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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-30365-C
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EMERALD CAPITAL INVESTMENTS, INC.
(Name of Small Business Issuer as specified in its charter)
Delaware 36-3693936
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
330 East Main Street, Suite 206 Barrington, IL 60010
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(Address of principal executive offices)
Registrant's telephone no., including area code: (847) 382-1100
N/A
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Former name, former address, and former fiscal year, if changed
since last report.
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
.
Common Stock outstanding at May 11, 1998 - 6,608,698 shares of $.001 par value
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
EMERALD CAPITAL INVESTMENTS, INC.
For the Quarter ended March 31, 1998
The following financial statements and schedules of the registrant are
submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-QSB
Item 1. Financial Statements:
Balance Sheet--March 31, 1998 3
Statements of Operations--for the three months
ended March 31, 1998 and March 31, 1997 4
Statements of Cash Flows--for the three months
ended March 31, 1998 and March 31, 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 10
Item 2. Changes in the Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Results of Votes of Security Holders 10
Item 5. Other Information 10
Item 6(a). Exhibits 10
Item 6(b). Reports on Form 8-K 10
2
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Balance Sheet
March 31, 1998
(Unaudited)
Assets
Current assets - cash $7,273
====================
Liabilities and Stockholders' Equity
Current liabilities
Stockholders' equity: $0
Common Stock - $.001 par value.
100,000,000 shares authorized
6,608,698 shares issued and outstanding, respectively 6,609
Additional paid-in capital 2,607,856
Retained deficit (2,607,192)
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Total stockholders' equity: 7,273
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Total liabilities and stockholders' equity: $7,273
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See accompanying Notes to Financial Statements.
3
EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Statement of Cash Flows
March 31, 1998
(Unaudited)
Three Months Ended
March 31
Cumulative
1998 1997 Amounts
---- ---- -------
Cash flows from operating activities:
Net loss - (2,515) (24,062)
Decrease in accounts receivable - - 30,000
Decrease in accounts payable (8,000) - (6,665)
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Net cash used in
operating activities - (2,515) (727)
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Cash flows from investing activities - - -
Cash flows from financing activities 8,000 - 8,000
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Net (decrease) increase in cash - (2,515) 7,273
Cash, beginning of period 7,273 - -
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Cash, end of period $ 7,273 $ 10,222 $ 7,273
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See accompanying Notes to Financial Statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Statement of Operations
March 31, 1998
(Unaudited)
Three Months Ended
March 31
Cumulative
1998 1997 Amounts
---- ---- -------
Revenue - -
Selling, general and administrativ - 2,515 24,062
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Loss from continuing operations - (2,515) (24,062)
Net loss - (2,515) (24,062)
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Net loss per share $(.00) $(.00) $(.00)
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Weighted average number of shares
outstanding 6,608,698 6,608,698 6,608,698
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See accompanying notes to financial statements.
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EMERALD CAPITAL INVESTMENTS, INC.
(A Development Stage Company)
Notes for Financial Statements
(1) The unaudited financial statements include the accounts of Emerald Capital
Investments, Inc., and include all adjustments (consisting of normal
recurring items) which are, in the opinion of management, necessary to
present fairly the financial position as of March 31, 1998 and the results
of operations for the three months ended March 31, 1998 and 1997, cash
flows for the three months ended March 31, 1998 and 1997 and cumulative
amounts since inception of the development stage through March 31, 1998.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire year.
(2) Income (loss) per common share is based on the weighted average number of
shares outstanding during the period.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company currently has no operations. Prior to December 29, 1995,
the Company had been involved in the business of recycling used tires and
designing, manufacturing, and marketing shredding equipment. The Company's tire
recycling and shredding equipment operations were unsuccessful and the Company
generated significant losses during 1994 and 1995. During 1995, the Company
funded its operations with loans from a commercial bank from management and
other individuals. By November 1995, the Board of Directors had concluded that
the Company did not have the capital, or the ability to obtain capital necessary
to continue its current operations. The Company's Board of Directors initiated
efforts to sell the Company's WRTI and CTR operations. The Company was able to
interest one of its directors and several other individuals in purchasing WRTI
and CTR.
Effective December 29, 1995, the Company sold all of its shares of WRTI
and CTR for $30,000 and the payment and or assumption of liabilities. As a
result of such sale, the Company's total liabilities, on a consolidated basis,
decreased from $1,758,308 to $6,665.
On May 7, 1998, the Company entered into an Agreement and Plan of
Merger to acquire American Polymer Corporation, a Utah Corporation. The Merger
will be a reverse merger whereby following the Merger, the shareholders and
management of American Polymer will be the controlling shareholders and
Management of the Company. The Merger is subject to several conditions and there
can be no assurance that it will be completed.
Financial Condition
Total assets at March 31, 1998 were $7,273, all of which was cash. At
March 31, 1998, the Company had no liabilities. The Company intends to use such
cash to pay for various filing fees and professional fees relating to its
reporting obligations and to fund the costs which may arise from seeking new
business opportunities.
It is likely that the Company will be required to raise additional
capital in order to attract any potential acquisition partner but there can be
no assurance that the Company will be able to raise any additional capital. It
is also likely that any future acquisition will be made through the issuance of
shares of the Company's common stock which will result in the dilution of the
percentage ownership of the current shareholders.
Results of Operations
The Company has generated no revenues since the sale of the WRTI/CTR
operations and assets. The Company will not generate any revenues, if ever,
until and unless it merges with an operating company or raises additional
capital for its own operations. There can be no assurance that either of such
events will happen.
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The Company had no income loss for the three months ended March 31,
1998 compared to $2,515 for the three months ended March 31, 1997.
Plan of Operation
Commencing in the fourth quarter of 1995, the Company's Plan of
Operation was essentially the plan to sell its WRTI and CTR operation. Effective
December 29, 1995 these operations were sold. The Company's current plan of
operation is to acquire another operating company. It is likely that any
acquisition will be a "reverse merger" acquisition whereby the Company acquires
a larger company by issuing shares of the Company's common stock to the
shareholders of the larger company. Although the Company would be the surviving
or parent company from a corporate law standpoint, the shareholders of the
larger company would be the controlling shareholders of the Company and the
larger company would be treated as the survivor or parent company from an
accounting point of view. It can be expected that any company which may desire
to be acquired by the Company will do so as a method of potentially becoming a
public company more quickly and less expensively than if such company undertook
its own public offering.
The Company has entered in to a Merger Agreement to acquire by merger,
American Polymer Corporation, a small specialty chemical company. The Merger is
subject to numerous conditions, including a requirement that the Company raise
additional capital. There can be no assurance that the Merger will be effected.
A general description of the Merger is as follows:
Overview of the Merger
The Merger Agreement provides that, subject to the approval of the
Merger Agreement by the shareholders of both the Company and American Polymer,
the satisfaction or waiver of certain other conditions, the Merger will be
effected and Emerald Merger Sub, a wholly-owned subsidiary of the Company, will
be merged with and into American Polymer, which will be the Surviving
Corporation and which will be a wholly-owned subsidiary of the Company. American
Polymer will continue to conduct its current business.
The Company will, prior to the Merger, effect a 1-for-10 reverse split
of its issued and outstanding shares of common stock. The 6,608,698 shares will
be reduced to approximately 660,869 shares as the result of the reverse split.
At the effective time ("Effective Time") of the Merger, all of the
issued and outstanding shares of American Polymer will be converted into a total
of 9,243,476 shares (calculated after the 1-for-10 reverse split) of the
Company's common stock. Further more, all outstanding options to purchase shares
of American Polymer will be converted into options to purchase shares of the
Company on the same conversion basis and ratio as each share of American Polymer
is converted into shares of the Company.
Reasons for the Merger
The Company is currently an inactive company whose business plan is to
seek a suitable merger partner. The Company's reason for participating in the
Merger is to enable it to commence active business operations in a business
which management believes (1) has potential for long-term growth; (2) has a
proven
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product in place; (3) has experienced management in place; and (4) is involved
in an industry which holds interest for product users, government agencies and
investors.
American Polymer has informed the Company that its reason for
participating in the Merger is (1) to obtain additional working capital; (2) to
have potential access to public markets for its shareholders thereby providing
liquidity for their investment; (3) to facilitate future capital raising efforts
to the extent necessary, (4) to enable it to provide incentives to employees and
product distributors with stock options; and (5) to reduce ownership dilution
which may result if American Polymer were to have undertaken its own initial
public offering.
Share Ownership Following Merger
If the Merger is completed, the following shares of the Company's
Common Stock will be issued and outstanding:
Maximum Offering Minimum Offering
Current Shareholders 660,869 660,869
Offering Investors 1,500,000 1,200,000
American Polymer Shareholders 9,243,476 9,243,476
Placement Agent Fee Shares 150,000 120,000
- -------------------------- ----------------- -------------------
Total 11,554,345 11,254,345
Accounting Treatment
It is expected that the Merger will be treated as a reverse merger
using the purchase method of accounting. However, since the Company is a public
shell with minimum activity, no good will be recorded.
Federal Tax Consequences
The Merger is intended to qualify as a reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, and if so
qualified, will not result in the recognition of any gain or loss by either the
Company, American Polymer, or the shareholders of either. Neither the Company
nor American Polymer has applied for a tax ruling with respect to the Merger,
nor has either obtained an opinion of counsel with respect to the Merger;
therefore, no assurances can be given that the expected tax result will be
achieved in the Merger.
Appointment of New Officers and Directors
Following the consummation and closing of the Merger, the current
officers and directors of the Company, except for Douglas P. Morris, shall
resign and the officers and directors of American Polymer shall be appointed as
the officers and directors of the Company. Mr. Morris will remain a director of
The Company and will be appointed The Company's Vice President of Capital
Markets.
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Change of Name and Possible Change of Domicile
The Company's name will be changed from "Emerald Capital Investments,
Inc.", to some other name chosen by American Polymer management, in connection
with the Merger. In an effort to reduce state corporate franchise taxes, the
Company and American Polymer may provide for the change of The Company's
domicile from the State of Delaware to the State of Utah in a change of domicile
merger.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. To the best knowledge of the Company's
management, the Company is not a party to any legal proceeding or
litigation.
Item 2. Changes in the Rights of the Company's Security Holders. None.
Item 3. Defaults by the Company on its Senior Securities. None.
Item 4. Submission of Matters to Vote of Security Holders. No matter was
submitted to a vote of the Company's security holders for the quarter
ended March 31, 1998.
Item 5. Other Information.
Item 6(a). Exhibits. Agreement and Plan of Merger
Item 6(b). Reports on Form 8-K. None filed.
SIGNATURE
In accordance with the requirements of the Exchange Act, the Company
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: May 13, 1998 EMERALD CAPITAL INVESTMENTS, INC.
By: /s/ Frank H. Ross, III
Frank H. Ross, III
President/Principal Executive Officer
By /s/ Douglas P. Morris
Douglas P. Morris
Principal Financial Office
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