SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 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
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DELTA CAPITAL TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 98-0187705
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1331 Homer St. #B201, Vancouver, B.C., Canada V6B 5M5
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(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
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The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of December 4, 2001, was 65,334,827.
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
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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 September 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.]
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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
September 30, 2001 and December 31,2000
(Unaudited) (Audited)
September December 31
30 2000
2001
ASSETS
Current Assets
Cash $ 18,099 $ 49
Prepaid Expenses 30,810 -
---------------- -----------------
Total Assets $ 48,909 $ 49
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts Payable $ 317,592 $ 304,439
Notes Payable 268,874 20,000
---------------- -----------------
Total Current Liabilities 586,466 324,439
Minority Interest 80,762 0
Shareholders' Equity (Deficit)
Common Stock, $.001 par value, 75,000,000 shares
authorized; 69,300,672 and 53,179,512 issued and
outstanding at September 30, 2001 and December 31, 2000
respectively 69301 53,179
Additional paid-in capital 6,570,438 6,039,552
Deficit accumulated during the developmental stage (7,258,058) (6,417,121)
Total Stockholders' Equity (Deficit) (618,319) (324,390)
---------------- -----------------
Total Liabilities and Stockholders' Equity (Deficit) $ 48,909 $ 49
================= =================
See Notes To Financial Statements.
F-2
DELTA CAPITAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS For
the Three and Nine Months Ended September 30, 2001 and 2000 and
the Period from March 4, 1998 (Date of Incorporation) to September 30, 2001
(Unaudited)
Cumulative
During the
Development
Stage Three Months Ended Nine Months Ended
September September September 2001 September
2001 2000 2000
Revenue $ 585,642 $ 11,958 $ 157,199 $ 20,264 $ 566,022
Expenses
General and Administrative (1,808,272) (282,537) (312,666) (653,100) (425,958)
Goodwill amortization (412,336) (169,065) - (202,879) (209,457)
Investment amortization (902,777) - - - (416,666)
License agreement amortization (12,199) - - - (5,630)
Interest expense (47,213) (7,024) (5,769) (10,710) (27,805)
Write off of investment (4,666,391) - (4,666,391) - (4,666,391)
------------- ------------ ------------ ------------ --------------
Total expenses (7,849,188) (458,626) (4,984,826) (866,689) (5,751,907)
------------- ------------ ------------ ------------ --------------
Loss before minority interest (7,263,546 (446,668) (4,827,627) (846,425) (5,185,885)
Minority interest in subsidiary loss 5,488 5,488 - 5,488 -
Net loss $ (7,258,058) $ (441,180) $ (4,827,627) $ (840,937) $ (5,185,885)
============= ============ ============ ============ ==============
Basic and diluted loss per share $ (0.19) $ (0.01) $ (0.11) $ (0.01) $ (0.12)
============= ============ ============ ============ ==============
See Notes to Financial Statements.
F-3
DELTA CAPITAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2001 and 2000 and
the Period from March 4, 1998 (Date of Incorporation) to September 30, 2001
(Unaudited)
Cumulative Nine months Nine months
During the ended ended
Development September September 30,
Stage 30, 2001 2000
---------------- -------------- ----------------
Cash Flows From Operating Activities
Net loss $ (7,258,058) $ (840,937) $ (5,185,885)
Adjustments to reconcile net loss to net cash used in
operating activities
Write off investment and related costs 4,666,391 - 2,409,532
Amortization 1,327,378 202,879 637,542
Minority interest in subsidiary loss (5,488) (5,488) -
Issuance of common stock for services 782,949 446,242 -
Increase (decrease) in accounts payable 202,221 (13,124) 188,860
Increase in accrued liabilities - - 36,011
(Increase) decrease in accounts receivable - - 13,674
(Increase) decrease in prepaid expenses (30,810) (30,810) -
---------------- -------------- ----------------
Net cash used in operating activities (315,417) (241,238) (1,900,446)
Cash Flows From Investing Activities
Capitalized development costs (2,256,551) - -
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) - (41,432)
---------------- -------------- ----------------
Net cash provided by (used in) investing activities (2,229,246) 61,654 (41,432)
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Nine Months Ended September 30,
2001 and 2000 and the Period from March 4, 1998
(Date of Incorporation) to September 30, 2001
(Unaudited)
Cash Flows From Financing Activities
Proceeds from loans 944,012 111,384 451,356
Proceeds from issuance of common stock 1,532,500 - 1,471,350
Proceeds from issuance of subsidiary stock to minority
interests 86,250 86,250 -
---------------- -------------- ----------------
Net cash provided by financing activities 2,562,762 197,634 1,922,706
---------------- -------------- ----------------
Net increase (decrease) in cash 18,099 18,050 (19,172)
Cash, beginning of period - 49 351
---------------- -------------- ----------------
Cash, end of period $ 18,099 $ 18,099 $ (18,821)
================ ============== ================
No cash payments for interest or income taxes have been made
See Notes to Financial Statements.
F-4
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS For the Nine Months Ended
September 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 had recorded
$202,879 of goodwill. On November 1, 2001 UMDN repurchased it's shares of stock
as explained in the Subsequent Event footnote. The goodwill has been written off
during the quarter ended September 30, 2001 because management determined that
this intangible asset was impaired.
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 nine months ended September 30, 2001 and September 30,2000 with those of
the Company results in the following pro forma data:
September 30, September 30,
2001 2000
----------------------- ----------------------
Revenue $ 46,303 $ 631,152
Expenses 808,445 5,902,549
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Net Loss $ (762,142) $ (5,271,397)
======================= ======================
Loss per Share $ (0.01) $ (0.12)
======================= ======================
Note 2. continued
F-5
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 58,284,546 and 44,702,343 for
the nine months ended September 30, 2001 and September 30, 2000, respectively.
The weighted average number of shares was 38,987,713 for the period from March
4, 1998 to September 30, 2001.
Note 3. Going Concern
As shown in the financial statements, the Company incurred a net loss of
$7,258,058 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 $618,319. 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.
Subsequent Event
On November 1st, 2001 UMDN exercised it's option to repurchase it's shares of
stock from the Company. In exchange the Company received the 1,000,000 shares of
it's common stock originally issued for the UMDN shares.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This Quarterly Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," and other similar expressions or variations of such words
are intended to identify these forward- looking statements. Additionally,
statements concerning future matters such as the development of new products,
enhancements or technologies, possible changes in legislation and other
statements regarding matters that are not historical fact are forward-looking
statements. Forward-looking statements involve risks and uncertainties. Actual
results could differ materially from those projected in the forward-looking
statements. Factors that could cause of contribute to such differences include,
but are not limited to, availability of financial resources adequate for short-,
medium- and long-term needs, demand for our products and services and market
acceptance, as well as those factors discussed in this "ITEM 2, Management's
Discussion and Analysis or Plan of Operations" and elsewhere in this Report.
Delta Capital Technologies, Inc. (the "Company"), has elected to end its
relationship with Union Members Discount Network "UMDN"), effective November 1,
2001. The Company and UMDN have executed an agreement that will allow both
companies to independently develop and complete their respective corporate
objectives. As part of the agreement, the Company and UMDN have agreed to unwind
the share exchange between the companies that was completed in May 2001. For the
period ending September 30, 2001, UMDN's Balance Sheet shows $18,000 cash and
$200,000 liabilities.
Continued Fund Raising
Delta Capital will require continued injections of working capital during the
next quarter of 2001 if it is to be successful in its planned activities.
Continuation of Delta as a going concern is dependent on obtaining the necessary
working capital. Management continues to monitor the capital markets and is
confident that it will be able to raise sufficient capital to continue the
Company's progress. Net cash provided by financing activities for the nine
months ending September 30, 2001 amounted to $197,634Management continues to
work with interested parties to secure funding, primarily through equity
financing. However, no assurance can be given that Delta Capital will
successfully consummate any further financings.
Management
Management of Delta Capital will aggressively pursue alternative business
opportunities. Each of the specific enterprises or operations to be reviewed in
these areas will have to meet certain minimum asset value and cash flow
requirements in order to be considered for potential acquisition. These
opportunities will be identified through the extensive contacts of its officers
and directors.
MartinTutschek, a graduate from the University of Texas and director of Delta
Capital, has resigned as the Manager, Business Development, US operations for
Trader.com allowing him to focus on the day-to-day operations of the Company.
His primary role will be to analyse and identify business opportunities while
executing the business and marketing plans of the Company.
The Company has accepted the resignations of Kent and Starla Keith effective
November 1, 2001.
Interglobe Investigation Services Inc.
The Company is negotiating for the acquisition of Interglobe Investigation
Services Inc. ("Interglobe") British Columbia Corporation formed in 1995, which
provides private investigation and security consulting services for individuals
and corporations. As of this date no definitive contract has been signed. If the
Company in fact acquires Interglobe, the Company's objective will be to work
towards becoming a pre-eminent, full service investigation and security
4
consulting company in North America. The Company has arranged for interim
capital advances of $25,000 to provide working capital to complete the expected
costs required to complete the acquisition
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
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.
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 7th day of December, 2001.
Delta Capital Technologies, Inc.
/s/ Judy Miller
- ---------------------------------------------------
Judy Miller, Secretary and Director
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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