UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended December 31, 2004.
[ ] 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 as specified in its charter)
DELAWARE 72-1235451
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
111 Congress Avenue, Fourth Floor, Austin, Texas 78701
(Address of principal executive offices) (Zip Code)
(512) 391-4970
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Act: None
Check whether the issuer (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 / /
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act.)
YES / / NO /X/
The number of shares outstanding of the issuer's classes of Common Stock as of
December 31, 2004:
Common Stock, $1.00 Par Value - 43,600 shares
EMERGING DELTA CORPORATION
Index to Form 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Balance Sheets as of December 31, 2004 and March 31, 2004 2
Statements of Operations for the Three and Nine Month Periods
Ended December 31, 2004 and 2003 3
Statements of Cash Flows for the Nine Months Ended December 31,
2004 and 2003 4
Notes to the Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
Item 3. Controls and Procedures 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities and Use of Proceeds 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EMERGING DELTA CORPORATION
BALANCE SHEETS
ASSETS
December 31, March 31,
2004 2004
------------ ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 66,716 $ 161,659
Prepaid expenses -- 423
------------ ------------
Total current assets 66,716 162,082
OFFICE EQUIPMENT, cost 5,629 5,629
Less - Accumulated depreciation (2,814) (1,407)
------------ ------------
Office equipment, net 2,815 4,222
------------ ------------
Total assets $ 69,531 $ 166,304
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,375 $ 3,603
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 50,000 shares authorized;
no shares subscribed, issued and outstanding -- --
Common stock, $1.00 par value; 200,000 shares authorized;
43,600 shares issued and outstanding 43,600 43,600
Additional paid-in capital 252,214 252,214
Accumulated deficit (245,658) (133,113)
------------ ------------
Total stockholders' equity 50,156 162,701
------------ ------------
Total liabilities and stockholders' equity $ 69,531 $ 166,304
============ ============
The accompanying notes are an integral part of these financial statements.
2
EMERGING DELTA CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine For the Nine For the Three For the Three
Months Ended Months Ended Months Ended Months Ended
December 31, December 31, December 31, December 31,
2004 2003 2004 2003
------------- ------------- ------------- -------------
INTEREST INCOME $ 574 $ 1,898 $ 254 $ 485
COSTS AND EXPENSES (113,119) (86,071) (38,665) (17,374)
------------- ------------- ------------- -------------
LOSS BEFORE TAX PROVISION (112,545) (84,173) (38,411) (16,889)
TAX PROVISION -- -- -- --
------------- ------------- ------------- -------------
NET LOSS $ (112,545) $ (84,173) $ (38,411) $ (16,889)
============= ============= ============= =============
BASIC AND DILUTED LOSS
PER SHARE $ (2.58) $ (1.93) $ (0.88) $ (0.39)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF BASIC
AND DILUTED SHARES OUTSTANDING 43,600 43,600 43,600 43,600
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
3
EMERGING DELTA CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
December 31
----------------------
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(112,545) $ (84,173)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 1,407 938
Changes in current asses nd liabilities:
Increase (decrease) in accounts payable 15,772 (2,800)
Decrease in prepaid expenses 423 1,060
--------- ---------
CASH USED IN OPERATING ACTIVITIES (94,943) (84,975)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to office equipment -- (5,629)
--------- ---------
CASH USED IN INVESTING ACTIVITIES -- (5,629)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (94,943) (90,604)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 161,659 272,642
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 66,716 $ 182,038
========= =========
The accompanying notes are and integral part of these financial statements.
4
EMERGING DELTA CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF ORGANIZATION
---------------------------
The financial statements included herein, which have not been audited pursuant
to the rules and regulations of the Securities and Exchange Commission, reflect
all adjustments which, in the opinion of management, are necessary to present a
fair statement of the results for the interim periods on a basis consistent with
the annual audited financial statements. All such adjustments are of a normal
recurring nature. The results of the operations for the interim periods are not
necessarily indicative of the results to be expected for an entire year. Certain
information, accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the Company's audited financial
statements included in the Company's Annual Report on Form 10-KSB for the year
ended March 31, 2004.
General Business and Nature of Operations
- -----------------------------------------
Emerging Delta Corporation (the "Company" or "Delta") 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, one similar company was formed, which is managed by
the same officers and directors and is 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. 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.
On November 26, 2003 management control of the Company was changed in connection
with a tender offer. New management intends to continue operating the Company as
a blind pool, as further described herein.
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.
The Company and EZklick, Inc., have agreed effective October 26, 2004, to
terminate their May 24, 2004 Plan of Collaboration with the objective of
acquiring ownership of several independent grocery wholesale distribution
centers ("IWDCs"), commonly called "Cash and Carry's".
The Company plans to continue working with Altos Growth Corporation as a
consultant to research the IWDC industry, identify prospective candidates for
acquisition, assist in negotiating the terms and conditions of acquisitions and
assist in securing debt and equity financing that is needed in the Company's
acquisition efforts.
5
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
The financial statements as of December 31, 2004 and for each of the nine month
periods ended December 31, 2004 and 2003 are unaudited, but in the opinion of
the management of the Company, contain all adjustments, consisting of only
normal recurring accruals, necessary to present fairly the financial position at
December 31, 2004 the results of operations for the nine months ended December
31, 2004 and 2003 and the cash flows for the nine months ended December 31, 2004
and 2003.
3. RELATED PARTY TRANSACTIONS
--------------------------
Officers and directors are compensated based on actual time and expenses devoted
to the Company's business. During each of the nine months ended December 31,
2004 and 2003 consulting fees of $27,000 were paid to the Company's Chief
Executive Officer. During each of the respective periods ended December 31, 2004
and 2003, consulting fees of $6,750 were paid to the Company's Chief Financial
Officer.
Effective May 24, 2004, the Company entered into a services agreement with Altos
Growth Corporation ("AGC"), pursuant to which AGC agreed to provide advisory
services to Delta in connection with the acquisition of several independent
grocery wholesale distribution centers ("IWDCs"). AGC's services are to include
finding IWDC acquisition candidates, negotiating their acquisition and arranging
for financing of such acquisitions. AGC agreed to provide the services of Martin
Nielson as a director and Executive Vice President for Corporate Development of
Delta; for such services, Delta has agreed to pay AGC $10,000 per month.
Effective September 1, 2004 AGC agreed to reduce the monthly fee to $5,000.
Effective November 1, 2004, AGC has agreed that Delta shall have the option to
pay the monthly fee in whole or in part by issuing new common shares of Delta at
an issue price per share of $15.00. As of December 31, 2004 Delta has a
liability of $15,000 for the period of October to December 2004 due to AGC that
Delta has the option to pay in cash or by issuing new common shares.
Effective September 30, 2004 Delta agreed to issue to AGC stock warrants for the
purchase of 4,350 shares of common stock at a price of $15.00 per share. The
issuance of the warrants is conditional of the determination of the Board of
Directors of Delta that AGC has performed to its satisfaction and a resolution
of Delta's directors authorizing the issuance of the warrants. The Board has
sole discretion in this determination and their decision is final. The warrants
will expire September 30, 2005. AGC will be permitted to pay for the shares by
applying fees owed by Delta for services provided by AGC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You must read the following discussion of the plan of the operations and
financial condition of the Company in conjunction with its financial statements,
including the notes, included in this Form 10-QSB filing. The Company's
historical results are not necessarily an indication of trends in operating
results for any future period.
Overview
The Company was incorporated in 1993 for the purpose of seeking out business
opportunities, including acquisitions, that the Board of Directors, in its
discretion, believes to be good 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 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.
The Company's current focus is on seeking out business opportunities. The
Company has created a web site, found at www.cleanpublicshellco.com, to assist
in finding business opportunities. The Company has begun the process of
contacting potential referral sources with respect to potential acquisitions.
6
Results of Operations
Nine and Three Month Periods Ended December 31, 2004 compared to December 31,
2003
The Company has commenced no operations and has no activities other than seeking
out potential business opportunities. Interest income for the nine and three
months ended December 31, 2004 was $574 and $254 respectively compared to the
nine and three months ended December 31, 2003 of $1,898 and $485 respectively.
The decrease in interest income in 2004 is due to lower interest rates and
decreased cash invested compared to 2003. Costs and expenses for the nine and
three months ended December 31, 2004 were $113,119 and $38,665 respectively
compared to the nine and three months ended December 31, 2003 of $86,071 and
$17,374 respectively. Costs and expenses consist primarily of consulting fees,
travel and legal expenses. Consulting fees in the nine and three months ended
December 31, 2004 were $83,750 and $26,250 respectively compared to the nine and
three months ended December 31, 2003 of $34,250 and $11,250 respectively. The
increase in 2004 is due to the monthly consulting fee paid to Altos Growth
Corporation, commencing with June 2004, for their services as described above.
The decrease in other costs and expenses during the nine and three months ended
December 31, 2004 compared to the nine and three months ended December 31, 2003
is primarily due to decreased legal and travel expenses incurred in connection
with potential business acquisitions in 2004 compared to 2003 and expenses
related to shareholder meetings in 2003.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
In connection with forward-looking statements contained in this Form 10-QSB and
those that may be made in the future by or on behalf of the Company which are
identified as forward-looking by such words as "believes," "intends" or words of
a similar nature, the Company notes that there are various factors that could
cause actual results to differ materially from those set forth in any such
forward-looking statements. The forward-looking statements contained in this
Form 10-QSB were prepared by management and are qualified by, and subject to,
significant business, economic, competitive, regulatory and other uncertainties
and contingencies, all of which are difficult or impossible to predict and many
of which are beyond the control of the Company. Accordingly, there can be no
assurance that the forward-looking statements contained in this Form 10-QSB will
be realized or the actual results will not be significantly higher or lower.
These forward-looking statements have not been audited by, examined by, compiled
by or subjected to agreed-upon procedures by independent accountants, and no
third party has independently verified or reviewed such statements. Readers of
this Form 10-QSB should consider these facts in evaluating the information
contained herein. In addition, the business and operations of the Company are
subject to substantial risks which increase the uncertainty inherent in the
forward-looking statements contained in this Form 10-QSB. The inclusion of the
forward-looking statements contained in this Form 10-QSB should not be regarded
as a representation by the Company or any other person that the forward-looking
statements contained in this Form 10-QSB will be achieved. In light of the
foregoing, readers of this Form 10-QSB are cautioned not to place undue reliance
on the forward-looking statements contained herein.
Item 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. We maintain
disclosure controls and procedures designed to provide reasonable assurance that
information required to be disclosed in the reports we file with the SEC is
recorded, processed, summarized and reported within the time periods specified
in the rules of the SEC. Within 90 days prior to the filing of our Quarterly
Report on Form 10-QSB, we carried out an evaluation, under the supervision and
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the design and operation of these disclosure
controls and procedures pursuant to the Exchange Act Rule 13a-14. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company that is required
to be included in our periodic SEC filings.
(b) Changes in internal controls. There were no significant changes in
internal control over financial reporting during out most recent completed
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
7
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits of the Company are included
herein.
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
**10.3 Joint Venture Agreement between Ezklick, Inc. and
Emerging Delta Corporation dated March 20, 2004 and
effective April 29, 2004
**10.4 Advisory Agreement between Altos Growth Corporation
and Emerging Delta Corporation dated May 24, 2004
31 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
-----------------------
*Filed in original registration statement on Form SB-2, File
No. 33-61890-FW (the "Registration Statement") and
incorporated by reference.
**Filed with March 31, 2004 Form 10-KSB
(b) Reports on Form 8-K
None
8
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on February 10, 2005.
EMERGING DELTA CORPORATION
By: /S/ ALLEN F. CAMPBELL
-----------------------
Allen F. Campbell
Chairman
In accordance with 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 February 10, 2005.
By: /S/ ALLEN F. CAMPBELL Chairman of the Board and Director
----------------------
Allen F. Campbell
By: /S/ JERRY W. JARRELL Chief Financial Officer, Secretary and Director
----------------------
Jerry W. Jarrell
9