SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended March 31, 1996
[ ] 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 33-61894-FW
EMERGING BETA CORPORATION
(Exact name of small business issuer in its charter)
DELAWARE 72-1235450
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer)
Identification No.
220 Camp Street,
New Orleans, Louisiana 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(504) 524-1801
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 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
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of 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 ]
State issuer's revenues for its most recent fiscal year: None
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 31, 1994 was $300,000 based upon the sales price
of the Common Stock in the Company's public offering.
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The number of shares outstanding of the issuer's classes of Common
Stock as of March 31, 1996:
Common Stock, $1.00 Par Value - 43,600 shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
Item 1. DESCRIPTION OF BUSINESS
History and Organization
Emerging Beta Corporation ("Company") was incorporated in the State of Delaware
on February 10, 1993. Since inception, the primary activity of the Company has
been devoted to organizational activities and obtaining initial funding. The
Company has only engaged in very limited preliminary efforts intended to
identify possible merger or acquisition "targets" and has neither conducted
negotiations concerning, nor entered into a letter of intent for any possible
mergers or acquisitions.
Plan of Operation - General
The Company was organized for the purpose of creating a corporate vehicle to
seek, investigate and, if the results of such investigation warrants, acquire a
business opportunity presented to it by persons or firms who or which desire to
employ the Company's funds in their business or to seek the perceived advantages
of a publicly held corporation. The Company will not restrict its search to any
specific business, industry or geographical location, and the Company may
participate in a business venture of virtually any kind or nature. The
discussion of the proposed business in this Item 1 is purposefully general and
is not meant to be restrictive of the Company's virtually unlimited discretion
to search for and enter into potential business opportunities.
The Company's proposed business is sometimes referred to as a "blind pool"
because investors entrust their investment monies to the Company's management
before they have a chance to analyze any ultimate use to which their money may
be put. Consequently, the Company's potential success is heavily dependent on
the Company's management, which will have virtually unlimited discretion in
searching for and entering into a business opportunity. The officers and
directors of the Companies have had limited experience in the proposed business
of their respective Company. The Company has adopted a policy that all potential
business opportunities will first be presented to Emerging Alpha Corporation,
until that corporation has entered into a definitive merger or acquisition
agreement, and thereafter in the order of Emerging Beta Corporation, Emerging
Delta Corporation, and finally Emerging Gamma Corporation. As a result, until
Emerging Alpha Corporation has entered into a definite merger or acquisition
agreement, the remaining companies will be dormant and not expend significant
funds. The only exception to this policy would occur if a Company, such as
Emerging Alpha Corporation, had expended a substantial portion of its cash and a
business opportunity was presented which required the greater amount of cash
which was held by another Company. Although management believes that each
Company will be able to enter into a business opportunity within 12 months of
the close of this offering, there can be no assurance as to how much
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time will elapse before a business opportunity is acquired. (See
"Management.")
Management anticipates that it may be able to participate in
only one or two potential business venture, due primarily to the
Company's limited financing. This lack of diversification should
be considered a substantial risk in investing in the Company
because it will not permit the Company to offset potential losses
from one venture against gains from another. (See "Risk Factors.")
The Company may seek a business opportunity with a firm which only recently
commenced operations, or developing companies in need of additional funds for
expansion into new products or markets, or are seeking to develop a new product
or service, or are established business which may be experiencing financial or
operating difficulties and are in the need for additional capital. In some
instances, a business opportunity may involve the acquisition 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. The Company may purchase
assets and establish wholly owned subsidiaries in various business or purchase
existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in which
to participate will be complex and extremely risky. Because of general economic
conditions, rapid technological advances being made in some industries, and
shortages of available capital, management believes that there are numerous
firms seeking even the limited additional capital which the Company will have
and/or the benefits of a publicly traded corporation. Such perceived benefits of
a publicly traded corporation may include facilitating or improving the terms on
which additional equity financing may be sought, providing liquidity for the
principals of a business, creating a means for providing incentive stock options
or similar benefits to key employees, providing liquidity (subject to
restrictions of applicable statutes) for all shareholders, and other factors.
Potentially available 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.
As is customary in the industry, the Company may pay a finder's fee for
locating an acquisition prospect or a real estate prospect. If any such fee is
paid, it will be approved by the Company's Board of Directors and will be in
accordance with the industry standards. Such fees are customarily between 1% and
5% of the size of the transaction, based upon a sliding scale of the amount
involved. Such fees are typically in the range of 5% on a $1,000,000 transaction
ratably down to 1% in a $4,000,000 transaction. Management has adopted a policy
that such a finder's fee or real estate brokerage fee will not be paid to any
employee, officer, director or 5% shareholder of the Company or their
affiliates, including Chaffe & Associates, Inc. Should the Company
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acquire a sizable business opportunity, the entire remaining proceeds of this
offering may be paid as a finder's fee. No finder's fee will be paid to Cullen
Investment Group, Ltd., unless approved beforehand by the NASD.
Management believes the Company will offer owners of business opportunities the
opportunity to acquire a controlling ownership interest in a public company at
substantially less cost than is required to conduct an initial public offering.
The owners of the business opportunities will, however, incur significant
post-merger or acquisition registration costs in the event they wish to register
a portion of their shares for subsequent sale.
The Company will also incur significant legal and accounting costs in
connection with the acquisition of a business opportunity including the costs of
preparing post-effective amendments, Forms 8-K, agreements and related reports
and documents nevertheless, the officers and directors of the Company have not
conducted market research and are not aware of statistical data which would
support the perceived benefits of a merger or acquisition transaction for the
owners of a business opportunity.
The Company will not make any loans to any prospective merger or acquisition
candidates or to unaffiliated third parties.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company (see "Management").
Management intends to concentrate on identifying prospective business
opportunities which may be brought to its attention through present associations
with management. In analyzing prospective business opportunities, management
will consider such matters as the available technical, financial and managerial
resources; working capital and other financial requirements; history of
operation, if any; prospects for the future; present and expected competition;
the quality and experience of management services which may be available and the
depth of that management; the potential for further research, development or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential for
growth or expansion; the potential for profit; the perceived public recognition
or acceptance of products, services or trades; name identification; the
potential eligibility of the Company for listing on the NASDAQ system and other
relevant factors. Officers and directors of the Company will meet personally
with management and key personnel of the firm sponsoring the business
opportunity as part of their investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited financial statements cannot be obtained.
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Currently, NASDAQ's quantitative listing requirements are 300 shareholders,
tangible net worth of at least $2,000,000, total assets of at least $4,000,000,
and a trading price of at least $3.00 per share. There can be no assurance that
management will be able to locate a business opportunity which meets NASDAQ's
quantitative criteria nor that the Company's Common Stock will meet NASDAQ's
qualitative criteria for listing.
It may be anticipated that any opportunity in which the Company participates
will present certain risks. Many of these risks cannot be adequately identified
prior to selection of the specific opportunity, and investors herein must,
therefore, depend on the ability of management to identify and evaluate such
risk. In the case of some of the opportunities available to the Company, it may
be anticipated that the promoters thereof have been unable to develop a going
concern or that such business is in its development stage in that it has not
generated significant revenues from its principal business activities prior to
the Company's participation. There is a risk, even after the Company's
participation in the activity and the related expenditure of the Company's
funds, that the combined enterprises will still be unable to become a going
concern or advance beyond the development stage. Many of the opportunities may
involve new and untested products, processes, or market strategies which may not
succeed. Such risks will be assumed by the Company and, therefore, its
stockholders.
The Company will not restrict its search for any specific kind of business, but
may acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
currently impossible to predict the status of any business in which the Company
may become engaged, in that such business may need additional capital, may
merely desire to have its shares publicly traded, or may seek other perceived
advantages which the Company may offer.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, franchise or licensing agreement with another corporation or entity. It
may also purchase stock or assets of an existing business. On the consummation
of a transaction, it is possible that the present management and shareholders of
the Company will not be in control of the Company. In addition, a majority or
all of the Company's officers and directors may, as part of the terms of the
acquisition transaction, resign and be replaced by new officers and directors
without a vote of the Company's shareholders. The Company does not intend to
obtain the approval of Company stockholders prior to consummating any
acquisition. Management does not intend to sell any shares held by them in
connection with a business acquisition.
It is anticipated that any securities issued in any such
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reorganization would be issued in reliance on exemptions from registration under
applicable Federal and state securities laws. In some circumstances, however, as
a negotiated element of this transaction, the Company may agree to register such
securities either at the time the transaction is consummated, under certain
conditions, or at specified time thereafter. The issuance of substantial
additional securities and their potential sale into any trading market which may
develop in the Company's Common Stock may have a depressive effect on such
market. While the actual terms of a transaction to which the Company may be a
party cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so called "tax free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code of 1986, as amended (the
"Code"). In order to obtain tax free treatment under the Code, it may be
necessary for the owners of the acquired business to own 80% or more of the
voting stock of the surviving entity. In such event, the shareholders of the
Company, including investors in this offering, would retain less than 20% of the
issued and outstanding shares of the surviving entity, which could result in
significant dilution in the equity of such shareholders. The Company intends to
structure a merger or acquisition in such manner as to minimize federal and
state tax consequences to the Company and to any target company.
As part of the Company's investigation, officers and directors of the
Company will meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check reference of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
The manner in which the Company participates in an opportunity will
depend on the nature of the opportunity, the respective needs and desires of the
Company and other parties, the management of the opportunity, and the relative
negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with target
company management will be expected to focus on the percentage of the Company
which target company shareholders would acquire in exchange for their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in all
likelihood hold a lesser percentage ownership interest in the Company following
any merger or acquisition. The percentage ownership may be subject to
significant reduction in the event the Company acquires a target company with
substantial assets. Any merger or acquisition effected by the Company can be
expected to have a significant dilutive effect on the percentage of shares held
by the Company's then shareholders, including purchasers in this offering. (See
"Risk Factors.")
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There can be no assurance that any Company will have sufficient funds
to undertake any significant development, marketing and manufacturing of any
products which may be acquired. Accordingly, following the acquisition of any
such product, the Company may be required to either seek additional debt or
equity financing or obtain funding from third parties, in exchange for which the
Company would probably be required to give up a substantial portion of its
interest in any acquired product. There is no assurance that the Company will be
able either to obtain additional financing or interest third parties in
providing funding for the further development, marketing and manufacturing of
any products acquired.
It is anticipated that the investigation of specific 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 business
opportunity the costs therefore incurred in the related investigation would not
be recoverable. Furthermore, even if an agreement is reached for the
participation in a specific business opportunity, the failure to consummate that
transaction may result in the loss to the Company of the related costs incurred.
Competition
The Company will remain an insignificant participant among firms which
engage in business combinations with, or financing of, development stage
enterprises. There are many established management and financial consulting
companies and venture capital firms which have significantly greater financial
and personnel resources, technical expertise and experience than the Company. In
view of the Company's limited financial resources and management availability,
the Company will continue to be a significant competitive disadvantage vis-avis
the Company's competitors.
Investment Company Act
The Company may participate in a business or opportunity by
purchasing, trading, or selling the securities of the business. However, the
Company does not intend to engage primarily in these activities, and is not
registered as an "investment company" under the Investment Company Act of 1940
(the "Investment Company Act"). The Company believes that such registration is
not required. The Company intends to conduct its activities to avoid being
classified as an "investment company" under the Investment Company Act, and to
avoid application of the costly and restrictive registration and other
provisions of the Investment Company Act and the regulations promulgated
thereunder.
Section 3(a) of the Investment Company Act sets forth the definition
of an "investment company" which excludes an entity which does not engage
primarily in the business of investing,
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reinvesting, or trading in securities, or which does not engage in business of
investing, owning, holding, or trading "investment securities" (defined as "all
securities other than United States government securities or securities of
majority-owned subsidiaries") the value of which exceeds 40% of the value of its
total assets (excluding government securities, cash, or cash items). The Company
intends to implement its business plan in a manner which will result in its
falling outside the definition of "investment company." Consequently, the
Company's participation in a business or opportunity through the purchase and
sale of investment securities will be limited. In order to avoid classification
as an investment company, the Company will use a major portion of the net
proceeds of this offering to search for, analyze, and acquire or participate in
a business or opportunity by use of a method which does not involve the
acquisition of investment securities as defined in the Investment Company Act.
Implementation of the Company's business plan, especially if it
involves a business reorganization as discussed above, may necessitate change in
the Company's capital structure, management, control, and business. Each of
these areas are regulated by the Investment Company Act, which regulation has
the purported purpose of protecting purchasers of investment company securities.
Since the Company will not register as an investment company, the purchasers
will not be afforded these protections.
The Company may take advantage of the provision set forth in the
Investment Company Act which allows an entity a one-time option during any
three-year period to claim an exemption as a "transient" investment company. The
necessity of asserting any such resistance or making any claim of exemption
could be time consuming and costly, given the Company's limited resources. There
is no assurance that such classification could be successfully avoided.
Neither the Company nor its officers or directors are registered as
investment advisers under the Investment Advisers Act of 1940 (the "Advisers
Act"). The Company and these individuals do not have authority to pursue any
course of business or conduct as that term is defined in the Advisers Act.
Company management believes that registration is not required and that certain
exemptions to the registration provisions of the Advisers Act are available,
including the exemptions for persons who may render advice to a limited number
of other persons and who may advise other persons located only within one state.
Employees and Consultants
The Company's only employees at the present time are its officers and
directors, who will devote as much time as the Board of Directors determine is
necessary to carry out the affairs of the Company. The Company has allocated a
portion of the proceeds of this offering for payment of expenses incurred in
connection with a business combination, financing transaction or purchase or
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exchange of assets. Such expenses may include business, financial
finder's fee and real estate commissions required to be paid by the
Company. The Company will not pay any such fees to the Underwriter
or to any other NASD member involved with the Company's public
offering, unless approved beforehand by the NASD, although the
Company may pay Chaffe & Associates, Inc. for services of staff
analysts and for clerical services. (See "Management" and "Certain
Transactions.")
Item 2. DESCRIPTION OF PROPERTY
The Company presently maintains its principal offices at the offices
of Chaffe & Associates, which is an affiliate of its principal stockholders,
located at 220 Camp Street, New Orleans, Louisiana 70130 where its telephone
number is (504) 524-1801. The office space is supplied at no cost. The Company
reimburses Chaffe & Associates for its charges for long distance telephone calls
and other miscellaneous expenses of secretarial, photocopying and similar
expense.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 31, 1996.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK-
HOLDER MATTERS
The Company's Common Stock has not traded. As of March 31, 1996, there
were 339 stockholders of record. No dividends have been paid and none are
expected to be paid in the foreseeable future.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
Selected Financial Information
The following sets forth selected financial information as of March
31, 1993, 1994, 1995 and 1996, and is qualified in its entirety by the financial
statements appearing elsewhere in this Report. The Company's fiscal year end
is March 31st.
<TABLE>
<CAPTION>
Balance Sheet Data
March 31, March 31, March 31, March 31,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Cash ........................ $ 13,000 $ 296,056 $ 301,608 $ 297,673
Organizational Costs................. 1,400 1,400 1,120 840
Total Assets. 14,400 298,338 302,768 298,692
Total Liabilities.................... 1,400 1,199 2,864 2,026
Stockholders' Equity................. 13,000 297,139 299,864 296,666
</TABLE>
The Company has been recently formed and has not engaged in any
operations other than organizational matters. The Company earned $11,820 in
interest income during 1995 and $21,121 in 1996. In January 1995, the Company
engaged a director to provide consulting services to the Company at the rate of
$1,250 per month, or $3,750 during the 1995 fiscal year and $15,000 in the 1996
fiscal year.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required to be
included in Item 7 are set forth in the Financial Statements Index.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNT-
ING AND FINANCIAL DISCLOSURE
Not Applicable.
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PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.
Directors and Executive Officers
Directors are elected to serve until the annual meeting of
shareholders and until their successors have been elected and have qualified.
Officers are appointed to serve, subject to the discretion of the Board of
Directors, until the meeting of the Board following the annual meeting of
shareholders and until their successors have been elected and have qualified.
All directors and officers have held their positions since inception, with the
exception of Mr. Jarrell, who was elected in 1994.
Name Age Office with the Company
Burt H. Keenan 56 President and Chief Financial
Officer and Director
D. B. H. Chaffe III 62 Director
Daniel B. Killeen 62 Secretary and Director
Jerry W. Jarrell 54 Director
Each officer and director will devote only such time to the business
affairs of the Company as he deems appropriate, as discussed under the caption
"Executive Compensation," estimated at an average of approximately 20-30 hours
per officer and director for each quarter. Management does not intend to devote
any significant amount of time to any Company until an acquisition candidate has
been preliminarily identified and a letter of intent is being negotiated between
the Company and the acquisition candidate.
Burt H. Keenan has been an associate with Chaffe & Associates, Inc.,
an investment banking firm located in New Orleans, Louisiana, since 1987. From
1969 to 1986, Mr. Keenan was the Chairman and Chief Executive Officer of
Offshore Logistics, Inc., a public oil and gas service company operating a fleet
of marine service vessels and helicopters worldwide. Mr. Keenan was a member of
the National Advisory Council on Oceans and Atmosphere, a presidential
commission, and various industry associations. Mr. Keenan received Bachelor and
Masters degrees in business administration from Tulane University. Mr. Keenan is
a director of Telescan, Inc.
Daniel B. Killeen has been an associate professor in infor-
mation systems in the A. B. Freeman School of Business at Tulane
University since 1983. From 1967 to 1983, he was Director of Com-
puting at the University, responsible for all computing activities
and a staff of fifty. Mr. Killeen performs consulting work for
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business and industry throughout the Gulf South. Mr. Killeen has
received degrees in Physics and a Ph.D in Engineering, and is
affiliated with several honorary business and scientific societies.
He is a registered Louisiana professional engineer.
D. B. H. Chaffe III has been President and Chief Executive
Officer of Chaffe & Associates, Inc., an investment banking firm
located in New Orleans, Louisiana, since 1982. From 1981 to 1985,
Mr. Chaffe was President, Chief Executive Officer and Treasurer of
Becker & Associates, Inc., a marine contracting firm, following a
leveraged buy-out by Mr. Chaffe and two other individuals. From
1971 to 1981, he was Executive Vice President and Director of
Howard, Weil, Labouisse, Friedrichs Incorporated and the head of
corporate finance at this regional investment banking firm. From
1969 to 1971, he was a general partner of Howard, Weil, Labouisse,
Friedrichs & Company. Prior to 1969 Mr. Chaffe was a registered
representative and a principal of investment banking firms. He has
served on advisory committees and has been a member of National
Securities Associations and stock exchanges. Mr. Chaffe received
a Bachelors degree in Engineering from Tulane University. Mr.
Chaffe is a director of Telescan, Inc.
Jerry W. Jarrell currently manages several joint ventures in Mexico
and Alaska for Offshore Logistics, Inc. He was Chief Financial Officer for the
Woodson Companies, an oil field construction company, from 1977 to 1990. During
1971 to 1977, he was secretary, treasurer and controller for Offshore Logistics,
Inc., a major marine and aviation service company. He was with Arthur Andersen
and Company, where he was a Certified Public Accountant from 1966 to 1971, prior
to joining Offshore Logistics. He earned a B.S. degree in accounting from
Louisiana Tech University.
Conflicts of Interest
Certain conflicts of interest now exist and will continue to exist
between the Company and its officers and directors due to the fact that each has
other business interests to which he devotes his primary attention. Each officer
and director may continue to do so notwithstanding the fact that management time
should be devoted to the business of the Company. No officer, director or 5%
greater stockholder of any Company is an officer, director or 5% or greater
stockholder of any other blind pool/blank check company other than Emerging
Alpha Corporation, Emerging Delta Corporation and Emerging Gamma Corporation.
Upon presentation of a business opportunity to each Company's
officers and directors, such persons may face a conflict of interest in
determining which of the Companies will receive the business opportunity. The
Companies have adopted a policy that all potential business opportunities will
first be presented to Emerging Alpha Corporation, until that corporation has
entered into a definitive merger or acquisition agreement, and thereafter in the
order of Emerging Beta Corporation, Emerging Delta Corporation, and
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finally Emerging Gamma Corporation. The only exception to this policy would
occur if a Company, such as Emerging Alpha Corporation, had expended a
substantial portion of its cash and a business opportunity was presented which
required the greater amount of cash which was held by another Company.
The Company has not established policies or procedures for the
resolution of other current or potential conflicts of interests between the
Company, its officers and directors or affiliated entities. There can be no
assurance that management will resolve all conflicts of interest in favor of the
Company, and failure by management to conduct the Company's business in the
Company's best interest may result in liability to the management. The officers
and directors are accountable to the Company as fiduciaries, which means that
they are required to exercise good faith and integrity in handling the Company's
affairs. Shareholders who believe that the Company has been harmed by failure of
an officer or director to appropriately resolve any conflict of interest may,
subject to applicable rules of civil procedure, be able to bring a class action
or derivative suit to enforce their rights and the Company's rights.
Chaffe & Associates, Inc., which is affiliated with two of the
Company's officers and directors, may be a source of business opportunities for
the Company. The Company does not intend to acquire any business opportunity of
which with any officer, director, or 5% or greater shareholder of the Company is
also an officer, director, or 5% or greater shareholder. In the event that such
a related party transaction is contemplated, the Company will first obtain the
approval of a majority of the Company's stockholders excluding those
stockholders who have a financial interest in the transaction.
Indemnification
The Delaware Supreme Court has held that directors' duty of care to a
corporation and its stockholders requires the exercise of an informed business
judgment. Having become informed of all material information reasonably
available to them, directors must act with requisite care in the discharge of
their duties. The Delaware General Corporation Law permits a corporation through
its certificate of incorporation to exonerate or indemnify its directors from
personal liability to the corporation or its stockholders for monetary damages
for breach of fiduciary duty of care as a director, with certain exceptions. The
Companies have adopted these exoneration and indemnification provisions in the
Delaware General Corporation Law in their respective certificates of
incorporation and bylaws. The exceptions include a breach of the director's duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violations of law, improper declarations of dividends, and
transaction from which the directors derived an improper personal benefit. The
Company's Certificate of Incorporation exonerates its directors, acting in such
capacity, from monetary liability to the extent permitted by this statutory
provision. The limitation of liability provision
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does not eliminate a stockholder's right to seek non-monetary, equitable
remedies such as an injunction or recision to redress an action taken by
directors. However, as a practical matter, equitable remedies may not be
available in all situations, and there may be instances in which no effective
remedy is available.
The extent to which the indemnification provisions of the Delaware
General Corporation Law and the Companies' certificates of incorporation and
bylaws provide indemnification to officers and directors for violations of the
federal securities laws has not been settled by court precedent. The Companies
understand that, in the position of the Securities and Exchange Commission, such
indemnification is against public policy and is unenforceable.
Item 10. EXECUTIVE COMPENSATION
No compensation has been paid or accrued to any officer or director
of the Company to date. Each officer and director may be paid on an hourly basis
for actual hours devoted to the Company's business, and will be reimbursed for
his actual out-of-pocket expenses for telephone, reproduction, travel, and
miscellaneous items. No hourly compensation has been determined as of the date
of this Prospectus, and any hourly compensation will be determined arbitrarily
by the Company's board of directors based on its opinion of the value of such
services, and will not be based on current compensation levels for employment
outside of the Company or other such measurements. The terms of such
compensation will not be determined in arm's length negotiation. The Company has
no retirement, pension, profit sharing, or insurance or medical reimbursement
plans covering its officers and directors, and does not contemplate implementing
any such plan at this time.
Except as noted above and under "Certain Transactions," the Company
has no agreement or understanding, express or implied, with any officer or
director, or any other person regarding employment with the Company or
compensation for services. Compensation of officers and directors is determined
by the Company's board of directors and is not subject to stockholder approval.
See "Use of Proceeds."
On acquisition of a business opportunity, current management
may resign and be replaced by persons associated with the business
opportunity acquired, particularly if the Company participates in
a business opportunity by effecting a reorganization, merger or
consolidation as discussed under "Business Plan." If any member of
current management remains after effecting a business opportunity
acquisition, that member's time commitment will likely be adjusted
based on the nature and method of the acquisition and location of
the business which cannot be predicted. See "Business Plan."
The Company has granted a total of 4,300 options to purchase Common
Stock under its 1993 Stock Option Plan, as follows: Burt H. Keenan, 2,600
shares; D.B.H. Chaffe, III, 1,200 shares; and Daniel B. Killeen, 500 shares. The
options are exercisable at $15.00 per
15
<PAGE>
share at any time until December 31, 1999. On February 15, 1994 the Company
issued Jerry W. Jarrell options to purchase 2,000 shares at $12.00 per share at
any time until December 31, 1999.
(See "Stock Option Plan.")
Office Use
The Company currently shares a portion of approximately 3900 square
feet of office space at 220 Camp Street, New Orleans, Louisiana 70130 with
Chaffe & Associates, Inc., an affiliate of the Company. There is no charge for
said space. The Company believes that such space will be adequate until such
time as a business opportunity is selected.
There is no arrangement or understanding between any of the directors
or officers of any of the four Companies and any other person pursuant to which
any director or officer was or is to be selected as a director or officer.
16
<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of March 31, 1996, the stock ownership of
all persons known to own beneficially five percent or more of the Company's
Common Stock and all directors and officers of the Company, individually and as
a group. Each person has sole voting and investment power over the shares
indicated, except as noted.
Number of Shares
of Common Stock
Beneficially
Names and Addresses Owned Percent
Burt H. Keenan(1) 11,350 26%
D. B. H. Chaffe III(2) 4,320 9.9%
Daniel B. Killeen(3) 760 1.7%
Jerry W. Jarrell(4) 2,125 4.9%
All Officers and
Directors as a Group:
(4 persons)(5) 18,555 42.5%
(1) Includes Shares issuable upon exercise of options to purchase
2,600 shares of Common Stock.
(2) Includes Shares issuable upon exercise of options to purchase
1,200 shares of Common Stock.
(3) Includes Shares issuable upon exercise of options to purchase
500 shares of Common Stock.
(4) Includes Shares issuable upon exercise of options to purchase
2,000 shares of Common Stock.
(5) Includes Shares issuable as set forth in Notes 1, 2, 3 and 4
above.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an oral agreement with Jerry W. Jarrell, a director, to
provide consulting services to the Company. The agreement, which commenced on
January 1, 1995, is for a term of 24 months and provides for $1,250 compensation
per month, plus a one-time grant of options to purchase 2,000 shares of Common
Stock at $12.00 per share. See "Stock Option Plan" below.
The Company has an oral agreement with Chaffe & Associates,
17
<PAGE>
Inc. ("C & A"), a firm affiliated with two of its officers and directors, to
perform certain services after the closing of the offering. Secretarial services
will be charged at $20 per hour, and the services of staff analysts will be
charged to rates ranging from $60 to $100 per hour. The total amount of charges
payable in any month cannot be estimated at this time and depend upon the
complexity of any opportunity investigated; however, each Company intends to
expend only $10,000 of the net proceeds received by it from this offering to pay
expenses of investigating and evaluating business opportunities, and therefore,
the maximum amount anticipated to be payable to C & A would be $10,000 per
Company. The Company has each adopted a policy not to compensate C & A for any
services (other than secretarial services) in connection with a transaction
between any Company and an existing C & A client. C & A's services (other than
secretarial services) will not be engaged by any Company until after a letter of
intent is being negotiated between a Company and the potential acquisition
candidate. Since Messrs. Chaffe and Keenan are officers and directors of each
Company, and respectively the principal stockholder and an associate of C & A,
any consulting fees paid to C & A can be expected to indirectly benefit Messrs.
Chaffe and Keenan.
C & A is engaged in financial consulting and advisory services, mergers
and acquisitions, corporate restructuring and financing, management consulting,
valuation of private companies and private placements of corporate debt. A
wholly owned subsidiary of C & A, Chaffe Securities, Inc., is a registered NASD
broker-dealer, but does not participate in public offerings nor engage in retail
securities transactions. Chaffe Securities, Inc. receives only advisory and
transaction fees for transactions in securities of privately held companies or
those with limited public markets and has been involved in one transaction in
each of the two prior calendar years.
C & A may be the source for a business opportunity submitted to the
Company. Although no present clients of C & A have been identified as possible
acquisition candidates, it is possible that a client of C & A will enter into a
business acquisition with the Company. Although C & A will not receive any
compensation in connection with any acquisition, the officers and directors of
the Company may face a conflict of interest in any transaction effected with a C
& A client. See "Management - Conflicts of Interest." C & A has not entered into
any contract or agreement with any private company to obtain a merger or
acquisition with a blind pool/blank check company such as the Companies.
Through March 31, 1995, the Company did not pay any amounts to C & A. In
fiscal 1996 the amount paid was $3,481.
In connection with organizing the Company, persons consisting
of its officers, directors and other individuals paid an aggregate
of $13,000.00 in cash to purchase a total of 13,000 shares of
Common Stock at a sales price of $1.00 per share. Under Rule 405
18
<PAGE>
promulgated under the Securities Act of 1933, such stockholders may be deemed to
be promoters of the Company.
All shares of Common Stock presently issued and outstanding are
"restricted securities" as that term is defined under the Securities Act and may
not be sold in the absence of registration or exemption under the Securities
Act. Under current law, the shares cannot be sold for two years from the date
they are purchased, and then only under limited circumstances. See "Description
of Securities."
Stock Option Plan
The Company, by resolution of its Board of Directors and stockholders,
adopted a 1993 Stock Option Plan (the "Plan") on February 16, 1993. The Plan
enables each Company to offer an incentive based compensation system to
employees, officers and directors and to employees of companies who do business
with the Company.
In the discretion of a committee comprised of non-employee directors
(the "Committee"), directors, officers, and key employees of the Company and its
subsidiaries or employees of companies with which the Company does business
become participants in the Plan upon receiving grants in the form of stock
options or restricted stock. A total of 2,000,000 shares are authorized for
issuance under the Plan, of which 4,300 shares are issuable under options
granted to officers and directors at $15.00 per share, and 2,000 shares as
issuable under options granted to a director of $12.00 per share, all
exercisable until December 31, 1999. The Company does not intend to grant
additional options until such time as a merger or acquisition has been
consummated. The Company may increase the number of shares authorized for
issuance under the Plan or may make other material modifications to the Plan
without shareholder approval. However, no amendment may change the existing
rights of any option holder. Currently, each Company's Certificate of
Incorporation authorizes the issuance of only 200,000 shares of Common Stock,
but the shareholders and Board of Directors have approved an increase to up to
20,000,000 shares of Common Stock.
Any shares which are subject to an award but are not used because the
terms and conditions of the award are not met, or any shares which are used by
participants to pay all or part of the purchase price of any option may again be
used for awards under the Plan. However, shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.
19
<PAGE>
Stock options may be granted as non-qualified stock options or incentive
stock options, but incentive stock options may not be granted at a price less
than 110% of the fair market value of the stock as of the date of grant (110% as
to any 10% shareholder at the time of grant); non-qualified stock options may
not be granted at a price less than 85% of fair market value of the stock as of
the date of grant. Restricted stock may not be granted under the Plan in
connection with incentive stock options.
Stock options may be exercised during a period of time fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability, whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock acquired through the exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery or recourse promissory notes
or a combination of notes, cash and shares of the Company's Common Stock or a
combination thereof. Incentive stock options may only be issued to directors,
officers and employees of the Company.
Stock options may be granted under the Plan may include the right to
acquire an Accelerated Ownership Non-Qualified Stock Option ("AO"). If an option
grant contains the AO feature and if a participant pays all or part of the
purchase price of the option with shares of the Company's Common Stock, then
upon exercise of the option the participant is granted an AO to purchase, at the
fair market value as of the date of the AO grant, the number of shares of common
stock the Company equal to the sum of the number of whole shares used by the
participant in payment of the purchase price and the number of whole shares, if
any, withheld by the Company as payment for withholding taxes. An AO may be
exercised between the date of grant and the date of expiration, which will be
the same as the date of expiration of the option to which the AO is related.
Stock appreciation rights and/or restricted stock may be granted in
conjunction with, or may be unrelated to stock options. A stock appreciation
right entitles a participant to receive a payment, in cash or common stock or a
combination thereof, in an amount equal to the excess of the fair market value
of the stock at the time of exercise over the fair market value as of the date
of grant. Stock appreciation rights may be exercised during a period of time
fixed by the Committee not to exceed ten years after the date of grant or three
years after death or disability, whichever is later. Restricted stock requires
the recipient to continue in service as an officer, director, employee or
consultant for a fixed period of time for ownership of the shares to vest. If
restricted shares or stock appreciation rights are issued in tandem with
options, the restricted stock or stock appreciation right is canceled upon
exercise of the option and the option will likewise terminate upon vesting of
the restricted shares.
20
<PAGE>
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits of the Company are
included herein.
3. Certificate of Incorporation and Bylaws
3.1 Restated Certificate of Incorporation*
3.2 Bylaws*
3.3 Proposed Certificate of Amendment to the Restated
Certificate of Incorporation*
10. Material Contracts
10.1 1993 Stock Option Plan*
10.2 Form of Stock Option Agreements with Messrs.
Keenan, Killeen, Jarrell and Chaffe with Schedule
of Details*
24. Power of Attorney**
* Filed in original registration statement on Form SB-2, File No.
33-61894-FW (the "Registration Statement") and incorporate
herein by reference.
** Filed herewith.
(b) Reports on Form 8-K.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized June 22, 1996.
EMERGING BETA CORPORATION
By:/s/ Burt H. Keenan*
Burt H. Keenan
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities on June 22, 1996.
By: /s/ Burt H. Keenan* President and Chief Financial Officer
Burt H. Keenan (Principal financial accounting and
executive officer) and Director
By: /s/ D. B. H. Chaffe III Director
D. B. H. Chaffe III
By: /s/ Daniel B. Killeen Secretary and Director
Daniel B. Killeen
By: /s/ Jerry W. Jarrell Director
Jerry W. Jarrell
*/s/D.B.H. Chaffe III
D.B.H. Chaffe III signs this report
as attorney in fact of
Burt H. Keenan
21
<PAGE>
EMERGING BETA CORPORATION
FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
F-8
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants F-2
Balance Sheet as of March 31, 1996 F-3
Statements of Operations for the Years Ended March 31, 1996 and 1995 F-4
Statements of Stockholders' Equity for the Years Ended March 31, 1996
and 1995 F-5
Statements of Cash Flows for the Years Ended March 31, 1996 and 1995 F-6
Notes to Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Emerging Beta Corporation:
We have audited the accompanying balance sheet of Emerging Beta Corporation (a
Delaware corporation) as of March 31, 1996, and the related statements of
operations, stockholders' equity and cash flows for the years ended March 31,
1996 and 1995. 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 audits.
We conducted our audits 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 audits provide 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 Beta Corporation as of
March 31, 1996, and the results of its operations and its cash flows for the
years ended March 31, 1996 and 1995, in conformity with generally accepted
accounting principles.
New Orleans, Louisiana
May 17, 1996
<PAGE>
EMERGING BETA CORPORATION
BALANCE SHEET
MARCH 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 297,673
Interest receivable 179
Total current assets 297,852
ORGANIZATION COSTS 840
Total assets 298,692
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,026
Taxes payable -
Total current liabilities 2,026
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 2,000,000
shares authorized; no shares
subscribed, issued or outstanding -
Common stock, $1.00 par value; 20,000,000 shares
authorized; 43,600
issued and outstanding 43,600
Additional paid-in capital 252,231
Retained earnings 835
Total liabilities and stockholders' equity $ 298,692
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
EMERGING BETA CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
1996 1995
<S> <C> <C>
INTEREST INCOME $ 21,121 $ 11,820
COSTS AND EXPENSES (24,319) (7,938)
NET INCOME (LOSS) BEFORE TAX (3,198) 3,882
CURRENT TAX PROVISION - (712)
NET INCOME (LOSS) $ (3,198) $ 3,170
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 43,600 43,600
EARNINGS (LOSS) PER SHARE $ (.073) $ .073
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
EMERGING BETA CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
Common Stock Additional
Number of Paid-in Retained
Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCE - March 31, 1994 43,600 $ 43,600 $ 252,676 $ 863 $ 297,139
OFFERING COSTS - - (445) - (445)
NET INCOME FOR THE YEAR - - - 3,170 3,170
BALANCE - March 31, 1995 43,600 43,600 252,231 4,033 299,864
NET LOSS FOR THE YEAR - - - (3,198) (3,198)
BALANCE - March 31, 1996 43,600 $ 43,600 $ 252,231 $ 835 $ 296,666
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
EMERGING BETA CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)- $ (3,198) $ 3,170
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities-
Decrease/(increase) in interest receivable (179) 882
Increase/(decrease) in taxes payable (864) 712
Increase/(decrease) in accounts payable 26 2,000
Amortization expense 280 280
Net cash provided (used) by operating activities (3,935) 7,044
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net - (1,492)
Net cash (used)/provided by financing activities - (1,492)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,935) 5,552
CASH BALANCE AND CASH EQUIVALENTS - beginning 301,608 296,056
CASH BALANCE AND CASH EQUIVALENTS - ending $ 297,673 $ 301,608
CASH TAXES PAID $ 712 $ -
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
EMERGING BETA CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
1. DESCRIPTION OF ORGANIZATION:
Emerging Beta Corporation (the "Company") was incorporated under the laws of the
State of Delaware on February 10, 1993, for the purpose of seeking out business
opportunities, including acquisitions, that the board of directors, in its
discretion, believes to be good opportunities. Coincident with the formation of
the Company, three similar companies were formed, managed by the same officers
and directors, which are engaged in the same business. The Company was
considered to be in the development stage through the time of its public
offering (See Note 5). The Company will be heavily dependent on the skills,
talents, and abilities of its management to successfully implement its business
plan. An affiliate of a director is expected to be the source for most business
opportunities submitted to the Company. Due to its currently limited funds, it
is likely that the Company will not be able to compete with larger and more
experienced entities for business opportunities which are less risky and are
more attractive to such entities; business opportunities in which the Company
ultimately participates will likely be highly risky and speculative.
The Company's proposed business is sometimes referred to as a "blind pool"
because investors entrust their investment monies to the Company's management
before they have a chance to analyze any ultimate use to which their money may
be put. Consequently, the Company's potential success is heavily dependent on
the Company's management, which will have virtually unlimited discretion in
searching for and entering into a business opportunity. The officers and
directors of the Company have had limited experience in the proposed business of
their respective Company.
2. SIGNIFICANT ACCOUNTING POLICIES:
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Organization costs relating to the expenses of incorporation ($1,400) are
amortized on a straight-line basis over five years beginning April 1, 1994.
There are no temporary differences between financial reporting and tax basis of
assets and liabilities. As no taxable income was generated during fiscal 1996,
no income tax provision has been recorded. In fiscal 1995, federal taxes were
provided for at the statutory income tax rate of 15%. A deferred tax asset has
been recorded in an amount equal to the tax effected net operating losses
generated in 1996. This asset has been reduced to zero by a valuation allowance.
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 at the date of the
financial statements and the reported results of operations during the reporting
period. Actual results could differ from those estimates.
<PAGE>
3. RELATED PARTY TRANSACTIONS:
The Company currently has informal arrangements with an affiliate of certain
officers and directors for use of office space and professional and clerical
services. Professional services, if any, are to be billed to the Company at $60
to $100 per hour. Use of clerical services, if any, are to be billed to the
Company at $20 per hour. The Company currently receives the use of office space
free of charge. The Company was charged $3,481 during fiscal 1996 for services
rendered on its behalf.
Officers and directors will be compensated based on actual time and expenses
devoted to the Company's business. Beginning in January 1995, and throughout
fiscal 1996, a consulting fee of $1,250 per month was paid to a director of the
Company.
4. STOCK OPTION PLAN:
The Company's 1993 Stock Option Plan (the "Plan") provides for the issuance of
up to 2 million shares of common stock at no less than 84% of market value at
the time of grant (for non-qualified options) and no less than 110% of market
value for incentive stock options (110% if the optionee holds 10% or more of the
Company's Common Stock). During 1993 the Company granted options to current
stockholders to purchase 4,300 shares of common stock at $15 per share. These
options are not currently exercisable and expire on December 31, 1999. During
1994, the Company granted options to a consultant to purchase 2,000 shares of
common stock at $12 per share.
5. STOCK ISSUANCE:
The Company made a public offering of 30,000 shares of newly issued common stock
in February 1994 at $10 per share. Total offering costs of $18,175 (including
underwriter's commission of $9,000 and $851 of offering costs recorded during
1995) are reflected as a reduction of the proceeds of the offering. In
accordance with the Underwriting Agreement, the underwriter purchased an
additional 600 shares at the par value of $1 per share.
EXHIBIT 24
POWER OF ATTORNEY
The undersigned officer and/or director of EMERGING BETA CORPORATION, a
Delaware corporation (the "Corporation"), hereby constitutes and appoints Jerry
W. Jarrell and D.B.H. Chaffe III, and each of them, with full power of
substitution and resubstitution, as attorney to sign for the undersigned in any
and all capacities the Corporation's Annual Report on Form 10-KSB for the year
ended March 31, 1996 and any and all amendments thereto, with the Securities and
Exchange Commission and with full power and authority to do and perform any and
all acts and things whatsoever required and necessary to be done in the
premises, as fully to all intents and purposes as the undersigned could do if
personally present. The undersigned hereby ratifies and confirms all that said
attorney-in-fact and agent, or any of his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof and incorporate such changes as
any of the said attorneys-in-fact deems appropriate.
- ------------------------------
Burt H. Keenan
May 23, 1996
