<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended December 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 333-15637
EMERGING GROWTH ACQUISITION CORPORATION I
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(Name of Small Business Issuer in Its Charter)
Delaware 06-1461855
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(State or Other (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
660 Steamboat Road,
Greenwich, CT 06830
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(Address of Principal (Zip Code)
Executive Offices)
(203) 861-7750
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(Issuer's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Exchange Act: None
Securities Registered Pursuant to Section 12(g) of the Exchange Act: None
Check whether the issuer (1) has 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 issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes |_| No |X|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|
The issuer's revenues for the fiscal year ended December 31, 1997 were 0.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1998 was $146,372. Directors and officers and ten
percent or greater shareholders are considered affiliates for purposes of this
calculation but should not necessarily be deemed affiliates for any other
purpose.
The number of shares outstanding of each of the issuer's classes of common
equity as of March 26, 1998 was as follows: 332,664 shares of common stock.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
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TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business.............................................1
Item 2. Description of Property.............................................3
Item 3. Description of Legal Proceedings....................................3
Item 4. Submission of Matters to a Vote of Security Holders.................4
PART II
Item 5. Market for the Issuer's Common Equity and Related Shareholder
Matters.............................................................4
Item 6. Plan of Operation...................................................4
Item 7. Financial Statements................................................4
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure............................................4
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..................5
Item 10. Executive Compensation.............................................7
Item 11. Security Ownership of Certain Beneficial Owners and Management.....7
Item 12. Certain Relationships and Related Transactions.....................8
Item 13. Exhibits, List and Reports on Form 8-K.............................8
-i-
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PART I
Item 1. Description of Business.
General
Emerging Growth Acquisition Corporation I ("the Company") is a newly
organized "blind pool" or "blank check" company, the objective of which is to
acquire an interest in an operating business. Ninety percent of the net proceeds
of the Company's Offering ($118,235.00) remain in an escrow account with the
escrow agent, Continental Stock Transfer & Trust Company pending consummation of
a business combination.
The Company's success will be dependent upon the success of acquiring an
interest in an operating business. The net proceeds of the Initial Public
Offering ("Offering") will be substantially utilized in the acquisition of a
Business on or before November 14, 1998. However, Management anticipates that
although the Company's current resources and advances, as needed, from the
Initial Stockholders will be sufficient to meet the Company's financial
requirements during such period, additional financing will be required to
implement the target company's business plan. Such funding may be in the form of
the issuance of debt or equity securities of the Company, or bank loans or lines
of credit. If additional equity is issued, dilution could result to the
Company's then stockholders.
To date, the Company has conducted no activities other than conducting
preliminary discussions with a potential operating business. On March 27, 1998,
the Company signed a non-binding letter of intent to acquire all of the capital
stock of a mortgage company located in Florida ("the Mortgage Company").
However, consummation of any transaction with the Mortgage Company is subject to
a number of conditions, including satisfactory completion of due diligence,
execution of a definitive acquisition agreement, distribution of an effective
post-effective amendment to the Company's stockholders describing the Mortgage
Company and the proposed transaction, and the approval by 80% in interest of the
Company's public stockholders. At this time, Management of the Company does not
believe that the consummation of a transaction with the Mortgage Company is
probable.
Selection of Business and Structuring a Business Combination
The activities of the Company are overseen by its Board of Directors, all
of whom are also executive officers. The Company also relies upon the expertise
of its founding stockholders who are not directors. The Company believes that
the technical skills and expertise of its Initial Stockholders, their collective
access to acquisition opportunities and ideas, their industry and academic
contacts and their proven management abilities will enable the Company to
identify and effect an acquisition.
The Company anticipates that acquisition candidates will be brought to its
attention from the Initial Stockholders and their affiliates, as well as from
various unaffiliated sources, including securities broker-dealers, investment
bankers, bankers and other members of the financial community. While the Company
does not presently anticipate engaging the services of professional firms that
specialize in business acquisitions on any formal basis, the Company may engage
such firms in the future, in which event the Company may pay a finder's fee or
other compensation. The Company may pay a finder's fee or commission to an
Initial Stockholder or an affiliated entity for such service.
The objective of the Company is to acquire an interest in an operating
Business. The Business to be acquired must have a Fair Market Value equal to at
least 80% of the net assets of the Company at the time of acquisition, as
determined by the Board of Directors of the Company. Subject to this limitation,
Management of the Company will have virtually unrestricted flexibility in
identifying and selecting an
<PAGE>
acquisition candidate. The Business may, among other things, be either a single
corporation, several corporations enjoying a parent-subsidiary or "sister"
company relationship, or a division of a large corporation.
The Company's goal is to seek to acquire a Business with significant long
term earnings growth potential and a strong management team. It is anticipated
that the Company will acquire a Business which is an emerging growth company and
either (i) in the development stage, and not currently generating revenues or
earnings, or (ii) generating a modest amount of revenues and/or earnings but
where significant upside still exists.
In evaluating a prospective target business, management will consider the
following material factors:
o growth potential;
o experience and skill of management and availability of additional
personnel;
o industry prospects;
o capital requirements;
o financial condition and results of operations of the business;
o stage of development of business products or services;
o degree of current or potential market acceptance of the products,
processes or services;
o proprietary features and degree of intellectual property or other
protection of the products, processes or services; and
o costs associated with consummating the business combination.
It is anticipated that an acquisition will be of an interest in an ongoing
business which either (i) does not need additional capital and solely seeks the
benefits of public ownership; or (ii) needs additional capital to implement its
business plan. As individual acquisitions have not been identified, it is
difficult to identify the amount of capital which a company may require.
However, the range is anticipated to be between $1.0 million and $15.0 million.
The Public Stockholders will, in all likelihood, neither receive nor
otherwise have the opportunity to evaluate any financials or other information
which will be made available to the Company in connection with selecting
potential acquisition of an interest in a Business until after the Company has
selected such Business. As a result, the Public Stockholders will be almost
entirely dependent on the judgment of Management in connection with the
selection of a potential acquisition of an interest of a Business.
The Company, prior to the consummation of any merger or acquisition of
interests of a Business will submit such proposed transaction to its
stockholders for their approval where the Company is required to do so under
Delaware General Corporation Law. The proposed transaction will also be
submitted to all of the Company's present stockholders, including the Company's
current officers and directors, which have agreed as of the date of this
prospectus to vote their respective shares of Common Stock in accordance with
the vote of the majority of all nonaffiliated future stockholders of the Company
<PAGE>
with respect to any such proposal for the acquisition of an interest of a
Business. The Company will provide its stockholders with complete disclosure
documentation concerning a target company and its business. The information
provided to the Company's stockholders will include, among other items, a brief
description of the target company's business, a summary of the terms of the
transaction, reasons for engaging in the transaction, the accounting treatment
of the transaction, audited financial statements for the Company and the target
company and pro forma financial information giving effect to the transaction.
In connection with its evaluation of a prospective Business, Management
anticipates that it will conduct an extensive due diligence review which will
encompass, among other things, meetings with incumbent management and inspection
of facilities, as well as review of financial or other information which will be
made available to the Company. The Company will not acquire a Business if
audited financial statements cannot be obtained for such Business. Additionally,
Management will provide the Public Stockholders with audited financial
statements of the prospective Business as part of the post-effective amendment
sent to the Public Stockholders to assist them in assessing the Business. The
time and costs required to identify, evaluate and select a Business (including
conducting a due diligence review) and to structure and consummate the Business
Combination (including preparing requisite documents for filing pursuant to
applicable securities laws) cannot presently be ascertained with any degree of
certainty. Any costs incurred in connection with the identification and
evaluation of a prospective Business with which a Business Combination is not
ultimately consummated will result in a loss to the Company and reduce the
amount of capital available to otherwise consummate a Business Combination.
Competition
In identifying, evaluating and selecting a Business, the Company expects
to encounter intense competition from other entities having a business objective
similar to that of the Company. Many of these entities are well established and
have extensive experience in connection with identifying and effecting Business
Combinations directly or through affiliates. Many of these competitors possess
greater financial, technical, personnel and other resources than the Company and
there can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be relatively limited when
contrasted with those of many of it competitors. This inherent competitive
limitation may compel the Company to select certain less attractive Business
Combination prospects. Further, the Company's obligation to redeem shares of
Common Stock held by Public Stockholders in certain circumstances may place the
Company at a competitive disadvantage in successfully negotiating a Business
Combination.
Facilities
Capital Growth International LLC, an affiliate of the Company, has agreed
that, until the acquisition of an interest in a Business, it will make a small
amount of office space, as well as certain office and secretarial services,
available to the Company, as may be required by the Company from time to time,
at no cost to the Company.
Employees
The Company has no salaried employees.
Item 2. Description of Property.
The Company's office is located at the office of International Capital
Growth, Ltd. ("ICG"). The Company and ICG share the use of office space
described below at no cost to the Company:
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1. Approximately 855 square feet at 660 Steamboat Road, Greenwich,
Connecticut 06830 for use as the principal executive offices of the
Company and ICG pursuant to a lease held by ICG expiring on
September 30, 1998 for monthly rent of $6,250.00.
Item 3. Description of Legal Proceedings.
The Company is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company has not submitted any matters to a vote of security holders.
PART II
Item 5. Market for the Issuer's Common Equity and Related Shareholder
Matters.
Market Information
The Company's common equity is not publicly traded.
Holders of Common Equity
As of March 31, 1998, there were approximately 81 holders of record of the
Common Stock, the Company's only class of common equity.
Dividends
The Company's Board of Directors did not declare any cash dividend on the
Company's common equity in the fiscal year ended December 31, 1997. Pursuant to
Rule 419 under the Securities Act of 1933, as amended, ninety percent of the net
proceeds of the Company's Offering is required to remain in an escrow account
pending acquisition of an operating company.
Item 6. Plan of Operation.
The Company is a newly organized "blind pool" or "blank check" company,
the objective of which is to acquire an interest in an operating business.
Ninety percent of the net proceeds of the Company's Offering ($118,235.00)
remain in an escrow account with the escrow agent, Continental Stock Transfer &
Trust Company pending consummation of a business combination.
Substantially all of the Company's working capital needs are attributable
to the identification, evaluation and selection of a suitable Business and,
thereafter, to structure, negotiate and consummate a Business Combination with
such Business. Such working capital needs are expected to be satisfied from the
Company's current resources and advances, as needed, from the Initial
Stockholders.
Item 7. Financial Statements.
The financial statements required by this Item, the accompanying notes
thereto and the reports of independent accountants are included as part of this
Form 10-KSB and immediately follow the signature page of this Form 10-KSB.
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
- ----------------------- --- ------------------------------------------
Chairman of the Board and Chief
Ronald B. Koenig 63 Executive Officer and Director
Stanley Hollander 60 President and Director
Alan L. Jacobs 56 Chief Operating Officer and Director
Michael S. Jacobs 32 Chief Financial Officer
Jay J. Matulich 43 Secretary and Treasurer
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(1) Stanley Hollander is also a Director of Capital Growth Holdings, Ltd. and
of Capital Media Group, Ltd. both publicly-held companies.
(2) Alan L. Jacobs is also a Director of Capital Growth Holdings, Ltd., a
publicly-held company. In addition, Alan L. Jacobs is Michael S.
Jacobs' father.
(3) Jay J. Matulich is also a Director of Waste Systems International, Inc., a
publicly-held company.
All Directors and Officers have held their respective positions since July
1996. Directors and officers are elected annually and serve for one year or
until their successors are duly elected and qualify. It is anticipated that the
officers will each devote as much time to the Company as is necessary or
advisable to carry out their duties. During the early stages of the Company's
operations, Management will undertake the responsibilities of researching
industries, forecasting trends and evaluating and selecting prospective
Businesses which may be potential acquisition candidates. After the acquisition
of an interest in a Business, Management may provide professional advisory
services, particularly in corporate finance, consult on certain matters and
oversee the Business' operations and management. The Company may also, after it
acquires interests in several Businesses, employ additional management personnel
and/or consultants with specific skills and experience related to the Company's
Business who are expected to spend all or nearly all of their time with the
Company and compensate such persons in accordance with their respective
positions and responsibilities. As of the date of this Form 10-KSB, there are no
contracts, agreements or understandings between any prospective employee,
consultant or other person or entity and any companies that are searching for
"blind pool" or "blank check" companies with which to merge, except as described
in Item 1.
Ronald B. Koenig
Since March 1996, Mr. Koenig has been chairman of the board, president and
C.E.O. of International Capital Growth, Ltd. Since 1993, Mr. Koenig has been
chairman and co-founder of U.S.
<PAGE>
Sachem and now its successor Capital Growth International LLC. From 1989 to
1993, Mr. Koenig was a senior managing director and department head of corporate
finance at Gruntal and Co., Incorporated. From 1974 to 1985, Mr. Koenig was a
managing director and from 1985 to 1989 chairman of the board of Ladenberg
Thalman and Co., Inc. From 1972 to 1974, he served as vice president,
institutional sales at Jas. H. Oliphant and Co. From 1968 to 1972, he was at
Leif Werle and Co., an NYSE specialist firm. Mr. Koenig was educated at the
University of Pennsylvania (Wharton School) and holds a B.S. in economics. Mr.
Koenig presently serves on the Wharton School Undergraduate Executive Board and
is on the business advisory board to the Sterling National Bank of New York.
Stanley Hollander
Since March 1996, Mr. Hollander has been senior managing director and a
director of International Capital Growth, Ltd. Since 1993, Mr. Hollander has
been president, C.E.O. and co-founder of Sachem and since 1996 its successor
Capital Growth International LLC. From 1989 to 1993, he served as a managing
director and joint head of corporate finance at Gruntal and Co., Inc. From 1985
to 1989 he was a managing director of investment banking at Ladenberg Thalman
and Co., Inc. From 1979 to 1985, he was co-owner and vice president of Zemex
Electronics-Stanlee, distributors of consumer electronics. From 1959 to 1979,
Mr, Hollander was president of All Brand Appliances Brandsmart, distributors of
consumer electronics. Mr. Hollander was educated at the University of Alabama.
Mr. Hollander is currently a director of Specialized Health Products Inc., a
publicly traded company.
Alan L. Jacobs
Since March 1996, Mr. Jacobs has been executive vice president and a
director of International Capital Growth, Ltd. Since February 1995, Mr. Jacobs
has been senior managing director of Capital Growth International LLC. From
February 1995 to October 1997 and from July 1993 to September 1994, Mr. Jacobs
served as Director of Boca Raton Capital Corporation, a publicly-held Florida
corporation ("BRCC"). He was Chairman of the Board of Directors of BRCC from
November 1993 to September 1994 and Chief Executive Officer of BRCC from
November 1993 to October 1997. From 1992 to 1995, Mr. Jacobs was senior vice
president and associate director of investment banking at Josephthal Lyon and
Ross Incorporated. From 1985 to 1991, Mr. Jacobs was a managing director of
investment banking at Ladenberg Thalman and Co., Inc. From 1982 to 1984, he was
director of investment banking at Schaenen Jacobs Etheredge and Co., Inc. From
1966 to 1982, Mr Jacobs practiced corporate and securities law in New York and
Boston. Mr. Jacobs was educated at Franklin and Marshall College and Columbia
Law School and holds A.B. and J.D. degrees. Mr. Jacobs is chief executive
officer and a director of Boca Raton Capital Corporation, a publicly traded
company.
Michael S. Jacobs
Since March 1996, Mr. Jacobs has been a senior vice president, secretary
and treasurer of International Capital Growth, Ltd. Since February 1995, Mr.
Jacobs has been a senior vice president of Sachem and since 1996 its successor
Capital Growth International LLC. From 1993 to 1995 he was a vice president of
investment banking at Josephthal Lyon and Ross, Incorporated, New York and from
1990 to 1993, Mr. Jacobs was an associate in corporate finance at Gruntal and
Co. From 1989 to 1990, Mr. Jacobs was a financial analyst at Ladenberg Thalman
and Co., Inc. Educated at New York University's Stern School of Business and
Emory University he holds an M.B.A. in finance and a B.B.A. degree.
Jay J. Matulich
Since March 1996, Mr. Matulich has been a senior vice president of
International Capital Growth, Ltd. Since October 1994, Mr. Matulich has been a
senior vice president of Sachem and since 1996 its successor Capital Growth
International. From May 1990 to October 1994, Mr. Matulich was a vice president
of Gruntal and Co., Inc. From 1989 to May 1990, Mr. Matulich served as an
associate in the Shansby Group, a San Francisco based leveraged buy-out firm.
From 1986 to 1989, Mr. Matulich was a
<PAGE>
senior manager at Arthur Young and Co., accountants in the merger and
acquisitions group. Educated at Brigham Young University, Mr. Matulich has a
B.A. degree. Mr. Matulich is a director of both BioSafe Int., Inc. and
Specialized Health Products Inc., which are publicly traded companies.
Conflicts of Interest
None of the Company's officers or directors is required to commit his full
time to the affairs of the Company and each has a full-time position elsewhere.
There is no requirement for any of the officers or directors to devote even a
substantial amount of time to the Company's business. Accordingly, such
personnel will have conflicts of interest in allocating management time among
various business activities. The officers and directors of the Company may be
involved with other acquisition funds with activities similar to those to be
undertaken by the Company and there can be no assurance that they will offer all
suitable prospective Businesses to the Company before any other acquisition
fund. In general, officers and directors of a corporation incorporated under the
laws of the State of Delaware are required to present certain business
opportunities to such corporation. Accordingly, as a result of multiple business
affiliations, certain of the Company's officers, directors and stockholders may
have similar legal obligations to present certain business opportunities to
multiple entities. There can be no assurance that any of the foregoing conflicts
will be resolved in favor of the Company.
To minimize potential conflicts of interest, the Company will not
consummate a Business Combination with an entity which is affiliated with any
Initial Stockholder. However, an Initial Stockholder or an entity with which he
is affiliated may be entitled to receive finder's or consulting fees in the
event that he or it originates a Business Combination.
Furthermore, in connection with any stockholder vote relating to approval
of a Business Combination, all of the Initial Stockholders have agreed to vote
their respective shares of Common Stock in accordance with the vote of the
majority in interest of the Public Stockholders, and have agreed to waive any
redemption rights they might have in connection with such a vote. In addition,
the Initial Stockholders have waived their respective rights to participate in
any liquidation distribution until after the Public Stockholders have received
their entire original investment in the Company. Any remaining net proceeds
shall be distributed to the Initial Stockholders in proportion to their
respective equity interests in the Company.
Item 10. Executive Compensation.
Prior to the consummation of a Business Combination, if any, none of the
Company's officers, directors and stockholders will receive any compensation.
However, certain of the Company's officers, directors or stockholders or their
respective affiliates may receive consulting or finder's fees in connection with
introducing the Company to, or evaluating, or providing additional financing
for, a Business.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Principal Stockholders
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 26, 1998, by (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock, (ii) each director of the Company and (iii) all
directors and officers as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by
<PAGE>
such owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable.
Number of
Principal Stockholders (1) Shares Percentage Beneficially Owned
- ---------------------------------- ----------- -----------------------------
Ronald B. Koenig 39,541 11.9%
Stanley Hollander 39,541 11.9
Navenby Investments, Inc. 31,225 9.4
Alan L. Jacobs 26,025 7.8
Michael S. Jacobs 10,000 3.0
Jay J. Matulich 10,000 3.0
All Officers and Directors as a
Group (5 persons) 125,107 37.6%
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(1) Each stockholder's address is c/o the Company, 660 Steamboat Road,
Greenwich, Connecticut 06830.
Item 12. Certain Relationships and Related Transactions.
In July 1996, the Company issued an aggregate of 166,332 shares of Common
Stock to the Initial Stockholders for an aggregate purchase price of $73,186.
Capital Growth International LLC, an affiliate of the Company, has agreed
that until the acquisition of the Business, it will make a small amount of
office space, as well as certain office and secretarial services available to
the Company, as may be required by the Company from time to time, at no cost to
the Company.
Item 13. Exhibits, List and Reports on Form 8-K.
Exhibits and List
Exhibit No. Description
3.1 Certificate of Incorporation of the Company is hereby
incorporated by reference to Exhibit 3.1 as included in the
Company's Registration Statement on Form SB-2 as originally
filed with the Securities and Exchange Commission on November
6, 1996.
<PAGE>
3.2 By-laws of the Company are hereby incorporated by reference to
Exhibit 3.2 as included in the Company's Registration
Statement on Form SB-2 as originally filed with the Securities
and Exchange Commission on November 6, 1996.
10 Escrow Agreement is hereby incorporated by reference to
Exhibit 4.3 as included in the Company's Registration
Statement on Form SB-2 as originally filed with the Securities
and Exchange Commission on November 6, 1996.
27 Financial data schedule.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on April 15, 1998.
EMERGING GROWTH ACQUISITION CORPORATION I
By: /s/ Ronald B. Koenig
---------------------
Ronald B. Koenig
Chairman of the Board and Chief
Executive Officer
In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Company and in the capacities indicated
on April 15, 1998
Signatures Title
- ---------- -----
/s/ Ronald B Koenig Chairman of the Board, Chief Executive
- ------------------- Officer and Director (Principal Executive
Ronald B. Koenig Officer)
/s/ Michael S. Jacobs Chief Financial Officer (Principal
- --------------------- Financial Officer)
Michael S. Jacobs
/s/ Stanley Hollander
- ---------------------
Stanley Hollander President and Director
/s/ Alan L. Jacobs
- ------------------
Alan L. Jacobs Chief Operating Officer and Director
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
For the Period from Inception (July 18, 1996) to
December 31, 1996 and
For the Year Ended December 31, 1997
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
For the Period from Inception (July 18, 1996) to
December 31, 1996 and
For the Year Ended December 31, 1997
CONTENTS
Report of Independent Certified Public Accountants..................F-2
Independent Auditor's Report........................................F-3
Financial Statements:
Balance Sheets..................................................F-4
Statements of Operations........................................F-5
Statements of Stockholders' Equity..............................F-6
Statements of Cash Flows........................................F-7
Notes to Financial Statements...................................F-8-F-9
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
Emerging Growth Acquisition Corporation I
We have audited the accompanying balance sheet of Emerging Growth Acquisition
Corporation I (a development stage company) as of December 31, 1997 and the
related statements of operations, stockholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Emerging Growth Acquisition
Corporation I as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Millward & Co. CPAs
Fort Lauderdale, Florida
April 9, 1998
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Stockholders of
EMERGING GROWTH ACQUISITION CORPORATION I
I have audited statements of operations and cash flows for the period July 18,
1996 (date of inception) through December 31, 1996 of Emerging Growth
Acquisition Corporation I. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, Emerging Growth Acquisition Corporation I, results of
operations and cash flows for period July 18, 1996 (date of inception) to
December 31, 1996, in conformity with generally accepted accounting principles.
March 27, 1997
Arnold G. Greene
New York, NY
F-3
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
A DEVELOPMENT STAGE COMPANY
BALANCE SHEET
December 31, 1997
ASSETS
CURRENT ASSETS:
Cash $ 38,189
Cash - Escrow 118,235
Prepaid Expenses 1,906
---------
Total Assets $ 158,330
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 2,500
---------
Total Liabilities 2,500
---------
STOCKHOLDERS' EQUITY:
Common Stock ($.001 Par Value; 10,000,000 Shares Authorized;
332,664 Shares Issued and Outstanding) 332
Preferred Stock ($.001 Par Value; 1,000,000 Shares Authorized;
No Shares Issued and Outstanding) --
Additional Paid-in Capital 166,292
Deficit Accumulated During the Development Stage (10,794)
---------
Total Stockholders' Equity 155,830
---------
Total Liabilities and Stockholders' Equity $ 158,330
=========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the
For the Period from
Period from Inception
For the Inception (July 18, 1996)
Year Ended (July 18, 1996) to December 31,
December 31, to December 31, 1997
1997 1996 (Unaudited)
--------- --------- ---------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
--------- --------- ---------
OPERATING EXPENSES
Filing Fees 804 713 1,517
Stock Transfer Fee 1,000 -- 1,000
Legal and Accounting 3,993 4,045 8,038
Other 113 126 239
--------- --------- ---------
Total Operating Expenses 5,910 4,884 10,794
--------- --------- ---------
NET LOSS $ (5,910) $ (4,884) $ (10,794)
========= ========= =========
NET LOSS PER SHARE
Basic $ (0.02) $ (0.03)
========= =========
Diluted $ (0.02) $ (0.03)
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING 241,067 166,332
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
A DEVELOPMENT STAGE COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING TOTAL
------------------------ PAID-IN DEVELOPMENT STOCKHOLDERS'
Shares Amount CAPITAL STAGE EQUITY
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shares Issued in July 1996 for Cash 166,332 $ 166 $ 73,021 $ -- $ 73,187
Net Loss for the Year Ended December 31, 1996 -- -- -- (4,884) (4,884)
--------- --------- --------- --------- ---------
Balance at December 31, 1996 166,332 166 73,021 (4,884) 68,303
Net Proceeds of Public Offering 166,332 166 93,271 -- 93,437
Net Loss for the Year Ended December 31, 1997 -- -- -- (5,910) (5,910)
--------- --------- --------- --------- ---------
Balance at December 31, 1997 $ 332,664 $ 332 $ 166,292 $ (10,794) $ 155,830
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
For the Period from
Period from Inception
For the Inception (July 18, 1996)
Year Ended (July 18, 1996) to December 31,
December 31, to December 31, 1997
1997 1996 (Unaudited)
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (5,910) $ (4,884) $ (10,794)
Adjustments to Reconcile Net Loss to Net Cash Flows
Used in Operating Activities:
(Increase) Decrease in:
Prepaid Expenses 1,085 (2,991) (1,906)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 1,000 1,500 2,500
------------ ------------ ------------
Net Cash Flows (Used in) Operating Activities (3,825) (6,375) (10,200)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 93,437 73,187 166,624
------------ ------------ ------------
Net Cash Flows Provided by Financing Activities 93,437 73,187 166,624
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash placed in Escrow Account (118,235) -- (118,235)
------------ ------------ ------------
Net Cash Flows (Used in) Investing Activities (118,235) -- (118,235)
------------ ------------ ------------
Net Increase in Cash (28,623) 66,812 38,189
Cash - Beginning of Period 66,812 -- --
------------ ------------ ------------
Cash - End of Period $ 38,189 $ 66,812 $ 38,189
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Emerging Growth Acquisition Corporation I is a Delaware corporation formed on
July 18, 1996, to seek and make one or more Business Combinations to the extent
its limited resources will allow. The Company is in the development stage and
has no operating history. The subsistence of the Company is dependent initially
upon sufficient proceeds being realized by the Company from a Blank Check
Offering. Proceeds of Blank Check Offering may be insufficient to enable the
Company to conduct potentially profitable operations or otherwise to engage in
any business endeavors, acquisitions or mergers.
As of December 31, 1997, the Company had conducted no activities and had not
identified an operating business as an acquisition target (see Note 3). Pursuant
to the Blank Check Offering requirements, $118,235 remains in an escrow account
with the escrow agent, Continental Stock Transfer & Trust Company.
Fiscal Year
The Company's year-end is December 31.
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 Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash equivalents are
carried at cost, which approximates market value.
Net Loss Per Common Share
The Financial Standards Board ("FASB") issued SFAS No. 128, "Earnings Per
Share". SFAS No. 128 supersedes Accounting Principles Board Opinion ("APB") No.
15, "Earnings Per Share" and the various other authoritative pronouncements
regarding earnings per share ("EPS"). SFAS No. 128 became effective for periods
ending after December 15, 1997. Accordingly, the Company adopted SFAS No. 128
effective December 31, 1997.
Under SFAS No. 128, primary earnings per share in accordance with APB No. 15 is
replaced with a simpler calculation called basic earnings per share, which
includes the dilutive effect of outstanding options, warrants and convertible
securities. Diluted earnings per share under SFAS No. 128 has not changed
significantly as compared to fully diluted earnings per share under APB No. 15,
but has been renamed "diluted earnings per share".
All loss per share amounts for all periods have been presented in accordance
with the requirements of SFAS No. 128. As a result of the adoption of SFAS No.
128, there was no change to the Company's previously reported calculation of
primary and fully diluted earnings per share under APB No. 15.
F-8
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 2 - SHAREHOLDERS' EQUITY
The Company is authorized to issue 10,000,000 shares of common stock having a
per share par value of $.001. The common shares carry no conversion, preemptive
or other subscription rights, and are not redeemable. The holders of Common
Stock are entitled to one vote for each share held of record on all matters to
be voted on by stockholders. Cumulative voting is not permitted.
In July 1996, the Company issued an aggregate of 166,332 shares of common stock
to the initial stockholders for an aggregate purchase price of $73,186.
On July 21, 1997, the Company received net proceeds of $93,438 pursuant to a
public offering of 166,332 shares at $.88 per share. Offering expenses
aggregated approximately $53,000 and have been charged to additional paid-in
capital.
The Company has authorized the issuance of 1,000,000 shares of Preferred Stock
with a par value of $.001 per share, bearing such voting, dividend, conversion,
liquidation and other rights and preferences as the Board of Directors may
determine. There has been no issuance of Preferred Stock.
NOTE 3 - COMMITMENTS
The Company has conducted its offering subject to the Securities and Exchange
Commission's Rule 419 of Regulation C under the Securities Act of 1933, as
amended. Rule 419 generally requires that the securities to be issued and the
funds received in a blank check offering be deposited and held in an escrow
account until an acquisition meeting specified criteria is completed. Before the
acquisition can be completed and before the funds and securities can be
released, the blank check company is required to update the registration
statement with a Post-Effective Amendment. After the effective date of any such
Post-Effective Amendment, the Company is required to furnish investors with the
prospectus produced thereby containing information, including audited financial
statements, regarding the proposed acquisition candidate and its business.
According to the rule, the investors must have no fewer than 20 and no more than
45 days from the effective date of the Post-Effective Amendment to decide to
remain as investors or require the return of their investment funds. Any
investors not making any decision within such 45-day period are to automatically
receive a return of their investment funds.
On March 27, 1998, the Company signed a non-binding letter of intent to acquire
all of the stock of a mortgage company. Before consummation of this transaction,
the Company will conform to the requirements described in the previous
paragraph.
The Company's office is located at the office of International Capital Growth,
Ltd. ("ICG"). The Company and ICG share the use of the office space at no cost
to the Company.
F-9
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation of the Company is hereby
incorporated by reference to Exhibit 3.1 as included in the
Company's Registration Statement on Form SB-2 as originally
filed with the Securities and Exchange Commission on November
6, 1996.
3.2 By-laws of the Company is hereby incorporated by reference to
Exhibit 3.2 as included in the Company's Registration
Statement on Form SB-2 as originally filed with the Securities
and Exchange Commission on November 6, 1996.
10 Escrow Agreement is hereby incorporated by reference to
Exhibit 4.3 as included in the Company's Registration
Statement on Form SB-2 as originally filed with the Securities
and Exchange Commission on November 6, 1996.
27 Financial data schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted the financial
statements included in Emerging Growth Acquisition Corporation I's Form 10-KSB
for the year ended December 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-01-1997
<CASH> 156,400
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,900
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 158,300
<CURRENT-LIABILITIES> 2,500
<BONDS> 0
0
0
<COMMON> 300
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 158,300
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (5,900)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,900)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
