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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
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 36-3693936
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
330 East Main Street, Suite 206 Barrington, IL 60010
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(Address of principal executive offices)
Registrant's telephone no., including area code: (847) 382-1100
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N/A
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Former name, former address, and former fiscal year, if changed
since last report.
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 X No
.
Common Stock outstanding at August 13, 1998 - 6,608,698 shares of $.001 par
value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
EMERALD CAPITAL INVESTMENTS, INC.
For the Quarter ended June 30, 1998
The following financial statements and schedules of the registrant are
submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-QSB
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Item 1Financial Statements:
Balance Sheet--June 30, 1998 3
Statements of Operations--for the six months
ended June 30, 1998 and June 30, 1997 4
Statements of Cash Flows--for the six months
ended June 30, 1998 and June 30, 1997 5
Notes to Financial Statements 6
Item 2Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 10
Item 2. Changes in the Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Results of Votes of Security Holders 10
Item 5. Other Information 10
Item 6(a). Exhibits 10
Item 6(b). Reports on Form 8-K 10
2
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Balance Sheet
June 30, 1998
(Unaudited)
Assets
Current assets - cash $1,567
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Liabilities and Stockholders' Equity
Current liabilities
Stockholders' equity: $0
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Common Stock - $.001 par value.
100,000,000 shares authorized
6,608,698 shares issued and outstanding,
respectively 6,609
Additional paid-in capital 2,607,856
Retained deficit (2,612,898)
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Total stockholders' equity: 1,567
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Total liabilities and stockholders' equity $1,567
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See accompanying Notes to Financial Statements.
3
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Statement of Cash Flows
June 30, 1998
(Unaudited)
Six months Ended
June 30
Cumulative
1998 1997 Amounts
---- ---- -------
Cash flows from operating activities:
Net loss (5,706) (3,688) (29,768)
Decrease in accounts receivable - - 30,000
Decrease in accounts payable (8,000) - (6,665)
----------- ----------- ------------
Net cash used in
operating activities (5,706) (3,688) (6,433)
----------- ----------- ------------
Cash flows from investing activities - - -
Cash flows from financing activities 8,000 - 8,000
----------- ------------ ------------
Net (decrease) increase in cash - (3,688) 1,567
Cash, beginning of period 7,273 12,737 -
----------- ------------ ------------
Cash, end of period $ 1,567 $ 9,049 $ 1,567
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See accompanying Notes to Financial Statements.
4
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Statement of Operations
June 30, 1998
(Unaudited)
Six months Ended
June 30
Cumulative
1998 1997 Amounts
---- ---- -----------
Revenue - -
Selling, general and administrative 5,706 3,688 29,768
----------- ----------- -----------
Loss from continuing operations (5,706) (3,688) (29,768)
Net loss (5,706) (3,688) (29,768)
=========== =========== ===========
Net loss per share $(.00) $(.00) $(.00)
=========== =========== ===========
Weighted average number of shares
outstanding 6,608,698 6,608,698 6,608,698
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See accompanying notes to financial statements.
5
<PAGE>
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes for Financial Statements
(1) The unaudited financial statements include the accounts of Emerald
Capital Investments, Inc., and include all adjustments (consisting
of normal recurring items) which are, in the opinion of management,
necessary to present fairly the financial position as of June 30,
1998 and the results of operations for the six months ended June 30,
1998 and 1997, cash flows for the six months ended June 30, 1998 and
1997 and cumulative amounts since inception of the development stage
through June 30, 1998. The results of operations for the six months
ended June 30, 1998 are not necessarily indicative of the results to
be expected for the entire year.
(2) Income (loss) per common share is based on the weighted average
number of shares outstanding during the period.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company currently has no operations. 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 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 and the payment and or assumption of liabilities. As a
result of such sale, the Company's total liabilities, on a consolidated basis,
decreased from $1,758,308 to $6,665.
On May 7, 1998, the Company entered into an Agreement and Plan of Merger
to acquire American Polymer Corporation, a Utah Corporation. The Merger will be
a reverse merger whereby following the Merger, the shareholders and management
of American Polymer will be the controlling shareholders and Management of the
Company. The Merger is subject to several conditions and there can be no
assurance that it will be completed.
Financial Condition
Total assets at June 30, 1998 were $1,567, all of which was cash. At June
30, 1998, 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 fund 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 any 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
shares of the Company's common stock which will result in the dilution of the
percentage ownership of the current shareholders.
Results of Operations
The Company has generated no revenues since the sale of the WRTI/CTR
operations and assets. The Company will not generate any revenues, if ever,
until and unless it merges with an operating company or raises additional
capital for its own operations. There can be no assurance that either of such
events will happen.
7
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The Company had a net loss of $5,706 for the six months ended June 30,
1998 compared to $3,688 for the six months ended June 30, 1997.
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. 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 a method of potentially becoming a public company more quickly and less
expensively than if such company undertook its own public offering.
The Company has entered in to a Merger Agreement to acquire by merger,
American Polymer Corporation, a small specialty chemical company. The Merger is
subject to numerous conditions, including a requirement that the Company raise
additional capital. There can be no assurance that the Merger will be effected.
A general description of the Merger is as follows:
Overview of the Merger
The Merger Agreement provides that, subject to the approval of the Merger
Agreement by the shareholders of both the Company and American Polymer, the
satisfaction or waiver of certain other conditions, the Merger will be effected
and Emerald Merger Sub, a wholly-owned subsidiary of the Company, will be merged
with and into American Polymer, which will be the Surviving Corporation and
which will be a wholly-owned subsidiary of the Company. American Polymer will
continue to conduct its current business.
The Company will, prior to the Merger, effect a 1-for-10 reverse split of
its issued and outstanding shares of common stock. The 6,608,698 shares will be
reduced to approximately 660,869 shares as the result of the reverse split.
At the effective time ("Effective Time") of the Merger, all of the issued
and outstanding shares of American Polymer will be converted into a total of
9,243,476 shares (calculated after the 1-for-10 reverse split) of the Company's
common stock. Further more, all outstanding options to purchase shares of
American Polymer will be converted into options to purchase shares of the
Company on the same conversion basis and ratio as each share of American Polymer
is converted into shares of the Company.
Reasons for the Merger
The Company is currently an inactive company whose business plan is to
seek a suitable merger partner. The Company's reason for participating in the
Merger is to enable it to commence active business operations in a business
which management believes (1) has potential for long-term growth; (2) has a
proven
8
<PAGE>
product in place; (3) has experienced management in place; and (4) is involved
in an industry which holds interest for product users, government agencies and
investors.
American Polymer has informed the Company that its reason for
participating in the Merger is (1) to obtain additional working capital; (2) to
have potential access to public markets for its shareholders thereby providing
liquidity for their investment; (3) to facilitate future capital raising efforts
to the extent necessary, (4) to enable it to provide incentives to employees and
product distributors with stock options; and (5) to reduce ownership dilution
which may result if American Polymer were to have undertaken its own initial
public offering.
Share Ownership Following Merger
If the Merger is completed, the following shares of the Company's Common
Stock will be issued and outstanding:
Maximum Offering Minimum Offering*
Current Shareholders 660,869 660,869
Offering Investors 1,500,000 1,200,000
American Polymer Shareholders 9,243,476 9,243,476
Placement Agent Fee Shares 150,000 120,000
- ------------------------------ ---------- -----------
Total 11,554,345 11,254,345
*The minimum offering may be reduced upon the agreement of the parties.
Accounting Treatment
It is expected that the Merger will be treated as a reverse merger using
the purchase method of accounting. However, since the Company is a public shell
with minimum activity, no good will be recorded.
Federal Tax Consequences
The Merger is intended to qualify as a reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, and if so
qualified, will not result in the recognition of any gain or loss by either the
Company, American Polymer, or the shareholders of either. Neither the Company
nor American Polymer has applied for a tax ruling with respect to the Merger,
nor has either obtained an opinion of counsel with respect to the Merger;
therefore, no assurances can be given that the expected tax result will be
achieved in the Merger.
Appointment of New Officers and Directors
Following the consummation and closing of the Merger, the current officers
and directors of the Company, except for Douglas P. Morris, shall resign and the
officers and directors of American Polymer shall be appointed as the officers
and directors of the Company. Mr. Morris will remain a director of The Company
and will be appointed The Company's Vice President of Capital Markets.
9
<PAGE>
Change of Name and Possible Change of Domicile
The Company's name will be changed from "Emerald Capital Investments,
Inc.", to some other name chosen by American Polymer management, in connection
with the Merger. In an effort to reduce state corporate franchise taxes, the
Company and American Polymer may provide for the change of The Company's
domicile from the State of Delaware to the State of Utah in a change of domicile
merger.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. To the best knowledge of the Company's
management, the Company is not a party to any legal
proceeding or litigation.
Item 2. Changes in the Rights of the Company's Security Holders. None.
Item 3. Defaults by the Company on its Senior Securities. None.
Item 4. Submission of Matters to Vote of Security Holders. No matter was
submitted to a vote of the Company's security holders for the
quarter ended June 30, 1998.
Item 5. Other Information.
Item 6(a). Exhibits. Agreement and Plan of Merger
Item 6(b). Reports on Form 8-K. None filed.
SIGNATURE
In accordance with the requirements of the Exchange Act, the Company has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: August 14, 1998 EMERALD CAPITAL INVESTMENTS, INC.
By /s/ Frank H. Ross, III
Frank H. Ross, III
President/Principal Executive Officer
By /s/ Douglas P. Morris
Douglas P. Morris
Principal Financial Office
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTS FROM
EMERALD CAPITAL INVESTMENTS, INC.'S FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-1-1998
<PERIOD-END> JUN-30-1998
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