<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------------- ----------------
COMMISSION FILE NUMBER: 1-11883
EMB CORPORATION
---------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS
SPECIFIED IN ITS CHARTER)
HAWAII 95-3811580
------------------------------ ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3200 BRISTOL STREET, EIGHTH FLOOR, COSTA MESA, CALIFORNIA 92626
----------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(714) 437-0738
--------------------------
(ISSUER'S TELEPHONE NUMBER)
NOT APPLICABLE
--------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
CHECK WHETHER THE ISSUER (1) 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 (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
CHECK WHETHER THE REGISTRANT FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE
FILED BY SECTION 12, 13 OR 15(D) OF THE EXCHANGE ACT AFTER THE DISTRIBUTION OF
SECURITIES UNDER A PLAN CONFIRMED BY COURT. YES X NO
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON EQUITY, AS OF THE LAST PRACTICABLE DATE: 7,086,176
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES NO X
--- ---
<PAGE>
Part I - Financial Information
Item 1. EMB CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS As of As of
June 30, 1997 September 30,
(Unaudited) 1996
CURRENT ASSETS (As restated) (As restated)
-------------- -------------
<S> <C> <C>
Cash $ 39,497 $ 395
Accounts receivable (no allowance deemed necessary) 292,099 14,582
Inventory, net 31,880 35,324
Notes receivable 256,218 14,000
Mortgage loans held for sale 5,848,050 -
Employee advances 198,500 -
----------- -----------
TOTAL CURRENT ASSETS 7,066,244 64,301
PROPERTY AND EQUIPMENT, net 353,242 149,363
RELATED PARTY RECEIVABLE - 129,687
NOTE RECEIVABLE, less current portion 3,161,134 -
LAND HELD FOR SALE 43,000 843,000
OTHER ASSETS 9,129 4,128
----------- -----------
$10,232,749 $ 1,190,479
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 484,893 $ 195,374
Bank overdrafts - 27,177
Accrued expenses 9,865 48,886
Warehouse line of credit 5,848,050 -
Notes payable - current portion 246,293 293,793
Capital lease obligations - current portion 14,161 28,553
Related party payable 63,750 -
----------- -----------
TOTAL CURRENT LIABILITIES 6,667,012 593,783
NOTES PAYABLE, net of current portion 251,370 65,000
CAPITAL LEASE OBLIGATIONS, net of current portion 19,015 30,096
DEFERRED GAIN 3,200,000 -
----------- -----------
TOTAL LIABILITIES 10,101,397 688,879
----------- -----------
COMMITMENTS
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, no par value, 30,000,000 shares
authorized; 6,316,692 and 5,311,817 shares issued
and outstanding, respectively 5,570,454 3,910,391
Common stock to be issued 101,278 585,000
Common stock subscribed (187,875) (200,000)
Retained deficit (5,388,505) (3,793,791)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 95,352 501,600
----------- -----------
$10,232,749 $ 1,190,479
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
EMB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the nine months For the years ended
ended June 30, September 30,
--------------------------------- -----------------------------
1997
(Unaudited) 1996 1996
(As restated) (Unaudited) (As restated) 1995
-------------------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Loan origination and other fees, net of commitment fees $ 2,484,359 $ 195,186 $ 244,874 $ 97,400
Product sales - - 31,545 -
----------- ---------- ----------- ----------
TOTAL REVENUES 2,484,359 195,186 276,419 97,400
----------- ---------- ----------- ----------
OPERATING EXPENSES
General and administrative 4,014,443 1,123,795 3,375,244 531,818
Cost of sales - product sales - - 29,636 -
Depreciation 27,393 13,300 31,056 2,662
----------- ---------- ----------- ----------
TOTAL OPERATING EXPENSES 4,041,836 1,137,095 3,435,936 534,480
----------- ---------- ----------- ----------
LOSS FROM OPERATIONS (1,557,477) (941,909) (3,159,517) (437,080)
OTHER INCOME (EXPENSE)
Interest expense (35,637) (39,014) (67,081) (2,164)
Other - - - 9,989
----------- ---------- ----------- ----------
TOTAL OTHER INCOME (EXPENSE) (35,637) (39,014) (67,081) 7,825
----------- ---------- ----------- ----------
LOSS BEFORE INCOME TAXES (1,593,114) (980,923) (3,226,598) (429,255)
Income taxes 1,600 800 1,600 800
----------- ---------- ----------- ----------
NET LOSS $(1,594,714) $ (981,723) $(3,228,198) $ (430,055)
=========== ========== =========== ==========
NET INCOME (LOSS) PER COMMON SHARE $(.27) $(.21) $(.89) $(.29)
=========== ========== =========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,859,218 4,735,233 3,641,421 1,469,225
=========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
EMB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Stock Common Total
-------------------- -------------------- Subscription Stock to be Retained Shareholders'
Shares Amounts Shares Amount Receivable Issued Deficit Equity (Deficit)
--------- ---------- ------- ---------- ------------ ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1994 1,288,600 $ 150,000 - $ - $ - $ - $ (135,538) $ 14,462
Shares issued for
Riverside land 8,250 33,000 - - - - - 33,000
Shares issued for services 172,500 155,250 - - - - - 155,250
Shares issued to founders
for services 175,000 7,000 - - - - - 7,000
Net loss - - - - - - (430,055) (430,055)
--------- ---------- ------- ---------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1995 1,644,350 $ 345,250 - $ - $ - $ - $ (565,593) $ (220,343)
Proceeds from sale of shares 412,707 1,017,914 - - - - - 1,017,914
Shares issued for services 836,389 1,279,460 - - - - - 1,279,460
Shares issued to founders
for services 893,712 35,749 - - - - - 35,749
Shares issued for Monterey
land 200,000 800,000 - - - - - 800,000
Shares issued for note
receivable 50,000 200,000 - - (200,000) - - -
Shares issued for debt 116,009 232,018 - - - - - 232,018
Shares issued for net
assets of Sterling
Alliance Group, Ltd. 1,158,650 - - - - - - -
Shares to be issued for
services - - - - - 585,000 - 585,000
Net loss - - - - - - (3,228,198) (3,228,198)
--------- ---------- ------- ---------- ----------- ----------- ----------- ------------
BALANCE, SEPTEMBER 30, 1996
(As restated) 5,311,817 $3,910,391 - $ - $ (200,000) $ 585,000 $(3,793,791) $ 501,600
Proceeds from sale of
shares 50,000 137,500 - - - - - 137,500
Proceeds from exercise
of warrants 108,750 140,938 - - - - - 140,938
Shares issued for services 450,000 724,375 - - - - - 724,375
Shares issued for prior
services 360,000 585,000 - - - (585,000) - -
Warrants exercised
for note receivable 36,125 72,250 - - (112,875) - - (40,625)
Payments on note receivable - - - - 125,000 - - 125,000
Shares to be issued for
services - - - - - 101,278 - 101,278
Net loss - - - - - - (1,593,714) (1,593,714)
--------- ---------- ------- ---------- ----------- ----------- ----------- ------------
BALANCE, JUNE 30, 1997
(Unaudited) (As restated) 6,316,692 $5,570,454 - $ - $ (187,875) $ 101,278 $(5,387,505) $ 95,352
========= ========== ======= ========== =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
EMB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months
ended Nine months
June 30, ended Year ended
1997 June 30, September 30, Year ended
(Unaudited) 1996 1996 September 30,
(As restated) (Unaudited) (As restated) 1995
------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,594,714) $(981,723) $(3,228,198) $(430,055)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services 724,375 116,307 1,315,209 162,250
Common stock to be issued for services 101,278 - 585,000 -
Related party payable issued for commitment fee 63,750 - - -
Depreciation 27,393 13,300 31,056 2,662
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (277,517) (21,613) (14,582) -
Inventory 3,444 (67,798) (35,324) -
Notes receivable (203,352) - - -
Employee advances (198,500) - - -
Prepaid expenses and other assets (5,001) (181,609) (2,951) (1,177)
Mortgage loans held for sale (5,848,050) - - -
Increase (decrease) in:
Accounts payable 262,342 120,653 217,867 349
Accrued expenses (39,021) 102,419 46,637 1,449
----------- --------- ----------- ---------
NET CASH USED IN OPERATING ACTIVITIES (6,983,573) (900,064) (1,085,286) (264,522)
----------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (231,272) (54,509) (96,846) (6,720)
Proceeds from sale of land held for sale 800,000 - - (10,000)
Loans made on notes receivable - - - (14,000)
Related party receivable 129,687 49,889 (74,798) (29,092)
----------- --------- ----------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 698,415 (4,620) (171,644) (59,812)
----------- --------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from warehouse line of credit 5,848,050 - - -
Proceeds from issuance of notes payable 287,000 874,798 268,893 355,776
Payments under capital lease obligations (25,473) (11,000) (17,300) -
Proceeds from exercise of warrants 140,938 - - -
Payments on borrowings (188,755) (68,779) (38,253) -
Payments on common stock subscribed 125,000 - - -
Sale of common stock 137,500 100,000 1,017,914 -
----------- --------- ----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,324,260 895,019 1,231,254 355,776
----------- --------- ----------- ---------
NET INCREASE (DECREASE) IN CASH 39,102 (9,665) (25,676) 31,442
CASH, BEGINNING OF PERIOD 395 26,071 26,071 (5,371)
----------- --------- ----------- ---------
CASH, END OF PERIOD $ 39,497 $ 16,406 $ 395 $ 26,071
=========== ========= =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION:
In the opinion of management, the accompanying financial statements
contain all adjustments (which include only normal recurring
adjustments) necessary to present fairly the balance sheet of EMB
Corporation and Subsidiary as of March 31, 1997 and the result of
their operations and their cash flows for the nine months ended March
31, 1997 and 1996, respectively. The financial statements are
consolidated to include the accounts of EMB Corporation and its
subsidiary company (together "the Company").
Certain 1996 amounts have been reclassified to conform to current
period presentation. These reclassifications have no effect on
previously reported net income.
The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements as stated in its report on
Form 10-K for the fiscal year ended September 30, 1996.
NOTE 2. INCOME (LOSS) PER COMMON SHARE:
Income (loss) per common share is based on the weighted average number
of common shares outstanding during the period. No material dilution
of earnings per share would result for the periods if it were assumed
that all outstanding warrants were exercised.
The income (loss) per common share computations, and the weighted
average common shares outstanding, for the three month period ended
December 31, 1995, were adjusted to reflect the effects of the 4:1
reverse stock split effected fiscal 1996.
NOTE 3. MATERIAL EVENT:
On December 30, 1996 the Company sold its Monterey, California land
(which had been held for sale) to an unrelated third-party for
$4,000,000. The Company received $800,000 cash and a note receivable
for $3,200,000. The note receivable is secured by the property, bears
interest at 12% per annum, and calls for nine annual installments of
principal and interest of $422,867 commencing December 30, 1997, with
the balanced due on December 30, 2006. This transaction was accounted
for consistent with Statement of Financial Accounting Standards No.
66, and applied the deposit method for recognition of gain on the
sale.
NOTE 4. SIGNIFICANT AGREEMENT:
The Company entered into an agreement with a national lender whereby
the lender has extended a $3,000,000 warehouse line of credit to the
Company solely for the purpose of funding residential mortgage loans.
Additionally, the lender has executed a master commitment to purchase
$50,000,000 of jumbo and conforming residential mortgages from the
Company, with an option for an additional $50,000,000 commitment.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. RESTATEMENT:
An error, resulting in the understatement of net loss, common stock to
be issued, operating expenses and retained deficit in the Company's
previously issued financial statements for the year ended September
30, 1996, has resulted in the restatement of those financial
statements. The changes to retained deficit as of September 30, 1996
and the related statement of operations for the year then ended are
summarized as follows:
<TABLE>
<CAPTION>
Retained
Deficit Net Loss
------------ ------------
<S> <C> <C>
As previously reported, September 30, 1996 $(3,208,791) $(2,643,198)
Omission of stock for services transaction (585,000) (585,000)
----------- -----------
As restated, September 30, 1996 $(3,793,791) $(3,228,198)
=========== ===========
</TABLE>
The current period financial statements have been restated to reflect
management's change in accounting for the land sale referred to in
Note 3 from the installment sale method to the deposit method. Both
methods are consistent with Statement of Financial Accounting
Standards No. 66, "Accounting for Sales of Real Estate."
In addition, the current period financial statements have been
restated to reflect management's reversal of a sales transaction
booked in the original filing, commitment fees not accrued for in the
original filing, common stock issued for services, and payroll expense
for common stock to be issued to employees not accrued for in the
original filing. The agreement that generated the sales transaction
was rescinded in a subsequent period.
The change to retained deficit as of June 30, 1997, and the related
statement of operations for the nine months then ended are summarized
below:
<TABLE>
<CAPTION>
Retained
Deficit Net Loss
------------ ------------
<S> <C> <C>
As previously reported, June 30, 1997 $(3,480,406) $ (271,615)
Omission of stock for services transaction (see above) (585,000) -
Change in accounting method - land sale (640,000) (640,000)
Reversal of sales transaction (400,000) (400,000)
Issuance of stock for services (186,875) (186,875)
Common stock to be issued to employees (101,278) (101,278)
Omission of commitment fees (63,750) (63,750)
----------- -----------
As restated, June 30, 1997 $(5,338,505) $(1,594,714)
=========== ===========
</TABLE>
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SUBSEQUENT EVENTS:
As of June 30, 1997, the Company had 5,000,000 shares of preferred
stock authorized. In August 1997, the Company designated 1,066,666
shares as Convertible Preferred Stock, Series A (the "Convertible
Preferred").
The Company sold a total of 648,648 shares of Convertible Preferred
(at a price of $1.85 per share) in a private placement that was
consummated in August 1997, for total proceeds of $1,200,000. As
additional consideration, the Company issued warrants to purchase
150,000 shares of the Company's common stock at an initial exercise
price of $1.85 per share. The Convertible Preferred has a stated value
of $1.85 and is entitled to receive cumulative dividends at an annual
rate of $.148 per share, payable quarterly when and if declared by the
Board of Directors and is convertible, at any time at the option of
the holder, into shares of the Company's common stock at a conversion
price equal to the lesser of (a) $1.85 per share or (b) 75% of the
average closing bid price of the Common Stock during the five trading
days immediately preceding such conversion. In the event of any
noticed conversion of the Convertible Preferred at a conversion price
of less than $1.125 per common share then the Company may, at its
option, redeem the shares of the Convertible Preferred, in whole or in
part, at an amount equal to 117% of the purchase price of the holder's
Convertible Preferred plus an amount equal to accrued and unpaid
dividends, if any, to (and including) the date fixed for redemption,
whether or not earned or declared. Each share of the Convertible
Preferred is entitled to vote on any matter submitted to the
shareholders as if the Convertible Preferred had been converted into
common stock, and each share has a liquidation preference equal to
$2.16.
In September 1997, the Company entered into a memorandum of
understanding whereby it has agreed in principle to acquire all of the
issued and outstanding capital stock of Investment Consultants, Inc.
("Sellers"), a Colorado corporation. In exchange for acquiring all of
the issued and outstanding capital stock of Sellers, the Company will
issue 400,000 shares of its common stock (the "Shares"). If as the
close of the business day eighteen months following closing of this
transaction, the aggregate fair market value of the Shares is less
than $2,000,000, the Sellers may elect one of two options. Sellers may
either elect: (1) that additional common shares are issued equivalent
to the difference between the sum of $2,000,000 and the aggregate fair
market value of the Shares, or (2) to rescind the transaction,
returning the parties to their respective positions prior to
consummation of the proposed transaction.
8
<PAGE>
Item 6. Exhibits
27 Financial Data Schedule
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act, the
Registrant caused this amendment to its Form 10-QSB report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EMB CORPORATION
Date: January 26, 1998 By: /s/ James E. Shipley
---------------------------------
James E. Shipley, President
Date: January 26, 1998 By: /s/ B. Joe Wimer
---------------------------------
B. Joe Wimer, Secretary, Treasurer
and Principal Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,497
<SECURITIES> 0
<RECEIVABLES> 292,099
<ALLOWANCES> 0
<INVENTORY> 31,880
<CURRENT-ASSETS> 7,066,244
<PP&E> 353,242
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,232,749
<CURRENT-LIABILITIES> 6,667,012
<BONDS> 0
0
0
<COMMON> 5,570,454
<OTHER-SE> (5,475,102)
<TOTAL-LIABILITY-AND-EQUITY> 10,232,749
<SALES> 1,219,859
<TOTAL-REVENUES> 1,219,859
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,370,238
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,536
<INCOME-PRETAX> (167,915)
<INCOME-TAX> 0
<INCOME-CONTINUING> (167,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (167,915)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
