U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-30365-C
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EMERALD CAPITAL INVESTMENTS, INC.
(Name of Small Business Issuer as specified in its charter)
Delaware 36-36939936
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
330 East Main, Suite 201 60010
Barrington, Illinois --------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (847) 516-2900
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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 preceding 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 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 Issuer'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 ending December 31,1996 were $0.
As of March 30, 1997, there were 5,808,698 shares of the Company's common
stock issued and outstanding of which 4,301,479 were held by non-affiliates. As
of March 30,1997 there was no active market for the Company's common stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
From March 1994 to December 29, 1995 the Company, through its
subsidiaries, Waste Reduction Technologies, Inc. ("WRTI") and Continental Tire
Recycles, Inc. ("CTR"), was engaged in the business of designing, manufacturing
and marketing waste reduction equipment (primarily shredding machines) and
collecting and recycling used tires. The Company acquired WRTI in March 1994.
WRTI was formed in 1993 and at the time of the acquisition, WRTI's activities
had been limited to developing a business plan and designing various shredding
equipment products. The products offered by WRTI included a variety of sizes of
shredding machines and waste reduction systems designed to meet the needs of
specific customers.
In May, 1994 the Company formed CTR as a wholly-owned subsidiary. CTR is
engaged in the business of collecting and recycling used tires. CTR is paid to
accept used tires from a variety of sources and once collected, the used tires
are sorted into various categories. Some used tires still have additional life
and are resold as used tires. Others are shredded into tire derived fuel and are
used as a fuel additive in coal fired furnaces.
The WRTI and CTR operations never generated significant revenue, were
capital intensive and resulted in significant losses to the Company. As of
December 1995, the Company had exhausted all of its working capital, had
exhausted its ability to borrow funds and was unable to continue with the
operations of WRTI and CTR. On December 29, 1995, the Company sold WRTI and CTR
to a group of purchasers which included a former member of the Company's
management.
During the year ended December 31, 1996, the Company conducted no
operations and generated no revenue. The Company has no current operations and
is seeking to enter into active business operations by acquiring one or more
other operating companies.
The information contained herein relating to the historical operations of
WRTI and CTR is no longer a current description of the Company's business plan
and is included solely for historical information.
History of the Company
The Company was formed March 22, 1989 for the purpose of investing in any
and all types of assets, properties and businesses. Pursuant to a registration
statement which was declared effective on December 19, 1989, the Company
registered 5,000,000 Units of its securities to be offered and sold in a public
offering. The offering was closed on April 17, 1990 and a total of 1,315,600
Units were sold. The net offering proceeds were approximately $102,052. The
offering was a "blind pool" or "blank check" offering. Each Unit sold in the
public offering consisted of one share of common stock, one Class "A" common
stock purchase warrant and one Class "B" common
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stock purchase warrant. The Warrants expired June 30, 1993 without being
exercised. In 1992, the Company effected a 1-for-10 reverse split of its then
issued and outstanding shares of common stock.
Prior to its acquisition of WRTI, the Company attempted to acquire a
number of businesses and attempted to commence business operations in different
industries. However, the Company was unsuccessful in such previous business
operations.
In 1992, the Company acquired an Area Development Franchise to open and
operate Ho Lee Chow restaurants in DuPage County and Kane County, Illinois. In
September 1993, the Company sold its Ho Lee Chow related assets in consideration
for the transfer to the Company of 2,612,500 shares of the Company's common
stock owned by the individuals comprising the group of purchasers and the
cancellation of options to purchase 300,000 shares of the Company's common stock
owned by the purchasers. The purchasers also assumed certain liabilities
relating to the Ho Lee Chow assets and operations.
Current Business Plan
The Company believes that in order to commence active operations, it must
acquire an operating company. The Company, proposes to seek, investigate and, if
warranted, acquire an interest in another Company ("Potential Business
Opportunity"). As of the date hereof, the Company has no Potential Business
Opportunity under contemplation for acquisition but proposes to investigate
Potential Business Opportunities from inventors or entrepreneurs with a concept
which has not yet been placed in operation, or from existing companies which
have recently commenced operations, and are in need of additional funds for
expansion into new products or markets, or from established businesses which may
be experiencing financial or operating difficulties and are in need of the
limited additional capital the Company could provide. It is likely that the
Company will be required to raise additional funds in order to attract a
Potential Business Opportunity. There can be no assurance that the Company will
be able to raise additional capital in sufficient amounts to enable it to
acquire a suitable Potential Business Opportunity.
In some instances, a Potential Business Opportunity may involve the
acquisition of or merger with a corporation which does not need substantial
additional cash but which desires to establish a public trading market for its
Common Stock. Some companies with Potential Business Opportunities may seek to
become a public company through merging with, being acquired by or selling their
assets to an existing public company. There are numerous reasons why an existing
privately-held company would seek to become a public company through a merger or
acquisition rather than doing its own public offering. Such reasons include, but
are not limited to, avoiding the time delays involved in a public offering;
retaining a larger share of voting control of the publicly-held company;
reducing the cost factors incurred in becoming a public company; and avoiding
any dilution requirements set forth under various states' blue sky laws.
Although there is no currently a public market for the Company's common stock,
the Company is a reporting company and does have a base of public shareholders.
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The Company does not propose to restrict its search for Potential Business
Opportunities to any particular industry or any particular geographic area and
may, therefore, engage in essentially any business to the extent of its limited
resources. It is anticipated that knowledge of Potential Business Opportunities
will be made known to the Company by various sources, including its officers and
directors, professional advisors such as attorneys and accountants, securities
broker-dealers, venture capitalists, members of the financial community, and
others who may present unsolicited proposals. The Company may compensate such
parties for services rendered.
There can be no assurance that the Company will ever acquire a Potential
Business Opportunity. Even if the Company is able to acquire a Potential
Business Opportunity, there can be no assurance that any such acquisition will
be profitable to the Company or its Stockholders. Stockholders should be aware
that an investment in the Company could result in a total loss of an investors
investment.
The analysis of a Potential Business Opportunity will be undertaken by or
under the supervision of the officers and directors of the Company. Inasmuch as
the Company will have only limited funds available to it in its search for
Potential Business Opportunities, the Company will not be able to expend
significant funds on a complete and exhaustive investigation of such business or
opportunity. The Company will, however, investigate, to the extent believed
reasonable by its management, such Potential Business Opportunities.
Prior to making a decision to acquire or participate in a Potential
Business Opportunity, the Company will obtain written materials regarding the
Potential Business Opportunity containing such items as a description of
products, services, and company history; management resumes; financial
information; available projections with related assumptions upon which they are
based; evidence of existing patents, trademarks, or service marks or rights
thereto; present any proposed forms of compensation to management; a description
of transactions between the prospective entity and its affiliates during
relevant analysis of risks and competitive conditions; and other information
deemed relevant.
It is anticipated that the investigation of specific Potential Business
Opportunities and the negotiation, drafting, and execution of relevant
agreements, disclosure documents, and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys,
and others. If a decision is made not to participate in a specific Potential
Business Opportunity, the costs theretofore incurred in the related
investigation would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific Potential Business Opportunity, the
failure to consummate that transaction may result in the loss to the Company of
the related costs incurred.
The Company will have unrestricted flexibility in seeking, analyzing, and
participating in Potential Business Opportunities. In its efforts, the Company
will consider the following kinds of factors:
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(a) Potential for growth, indicated by new technology, anticipated
market expansion, or new products;
(b) Competitive position as compared to other firms engaged in similar
activities;
(c) Strength of management;
(d) Capital requirements and anticipated availability of required funds
to be provided by the Company from future operations through the
sale of additional securities, through joint ventures or similar
arrangements or from other sources;
(e) Other relevant factors.
Potential Business Opportunities may occur in many different industries
and at various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities extremely
difficult and complex. Potential investors must recognize that due to the
Company's limited capital available for investigation and management's limited
experience in business analysis the Company may not discover or adequately
evaluate adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may acquire a Potential Business
Opportunity. It expects, however, that the analysis of specific proposals and
the selection of a Potential Business Opportunity may take several months or
more.
The manner in which the Company participates in a Potential Business
Opportunity will depend upon the nature of the opportunity, the respective needs
and desires of the Company and the promoters of the opportunity, and the
relative negotiating strength of the Company and such promoters. The exact form
or structure of the Company's participation in a Potential Business Opportunity
or venture will be dependent upon the needs of the particular situation. The
Company's participation may be structured as an asset purchase agreement, a
lease, a license, a joint venture, a partnership, a merger or acquisition of
securities. Generally, issuance of the Company's securities in an acquisition
would be undertaken in reliance upon one or more exemptions from the
registration provisions of applicable federal securities laws, including the
exemptions provided for non-public or limited offerings, distributions to
persons resident in only one state, and analogous exemptions provided under
state securities laws. Shares issued in a reorganization transaction based upon
these exemptions would be considered "restricted" securities under the
Securities Act of 1933 and Rule 144 promulgated thereunder, could not generally
be resold for a period of two years, and would be subject to certain other
restrictions. However, the Company may agree in any such transaction to register
securities to be issued either at the time of the transaction or at certain
specified times thereafter.
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WRTI Operations-General
The Company owned and operated Waste Reduction Technology, Inc. ("WRTI) an
Illinois corporation from march 1994 to December 29, 1995. WRTI was founded to
develop a business plan relating to the business of manufacturing and marketing
waste reduction equipment and, subject to adequate financing, to commence
operations in such business. While it was owned by the Company, WRTI's business
plan was to market waste reduction equipment to be used to shred waste materials
including, but not limited to tires, paper, wood, glass, metal and other waste
products. While its was owned by the Company, WRTI offered four direct-drive
shredder models and one compactor model. WRTI's products were purchased from
stock parts or manufactured by third party machine shops according to the
specifications of WRTI. WRTI assembled its products in its own facility.
On December 29, 1995, the Company sold all of its shares of WRTI and no
longer has any interest in WRTI.
Continental Tire Recyclers, Inc. ("CTR")
CTR was a wholly-owned subsidiary of the Company which owned and operated
a tire processing and recycling facility in Pekin, Illinois. The process
mechanically shreds whole truck and passengers tires into chips which can be
used in the following ways:
Tire Derived Fuel: (TDF) Shredded tires result in a TDF by-product which
have been sold principally to cement kilns to be used as a fuel source. It takes
approximately 120 passenger tires to make a ton of TDF.
Used Tire and Casing Products: Between ten and twenty percent of the
current generation of scrap tires can be sorted out or "culled" and sold to both
domestic and foreign markets. Used tires have been sold at the facility for
between $1.50 and $3.00 for passenger tires and between $5.00 and $45.00 for
trucks. Casings, used in the retreading industry have brought $.75 to $2.00 for
passenger castings and $4.00 to $25.00 for truck castings.
Crumb Rubber: Crumb Rubber may be used for a variety of products.
Sale of WRTI and CTR
On December 29, 1995, the Company sold all of its shares of WRTI and CTR
to a group of 20 buyers ("Buyers"). One of the Buyers was William G. Holmes, a
former officer and director of the Company. The purchase price for all of the
shares of WRTI and CTR sold by the Company to the Buyers was $30,000. The total
liabilities of WRTI and CTR as of December 29, 1995 was approximately
$1,758,308, including bank debt of $250,000 and approximately $394,950 owed to
six individual lenders, including the Company's president and secretary.
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Some of the individual lenders also had personally guaranteed bank loans
of WRTI and CTR. As payment in full of the $394,950, the individual lenders were
paid a total of $75,000 by the Buyers and were issued a total of 26% equity
interest in a new limited liability company known as Continental Tire Recyclers,
LLC, a company formed by the Buyers to own and operate CTR. In connection with
such transaction, the bank released all parties from their personal guarantee of
the indebtedness of WRTI and CTR. Additionally, the individual lenders acquired,
either directly from the Company or from other shareholders a total of 620,809
shares of the Company's common stock in connection with such transaction (See
"Certain Transactions.")
Employees
The Company currently has no employees.
ITEM 2. PROPERTIES
The Company currently operates out of the office of Douglas P. Morris, the
Secretary and a director of the Company. The Company does not pay for the use of
these facilities.
ITEM 3. LEGAL PROCEEDINGS
There are not presently any material pending legal proceedings to which
the Company is a party or of which any of its property or wholly-owned
subsidiary is subject and no such proceedings are known to the Company to be
threatened or contemplated against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No meetings of the Company's shareholders were held during the last
quarter of the Company's fiscal year.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND WARRANTS
AND RELATED SECURITY HOLDER MATTERS
A. Market for Common Stock. There is no active public market for the
Company's securities. From time-to-time, the Company's common stock has been
traded, on a very limited basis, in the over-the-counter market.
B. Holders. The number of record holders of the Company's common stock as
of March 30, 1997 approximately 170. One of the Company's shareholders is a
brokerage firm which owns securities as a nominee for its customers.
C. Dividends. The Company has not paid any cash dividends to date and does
not anticipate or contemplate paying dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for the
development of the Company's business.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company is currently an inactive company seeking to commence
operations by acquiring another company which is conducting operations. During
the year ended December 31, 1996, the Company conducted no operations and
generated no revenues. Prior to December 29, 1995, the Company had been involved
in the business of recycling used tires and designing, manufacturing and
marketing shredding equipment. The Company's tire recycling and shredding
equipment operations were unsuccessful and the Company generated significant
losses during 1994 and 1995. During 1995 the Company funded its operations with
loans from a commercial bank, from management and from other individuals. By
November 1995, the Board of Directors had concluded that the Company did not
have the capital, or the ability to obtain capital necessary to continue its
current operations. The Company's Board of Directors initiated efforts to sell
the Company's WRTI and CTR operations. The Company was able to interest one of
its directors and several other individuals in purchasing WRTI and CTR.
Effective December 29, 1995, the Company sold all of its shares of WRTI
and CTR for $30,000. As a result of such sale, the Company's total liabilities,
on a consolidated basis, decreased from $1,758,308 to approximately $6,500.
The Company currently has no active business operations and is seeking
investments in other business entities made through the issuance of the
Company's securities.
The financial statements attached hereto exclude WRTI and CTR for 1995
inasmuch as they are discontinued operations.
As a result of the matters described above, the Company's historical
financial statements and this Management's Discussion and Analysis are not
necessarily reflective of the Company's future operations or financial
condition.
Financial Condition
Total assets at December 31,1996 were $12,738, all of which was cash.
This reflects the sale of WRTI and CTR on December 31,1996. On December 31,1995,
the Company's total assets on a consolidated basis which included the assets of
WRTI and CTR, was $1,006,535. On December 31,1996, the Company had no
liabilities. The Company intends to use such cash to pay for various filing fees
and professional fees relating to its reporting obligations and to find the
costs which may arise from seeking new business opportunities.
It is likely that the Company will be required to raise additional capital
in order to attract and potential acquisition partner but there can be no
assurance that the Company will be able to raise any additional capital. It is
also likely that any future acquisition will be made through the issuance of
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shares of the Company's common stock which will result in the dilution of the
percentage ownership of the current shareholders.
Results of Operations
During 1996, the Company conducted no operations and generated no
revenues. All of the Company's revenues for the years ended December 31, 1995
and 1994 were derived from the operations of WRTI and CTR. As stated above, the
Company sold WRTI and CTR on December 29,1995 and has treated them as
discontinued operations. Therefore, the revenues of WRTI and CTR have been
excluded from the Statement of Operations which is included in the financial
statements attached hereto. Therefore, excluding the operations of WRTI and CTR,
the Company had no revenues during 1996, 1995 or 1994. If the revenues of WRTI
and CTR were included in the Statement of Operations, total consolidated
revenues would have been $1,093,283 during 1995 and $305,387 during 1994. (See
Footnote 3 to the financial statements.)
The Company's total loss for 1996 was $10,597 compared to a loss of
$860,846 during 1995. The 1995 loss includes losses from the operations of WRTI
and CTR.
It is unlikely that the Company will be able to generate any revenues
unless and until it acquires an operating company, of which there can be no
assurance.
Plan of Operation
Commencing in the fourth quarter of 1995, the Company's Plan of Operation
was essentially the plan to sell its WRTI and CTR operation. Effective December
29, 1995 these operations were sold. The Company's current plan of operation is
to acquire another operating company. (See "Item 1 - Description of Business -
Current Business Plan.")
It is likely that any acquisition will be a "reverse merger" acquisition
whereby the Company acquires a larger company by issuing shares of the Company's
common stock to the shareholders of the larger company. Although the Company
would be the surviving or parent company from a corporate law standpoint, the
shareholders of the larger company would be the controlling shareholders of the
Company and the larger company would be treated as the survivor or parent
company from an accounting point of view. It can be expected that any company
which may desire to be acquired by the Company will do so as method of
potentially becoming a public company more quickly and less expensively than if
such company undertook its own public offering. The Company has not identified
any potential acquisition target and there can be no assurance that it will be
able to acquire any other company. Furthermore, even if the Company is able to
acquire another company, there can be no assurance that the Company will ever
operate at a profit.
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ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
Financial Statements
Independent Accountants' Report
Year Ended December 31,1996
Balance Sheet
December 31,1996
Statement of Operations
Years ended December 31,1996 and 1995
Statement of Changes in Stockholders' Equity From January 1, 1995 through
December 31,1996
Statement of Cash Flows -
Years ended December 31,1996 and 1995
Notes to Financial Statements
Financial Statement Schedules All schedules are omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Emerald Capital Investments, Inc.
We have audited the accompanying balance sheet of Emerald Capital Investments,
Inc., (a development stage company) as of December 31, 1996 and the related
statements of operations, stockholders' equity, and cash flows for the two years
then ended and the cumulative amounts since December 29, 1995 (commencement of
development stage). 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 Emerald Capital Investments,
Inc. (a development stage company) as of December 31, 1996, and the results of
its operations and its cash flows for the years ended December 31, 1996 and 1995
and the cumulative amounts since December 29, 1995 (commencement of development
stage), in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses that raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
TANNER + CO.
Salt Lake City, Utah
February 14, 1997
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1996
- ------------------------------------------------------------------------------
Assets
Current assets -
cash $ 12,738
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Total assets $ 12,738
------------
- ------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities $ -
------------
Commitments -
Stockholders' equity:
Common stock - $.001 par value. 100,000,000 shares
authorized; 5,808,698 shares issued and outstanding,
respectively 5,809
Additional paid-in capital 2,600,656
Accumulated deficit (2,593,727)
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Total stockholders' equity 12,738
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Total liabilities and stockholders' equity $ 12,738
------------
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Satement of Operations
- ------------------------------------------------------------------------------
Year Ended
December 31,
------------------------ Cumulative
1996 1995 Amounts
-----------------------------------
Revenue $ - $ - $ -
Selling, general and administrative expenses 10,597 470,476 10,597
-----------------------------------
Loss from continuing operations (10,597) (470,476) (10,597)
Discontinued operations:
Loss from discontinued operations - (1,238,194) -
Income on disposal of discontinued
operations - 847,824 -
-----------------------------------
Loss from discontinued operations - (390,370) -
-----------------------------------
Loss before income taxes (10,597) (860,846) (10,597)
Income tax expense - - -
-----------------------------------
Net loss $(10,597) $(860,846) $ (10,597)
-----------------------------------
Net loss per share continuing
operations $ (.00) $ (.08) $ (.00)
Net loss per share discontinued
operations $ (.00) $ (.07) $ (.00)
-----------------------------------
$ (.00) $ (.15) (.00)
-----------------------------------
Weighted average number of shares
outstanding 5,809,000 5,689,000 5,809,000
-----------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
Years Ended December 31, 1996 and 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------ Paid-In Retained Stockholders
Shares Amount Capital Deficit Equity
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 5,344,887 $5,345 $2,137,309 $(1,722,284) $420,370
Shares issued for services valued at $1.00
per share 302,911 303 302,608 - 302,911
Shares issued for cash at $1.00
per share 160,900 161 160,739 - 160,900
Net loss - - - (860,846) (860,846)
---------------------------------------------------------------
Balance, December 31, 1995 5,808,698 5,809 2,600,656 (2,583,130) 23,335
Net loss - - - (10,597) (10,597)
---------------------------------------------------------------
Balance, December 31, 1996 5,808,698 $5,809 $2,600,656 $(2,593,727) 12,738
---------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Statement of Cash Flows
- ------------------------------------------------------------------------------
Year Ended
December 31,
---------------------- Cumulative
1996 1995 Amounts
------------------------------------
Cash flows from operating activities:
Net loss $ (10,597) $ (860,846) $ (10,597)
Adjustment to reconcile net loss to
net cash used in operating activities:
Loss on discontinued operations - 1,238,194 -
Gain on disposal of discontinued
operations - (847,824) -
Stock issued for services - 302,911 -
Decrease in accounts receivable 30,000 - 30,000
(Decrease) increase in accounts
payable (6,665) 6,665 (6,665)
------------------------------------
Net cash provided by (used in)
operating activities 12,738 (160,900) 12,738
------------------------------------
Cash flows from investing activities - - -
------------------------------------
Cash lows from financing activities -
proceeds from issuance of common stock - 160,900 -
------------------------------------
Net increase in cash 12,738 - 12,738
Cash, beginning of period - - -
------------------------------------
Cash, end of period $ 12,738 $ - $ 12,738
------------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
- ------------------------------------------------------------------------------
Disclosure of noncash transactions
During the year ended December 31, 1995, the Company sold its wholly owned
subsidiaries in exchange for a receivable of $30,000. This receivable was
subsequently collected during 1996.
Supplemental disclosures of cash flow information:
Year Ended
December Cumulative
------------------------
1996 1995 Amounts
------------------------------------
Cash paid during the year for:
Interest $ - $ - $ -
------------------------------------
Income taxes $ - $ - $ -
------------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996 and 1995
- ------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Organization
Emerald Capital Investments, Inc. (the Company) was organized under the laws of
the state of Delaware on March 22, 1989. On January 10, 1994, the Company
entered into an agreement whereby the Company issued 1,862,427 shares of its
common stock for all of the issued and outstanding shares of Waste Reduction
Technologies, Inc., (WRTI) and its wholly owned subsidiary Continental Tire
Recycles, Inc. (CTR).
Effective December 29, 1995 the Company sold its common stock of WRTI. The
Company ultimately received $30,000 cash from the sale of the WRTI stock. The
purchaser was a company in which a shareholder and former officer of Emerald
Capital, Inc., is a part owner.
The 1995 financial statements reflect the operations and net assets of WRTI as
discontinued operations and net assets of discontinued operations.
Effective with the sale of WRTI on December 29, 1995, the Company became a
development stage company. There were no transactions in the period December 29,
1995 through December 31, 1995. The Company is considered a development stage
Company as defined in SFAS No. 7. The Company has, at the present, time, not
paid any dividends and any dividends that may be paid in the future will depend
upon the financial requirements of the Company and other relevant factors.
Loss Per Common Share
Loss per share of common stock is calculated based on the weighted average
number of shares outstanding during each year. Stock options were not included
in the calculation of loss per share as the effect would be antidilutive.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
- ------------------------------------------------------------------------------
17
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies Continued
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.
2. Going Concern
The accompanying consolidated financial statements of Emerald Capital
Investments, Inc., have been prepared on a going-concern basis, which
contemplates profitable operations and the satisfaction of liabilities in the
normal course of business. There are uncertainties that raise substantial doubt
about the ability of the Company to continue as a going concern. As shown in the
consolidated statement of operations, the Company reported a net loss of $10,597
for the year ended December 31, 1996.
The Company's continuation as a going concern is dependent upon its ability to
develop sufficient cash flows for operations to meet its obligations. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
3. Discontinued Operations
During 1994, the Company entered into an agreement to purchase WRTI and CTR (see
note 1). During 1995, the Company determined that it appeared unlikely that the
subsidiaries would succeed. In addition, the buyer of the subsidiaries agreed to
purchase all of the assets and assume the obligations and commitments to the
Company in connection with the franchise agreements in exchange for $30,000.
- ------------------------------------------------------------------------------
18
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
3. Discontinued Operations Continued
Condensed financial information of discontinued operations for the years ended
December 31, 1995 are as follows:
Revenues $ 1,093,283
Expenses 2,331,477
------------
Net loss $ (1,238,194)
------------
4. Warrants
Pursuant to an underwriting agreement for a Company stock offering in a prior
year, the Company has issued 13,156 warrants to the underwriter to purchase one
share of common stock for each warrant at a price of $.125 per share. At
December 31, 1996, no warrants had been exercised.
5. Common Stock
Stock Issuance
During the year ended December 31, 1995, the Company issued 160,900 shares of
restricted common stock in a private placement to investors at approximately
$1.00 per share. The Company also issued 302,911 of common stock for services.
6. Related Party Transactions
During 1995, the Company sold its 100% interest in WRTI to a company which has
an officer and shareholder who is a former officer and shareholder of Emerald
Capital Investments, Inc.
During 1995, as an incentive to related parties and officers to provide personal
guarantees for security of the Company's line of credit, the Company agreed to
issue to them an aggregate of 45,000 shares of the Company's common stock and
provided options to purchase additional common stock. In addition, the Company
also agreed to issue to an officer and two related parties an aggregate of
27,000 shares of the Company's common stock as an incentive for loaning the
Company $150,000. individuals also received stock options (see note 8).
- ------------------------------------------------------------------------------
19
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
7. Income Taxes
The difference between income taxes at statutory rates and the amount presented
in the financial statements is the increase in the tax valuation allowance,
which offsets the income tax benefit for the operating loss.
Deferred tax assets are as follows:
1996
------------
Operating loss carryforward $ 882,000
Valuation allowance (882,000)
------------
$ -
------------
As of December 31, 1996, the Company had a net operating loss carryforward of
approximately $2,593,000 available to offset future income for income tax
reporting purposes. This amount begins to expire in 2004. The ability of the
Company to utilize the net operating loss is dependent upon the tax laws in
effect at the time such loss carryforwards can be utilized.
8. Stock Options
As part of the private placement the Company issued 2,502,566 options to
purchase one share each of the Company's common stock for $1.00. The options
expire two years from the date of issuance. No options have been exercised at
December 31, 1996.
The Company has issued stock options to certain officers and related parties as
an incentive for them to loan the Company an aggregate of $150,000 and provide a
personal guarantee for the line of credit. Options under these agreements total
202,500 options. The option price is $.75 per share and expires in 1999.
- ------------------------------------------------------------------------------
20
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
9. Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement of
financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123) which established financial accounting and reporting
standards for stock-based compensation. The new standard defines a fair value
method of accounting for an employee stock option or similar equity instrument.
This statement gives entities the choice between adopting the fair value method
or continuing to use the intrinsic value method under Accounting Principles
Board (APB) Opinion No. 25 with footnote disclosures of the pro forma effects if
the fair value method had been adopted. The Corporation has opted for the latter
approach. Accordingly, no compensation expense has been recognized for the stock
option plans. Had compensation expense for the Corporation's stock option plan
been determined based on the fair value at the grant date for awards in 1996 and
1995 consistent with the provisions of FAS No. 123, the Corporation's results of
operations would have been reduced to the pro forma amounts indicated below:
December 31,
---------------------------
1996 1995
---------------------------
Net loss - as reported $ $ (860,846)
Net loss - pro forma $ $ (3,363,412)
Earnings per share - as reported $ - $ (.15)
Earnings per share - pro forma $ - $ (.59)
---------------------------
The fair value of each option grant is estimated in the date of grant using the
Black-Scholes option pricing model with the following assumptions:
December 31,
------------------------
1996 1995
------------------------
Expected dividend yield $ $ -
Expected stock price volatility - 410%
Risk-free interest rate - 4.5%
Expected life of options - 2 years
------------------------
- ------------------------------------------------------------------------------
21
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
The weighted average fair value of options granted during 1995 was $1.00.
9. Stock Based
The following table summarizes information about fixed stock options outstanding
at December 31, 1996:
Options Outstanding Options Exercisable
---------------------------------------------
Weighted
Average
Number Remaining Weighted Number Weighted
Range of Outstanding Contractual Average Exercisable Average
Exercise at Life Exercise at Exercise
Prices 12/31/96 (Years) Price 12/31/96 Price
- ------------------------------------------------------------------------------
$ .75 202,500 3.0 $ .75 202,500 $ .75
1.00 2,502,566 0.5 1.00 2,502,566 1.00
- ------------------------------------------------------------------------------
$ .75 to 2,705,066 $.69 $ .98 2,705,066 $ .98
to 1.00
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
22
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
A. Identification of Directors. Background information concerning the
Company's officers and directors is as follows:
Name Age Position
Frank H. Ross, III 51 CEO/President/
Treasurer /Director
Douglas P. Morris 41 Secretary/Director
Henry O'bartuch, II 48 Director
Frank H. Ross, III. Mr. Ross is a founder of WRTI. Since 1973, he has been
the president of Ross-Payne & Associates, a business consulting firm
specializing in the management of construction and heavy equipment companies.
Mr. Ross has been an officer and director of the Company since March 5, 1994.
Douglas P. Morris. Mr. Morris, is and has been since 1988, the owner of H &
M Capital Investments, Inc. a privately-held business consulting firm. H & M
Capital Investments, Inc. is engaged in consulting with privately-held and
publicly-held companies relating to management, debt financing and equity
financing. Mr. Morris is the president of Celtic Investment, Inc., a publicly
held company engaged in the financial services business. Mr. Morris is also a
director of Beacon Capital Investment, Inc. and Dauphin Technology, Inc. From
1984, to 1988, Mr. Morris was self-employed in managing his own investments. Mr.
Morris received his Masters Degree in Public Administration at the University of
Southern California in 1982, and his Bachelor of Arts Degree in Judicial
Administration from Brigham Young University in 1978.
Henry O'bartuch, II. Mr. O'bartuch was appointed a director of the Company
in January 1996. Mr. O'bartuch owns and operates a funeral home business in
Chicago, Illinois.
B. Significant Employees. None
- ------------------------------------------------------------------------------
23
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
C. Family Relationships. None
D. Compliance with Section 16(a). The Company is not subject to
Section 16 of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the Company
for services rendered during the last three calendar years to the Company's
Chief Executive Officer and other executive officers.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Name Other
and Annual Restricted All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank Ross, III 1996 -0- -0- -0- -0- -0- -0- -0-
CEO/President 1995 $34,616 -0- -0- -0- -0- -0- -0-
1994 $66,925 -0- -0- -0- -0- -0- -0-
Thomas J. Katsoulis(2) 1996 -0- -0- -0- -0- -0- -0- -0-
Former President 1995 -0- -0- -0- -0- -0- -0- -0-
1994 $106,925 -0- -0- -0- -0- -0- -0-
William G. Holmes(3) 1996 -0- -0- -0- -0- -0- -0- -0-
Former Executive V.P. 1995 -0- -0- -0- -0- -0- -0- -0-
1994 $122,669 -0- -0- -0- -0- -0- -0-
Douglas P. Morris (4) 1996 -0- -0- -0- -0- -0- -0- -0-
Secretary 1995 -0- -0- $8,000 -0- -0- -0- -0-
1994 -0- -0- $10,000 -0- -0- -0- -0-
</TABLE>
(1) Mr. Ross was appointed a director and Chief Financial Officer of the
Company in March 1994. In January 1995, Mr. Ross was appointed CEO and
President of the Company. Pursuant to his Employment Agreement. Mr. Ross
earned a monthly salary of $10,000. However, due to the financial condition
of the Company, Mr. Ross was only paid $34,616 in total salary during the
year ended December 31,1995. The liability for the balance of the salary
was eliminated in the transaction wherein WRTI and CTR were sold by the
Company. In March 1994, the Company granted Mr. Ross an Option to purchase
833,333 shares of the Company's common stock at $.05 per share. Such option
was subject to certain conditions and was not exercisable in 1994. In 1995,
such option was canceled pursuant to the agreement of the Company and Mr.
Ross. During 1994, Mr. Ross was issued options to purchase 67,500 shares of
the Company's common stock at a $1.00 per share for loans and guarantees
and not as compensation for services rendered. During 1995, Mr. Ross was
assigned 416,081 shares of common stock from former officers and was
granted options by the Company to purchase 478,176 shares of the Company's
common stock at $.75 per share. Such shares and options were not issued for
services rendered but related to financing matters.
(2) Mr. Katsoulis was appointed a director and President/CEO of the Company in
March 1994. Subsequently Mr. Katsoulis resigned as President/CEO and a
director of the Company. Mr. Katsoulis had previously entered into an
Employment Agreement with the Company but such agreement was terminated
pursuant to the agreement of the Company and Mr. Katsoulis. In March 1994,
the Company granted Mr. Katsoulis an Option to purchase 833,334 shares of
the
- ------------------------------------------------------------------------------
24
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
Company's common stock at $.05 per share. Such option was not exercisable
in 1994. In 1995, such option was canceled pursuant to the agreement of the
Company and Mr. Katsoulis.
(3) Mr. Holmes was appointed a director and executive vice president of the
Company in March 1994. In March 1994, the Company granted Mr. Holmes an
option to purchase 833,333 shares of the Company's common stock at $.05 per
share. Such option was subject to certain conditions and was not
exercisable in 1994. In 1995, such option was canceled pursuant to the
Agreement of the Company and Mr. Holmes. Mr. Holmes is no longer an officer
or director of the Company.
(4) Mr. Morris was president of the Company until March 5, 1994. He is
currently a director and the secretary of the Company. Mr. Morris was paid
$8,000 as cash compensation by the Company during 1995. In March 1994, the
Company granted Mr. Morris an option to purchase 350,000 shares of the
Company's common stock at $.05 per share. Such option was subject to
certain conditions and was not exercisable in 1994. In 1995, such option
was canceled pursuant to the agreement of the Company and Mr. Morris.
During 1994. Mr. Morris was issued options to purchase 67,500 shares of the
Company's common stock at $1.00 per share in consideration for loans and
guarantees and not as compensation for services rendered. In 1995, Mr.
Morris was assigned 159,593 shares of the Company's common stock from two
former officers and was granted options by the Company to purchase 202,500
shares of common stock in connection with financing matters and not for
services rendered.
Stock Options Granted in the Last Fiscal Year
No stock options were granted to management during 1996. During 1995, the
Company granted Douglas P. Morris an option to purchase 202,500 shares of the
Company's common stock and Frank H. Ross, III an option to purchase 478,176
shares of the Company's common stock in consideration for loans made to the
Company by these individuals and for their guarantee of certain bank financing.
These options were not issued for services rendered.
Aggregate Option Exercises and Number/Value of Unexercised Options
The following table provides information concerning the exercise of
options during the last fiscal year by persons named in the Summary Compensation
Table, the number of unexercised options held by such person at the end of the
last fiscal year, and the value of such unexercised options as of such date:
<TABLE>
<CAPTION>
Nature of Value of Unexercised
Shares Acquired Values Unexercised Options In-the Money Options
Name on Exercise (#) Realized ($) at 12/31/96 at 12/31/96(1)
- ---------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Douglas P. Morris -0- -0- 470,000(2) -0- -0- -0-
Frank H. Ross, III -0- -0- 545,676(3) -0- -0- -0-
</TABLE>
(1) An "In-the-Money" stock option is an option for which the market price
of the Company's Common Stock underlying the option on December 31,1996
exceeded the option exercised price. At December 31,1996, there was no
market for the Company's securities.
(2) Mr. Morris was granted 200,000 of these options in 1992, all of which
are exercisable at $.25 per share and which carry piggy back registration
rights such 200,000 options expire December 31, 1996. In 1994, Mr. Morris
was granted an option to purchase 30,000 share at $1.00 per share as
additional consideration for a loan he made to the Company. Such option
expires December 31, 1998. In 1994, Mr. Morris was also granted an option
to purchase 37,500 shares of the Company's common stock at $1.00 per share
as additional consideration for his personal guarantee of a bank loan.
Such option expires
- ------------------------------------------------------------------------------
25
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
March 31, 1998. In 1995, Mr. Morris was granted options to purchase
202,500 shares of the Company's common stock at $.75 per share in
consideration for loans and loan guarantees. Such options expire in 1999.
(3) In 1994, Mr. Ross was granted an option to purchase 30,000 share at
$1.00 per share as additional consideration for a loan he made to the
Company. Such option expires December 31, 1998. In 1994, Mr. Ross was also
granted an option to purchase 37,500 shares of the Company's common stock
at $1.00 per share as additional consideration for his personal guarantee
of a bank loan. Such option expires March 31, 1998. In 1995, Mr. Ross was
granted options to purchase 478,176 shares of the Company's common stock
at $.75 per share in consideration for loans and loan guarantees. Such
options expire in 1999.
Compensation of Directors
The Company's non-employee directors are not paid for Board of Directors
Meeting attended.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. Security Ownership of Certain Beneficial Owners. The following table
sets forth information regarding shares of the Company's common stock
beneficially owned as of March 30, 1997 by: (1) each officer and director of the
Company; (ii) all officers and directors as a group; and (iii) each person known
by the Company to beneficially own 5 percent or more of the outstanding shares
of the Company's common stock.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership(1) Class Ownership
Douglas P. Morris(2) 746,259 11%
330 East Main Street
Second Floor
Barrington, Illinois 60010-3218
Frank H. Ross, III(3) 1,526,969 22%
536 Eton Drive
Barrington, IL 60010
Henry O'bartuch, II(4) 499,334 7%
150 South Dundee Road
East Dundee, IL 60118
All Officers and
Directors as a
Group (3 persons) 2,772,562 39%
(1) There were 5,808,698 shares issued and outstanding as of March 30, 1997.
For purposes of disclosure of shares outstanding and shares owned by
persons listed above, all shares issuable within 60 days are deemed to be
issued and outstanding pursuant to rules and regulations of the Securities
and Exchange Commission. Currently, the above-referenced persons own
options to purchase 1,265,343 shares which are currently exercisable.
Therefore, for the sole purpose of the above set forth chart, there are
deemed to be 7,074,041 shares issued and outstanding.
- ------------------------------------------------------------------------------
26
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
(2) A total of 276,259 of these shares are shares owned of record by Mr. Morris
or his affiliates. The remaining 470,000 shares listed as own relate to
currently exercisable options to purchase 470,000 shares.
(3) A total of 981,293 of these shares are shares owned of record by Mr. Ross.
The remaining 545,676 shares listed above relate to currently exercisable
options to purchase 545,676 shares.
(4) A total of 249,667 of these shares are shares owned of record by Mr.
O'bartuch. The remaining 249,667 shares listed above relate to currently
exercisable options to purchase 249,667 shares.
B. Security Ownership of Management. See Item 11(a) above.
C. Changes in Control. No changes in control of the Company are
contemplated. The Company is seeking acquisitions of other companies. If an
acquisition is effected, of which there can be no assurance, the Company would
likely issue such number of shares to the owners of the acquired company which
would give them control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 7, 1994, the Company borrowed a total of $150,000 from two
directors and one shareholder of the Company. The Company needed immediate
capital to fund its operations and was unable to obtain bank financing without
an addition infusion of capital. As additional consideration for such loan, the
Company issued 9,000 shares of its common stock to each Frank H. Ross, III,
Douglas P. Morris and James G. Blackburn and granted each of them an option to
purchase 30,000 shares of the Company's common stock at $.75 per share. The
options expire December 31, 1998. This loan was secured by the assets of Waste
Reduction Technologies, Inc. The loan was extended three additional quarters
during 1995. Each extension resulted in a grant of an additional 9,000 shares of
common stock and an option to purchase 30,000 shares of common stock for each of
these individuals. The additional options expire December 31, 1999. The loan was
deemed repaid and the security interest was released in connection with the
Company's 1995 recapitalization plan which included the sale of WRTI and CTR.
On December 22, 1994, the Company obtained a line of credit from Bank One
in the amount of $250,000. Bank One agreed to provide the line of credit only if
the Board members would personally guarantee the loan. Three of the Board
Members and Mr. James G. Blackburn, a shareholder of the Company, agreed to
guarantee the line of credit in consideration of the Company granting certain
options to them and issuing shares of the Company's common stock to them. On the
basis of the Company's inducements, the personal guarantees were given and the
line of credit was obtained. The Company needed to obtain additional funds in
order to continue its operations. As consideration for Frank H. Ross, III,
Douglas P. Morris and James G. Blackburn guaranteeing such line of credit, the
Company issued each of them 11,250 shares of the Company's common stock and
options to purchase 37,500 shares of the Company's common stock at a price of
$.75 per share. The Options expire March 31, 1999. The personal guarantees were
extended three additional quarters during 1995. Each extension resulted in a
grant of an additional 11,250 shares of common stock and an option to purchase
37,500 shares of common stock for each of these individuals. The
- ------------------------------------------------------------------------------
27
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
additional options expire December 31, 1999. These guarantees were released and
the line of credit paid in connection with the Company's December 1995
recapitalization plan.
7. In 1993, Douglas P. Morris, the current president of the Company, loaned
$25,000 to the Company to enable it to repay certain liabilities and for
professional fees. Such loan was due on demand and had an interest rate of 10%
per annum. In 1994, Mr. Morris converted this loan into 100,000 shares of the
Company's common stock. Mr. Morris subsequently sold such 100,000 shares of
common stock to James G. Blackburn at $.10 per share in a private transaction.
During 1993, Douglas P. Morris purchased 50,000 shares of the Company's
common stock for an aggregate of $15,000. The sale of such shares was part of a
private placement of 166,667 shares for $50,000. The offering proceeds was used
to repay certain liabilities of the Company related to the Ho Lee Chow
operations.
On March 15, 1994, Mr. Ross became an employee of the Company. Prior to
this date, Mr. Ross provided financial services to the Company through the
consulting firm of Ross-Payne & Associates, Inc. Fees for services rendered from
September, 1993 through march 14, 1994 amounted to $43,420. The Company
continues to utilize the capabilities of Ross-Payne & Associates, Inc. in the
areas of accounting, marketing, and administrative services. Fees for these
services for the calendar year 1994 amounted to $39,505.
Sale of WRTI and CTR
In December 1995, the Company completed a recapitalization plan. In
connection with the plan, the Company sold its shares of WRTI and CTR to a group
of Buyers, one of which was William Holmes, who, at the time of such sale, was
an officer and director of the Company. (See "Item 1.") In connection with this
transaction and the forgiveness of certain debt owed to secured creditors of
WRTI and CTR, Mr. Holmes transferred all 620,809 of his shares of the Company's
common stock to the following secured creditors of the Company:
Frank H. Ross, III 259,281
Douglas P. Morris 78,593
Bruce Johnson 78,593
Bill Pragalz 78,593
James Blackburn 78,593
Kirk Ferguson 47,156
The plan also included the assignment of 350,000 shares of the Company's
common stock owned by Thomas F. Katsoulis, a former officer and director, to the
above referenced persons as additional consideration of their forgiveness of
debt owed by the Company. Such shares were assigned to the following persons:
- ------------------------------------------------------------------------------
28
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
Frank H. Ross, III 156,800
Douglas P. Morris 81,000
Bruce Johnson 81,000
Bill Pragalz 12,000
James Blackburn 12,000
Kirk Ferguson 7,200
In 1995, the Company issued approximately 308,000 shares of stock for
services which had been rendered in 1994 in connection with the initial
acquisition of WRTI by the Company and with a private placement of the Company's
securities. A total of 250,257 of such shares were issued to ACAP Financial for
fees in the Company's 1994 private placement. A total of 58,584 of such shares
were issued to James Blackburn for finders fees related to the acquisition of
WRTI in 1994. These shares were authorized for issuance in 1994 but were not
actually issued until 1995.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits.
3.1 Certificate of Incorporation - incorporated by reference to Exhibit 3.1
to Registration Statement on Form S-18 (SEC File No. 33-30365-C)
3.2 Bylaws - incorporated by reference to Exhibit 3.2 to Registration
Statement on Form S-18 (SEC File No. 33-30365-C).
10.1 Agreement and Plan of Reorganization - incorporated by reference to
Form 8-K filed March 7, 1994. This Agreement pertains to the Registrant's
acquisition of Waste Reduction Technology, Inc.
10.2 Stock Acquisition Agreement. Attached.
B. The Company filed no Form 8-K's during the quarter ended December
31,1996.
- ------------------------------------------------------------------------------
29
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EMERALD CAPITAL INVESTMENTS, INC.
Date: April 15, 1997 By: /s/ Frank H. Ross, III
----------------------
Frank H. Ross, III
Principal Executive
Principal Financial Officer
In accordance with the Exchange Act, this Report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature Capacity Date
/s/ Frank H. Ross, III President/ CEO
Frank H. Ross, III Treasurer/Director April 15, 1997
/s/ Douglas P. Morris Secretary/Director April 15, 1997
Douglas P. Morris
/s/ Henry O'bartuch, II Director April 15, 1997
Henry O'bartuch, II
- ------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
EMERALD CAPITAL INVESTMENT INC.'S FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 12,738
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 12,738
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,738
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,738
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 5,809
<OTHER-SE> 12,738
<TOTAL-LIABILITY-AND-EQUITY> 12,738
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (10,597)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
