SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from ______ to ______ .
Commission file number: 000-27407
----------
DELTA CAPITAL TECHNOLOGIES, INC.
----------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 98-0187705
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1331 Homer St. #B201, Vancouver, B.C., Canada V6B 5M5
-----------------------------------------------------
(Address of principal executive office) (Zip Code)
(604) 644-4979
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes XX No
-- ----
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of September 4, 2001, was 65,334,827.
1
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.................................4
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS....................................................5
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................5
SIGNATURES....................................................................6
INDEX TO EXHIBITS.............................................................7
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Delta Capital Technologies, Inc., a
Delaware corporation and predecessors unless otherwise indicated. Unaudited,
condensed interim financial statements including a balance sheet for the Company
as of the quarter ended June 30, 2001 and statements of operations, and
statements of cash flows for the interim period up to the date of such balance
sheet and the comparable period of the preceding year are attached hereto as
Pages F-1 through F-7 and are incorporated herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
3
INDEX TO FINANCIAL STATEMENTS
PAGE
Balance Sheet..............................................................F-2
Statement of Operations....................................................F-3
Statement of Cash Flows....................................................F-4
Notes to Unaudited Financial Statements....................................F-6
F-1
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development State Company)
CONSOLIDATED BALANCE SHEETS
June 30, 2001 and December 31,2000
(Unaudited) (Audited)
June 30 December 31
2001 2000
ASSETS
Current Assets
Cash $ 31,305 $ 49
Prepaid Expenses 17,950 -
----------------- -----------------
Total Current Assets $ 49,255 $ 49
Other Assets
Goodwill, net of accumulated amortization of $33,814 169,065 -
----------------- -----------------
Total Assets $ 218,320 $ 49
================= =================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts Payable $ 315,700 $ 304,439
Deposits 55,000 -
Notes Payable 229,001 20,000
----------------- -----------------
Total Current Liabilities 599,701 324,439
Shareholders' Equity (Deficit)
Common Stock, $.001 par value, 75,000,000 shares
authorized; 61,634,827 and 53,179,512 issued and
outstanding at June 30, 2001 and December 31, 2000
respectively 61,635 53,179
Additional paid-in capital 6,373,862 6,039,552
Deficit accumulated during the developmental stage (6,816,878) (6,417,121)
Total Stockholders' Equity (Deficit) (381,381) (324,390)
----------------- -----------------
Total Liabilities and Stockholders' Equity (Deficit) $ 218,320 $ 49
==== ================= === =================
See Notes To Financial Statements.
F-2
DELTA CAPITAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS For
the Three and Six Months Ended June 30, 2001 and 2000
and
the Period from March 4, 1998 (Date of Incorporation) to June 30, 2001
(Unaudited)
Cumulative
During the
Development
Stage Three Months Ended Six Months Ended
June 2001 June 2000 June 2001 June 2000
Revenue $ 573,684 $ 8,306 $ 245,064 $ 8,306 $ 408,823
Expenses
General and Administrative (1,525,735) (307,873) (71,842) (370,563) (113,292)
Goodwill amortization (243,271) (33,814) (104,728) (33,814) (209,457)
Investment amortization (902,777) - (208,333) - (416,666)
License agreement amortization (12,199) - (2,815) - (5,630)
Interest expense (40,189) (3,686) (13,336) (3,686) (22,036)
Write off of investment (4,666,391) - - - -
---------------- --------- ----------- ----------- ----------
Total expenses (7,390,562) (345,373) (401,054) (408,063) (767,081)
---------------- --------- ----------- ----------- ----------
Net loss $ (6,816,878) $(337,067) $ (155,990) $ (399,757) $ (358,258)
================ ========= =========== =========== ==========
Basic and diluted loss per share $ (0.18) $ (0.01) $ (0.00) $ (0.01) $ (0.01)
================ ========= =========== =========== ==========
See Notes to Financial Statements.
F-3
DELTA CAPITAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
2001 and 2000 and the Period from March 4,
1998 (Date of Incorporation) to June 30, 2001
(Unaudited)
Cumulative Six months Six months
During the ended June ended June
Development 30, 2001 30, 2000
Stage
----------------- ----------------- ------------------
Cash Flows From Operating Activities
Net loss (6,816,878) $ (399,757) $ (358,258)
Adjustments to reconcile net loss to net cash used in
operating activities
Write off investment and related costs 4,666,391 - -
Amortization 1,158,313 33,814 636,507
Issuance of common stock for services 578,707 242,000 -
Increase (decrease) in accounts payable 203,306 (12,039) 209,079
Increase in accrued liabilities - - 42,313
(Increase) decrease in accounts receivable - - (1,085,851)
(Increase) decrease in prepaid expenses (17,950) (17,950) -
----------------- ----------------- ------------------
Net cash provided by (used in) operating activities (228,111) (153,932) (556,210)
Cash Flows From Investing Activities
Capitalized development costs (2,256,551) - (609,238)
Purchase of UMDN, Inc., net cash acquired 61,654 61,654 -
Purchase of marketing license (33,785) - -
Purchase of office equipment and leasehold improvements (564) - (44,852)
----------------- ----------------- ------------------
Net cash provided by (used in) investing activities (2,229,246) 61,654 (654,090)
See Notes to Financial Statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Six Months Ended June 30,
2001 and 2000 and the Period from March 4,
1998 (Date of Incorporation) to June 30, 2001
(Unaudited)
Cash Flows From Financing Activities
Proceeds from deposits 55,000 55,000 -
Proceeds from loans 901,162 68,534 208,667
Proceeds from issuance of common stock 1,532,500 - 971,000
----------------- ----------------- ------------------
Net cash provided by financing activities 2,488,662 123,534 1,179,677
----------------- ----------------- ------------------
Net increase (decrease) in cash 31,305 31,256 (30,623)
Cash, beginning of period - 49 351
----------------- ----------------- ------------------
Cash, end of period $ 31,305 $ 31,305 $ (30,272)
================= ================= ==================
No cash payments for interest or income taxes have been made
See Notes to Financial Statements.
F-5
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS For the Six Months Ended
June 30, 2001
(Unaudited)
Note 1. Basis of Presentation
The interim period consolidated financial statements contained herein include
the accounts of Delta Capital Technologies, Inc. and it's subsidiary (the
"Company").
The interim period consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. The interim period consolidated financial statements
should be read together with the audited consolidated financial statements and
accompanying notes included in the Company's latest annual report on Form 10-KSB
for the fiscal year ended December 31, 2000. In the opinion of the Company, the
unaudited consolidated financial statements contained herein contain all
adjustments necessary to present a fair statement of the results of the interim
periods presented.
Note 2. Summary of Significant Accounting Policies
Acquisition
Effective May 4, 2001, the Company acquired 100% of the outstanding shares of
common stock of Union Members Discount Network, LTD (UMDN), a privately held
marketing and communications company in Santa Monica, California. This
acquisition has been accounted for under the purchase method. In consideration,
the Company issued 1,000,000 shares of its own common stock. The cost of the
acquisition totaled $264,533. Due to this acquisition the Company has recorded
$202,879 of goodwill, which is being amortized over 12 months, its estimated
useful life.
From May 4, 2001 forward, the Company's consolidated statement of operations
includes the revenue and expenses of UMDN. Combining UMDN's operating results
for the six months ended June 30, 2001 and June 30,2000 with those of the
Company results in the following pro forma data:
June 30, 2001 June 30, 2000
----------------------- ----------------------
Revenue $ 31,420 $ 451,640
Expenses 503,564 864,810
----------------------- ----------------------
Net Loss $ (472,144) $ (413,170)
======================= ======================
Loss per Share $ (0.01) $ (0.02)
======================= ======================
F-6
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS For the Six Months Ended
June 30, 2001
(Unaudited)
Note 2. continued
Earnings Per Share
Basic earnings per share, is computed by dividing income (loss) for the period
by the weighted average number of common shares outstanding during a period.
Diluted earnings per share, takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive common
shares. The weighted average number of shares was 50,165,922 and 43,605,471 for
the six months ended June 30, 2001 and June 30, 2000, respectively. The weighted
average number of shares was 37,010,033 for the period from March 4, 1998 to
June 30, 2001.
Note 3. Going Concern
As shown in the financial statements, the Company incurred a net loss of
$6,816,878 since inception, largely due to its write-off of assets related to
its investment in its computer software. Further, the Company has net deficiency
in capital of $381,381. These factors raise concerns about the Company's ability
to continue as a going concern.
The Company will need additional working capital to be successful in any future
business activities and to service its current debt for the coming year.
Therefore, continuation of the Company as a going concern is dependent upon
obtaining the additional working capital necessary to accomplish its objective.
Management is presently engaged in seeking additional working capital equity
funding and plans to continue to invest in other businesses with funds obtained.
The accompanying financial statements do not include any adjustments to the
recorded assets or liabilities that might be necessary should the Company fail
in any of above objectives and is unable to operate for the coming year.
F-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
As used herein the term "Company" refers to Delta Capital Technologies, Inc., a
Delaware corporation and its predecessors, unless the context indicates
otherwise. The Company's executive offices are currently located at B201- 1331
Homer Street, Vancouver, B. C., Canada. At the beginning of the current quarter
on April 1, 2001, the Company was a shell company whose purpose was to acquire
operations through an acquisition or merger, or to begin its own start-up
business.
On January 22, 2001, the Company reached an agreement in principle with Acer
Capital Corp., an Alberta corporation and a reporting issuer whose shares are
traded on the Canadian Venture Exchange (trading symbol ""ART""), and its joint
venture partner Rio Minerals Ltd. to co-develop its Au-online.com business
venture.
Au-online.com, Inc., a Nevada corporation, has the exclusive purchase and
marketing rights for all gold-nugget production originating from a group of
claims in the Ten Mile district of north-central Nevada held by Kayzak Resources
of Winnemucca, Nevada. On February 26, 2001, the Company finalized the terms of
the acquisition of Au- online.com, Inc. The Company agreed to issue 6,500,000
common shares as consideration for an 85% interest in the venture and the right
to acquire the remainder of the shares of Au-online.com, Inc. for a one-time
cash payment of $150,000 or the issuance of a further 1,500,000 shares.
On June 15, 2001, the Company resolved to suspend any further efforts to
complete the acquisition of Au-Online.com from Acer Capital Corp. and its joint
venture partners Cadre Capital Ltd., and some minority owners, until such time
as Au-On-line is able to provide the Company with audited financial statements
and the necessary documentation to bring the acquisition to a close.
On May 4, 2001, the Company acquired 100% of the outstanding common shares of
UMDN, Inc. ("UMDN") In exchange for one million (1,000,000) shares of its common
stock [See Exhibit 10(ii)].
UMDN does business under the name "Union Members Discount Network." UMDN is an
innovative marketing company focused on capturing a percentage of the
advertising dollars of small to mid-size businesses in major metropolitan areas.
UMDN intends to capture a share of this market by delivering these businesses
exclusive access to a highly desirable niche of consumers, members of labor
unions and associations. These union and association members utilize the UMDN
service and build loyalty to it for the money-saving value they receive and
because of the unique mechanism of promoting the service directly through union
locals, as a supplement to union benefits packages.
In marketing a union benefits program, the UMDN business model is unlike most
association businesses (i.e. Costco, AAA, etc.) in that union members are not
charged to register with, or to use, the UMDN network. UMDN contracts local
businesses, for a flat fee, to become "Preferred Providers" and receive
referrals directly from UMDN. Large corporations generating revenue for UMDN
fall into two different categories, National Providers and Strategic Partners.
National Providers are nationwide chains that provide popular consumer outlets.
Strategic Partners provide products or services in a branded or co-branded
environment, such as Cellular or Insurance. These large, corporate accounts are
contracted on a yearly basis for a percentage of sales or up-front fees
The Company does not have sufficient capital to operate over the next fiscal
year without a substantial infusion of operating capital. It will be necessary
for the Company to either borrow funds to operate or generate operating funds
through the sale of equity in the Company or its subsidiaries. There can be no
assurance that the Company will be able to generate sufficient income from
either borrowing, the sale of equity, or a combination thereof to allow it to
operate its business during the coming year. Unless the Company is successful in
4
raising additional operating capital, it will not have sufficient funds to
operate during the balance of the fiscal year.
The Company has no current plans to perform any product research and development
during the coming year.
The Company has no current plans to spend any significant amount in the coming
year on Plant or Equipment.
At the present time, it is not anticipated that the Company will have any
significant increase in the number of employees working for the Company.
However, if sufficient capital can be raised, the Company intends to attempt
development of the business of UMDN during the coming year. If the Company is
successful in raising the funds necessary to continue operations of UMDN,
additional employees will need to be hired by UMDN, and possibly by the Company.
At the present time it is not possible to give a valid estimate of the number of
additional employees that may be needed.
Going Concern
The Company's auditors have expressed an opinion as to the Company's ability to
continue as a going concern. The Company's ability to continue as a going
concern is subject to the ability of the Company to obtain a profit and/or
obtaining the necessary funding from outside sources. Management's plan to
address the Company's ability to continue as a going concern, includes: (1)
obtaining funding from the sale of the Company's securities; (2) increasing
sales, and (3) obtaining loans and grants from various financial institutions
where possible. Although management believes that it will be able to obtain the
necessary funding to allow the Company to remain a going concern through the
methods discussed above, there can be no assurances that such methods will prove
successful.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Daniel Turner vs. Delta Capital Technologies, Inc. filed in the Court of Queen's
Bench of Alberta, Judicial District of Calgary (Canada). Daniel Turner has filed
suit asking for $22,580.41 for unpaid expenses and salary and vacation pay, and
$40,000 in general damages based upon a claim of unreasonable termination of
employment. The Company has denied liability. Settlement negotiations are
ongoing. The Company has offered $10,000 to settle the case. The Company has not
yet received a response to its offer.
JTE Management, Inc. vs. Delta Capital Technologies, Inc. filed in the Court of
Queen's Bench of Alberta, Judicial District of Calgary (Canada), case no.
0101-06733. JTE Management has filed suit asking for $147,542 for services and
expenses it claims are owed by the Company. The Company has just received copies
of the court papers and has referred the case to its attorneys. The Company has
not yet responded to the claim and is currently investigating its options and
defenses to the claims.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 7 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K during
the period covered by this report.
5
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 6th day of September, 2001.
Delta Capital Technologies, Inc.
/s/ Judy Miller
- ---------------------------------------------------
Judy Miller, Secretary and Director
6
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation dated March 4, 1998. (Incorporated by
reference from Form 10SB filed with the SEC on January 5, 2000.)
3(ii) * Amended Articles of Incorporation dated April 23, 1998.
(Incorporated by reference from Form 10SB filed with the SEC on
January 5, 2000.)
3(iii) * By-Laws of Delta Capital dated April 23, 1998. (Incorporated by
reference from Form 10SB filed with the SEC on January 5, 2000.)
10(i) * Share Exchange Agreement dated February 26, 2001 between Delta
Capital Technologies, Inc. and Shareholders of Au-Online.Com,
Inc. (Incorporated by reference from Form 10- QSB filed with the
SEC on May 21, 2001.)
10(ii) * Stock Purchase and Sale Agreement dated May 4, 2001 between Delta
Capital Technologies, Inc. and Shareholders of UMDN, Inc.
(Incorporated by reference from Form 10-QSB filed with the SEC on
May 21, 2001.)
* Incorporated by reference from previous filings as noted.
7