<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, 1998
[ ] 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
Incorporation or organization) Identification No.)
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 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: 8,845,668
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES NO X
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMB Corporation and Subsidiaries -- Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS As of As of
June 30,1998 September 30,
(Unaudited) 1997
-------------- --------------
<S> <C> <C>
CURENT ASSETS
Cash $ 588,185 $ 61,409
Restricted Cash - 34,000
Accounts receivable 148,856 8,890
Mortgage Loans Held For Sale 21,266,952 7,092,238
Notes Receivable - Officers 245,000 227,600
Notes Receivable (Current Portion) 740,720 165,574
Prepaid Expenses and Other 538,639 218,441
----------- -----------
TOTAL CURRENT ASSETS 23,528,352 7,808,152
PROPERTY AND EQUIPMENT, net 1,345,996 462,992
NOTE RECEIVABLE, less current portion 3,161,133 3,161,133
RELATED PARTY RECEIVABLE 29,085 166,212
LAND HELD FOR SALE 357,879 43,000
INTANGIBLE ASSETS, net 79,602 105,885
OTHER ASSETS 1,115,922 1,275,210
----------- -----------
TOTAL ASSETS $29,617,969 $13,022,584
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 888,612 $ 539,488
Warehouse Line of Credit 20,977,903 7,029,738
Accrued Expenses 893,260 170,743
Notes Payable current portion 324,497 227,487
Capital lease obligations current portion 143,726 24,467
Other current liabilities 321,193 -
----------- -----------
TOTAL CURRENT LIABILITIES 23,549,191 7,991,923
RELATED PARTY PAYABLE 446,633 130,405
NOTES PAYABLE, net of current portion 585,000 17,154
CAPITAL LEASE OBLIGATIONS, net of current portion 425,854 3,361
DEFERRED GAIN 3,161,133 3,200,000
----------- -----------
TOTAL LIABILITIES $28,167,811 $11,342,843
----------- -----------
SHAREHOLDER' EQUITY
Preferred stock, no par value, 5,000,000 shares authorized,
837,162 shares issued and outstanding $ 1,359,000 $ 1,009,000
Common stock, no par value, 30,000,000 shares
Authorized; 8,845,668 and 7,535,942 shares issued
and outstanding, respectively 9,013,841 6,955,482
Common Stock To Be Issued - 160,875
Common Stock Subscribed (100,000) (100,000)
Retained Deficit (8,822,903) (6,345,616)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,450,158 1,679,741
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $29,617,969 $13,022,584
=========== ===========
</TABLE>
<PAGE>
EMB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' QUITY
FOR NINE MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Preferred
Stock Stock Common Common Total
----------- -------- Stock Stock to Retained Shareholders
Shares Amounts Shares Amounts Subscribed be Issued Deficit Equity
---------- ---------- -------- ---------- ---------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER
30, 1997 7,535,942 $6,955,482 648,648 $1,009,000 ($100,000) $160,875 $(6,345,616) $1,679,741
Shares issued for
services 1,565,000 2,642,579 -- -- -- (160,875) -- 2,481,704
Shares issued for
acquisition of
Preferred
Financial
Services, Inc. 100,000 191,000 -- -- -- -- -- 191,000
Shares issued for
acquisition of
American
Teleconferencing
Services, Inc. 500,000 855,000 -- -- -- -- -- 855,000
Shares issued for
acquisition of
Investment
Consultants,
Inc.
(Equityline) 400,000 684,000 -- -- -- -- -- 684,000
Shares issued for
cancellation of
Notes 144,726 120,000 -- -- -- -- -- 120,000
Proceeds from
sale of Series B
Preferred
stock -- -- 675,000 350,000 -- -- -- 350,000
Shares canceled
issued for
acquisition of
American
Teleconferencing
Services, Inc. (400,000) (684,000) -- -- -- -- -- (684,000)
Cancellation of
shares issued to
Technik & Trade
(EMB
International) (1,000,000) (1,750,000) -- -- -- -- -- (1,750,000)
Cancellation of
Series A
preferred Stock -- -- (486,486) -- -- -- -- --
Net Loss -- -- -- -- -- -- (2,477,287) (2,477,287)
BALANCE, JUNE 30,
1998 8,845,668 $9,013,841 837,162 $1,359,000 ($100,000) -0- $(8,822,903) $1,450,158
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the nine months For the three months
ended June 30, ended June 30,
------------------------------- --------------------------
1998 1997 1998 1997
--------------- --------------- ------------ -------------
(unaudited) (as restated) (unaudited) (as restated)
<S> <C> <C> <C> <C>
REVENUES
Mortgage Loan Revenues $ 8,361,243 $2,536,337 $4,314,298 $1,217,596
Product Sales - 11,473 - 2,263
Service Revenue 83,516 - 83,516 -
----------- ---------- ---------- ----------
TOTAL REVENUES 8,444,759 2,547,810 4,397,814 1,219,859
COST OF SALES 4,655,231 9,752 2,453,338 1,880
----------- ---------- ---------- ----------
Gross Profit 3,789,748 2,538,058 1,944,476 1,217,979
OPERATING EXPENSES
General & Administration 6,572,783 3,316,239 1,798,103 1,116,099
Depreciation 71,998 27,393 25,423 15,540
----------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 6,644,781 3,343,632 1,823,526 1,131,639
----------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (2,855,253) (805,574) 120,950 86,340
OTHER INCOME (EXPENSE)
Interest Income 426,344 - 2,157 -
Interest Expense (87,245) (35,637) (9,891) (17,536)
Gain on Land Sale 38,867 640,000 - -
----------- ---------- ---------- ----------
TOTAL OTHER INCOME (Expense) 377,966 604,363 (7,734) (17,536)
NET INCOME (LOSS) before income taxes (2,477,287) (201,211) 113,216 68,804
Income Tax - 1,600 - -
----------- ---------- ---------- ----------
NET INCOME (LOSS) $(2,477,287) $ (202,811) $ 113,216 $ 68,804
=========== ========== ========== ==========
NET INCOME (LOSS) per common share $ (.29) $ (.03) $ .01 $ .00
=========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,631,332 5,805,527 9,656,811 5,811,692
=========== ========== ========== ==========
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended Nine months ended
June 30, June 30,
------------------ ------------------
(Unaudited)
<S> <C> <C>
1998 1997
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,467,287) $ (202,811)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services 2,481,704 537,500
Gain on sale of land - (640,000)
Depreciation 71,998 27,393
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 143,243 (277,517)
Mortgage loans receivable (15,149,853) (5,848,050)
Employee advances 70,667 (198,500)
Inventory 31,880 3,444
Note receivable (358,587) (345,102)
Prepaid expenses and other assets (363,833) 5,001
Increase (decrease) in:
Accounts payable ( 57,350) 252,340
Accrued expenses 519,925 (39,021)
Other liabilities 398,103 -
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (14,681,390) (6,725,323)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (856,721) (231,272)
Proceeds from sale of land - 800,000
Proceeds from sale of rights - (258,250)
Loans made on related party receivable - 129,687
------------ -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (856,721) 440,165
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Warehouse line of credit 15,149,853 5,848,050
Proceeds from issuance of notes payable 735,359 287,000
Payments under capital lease obligations (141,444) (25,473)
Payments on borrowings (28,881) (188,755)
Payments on common stock subscribed - 125,000
Sale of common stock - 137,500
Sale of preferred stock 350,000 -
Proceeds from exercise of warrants - 140,938
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,064,887 6,324,260
------------ -----------
NET INCREASE (DECREASE) IN CASH 526,776 39,102
CASH, BEGINNING OF PERIOD 61,409 395
------------ -----------
CASH, END OF PERIOD $ 588,185 $ 39,497
============ ===========
</TABLE>
<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 subsidiaries as of June 30, 1998, and the results of
their operations and their cash flows for the nine months ended June
30, 1998 and 1997, respectively. The financial statements are
consolidated to include the accounts of EMB Corporation and its
subsidiary companies (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 A
to the Company's financial statements as stated in its report on Form
10-KSB for the fiscal year ended September 30, 1997.
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.
NOTE 3. SIGNIFICANT AGREEMENT:
In 1996, the Company entered into an agreement with a national lender
whereby the lender extended a $3,000,000 warehouse line of credit to
the Company solely for the purpose of funding residential mortgage
loans. In February 1998 this agreement was revised to provide for a
$10,000,000 warehouse line of credit. In July 1998, this agreement was
again revised to provide for a $21,000,000 warehouse line of credit.
Following fulfillment, in February 1998, of the then-existing master
commitments, with such lender, totaling $150,000,000, the Company, in
March, 1998, entered in a new master commitment for such lender to
purchase a total of $500,000,000 of jumbo and conforming residential
first and second mortgages from the Company. As of July 1998, the
Company had funded in excess of $100,000,000 against its master
commitment.
<PAGE>
NOTE 4. SUBSEQUENT EVENT:
On June 30, 1998, the Company and Holdfast Holdings, Inc. ("Holdfast")
agreed to rescind the Installment Land Sale Contract entered into on
December 30, 1996, whereby Holdfast purchased land owned by the Company
located in Monterey County, California. As a result of the rescission,
which will become effective on August 15, 1998, the Company will return
to Holdfast the December 30, 1997 installment payment made by Holdfast
in the amount of $422,867. The Company has segregated such amount for
return to Holdfast. In addition, the Company has agreed to issue to
Holdfast a convertible note as reimbursement of the initial down
payment made by Holdfast in the amount of $800,000, plus interest on
the two above-referenced payments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
GENERAL
The Company, formerly called "Pacific International, Inc.", a Hawaii
corporation, was incorporated in 1960, was originally organized to acquire and
manage developed and undeveloped real estate and had not conducted significant
operations for a number of years until, in December 1995, it agreed to acquire
substantially all of the assets and assume certain liabilities of Sterling
Alliance Group, Ltd., a Colorado corporation ("SAG"). Following the close of the
transaction, the Company changed its name to "EMB Corporation" to reflect the
change in the purpose and nature of its business. For accounting purposes, such
transaction was treated as a recapitalization of SAG, with the historical
financial information prior to merger being that of SAG.
The principal business of the Company is the origination and processing
of residential mortgage loans using a service which the Company calls Video
Interactive Mortgage Process ("VIP"). Mortgages originated and/or purchased by
the Company have been resold primarily to Impac Funding Corporation, formerly
ICI Funding Corporation; although mortgages in the future may be held for
investment, sold to other third parties, or securitized and issued as mortgage-
backed securities. See "Capital Resources" and "Liquidity", below.
LOAN ORIGINATIONS AND PURCHASES
The Company increased its funded mortgage loan volume to $109,199,353
during the three-month period ended June 30, 1998 and $292,798,749 during the
nine-month period ended June 30, 1998, as compared to $41,134,110 and
$72,958,470 for the three- and nine-month periods ended March 31, 1997,
respectively. This represents an increase of 165% for the three-month period
and 301% for the nine-month period as compared to the prior year periods. The
primary causes of such increase in mortgage loan volume were the expansion of
the Company's marketing activities and by the opening of new offices in Denver,
Colorado and Dallas, Texas, and from an increase sales efforts in the Costa Mesa
and Sherman Oaks (Los Angeles County) offices. The Denver operations resulted
from the acquisition of all of the stock of Investment Consultants, Inc., dba
Equityline Financial Services, Inc., in December 1997. The Dallas operations
resulted from the purchase of the Dallas office of Deposit Guaranty Mortgage
Corporation in January 1998.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain operating information regarding the
Company:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues........................... $4,397,814 $1,219,859 $ 8,444,759 $2,547,810
Operating Expenses................. $1,823,526 $1,131,639 $ 6,644,781 $3,343,632
Income (loss) from
Operations....................... $ 120,950 $ 86,340 $(2,855,033) $ (805,574)
Other Income (expense)............. $ (7,734) $ (17,536) $ 377,966 $ 604,363
Income (loss) before
Income taxes..................... $ 113,216 $ 68,804 $(2,477,067) $ (201,211)
Income Taxes....................... $ - $ - $ - $ 1,600
Net Income (loss).................. $ 113,216 $ 68,804 $(2,477,067) $ (202,811)
Net Income (loss) per share........ $ .01 $ .00 $ (.29) $ (.03)
</TABLE>
Three months ended June 30,1998 compared with three months ended June 30,1997
REVENUES. Revenues increased 261% to $4,397,814 in the three-month period
ended June 30, 1998, from $1,219,859 in 1997. Revenues were generatea primarily
from loan fundings and resale of mortgage loans. The increase in revenues was
attributable to the expansion of the Company's marketing activities outside the
State of California as a result of the opening of offices in Denver, Colorado
and Dallas, Texas and from increased sales efforts in the Costa Mesa and Sherman
Oaks (Los Angeles County) California offices.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 61% to $1,798,103 in the three-month period ended June 30, 1998 from
$1,116,099 in 1997. This increase is principally attributable to increased
activity in the Company's mortgage loan business, an increase in its employees,
and the costs of the newly acquired Denver and Dallas offices.
DEPRECIATION. Depreciation increased 64% to $25,423 in the three-month
period ended June 30, 1998, from $15,540 in the three months ended June 30,
1997. This increase in depreciation resulted from the additional expenditures
for office equipment and office furniture for expansion of the Company's
mortgage operations.
RESULTS OF OPERATIONS. The net income was $113,216 during the three-month
period ended June 30, 1998, as compared with net income of $68,804 during the
same period of 1997.
As a result of the acquisition of all of the outstanding capital stock
of Investment Consultants, Inc., dba Equityline, Inc., and of the assets of the
Dallas, Texas office of Deposit Guaranty Mortgage in December 1995, there was an
increase in assets attributable, to "Land Held for Sale", "Property and
Equipment" and Related Party Receivable" and an increase in liabilities
attributable to "Related Party Payable".
During the fiscal year-to-date, the increase in business activities has
led to an additional increase assets attributable to "Property and Equipment",
primarily from the acquisition of new computer equipment for the Costa Mesa
headquarters office and several branch offices of EMB Mortgage Corporation..
Certain of this equipment was acquired by means of a lease arrangement with a
resulting increase in liabilities reflected in "Capital Lease Obligations". The
increase in business activities also has led to an increase in liabilities
attributable to "Accrued Expenses" from increases to accrued payroll taxes and
interest.
Additionally, the private placement of a convertible note by the
Company in January 1998 has led to an increase in liabilities attributable to
"Notes Payable (net of current portion). Certain principal amounts of this
note have been converted by the holder thereof into common stock (See Part II,
Item 2. Changes in Securities).
CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY
CAPITAL EXPENDITURES. The Company has incurred capital expenditures for
office equipment, office furniture and other fixed assets used primarily in its
mortgage loan business. Capital expenditures during the nine-month periods
ended June 30, 1998 and 1997 totaled $856,721 and $231,272, respectively.
LIQUIDITY AND CAPITAL RESOURCES. The Company's capital resources have
historically been provided by cash from operations, by the sale of its Common
Stock, Preferred Stock and warrants and by long- and short-term loans.
As of June 30, 1998, the Company has long-term notes payable to an
unrelated party in the amount of $585,000.
PART II - OTHER INFORMATION
The Company intends to raise additional capital through an offering of its
Common Stock, Preferred Stock and warrants to fund mortgage loans and to provide
additional working capital to fund future operations, although no specific plans
or commitments presently exist to pursue any offering of its securities.
<PAGE>
At June 30, 1998, the Company had current assets of $23,528,352 and current
liabilities of $23,549,191, resulting in a working capital deficit of $ 20,839
as compared to a net working capital of $183,772 at June 30, 1997. Working
capital decreased by $162,933.
Net cash used in operating activities decreased to $(14,681,390) for the
nine months ended June 30, 1998, from $(6,725,323) for the nine months ended
June 30, 1997, or a difference of $7,956,067. The increase in net cash used in
operating activities was primarily attributable to the increase of mortgage loan
receivables and other assets.
The warehouse line of credit is available for the funding of loans which
the Company expects will be sold not only to Impac Funding Corporation, formerly
ICI Funding Corporation, but also to other investors, including: Resource
Bancshares Mortgage Group, Source One Mortgage (formerly doing business as The
Mortgage Authority) and others. During the time period following funding of a
loan, but prior to resale of the loan, the Company realizes either interest
income or expense depending upon the note rate for the underlying mortgage vis a
vis the interest rate on the warehouse line of credit, i.e., presently, prime +
1/2%.
The Company has increased the amount of its outstanding indebtedness to
$30,915,850 from $l1,342,843 during the nine month period June 30, 1998, an
increase of $19,573,007 due primarily to an increase in the above referenced
warehouse line of credit. Notes to related parties payable of $130,405 at
September 30, 1997, increased to $446,633 at June 30, 1998, as a result of the
Equityline acquisition.
ITEM 1. LEGAL PROCEEDINGS
No material legal proceedings or other legal developments occurred
during the period.
ITEM 2. CHANGES IN SECURITIES
Effective November 1, 1997, the Company entered into a Stock Purchase
Agreement with the sole stockholder of Preferred Holding Group, Incorporated
("PHG"), Colorado corporation, to purchase all of the issued and outstanding
capital stock of PHG in exchange for 100,000 shares of the Common Stock of the
Company in reliance upon Section 4(2) of the Securities Act of 1933. In November
1997, the name of Preferred Holding Group, Incorporated, was changed to EMB
Financial Services, Inc.
Effective December 23, 1997, the Company entered into a Stock Purchase
Agreement with the two stockholders of Investment Consultants, Inc. ("ICI") a
Colorado corporation (d/b/a Equityline Financial Services, to purchase all of
the issued and outstanding capital stock of ICI in exchange for 400,000 shares
of the Common Stock of the Company in reliance upon Section 4(2) of the
Securities Act of 1933.
Effective December 23, 1997, the Company entered into a Stock Purchase
Agreement with the sole stockholder of American Teleconferencing Services, Inc.
("ATS") a Nevada corporation, to purchase all of the issued and outstanding
capital stock of ATS in exchange for 500,000 shares of the Common Stock of the
Company in reliance upon Section 4(2) of the Securities Act of 1933.
Effective December 31, 1997, the Company entered into a 10%
Convertible Preferred Purchase Agreement by which the Company issued 675,000
shares of its new 10% Convertible Preferred Stock, Series B for $350,000 and in
exchange for 486,486 shares of its previously outstanding shares of its 8%
Convertible Preferred Stock, Series A, and issued additional warrants to
purchase 400,000 shares of the Common Stock of the Company exercisable at $2.375
per share in reliance upon Section 4(2) of the Securities Act of 1933. As a
result, the Company had 162,162 of its Series A Preferred Stock and 675,000
shares of its Series B Preferred Stock issued and outstanding as of December 31,
1997.
<PAGE>
Effective January 30, 1998, the Company offered and sold a convertible
note with warrants in the principal amount of $500,000 to non-U.S. persons in
reliance upon Regulation S under the Securities Act of 1933. Interest is payable
on the note at eight percent (8%) per annum and is due and payable on January
30, 2000. The principal amount of the note is convertible into shares of the
Common Stock of the Company at a conversion rate of $2.375 per share, subject to
adjustment. In addition, the holders of the note acquired warrants to purchase
100,000 shares of Common Stock at an exercise price of $2.375 per share.
During the fiscal quarter ending March 31, 1998, the Company issued
300,000 shares of Common Stock to Impac Funding Corporation in connection with
the purchase by the Company of a new master commitment totaling $500,000,000. In
addition, the Company issued 760,000 shares of Common Stock to various non-
affiliated persons or entities as consideration for consulting services pursuant
to various consulting agreements between the Company and those persons or
entities. These issuances were made pursuant to the Company's 1996 Stock Option,
SAR and Stock Bonus Plan with the shares being registered with the U.S.
Securities and Exchange Commission on Form S-8 (the "S-8")(File No. 333-45283),
effective January 30, 1998. Another 50,000 shares of the Company's Common Stock
were issued to an officer of the Company in reliance upon Section 4(2) of the
Securities Act of 1933.
During the fiscal quarter ending June 30, 1998, the holder of the
Company's convertible note in the principal amount of $500,000 converted $80,000
of said principal into 104,721 shares of Company's Common Stock (See "Results
of Operations," above).
During the fiscal quarter ending June 30, 1998, the Company issued
490,000 shares of Common Stock to various non-affiliated persons or entities as
consideration for consulting services pursuant to various consulting agreements
between the Company and those persons or entities. These issuances were made
pursuant to the S-8.
On April 1, 1998, the Company completed a renegotiation of the terms of
the Stock Purchase Agreement dated December 23, 1997, by and between the Company
and American Teleconferencing Systems, Inc. ("ATS"). As a result thereof,
400,000 shares of Company's Common Stock out of the 500,000 shares issued by the
Company in connection with said transaction were returned to the Company by the
former shareholder of ATS for cancellation. Notwithstanding such cancellation,
ATS remains a wholly-owned subsidiary of the Company.
On June 30, 1998, the Company and Technik & Trade, Inc., agreed to
rescind that certain joint venture agreement entered into in August 1997 by and
between the Company and Technik & Trade, Inc. As a result thereof, all 1,000,000
shares of Company's Common Stock issued by the Company to Technik & Trade, Inc.
were returned to the Company by Technik & Trade, Inc., for cancellation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the shareholders of the Company was held on
April 9, 1998. At that meeting, the shareholders elected eight directors, all of
which were nominees of the Company, and approved the appointment of Harlan &
Boettger as independent accountants for the Company for the current fiscal year,
subject to change by the Board of Directors of the Company.
ITEM 5. OTHER INFORMATION.
On May 20, 1998, the Company dismissed its independent accountants,
Harlan & Boettger of San Diego, California. The reports of Harlan & Boettger for
the fiscal years ended September 30, 1996 and September 30, 1997 contained no
adverse opinion, disclaimers or opinion nor were they modified as to
uncertainty, audit scope or accounting principles. The decision to dismiss the
firm of Harlan & Boettger was made by the Board of Directors of the Company. At
no time during the engagement of Harlan & Boettger as independent accountants
for the Company were there any disagreements, whether or not resolved, on any
matter of accounting principles or practices, financial statement or disclosure
or auditing scope of procedure. On or about August 12, 1998, the Company
provided a draft copy of its Quarterly Report on Form 10-QSB, for the period
ended June 30, 1998, to Harlan & Boettger, requesting their comments on the
information contained therein including the disclosures set forth in Item 5 of
said Quarterly Report on Form 10-QSB. At no time after August 12, 1998, to and
including the date of filing of this amended Quarterly Report on Form 10-QSB/A
did Harlan & Boettger respond to this request by the Company.
<PAGE>
On May 20, 1998, the Company engaged the firm of Corbin & Wertz of
Irvine, California, as independent accountants for the Company. Prior to May
20, 1998, neither the company, nor anyone on its behalf, has consulted with
Corbin & Wertz concerning the accounting principles of any specific completed or
contemplated transaction, any type of audit opinion on the Company's financial
statements nor any other material factor which might be considered by the
Company in reaching a decision as to any accounting, auditing or financial
reporting issue.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. 27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the fiscal
quarter ended June 30, 1998.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EMB CORPORATION
Date: November 17, 1998 By: /s/ James E. Shipley
---------------------------
James E. Shipley, President
Date: November 17, 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-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 588,185
<SECURITIES> 0
<RECEIVABLES> 25,591,746
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,654,541
<PP&E> 1,808,900
<DEPRECIATION> (25,423)
<TOTAL-ASSETS> 29,617,969
<CURRENT-LIABILITIES> 20,103,967
<BONDS> 0
0
1,359,000
<COMMON> 9,013,841
<OTHER-SE> (100,000)
<TOTAL-LIABILITY-AND-EQUITY> 29,617,969
<SALES> 4,397,814
<TOTAL-REVENUES> 4,397,814
<CGS> 2,453,338
<TOTAL-COSTS> 2,453,338
<OTHER-EXPENSES> 1,823,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,891
<INCOME-PRETAX> 113,216
<INCOME-TAX> 0
<INCOME-CONTINUING> 113,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,216
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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