10QSB 1 a4895354.txt AMERICAN CAPITAL PARTNERS 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-QSB ________________ (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 000-31663 AMERICAN CAPITAL PARTNERS LIMITED, INC. (Name of small business issuer in its charter) Nevada 88-0440536 (State or other jurisdiction (I.R.S.Employer of incorporation) Identification No.) 319 Clematis Street, Suite 211, West Palm Beach, FL 33401 (Address of principal executive offices)(Zip Code) (561) 366-9211 (Registrant's telephone no., including area code) Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value per share (Title of Class) Check whether the issuer: (i) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| As of May 23, 2005, there were 111,393 shares of the registrant's common stock outstanding. AMERICAN CAPITAL PARTNERS LIMITED, INC. Part I. Financial Information Page Item 1. Condensed Consolidated Financial Statements and Notes to Consolidated Financial Statements (a) Consolidated Balance Sheet for the Three Months Ended March 31, 2005 (unaudited) 3 (b) Condensed Statements of Operations for the Three Months Ended March 31, 2005 and 2004 (unaudited) 4 (c) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004 (unaudited) 5 (d) Notes to Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Controls and Procedures 15 Part II. Other Information Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 18 PART I FINANCIAL INFORMATION General The accompanying reviewed financial statements have been prepared in accordance with the instructions to Form 10-QSB. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flow, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the company's annual report on Form 10-KSB for the year ended December 31, 2004. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the quarter ended March 31, 2005 are not necessarily indicative of the results that can be expected for the year ended December 31, 2005. AMERICAN CAPITAL PARTNERS LIMITED, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2005 (Unaudited) TABLE OF CONTENTS Page Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Cash Flows 4 Notes to the Condensed Consolidated Financial Statements 5-6 AMERICAN CAPITAL PARTNERS LIMITED, INC. CONDENSED CONSOLIDATED BALANCE SHEET March 31, 2005 --------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 17,027 Investments - current: Available for sale securities equities at fair market value 10,110 --------------- Total Current Assets 27,137 Investments - non-current: Available for sale securities equities at fair market value 246,849 Furniture and equipment, net 7,248 --------------- Total Assets $ 281,234 =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 26,773 Accrued expenses 139,820 --------------- Total Current Liabilities 166,593 CONVERTIBLE DEBT, NET 25,870 --------------- Total Liabilities 192,463 --------------- COMMITMENTS AND CONTINGENCIES (See Note 8) Shareholders' Equity: Common stock, $.001 par value, 150,000,000 shares authorized; 11,483,980 shares issued and outstanding 11,484 Additional paid-in capital 41,077 Accumulated deficit (169,375) Accumulated other comprehensive income 205,585 --------------- Total Shareholders' Equity 88,771 --------------- Total Liabilities and Shareholders' Equity $ 281,234 =============== AMERICAN CAPITAL PARTNERS LIMITED, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, 2005 2004 --------------- --------------- (Unaudited) (Unaudited) REVENUES $ 84,074 $ 101,787 Operating Expenses: General and administrative 21,534 87,933 Compensation 51,336 - Directors fees 15,218 - Professional fees 16,633 - --------------- --------------- Total Operating Expenses 104,721 87,933 --------------- --------------- Income (loss) from operations (20,647) 13,854 OTHER EXPENSES Interest expense 2,000 7,000 --------------- --------------- Income (loss) before provision for income taxes (22,647) 6,854 Income tax expense - - --------------- --------------- NET INCOME (LOSS) $ (22,647) $ 6,854 =============== =============== Comprehensive income (loss) Unrealized loss on available for sale securities, net (61,672) - --------------- --------------- Total Comprehensive Income (Loss) $ (84,319) $ 6,854 =============== =============== Net loss per share - basic and diluted $ (0.00) $ 0.06 =============== =============== Weighted average number of shares outstanding - basic and diluted 5,686,402 111,393 =============== =============== AMERICAN CAPITAL PARTNERS LIMITED, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2005 2004 --------------- --------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (22,647) $ 6,854 Adjustments to reconcile net loss to net cash provided (used) by operating activities: Common stock issued for services 11,373 - Depreciation expense 454 - Amortization of discount on convertible debt 5,000 5,000 Changes in operating assets and liabilities: Increase (decrease) in accounts payable and accrued expenses (123,318) 5,000 --------------- --------------- Net cash provided by (used in) operating activities (129,138) 16,854 --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of available-for-sale securities 3,195 - Purchases of furniture and equipment - (1,796) --------------- --------------- Net cash used in investing activities 3,195 (1,796) --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock 78,959 - --------------- --------------- Net cash provided by financing activities 78,959 - --------------- --------------- Net increase in cash (46,984) 15,058 Cash - Beginning of period 64,011 38,322 --------------- --------------- Cash - End of period $ 17,027 $ 53,380 =============== =============== NON-CASH INVESTING AND FINANCING ACTIVITIES: Unrealized loss on available for sale securities, net 61,672 - --------------- --------------- Total non-cash investing and financing activities $ 61,672 $ - =============== =============== SUPPLEMENTAL INFORMATION: Cash paid for interest $ - $ - =============== =============== Cash paid for income taxes $ - $ - =============== =============== AMERICAN CAPITAL PARTNERS LIMITED, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2005 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization ------------ Effective on January 16, 2004, the Company filed amended Articles of Incorporation with the State of Nevada to change its name to American Capital Partners Limited, Inc. The Company is authorized to issue 150,000,000 shares of common stock at a par value of $0.001 per share. In December 2004, the Company filed a Form N-54 with the Securities and Exchange Commission ("SEC") to be regulated as a Business Development Company ("BDC") pursuant to the provisions of section 54(a) of the Investment Company Act of 1940 ("the Act"), to be subject to the provisions of section 55 through 65 of the Act. The Company has determined that its operating model best approximates that of an investment company and intends to make investments into developing businesses As a BDC, the Company will be structured in a manner more consistent with its current business strategy. As a result, the Company is positioned to raise capital in a more efficient manner and to develop and expand its business interests. The Company believes that potential acquisitions, in total, will enhance value to stockholders through capital appreciation and payments of dividends to the Company by its investee companies. BDC regulation was created in 1980 by Congress to encourage the flow of public equity capital to small businesses in the United States. BDC's, like all mutual funds and closed-end funds, are regulated by the Act. BDC's report to stockholders like traditional operating companies and file regular quarterly and annual reports with the Securities and Exchange Commission. BDC's are required to make available significant managerial assistance to their portfolio companies. Principals of Consolidation: ---------------------------- The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Interim Financial Statements ---------------------------- The interim financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The interim financial statements should be read in conjunction with the Company's annual financial statements, notes and accounting policies included in the Company's annual report on Form 10-KSB for the year ended December 31, 2004 as filed with the SEC. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of financial position as of March 31, 2005 and the related operating results and cash flows for the interim period presented have been made. The results of operations, for the period presented are not necessarily indicative of the results to be expected for the year. Use of Estimates ---------------- Use of estimates and assumptions by management is required in the preparation of financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates and assumptions. Earnings Per Share ------------------ Basic earnings per share ("EPS") is computed by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding for the period as required by the Financial Accounting Standards Board (FASB) under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Shares". Diluted EPS reflects the potential dilution of securities that could share in the earnings. Revenue Recognition ------------------- Revenues from the current and future activities as a Business Development Company which may include investment income such as interest income and dividends, and realized or unrealized gains and losses on investments will be recognized in accordance with the AICPA's Audit and Accounting Guide, "Audits of Investment Companies". NOTE 3 - INVESTMENTS Investments in securities of unaffiliated issuers represent holdings of less than 5% of the issuer's voting common stock. Investments in securities or other than securities of privately held entities are initially recorded at their original cost as of the date the Company obtained an enforceable right to demand the securities or other investment purchased and incurred an enforceable obligation to pay the investment price. For financial statement purposes, investments are recorded at their fair value. Realized gains (losses) from the sale of investments are reflected in operations during the period incurred. NOTE 4 - INCOME TAXES At March 31, 2005, there are no items that give rise to deferred income taxes. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis contains various "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-QSB, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to "anticipates", "believes", "plans", "expects", "future" and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company's business, including but not limited to, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein. Management's Discussion and Analysis of Consolidated Results of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the consolidated financial statements included herein. Further, this quarterly report on Form 10-QSB should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements included in its 2004 Annual Report on Form 10-KSB. In addition, you are urged to read this report in conjunction with the risk factors described herein. American Capital Partners Limited, Inc. is a Nevada Corporation formed on October 29, 1999 under the name American IR Technology, Inc. On November 18, 2002, the Company changed its name to American Product Corp. On January 16, 2004, the Company changed its name to American Capital Partners Limited, Inc. The Company is a publicly trade company currently listed on the OTC Pink Sheets under the symbol APRJ. Until September of 2002, American Products manufactured and marketed consumer electronic products that targeted the home health and safety markets. However, sales from these products were not sufficient to enable the company to continue operations and the Company ceased manufacturing and marketing consumer electronic products in September, 2002 and operated as a development stage company, while formulating a plan to improve it financial position. OVERVIEW In the first step of the plan, the Company acquired American Capital Partners Limited, Inc. ("ACP"), a development stage company with the expertise to enable the company to become a Business Development Company ("BDC") as outlined in the Investment Company Act of 1940, as amended (the "1940 Act"). The Company will operate as a closed end mutual fund. The investment objective of the Fund is to provide its shareholders with current income and long-term capital appreciation by investing primarily in privately placed securities of small public companies. The Company notified the Securities and Exchange Commission that it elects, pursuant to the provisions of section 54(a) of the Investment Company Act of 1940, to be subject to the provisions of sections 55 through 65 of the Investment Company Act of 1940 and accordingly, the Company is BDC. In 1980, Congress enacted the Small Business Investment Incentive Act, which created the framework for Business Development Companies from the initial provisions of the Investment Company Act of 1940. The Small Business Investment Incentive Act established a new type of investment company specifically identified as a Business Development Company as a way to encourage financial institutions and other major investors to provide a new source of capital for small developing businesses. These companies are publicly traded closed-end funds that make investments in private companies or thinly traded public companies through the use of senior debt, mezzanine finance, and equity funding. BDC's use equity capital provide by public shareholders and financial institutions and debt capital from various sources to make these investments, with a goal of providing to stockholders a total return of capital appreciation and a solid dividend yield. A BDC: I. is a closed-end management company that generally makes 70% or more of its investments in "Eligible Portfolio Companies" and "cash items" pending other investment. Under the regulations established by the Securities and Exchange Commission (the "SEC") under the 1940 Act, only certain companies may qualify as "Eligible Portfolio Companies." II. To be an "Eligible Portfolio Company," the Company must satisfy the following: A. It must be organized under the laws of, and has its principal place of business in, any state or states; B. Is neither an investment company as defined in Section 3 (other than a small business investment company which is licensed by the Small Business Administration to operate under the Small Business Investment Act of 1958 and which is a wholly-owned subsidiary of the business development company) nor a company which would be an investment company except for the exclusion from the definition of investment company in Section 3(c); and C. Satisfies one of the following: (a) it does not have any class of securities with respect to which a member of a national securities exchange, broker, or dealer may extend or maintain credit to or for a customer pursuant to rules or regulations adopted by the Board of Governors of the Federal Reserve System under Section 7 of the Securities Exchange Act of 1934; (b) it is controlled by a business development company, either alone or as part of a group together, and such business development company in fact exercises a controlling influence over the management or policies of such eligible portfolio company and, as a result of such control, has an affiliated person who is a director of such eligible portfolio company; (c) it has total assets of not more than $4,000,000, and capital and surplus (shareholders' equity less retained earnings) of not less than $2,000,000, except that the Commission may adjust such amounts by rule, regulation, or order to reflect changes in one or more generally accepted indices or other indicators for small businesses; or it meets such other criteria as the Commission may, by rule, establish as consistent with the public interest, the protection of investors, and the Critical accounting policies and estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires application of management's subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in the subsequent periods. Our actual results may differ substantially from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to consolidated financial statements included in the Form 10-QSB, we believe that the following accounting policies require the application of significant judgments and estimates. FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED MARCH 31, 2005 TO THREE MONTHS ENDED MARCH 31, 2004 Gross Revenues and Costs of Operations -------------------------------------- Gross Revenues. Gross Revenues decreased from $101,787 for the period ended March 31, 2004 to $84,074 for the period ended March 31, 2005. The decrease is primarily due to our transition into a business development corporation. General and administrative expenses. General and administrative expenses decreased from $87,933 for the period ended March 31, 2004 to $21,834 for the period ended March 31, 2005. The increase is primarily due to decreased operating costs as we transition into a business development corporation. Net Loss. Net loss decreased from a profit of $6,854 for the period ended March 31, 2004 to net loss of ($22,647) for the period ended March 31, 2005. The decrease is primarily due to our transition into a business development corporation. Current Assets and Liabilities ------------------------------ At March 31, 2005, we had cash of $17,027 and total assets of $27,137. We anticipate increasing our assets as we transition into a business development corporation. At March 31, 2005, we had total liabilities of $192,463, consisting primarily of accrued expenses of $139,820. We anticipate increasing our liabilities as we transition into a business development corporation. PLAN OF OPERATIONS The Company acquired American Capital Partners Limited, Inc. ("ACP"), a development stage company with the expertise to enable the company to become a Business Development Company ("BDC") as outlined in the Investment Company Act of 1940, as amended (the "1940 Act"). The Company will operate as a closed end mutual fund. The investment objective of the Fund is to provide its shareholders with current income and long-term capital appreciation by investing primarily in privately placed securities of small public companies. The Company notified the Securities and Exchange Commission that it elects, pursuant to the provisions of section 54(a) of the Investment Company Act of 1940, to be subject to the provisions of sections 55 through 65 of the Investment Company Act of 1940 and accordingly, the Company is BDC. Management intends to seek out and pursue private companies or thinly traded public companies and provide financing to such entities through the use of senior debt, mezzanine finance and equity finance which, management anticipates that it will result in capital appreciation and a solid dividend yield for the Company. Management does not intend to target any particular industry but, rather, intends to judge any opportunity on its individual merits. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations and other working capital requirements principally from its investments in securities. The Company has elected to be treated as a Business Development Company under the Small Business Incentive Act of 1980, which modified the 1940 Act and intends to raise capital and make investments in accordance with the requirements of a Business Development Company. Capital will be required for the first and second quarter of fiscal 2005 for the Company to continue to satisfy its cash requirements and maintain a business plan focusing on raising the capital needed to make investments. The Company expects to raise additional capital but no assurances can be given that any capital will be raised or investments made subsequent to any capital raise will generate profits. The notes in the audited financial statements at and for the year ended December 31, 2005, contain an explanatory paragraph raising doubt of the Company's ability to continue as a going concern. Note 2 to the unaudited financial statements at and for the year ended December 31, 2004 describe the conditions which raise this doubt and management's plans. OFF BALANCE SHEET ARRANGEMENT During the year ended December 31, 2004, the Company had no off balance sheet arrangements. ACCOUNTING POLICIES SUBJECT TO ESTIMATION AND JUDGMENT Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When preparing our financial statements, we make estimates and judgments that affect the reported amounts on our balance sheets and income statements, and our related disclosure about contingent assets and liabilities. We continually evaluate our estimates, including those related to revenue, allowance for doubtful accounts, reserves for income taxes, and litigation. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable in order to form the basis for making judgments about the carrying values of assets and liabilities that are not readily ascertained from other sources. Actual results may deviate from these estimates if alternative assumptions or condition are used. ITEM 3. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of March 31, 2005 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Changes in Internal Controls There have been no material changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the quarter ended March 31, 2005. PART II OTHER INFORMATION ------------------------- Item 1. Legal Proceedings No legal proceedings were initiated in this quarter. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K A. Exhibits: 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2 Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. 32.2 Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. B. Reports on Form 8-K SIGNATURES Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Ottawa, Canada, on May 23, 2005. AMERICAN CAPITAL PARTNERS LIMITED, INC. By: /s/ C. Frank Speight ------------------------------- C. Frank Speight, Principal Executive Officer and Director Date: May 23, 2005 By: /s/ Tim Ellis ------------------------------- Tim Ellis Principal Accounting Officer Date: May 23, 2005