period ended September 30, 1993.
(16) Letter regarding change in certifying accountant incorporated by reference to Form 8-K filed in February, 1993.
(21) Subsidiaries of the Company:
(i) Finca Consulting Costa Brava, S.A. - is a corporation formed under the laws of the Country of Spain and is the name under which it conducts business.
(ii) Finca Consulting, GmbH - is a corporation formed under the laws of the Country of Germany and is the name under which it conducts business.
(iii)Opti-Wert-Interest, AG - is a corporation formed under the laws of the Country of Switzerland and conducts its retail securities and options business in Germany.
(27) Financial Data Schedule - attached to Exhibit A
EXHIBIT A
Finca Consulting, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 1994 and 1993
Finca Consulting, Inc. and Subsidiaries Index to the Consolidated Financial Statements December 31, 1994 and 1993
Independent Auditors' Report on the Financial Statements........................
Financial Statements
Consolidated Balance Sheets................................................
Consolidated Statements of Operations......................................
Consolidated Statements of Changes in Stockholders' Equity.................
Consolidated Statements of Cash Flows......................................
Notes to the Consolidated Financial Statements.............................
Independent Auditors' Report
Rosenberg Rich Baker Berman & Company 380 Foothill Road Bridgewater, New Jersey 08807
To the Board of Directors and Stockholders of Finca Consulting, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Finca Consulting, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years then ended. These consolidated 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 generally accepted auditing standards. 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 provides 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 Finca Consulting, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/Rosenberg Rich Baker Berman & Company - ---------------------------------------- Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey January 14, 1996
See notes to the consolidated financial statements.
See notes to the consolidated financial statements.
See notes to the consolidated financial statements.
See notes to the consolidated financial statements.
See notes to the consolidated financial statements.
Finca Consulting, Inc. and Subsidiaries Notes to the Consolidated Financial Statements
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Finca Consulting, Inc. and Subsidiaries (the Company) through its subsidiary Opti-Wert-Interest AG, is engaged principally in the buying and selling of marketable securities and options on behalf of its customers and through its subsidiaries Finca Consulting Costa Brava, S.A. and Finca Consulting GmBH the buying, selling and administration of real estate.
Principles of Consolidation The consolidated financial statements include the accounts of Finca Consulting, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Pursuant to Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation", substantially all assets and liabilities of the Company's wholly owned subsidiaries are translated at their respective period-end currency exchange rates and revenues and expenses are translated at average currency exchange rates for the period. The resulting translation adjustments are accumulated in a separate component of stockholders' equity. All foreign currency transaction gains and losses are included in other income (expense) on the accompanying statements of operations and are immaterial in each year.
Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Property and Equipment Property and equipment are reported at cost with depreciation being provided by using the straight line method over the estimated useful lives of the respective assets which range from 3-5 years as to equipment, furniture and fixtures and 25 years as to real estate. Repairs and maintenance expenditures which do not extend the useful lives of the related assets are expensed as incurred.
Income Taxes As of January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes". Under SFAS No. 109, the liability method issued in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of
Finca Consulting, Inc. and Subsidiaries Notes to the Consolidated Financial Statements
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
assets and liabilities and are measured using enacted tax rates that are expected to be in effect when the differences reverse. The adoption of SFAS No. 109 did not have a material impact on the Company's position or results of operations.
International subsidiaries are taxed according to applicable laws of the countries in which they do business.
Reclassifications Certain items in the 1993 financial statements have been reclassified for comparability purposes with the 1994 financial statements. These reclassifications did not affect the financial position or results of operations as previously reported.
Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances. The Company invests its excess cash with large financial institutions.
Net (Loss) Per Share
The net (loss) per share has been computed using the weighted average number of common stock shares outstanding during the year. During 1993 and 1994, common shares were outstanding as follows:
A. January 1, 1993 through May 15, 1993 - 2,012,582 B. May 16, 1993 Through November 14, 1993 - 2,040,937 C. November 15, 1993 through December 31, 1993 - 2,146,633 D. January 1, 1994 through December 31, 1994 - 2,146,633
Common stock purchase warrants and common stock issuable upon conversion of the Company's preferred shares have been excluded from the computation in that their effects are anti-dilutive.
Finca Consulting, Inc. and Subsidiaries Notes to the Consolidated Financial Statements
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at cost, less accumulated depreciation, consists of the following:
Depreciation expense charged to operations was $70,412 in 1994 and $246,181 in 1993.
NOTE 3 - RELATED PARTY TRANSACTIONS
(1) OWI AG pays fees for sales administration services to Telecom GmbH, Dusseldorf. Both companies have the same manager. Fees paid for the years ended 1994 and 1993 amounted to $2,731,982 and $1,703,792, respectively. Telecom also pays certain brokerage fees on behalf of the company which amounted to $2,552,161 and $1,891,704 for 1994 and 1993, respectively.
(2) The Company advances, from time-to-time, funds to a shareholder and officer of the Company and entities in which he has a controlling interest. Such advances amounting to $375,654 and $293,931 at December 31, 1994 and 1993 are unsecured, non-interest bearing and payable upon demand.
(3) During 1994 the Company's subsidiary, Opti-Wert - Interest AG sold 1,688,146 shares of the Company's preferred stock to its customers. Gross proceeds therefrom amounted to $5,419,638. Opti-Wert - Interest AG's proportionate costs of the offering, consisting of allocable selling, general and administrative expenses amounted to $1,841,260 and have been charged against such gross proceeds.
(4) OWIAG has granted a loan of $141,750 to its company manager. The loan is payable in quarterly installments of $7,020 with interest at five percent per annum.
Finca Consulting, Inc. and Subsidiaries Notes to the Consolidated Financial Statements
NOTE 3 - RELATED PARTY TRANSACTIONS, Continued
(5) Finca Consulting Limited, a wholly-owned subsidiary of the Company, was provided, free of charge, office space in London, England in the business office of a Company officer and director through November 1, 1994.
NOTE 4 - INCOME TAXES
As of December 31, 1994, the Company has domestic and foreign net operating loss carryforwards of approximately $4,800,000, substantially all of which expire by 2001.
The Company has not provided a deferred tax asset at December 31, 1994 and 1993 since it is undetermined that the deferred asset would be realized in the future.
NOTE 5 - OPERATING LEASE COMMITMENTS
The Company leases office space in Playa de Aro, Spain under a five year lease which commenced February 1991. The lease is cancelable with a 90 day notice and provides for annual rent increases based on a price index. The Company paid $29,888 and $32,103 for the years 1994 and 1993, respectively.
In January 1992 the Company entered into a lease agreement for office space in Dusseldorf, Germany. The lease required a deposit of $37,345 and requires monthly rental of $12,448 through December 1996. The monthly rent may be increased based on a price index and the lease provides for a five year renewal option.
In January 1993, the Company leased the Spanish property, consisting of a residential dwelling located in Gerona, Spain to Volker Montag, an officer and director of the Company. The term of the lease is for a period of five years commencing January 1, 1993 and requires payment of $1,000 rent per month for each of the ensuing sixty months.
The Company leases office space in Switzerland, as well as automobiles and office equipment under operating leases. The Company paid $90,702 for the year ended December 31, 1994.
The following is a schedule years of future minimum rental payments required under operating leases that have initial or remaining noncancelable terms:
Year Ending December 31, Total ------------------------ ----- 1995 $ 243,540 1996 180,742 1997 5,926 -------------- Total Minimum Payments Required $ 430,208 ==============
Finca Consulting, Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Total rental expense for all operating leases, except those with terms of a month or less that were not renewed, amounted to $263,733 and $284,049 for the year ended December 31, 1994 and 1993, respectively.
NOTE 6 - MINORITY INTEREST IN SUBSIDIARY
One of the Company's subsidiaries (Opti-Wert - Interest) has issued 10,500 participation certificates with a minimal value of Sfr. 10 (US $6.60) for a subscription price of US $9.07. These participation certificates carry no voting rights and do not have a fixed return. A total of 5,040 certificates have been subscribed to by the Company and have been eliminated in the consolidation process. The remaining 5,460 certificates are held by various investors.
NOTE 7 - OPERATIONS OF BUSINESS SEGMENTS AND IN GEOGRAPHIC AREAS
Business Segments The Company operates in two business segments, through its subsidiary Opti-Wert - Interest AG buying and selling marketable securities and options on behalf of its customers in Germany and through its subsidiaries Finca Consulting Costa Brava, SA and Finca Consulting GmBH buying, selling, and the administration of real estate.
The Company conducts no business activities and has no identifiable assets in the United States.
NOTE 8 - COMMON STOCK ISSUANCE
For the year ended December 31, 1993, respectively the Company authorized the issuance of 206,738 additional common shares with a par value per share of $.01. The offering was undertaken pursuant to Regulation S under the Securities Act of 1993 as amended.