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
For the fiscal year ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to ______________
Commission file number 33-61892-FW
EMERGING DELTA CORPORATION
(Exact name of small business issuer in its charter)
DELAWARE 72-1235451
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
220 Camp Street,
New Orleans, Louisiana 70130
(Address of principal executive (Zip Code)
offices)
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, 2000 was $300,000.
The number of shares outstanding of the issuer's classes of Common
Stock as of March 31, 2000:
Common Stock, $1.00 Par Value - 43,600 shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
PART I
Item 1. DESCRIPTION OF BUSINESS
History and Organization
Emerging Delta 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 Company 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 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.
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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 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.
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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.
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
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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
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
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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.")
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 visa-vis 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, reinvesting, or trading in
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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 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.")
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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, 2000.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has not traded. As of March 31, 2000,
there were 339 stockholders of record.
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, 1996, 1997, 1998, 1999 and 2000 and is qualified in its entirety by the
financial statements appearing elsewhere in this Report. The Company's
fiscal year end is March 31st.
Balance Sheet Data
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, March 31,
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash $ 297,769 $ 290,442 $295,347 $ 297,884 $ 301,229
Organizational Costs 840 560 280 -- --
Total Assets 298,788 293,089 295,343 297,884 301,229
Total Liabilities 2,028 1,050 1,341 1,800 2,700
Stockholders' Equity 296,760 292,039 294,277 296,084 298,529
</TABLE>
The Company was formed in 1993 and has not engaged in any operations
other than organizational matters. The Company earned $16,335 in interest
income during 1998, $15,950 in 1999, and $16,104 in 2000. In January 1995,
the Company engaged a director to provide consulting services to the
Company at the rate of $1,250 per month, which was revised to $750 per
month effective January 1, 1997. In 1997 the amount paid was $13,500 and in
fiscal year 1998, 1999 and 2000 was $9,000. It is anticipated that the
amount in fiscal 2001 will be $9,000.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required to be
included in Item 7 are included elsewhere in this report.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 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, with the exception of Mr. Jarrell who was elected in 1994,
all directors and officers have held their positions since inception.
Name Age Office with the Company
---- --- -----------------------
Burt H. Keenan 60 President, Chief Financial Officer and
Director
D. B. H. Chaffe III 66 Director
Daniel B. Killeen 66 Secretary and Director
Jerry W. Jarrell 58 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 was Chairman and Chief Executive Officer of Independent
Energy Holdings plc from April 1991 to June 1998 and currently serves as a
director of Independent Energy. He has, since 1987, been an associate of
Chaffe & Associates, Inc., an investment banking firm located in New
Orleans, Louisiana, where he has specialized in capital formation for
emerging and middle market companies. From 1969 to 1986, Mr. Keenan was
the founder, chairman and chief executive officer of Offshore Logistics,
Inc. a Nasdaq-listed quoted marine and aviation oil and gas service company
operating a fleet of marine service vessels and helicopters worldwide. Mr.
Keenan received Bachelors and Masters degrees in business administration
from Tulane University. He is a director of Telescan Incorporated, a
Nasdaq-listed quoted interactive online information business.
Daniel B. Killeen has been an associate professor in information
systems in the A. B. Freeman School of Business at Tulane University since
1983. From 1967 to 1983, he was Director of Computing at the University,
responsible for all computing activities and a staff of fifty. Mr. Killeen
performs consulting work for 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.
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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 was Executive Director - Finance of Independent
Energy Holdings plc from April 1991 to May 1998 and currently serves a
director of Independent Energy Holdings. He is a private consultant and
currently consults to several public and private companies. He was chief
financial officer for the Woodson Companies, an oilfield construction
company from 1977 to 1990. From 1971 to 1977, he was secretary, treasurer
and controller of Offshore Logistics, Inc., a major marine and aviation oil
and gas company. Prior to joining Offshore Logistics, he was a certified
public accountant with Arthur Andersen & Company between 1966 and 1971. He
earned a BS 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 Beta Corporation, Emerging
Alpha 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 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
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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 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 Report, and any hourly compensation
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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.
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 share at any time until
December 31, 2000. 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, 2000. (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.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, 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.
13
<PAGE>
Number of Shares
of Common Stock
Beneficially
Name 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. Mr. Keenan's business address is 220 Camp
Street, New Orleans, Louisiana 70130.
(2) Includes Shares issuable upon exercise of options to purchase 1,200
shares of Common Stock. Mr. Chaffe's business address is 220 Camp
Street, New Orleans, Louisiana 70130.
(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. The agreement was
renewed on January 1, 1997 but the compensation was reduced to $750 per
month. See "Stock Option Plan" below.
The Company has an oral agreement with Chaffe & Associates, 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)
14
<PAGE>
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.
No amounts were paid to C & A through March 31, 1995. In fiscal 1996
and 1997 the amounts paid were $3,481 and $112, respectively and in fiscal
1999 and 2000 no amounts were paid. It is anticipated that C & A will not
be paid additional amounts until an acquisition is identified.
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 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.
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
15
<PAGE>
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, 2000. 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.
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
16
<PAGE>
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.
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*
________________
* Filed in original registration statement on Form SB-2, File No. 33-
61892-FW (the "Registration Statement") and incorporated by reference.
(b) Reports on Form 8-K.
Not Applicable.
17
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants F-2
Balance Sheet as of March 31, 2000 F-3
Statements of Operations for the Years Ended March 31, 2000 and 1999 F-4
Statements of Stockholders' Equity for the Years Ended March 31,
2000 and 1999 F-5
Statements of Cash Flows for the Years Ended March 31, 2000 and 1999 F-6
Notes to Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Emerging Delta Corporation:
We have audited the accompanying balance sheet of Emerging Delta
Corporation (a Delaware corporation) as of March 31, 2000, and the related
statements of operations, stockholders' equity and cash flows for the years
ended March 31, 2000 and 1999. 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 auditing standards generally
accepted in the United States. 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 Delta
Corporation as of March 31, 2000, and the results of its operations and its
cash flows for the years ended March 31, 2000 and 1999 in conformity with
accounting principles generally accepted in the United States.
Arthur Andersen LLP
New Orleans, Louisiana,
May 26, 2000
F-2
<PAGE>
EMERGING DELTA CORPORATION
BALANCE SHEET
MARCH 31, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 301,229
---------
Total assets $ 301,229
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,700
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 252,214
Retained earnings 2,715
---------
Total stockholders' equity 298,529
---------
Total liabilities and stockholders' equity $ 301,229
=========
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
EMERGING DELTA CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
2000 1999
--------- ---------
INTEREST INCOME $ 16,104 $ 15,950
COSTS AND EXPENSES (13,659) (14,143)
--------- ---------
INCOME BEFORE TAX PROVISION 2,445 1,807
TAX PROVISION -- --
--------- ---------
NET INCOME $ 2,445 $ 1,807
========= =========
BASIC EARNINGS PER SHARE $ .056 $ .042
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 43,600 43,600
========= =========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
EMERGING DELTA CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<CAPTION>
Common Stock
---------------------- Additional Retained
Number of Paid-in Earnings
Shares Amount Capital (Deficit) Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE - March 31, 1998 43,600 $ 43,600 $ 252,214 $ (1,537) $ 294,277
NET INCOME -- -- -- 1,807 1,807
---------- ---------- ---------- ---------- ----------
BALANCE - March 31, 1999 43,600 43,600 252,214 270 296,084
NET INCOME -- -- -- 2,445 2,445
---------- ---------- ---------- ---------- ----------
BALANCE - March 31, 2000 43,600 $ 43,600 $ 252,214 $ 2,715 $ 298,529
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EMERGING DELTA CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
2000 1999
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,445 $ 1,807
Adjustments to reconcile net income to net
cash provided by operating activities-
Increase in accounts payable 900 454
Amortization -- 280
---------- ---------
Net cash provided by operating
activities 3,345 2,541
---------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 3,345 2,541
CASH AND CASH EQUIVALENTS - beginning of year 297,884 295,343
---------- ---------
CASH AND CASH EQUIVALENTS - end of year $ 301,229 $297,884
========== =========
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
EMERGING DELTA CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
1. DESCRIPTION OF ORGANIZATION:
Emerging Delta 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 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 directed. 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.
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.
There are no temporary differences between financial reporting and tax
basis of assets and liabilities. As of March 31, 1997, the Company had
incurred a cumulative loss from operations since inception. Therefore, a
valuation allowance was provided against the deferred tax asset resulting
from the net operating loss (NOL) carryforward. In 2000 and 1999 this
valuation allowance was reduced in an amount equivalent to the NOL
utilization and therefore no tax provision was recorded. This asset has
been reduced to zero by a valuation allowance. The net operating loss
carryforward at March 31, 2000 was approximately $1,300 and will partially
expire in 2010 with the remaining portion expiring one year thereafter.
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.
F-7
<PAGE>
3. RELATED PARTY TRANSACTIONS:
Officers and directors will be compensated based on actual time and
expenses devoted to the Company's business. During 2000 and 1999, a
consulting fee of $750 per month was paid to the Company's Treasurer.
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. During 1994, the Company granted options to a
consultant to purchase 2,000 shares of common stock at $12 per share. All
of the options are currently exercisable and expire on December 31, 2000.
In October 1995 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-
Based Compensation," effective for the Company at March 31, 1997. Under
SFAS 123, companies can either record expense based on the fair value of
stock-based compensation upon issuance or elect to remain under the current
APB Opinion No. 25 method whereby no compensation cost is recognized upon
grant. The Company will continue to account for its stock-based
compensation plans under APB Opinion No. 25. Entities electing to remain
with the accounting in APB Opinion No. 25 must make disclosures as if SFAS
123 had been applied. The disclosure requirements of this Statement are
effective for options granted in fiscal 1996 and other. As a result, SFAS
123 is not applicable to the Company's existing outstanding stock options.
F-8
<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 on June
29, 2000.
EMERGING DELTA 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 29, 2000.
By: /s/ Burt H. Keenan President, Chief Financial Officer
------------------------------- and Director
Burt H. Keenan
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
