10KSB: Optional form for annual and transition reports of small business issuers [Section 13 or 15(d), not S-B Item 405]
Published on April 16, 2001
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required) for the transition period from
to
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Commission file number: 000-27407
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Delta Capital Technologies, Inc.
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(Name of Small Business Issuer in Its Charter)
Delaware 98-0187705
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(State or Other Jurisdiction of
Incorporation or Organization) (I.R.S. Employer Identification No.)
1331 Homer St. #B201, Vancouver, B.C., Canada V6B 5M5
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(Address of Principal Executive Offices) (Zip Code)
(604) 644-4979
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock ($0.001 Par Value) None
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 X No
------ ----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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 [ ].
The issuer's total consolidated revenues for the year ended December 31, 2000,
were $565,378
The aggregate market value of the registrant's common stock, $0.001 par value
(the only class of voting stock), held by non-affiliates was approximately
$2,301,607 based on the average closing bid and asked prices for the common
stock on April 11, 2000.
At April 12, 2001, the number of shares outstanding of the registrant's common
stock, $0.001 par value (the only class of voting stock), was 55,034,827.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business.........................................1
Item 2. Description of Property.........................................6
Item 3. Legal Proceedings...............................................6
Item 4. Submission of Matters to a Vote of Security-Holders............ 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters........7
Item 6. Management's Discussion and Analysis or Plan of Operation.......8
Item 7. Financial Statement...................................F-1 to F-11
Item 8. Changes in and Disagreements With
Accountants on Accounting and Financial Disclosure.............10
PART III
Item 9. Directors and Executive Officers .............................10
Item 10. Executive Compensation.........................................11
Item 11. Security Ownership of Certain Beneficial Owners and Management.11
Item 12. Certain Relationships and Related Transactions.................12
Item 13. Exhibits, List and Reports on Form 8-K.........................13
Signatures ....................................................14
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
As used herein the term "Company" refers to Delta Capital Technologies, Inc., a
Delaware corporation and its subsidiaries and predecessors, unless the context
indicates otherwise. The Company was incorporated under the laws of the State of
Delaware on March 4, 1998. The Company has previously been involved in business
activities, all of which have been discontinued. Between March 4, 1998, and June
1, 1999, Delta Capital's focus was directed towards assessing various potential
acquisition targets in the Internet and related fields. On June 1, 1999 Delta
Capital entered into the software development business. The Company discontinued
developing its software on October 27, 2000.
General
On June 1, 1999, Delta Capital acquired the rights to an exclusive worldwide
license to the relBuilder(TM) Enterprise Suite of business intelligent
e-Commerce and e-Business software (the "Software") from 827109 Alberta Ltd.
("AltaCo"), an Alberta, Canada based private company. The rights were acquired
pursuant to a License Agreement dated June 1, 1999 between Delta Capital and
AltaCo, as amended by a Letter Agreement dated September 2, 1999 (the "License
Agreement"). The Software application included modules for e-Commerce, e-Project
Management, e-Customer Services, e-Document Assembly, e-Contact Management,
e-Business Intelligence and e-Back office and a core technology which models
business rules and relationships. The License Agreement allowed Delta Capital to
distribute licenses for the Software through sub-licenses.
Following the acquisition of the relBUILDER(TM) technologies, the Company
entered into negotiations to acquire The Matridigm Corporation, an Alberta,
Canada-based strategic marketing and communications company with special
high-tech expertise. On April 19, 2000, the acquisition was completed.
Management believed that the acquisition of The Matridigm Corporation and its
key managers - and the strong marketing base they provided to the Company were
critical to the Company's attempts to successfully penetrate both United States
and international markets.
However, due to problems which arose relative to the achievement of the
Company's planned operations, the Company decided on October 27, 2000 to
discontinue its development and licensing of the relBUILDER B2B(TM) software
that it had licensed from Delta Enterprise Technologies (Canada) Ltd., of
Calgary, Alberta ("Delta E"). The Company and Delta E executed a termination
agreement to the licensing agreement that allowed both companies to
independently develop and complete their respective corporate objectives. As
part of the termination agreement the Company and Delta E agreed to cancel the
share exchange between the companies that was completed in June of 1999 pursuant
to which each company issued 5 million (5,000,000) shares (15,000,000 post 3:1
forward split) to each other.
The Company is currently a shell company whose purpose is to acquire operations
through an acquisition or merger.
1
Since the Company discontinued its software development it has attempted to
identify and acquire a favorable business opportunity. The Company continues to
investigate, review, and evaluate business opportunities as they become
available and will seek to acquire or become engaged in business opportunities
at such time as specific opportunities warrant.
To date, opportunities have been made available to the Company through its
officers and directors and through professional advisors including securities
broker-dealers and through members of the financial community. It is anticipated
that business opportunities will continue to be available primarily from these
sources.
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis regarding the quality of the other firm's
management and personnel, the asset base of such firm or enterprise, the
anticipated acceptability of new products or marketing concepts, the merit of
the firms business plan, and numerous other factors which are difficult, if not
impossible, to analyze through the application of any objective criteria.
The Company currently has no specific commitment or arrangement to participate
in a business and cannot now predict what type of business it may enter into or
acquire. It is emphasized that the business objectives discussed herein are
extremely general and are not intended to be restrictive on the discretion of
the Company's management.
There are no plans or arrangements proposed or under consideration for the
issuance or sale of additional securities by the Company prior to the
identification of an acquisition candidate. Consequently, management anticipates
that it may be able to participate in only one potential business venture, due
primarily to the Company's limited capital. This lack of diversification should
be considered a substantial risk, because it will not permit the Company to
offset potential losses from one venture against gains from another.
Selection of a Business
The Company anticipates that businesses for possible acquisition will be
referred by various sources, including its officers and directors, professional
advisors, securities broker-dealers, venture capitalists, members of the
financial community, and others who may present unsolicited proposals. The
Company will not engage in any general solicitation or advertising for a
business opportunity, and will rely on personal contacts of its officers and
directors and their affiliates, as well as indirect associations between them
and other business and professional people. By relying on "word of mouth", the
Company may be limited in the number of potential acquisitions it can identify.
While it is not presently anticipated that the Company will engage unaffiliated
professional firms specializing in business acquisitions or reorganizations,
such firms may be retained if management deems it in the best interest of the
Company.
Compensation to a finder or business acquisition firm may take various forms,
including one-time cash payments, payments based on a percentage of revenues or
product sales volume, payments involving issuance of securities (including those
of the Company), or any combination of these or other compensation arrangements.
Consequently, the Company is currently unable to predict the cost of utilizing
such services.
2
The Company will not restrict its search to any particular business, industry,
or geographical location, and management reserves the right to evaluate and
enter into any type of business in any location. The Company may participate in
a newly organized business venture or a more established company entering a new
phase of growth or in need of additional capital to overcome existing financial
problems. Participation in a new business venture entails greater risks since in
many instances the management of such a venture will not have proved its
ability, the eventual market of such venture's product or services will likely
not be established, and the profitability of the venture will be unproved and
cannot be predicted accurately. If the Company participates in a more
established firm with existing financial problems, it may be subjected to risk
because the financial resources of the Company may not be adequate to eliminate
or reverse the circumstances leading to such financial problems.
In seeking a business venture, the decision of management will not be controlled
by an attempt to take advantage of any anticipated or perceived appeal of a
specific industry, management group, product, or industry, but will be based on
the business objective of seeking long-term capital appreciation in the real
value of the Company.
The analysis of new businesses will be undertaken by or under the supervision of
the officers and directors. In analyzing prospective businesses, management will
consider, to the extent applicable, the available technical, financial, and
managerial resources; working capital and other prospects for the future; the
nature of 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; the potential for
growth and expansion; the potential for profit; the perceived public recognition
or acceptance of products, services, or trade or service marks; name
identification; and other relevant factors. It is anticipated that the results
of operations of a specific firm may not necessarily be indicative of the
potential for the future because of the requirement to substantially shift
marketing approaches, expand significantly, change product emphasis, change or
substantially augment management, and other factors.
The Company will analyze all available factors and make a determination based on
a composite of available facts, without reliance on any single factor. The
period within which the Company may participate in a business cannot be
predicted and will depend on circumstances beyond the Company's control,
including the availability of businesses, the time required for the Company to
complete its investigation and analysis of prospective businesses, the time
required to prepare appropriate documents and agreements providing for the
Company's participation, and other circumstances.
On November 9, 2000 the Company entered into a consulting agreement with
Greystone Mercantile Bancorp, Ltd. of Calgary, Alberta Canada ("Greystone")
wherein the Company agreed to pay to fifty thousand dollars (USD $50,000) for
consulting services related to helping the Company locate prospective businesses
and provide the Company with funding. See exhibit 10(xx) attached hereto.
Acquisition of a Business
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, or other reorganization with
another corporation or entity; joint venture; license; purchase and sale of
assets; or purchase and sale of stock, the exact nature of which cannot now be
3
predicted. Notwithstanding the above, the Company does not intend to participate
in a business through the purchase of minority stock positions. On the
consummation of a transaction, it is likely 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 directors may, as part of the terms of the
acquisition transaction, resign and be replaced by new directors without a vote
of the Company's shareholders.
In connection with the Company's acquisition of a business, the present
shareholders of the Company, including officers and directors, may, as a
negotiated element of the acquisition, sell a portion or all of the Company's
common stock held by them at a significant premium over their original
investment in the Company. As a result of such sales, affiliates of the entity
participating in the business reorganization with the Company would acquire a
higher percentage of equity ownership in the Company. Although the Company's
present shareholders did not acquire their shares of common stock with a view
towards any subsequent sale in connection with a business reorganization, it is
not unusual for affiliates of the entity participating in the reorganization to
negotiate to purchase shares held by the present shareholders in order to reduce
the amount of shares held by persons no longer affiliated with the Company and
thereby reduce the potential adverse impact on the public market in the
Company's common stock that could result from substantial sales of such shares
after the business reorganization. Public investors will not receive any portion
of the premium that may be paid in the foregoing circumstances. Furthermore, the
Company's shareholders may not be afforded an opportunity to approve or consent
to any particular stock buy-out transaction.
In the event sales of shares by present shareholders of the Company, including
officers and directors, is a negotiated element of a future acquisition, a
conflict of interest may arise because directors will be negotiating for the
acquisition on behalf of the Company and for sale of their shares for their own
respective accounts. Where a business opportunity is well suited for acquisition
by the Company, but affiliates of the business opportunity impose a condition
that management sell their shares at a price which is unacceptable to them,
management may not sacrifice their financial interest for the Company to
complete the transaction. Where the business opportunity is not well suited, but
the price offered management for their shares is attractive, management will be
tempted to effect the acquisition to realize a substantial gain on their shares
in the Company. Management has not adopted any policy for resolving the
foregoing potential conflicts, should they arise, and does not intend to obtain
an independent appraisal to determine whether any price that may be offered for
their shares is fair. Stockholders must rely, instead, on the obligation of
management to fulfill its fiduciary duty under state law to act in the best
interests of the Company and its stockholders.
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 the transaction, the Company may agree to register such securities either at
the time the transaction is consummated, under certain conditions, or at
specified times thereafter. Although the terms of such registration rights and
the number of securities, if any, which may be registered cannot be predicted,
it may be expected that registration of securities by the Company in these
circumstances would entail substantial expense to the Company.
4
The issuance of substantial additional securities and their potential sale into
any trading market which may develop in the Company's securities 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 structure the acquisition as a so-called
"tax-free" event under sections 351 or 368(a) of the Internal Revenue Code of
1986, (the "Code"). In order to obtain tax-free treatment under section 351 of
the Code, it would 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 would retain less than 20% of the issued and
outstanding shares of the surviving entity. Section 368(a)(1) of the Code
provides for tax- free treatment of certain business reorganizations between
corporate entities where one corporation is merged with or acquires the
securities or assets of another corporation. Generally, the Company will be the
acquiring corporation in such a business reorganization, and the tax-free status
of the transaction will not depend on the issuance of any specific amount of the
Company's voting securities. It is not uncommon, however, that as a negotiated
element of a transaction completed in reliance on section 368, the acquiring
corporation issue securities in such an amount that the shareholders of the
acquired corporation will hold 50% or more of the voting stock of the surviving
entity. Consequently, there is a substantial possibility that the shareholders
of the Company immediately prior to the transaction would retain less than 50%
of the issued and outstanding shares of the surviving entity. Therefore,
regardless of the form of the business acquisition, it may be anticipated that
stockholders, immediately prior to the transaction, will experience a
significant reduction in their percentage of ownership in the Company.
Notwithstanding the fact that the Company is technically the acquiring entity in
the foregoing circumstances, generally accepted accounting principles will
ordinarily require that such transaction be accounted for as if the Company had
been acquired by the other entity owning the business and, therefore, will not
permit a write-up in the carrying value of the assets of the other company.
The manner in which the Company participates in a business will depend on the
nature of the business, the respective needs and desires of the Company and
other parties, the management of the business, and the relative negotiating
strength of the Company and such other management.
The Company will participate in a business only after the negotiation and
execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require specific
representations and warranties by all of the parties thereto, will specify
certain events of default, will detail the terms of closing and the conditions
which must be satisfied by each of the parties prior to such closing, will
outline the manner of bearing costs if the transaction is not closed, will set
forth remedies on default, and will include miscellaneous other terms.
Operation of Business After Acquisition
The Company's operation following its acquisition of a business will be
dependent on the nature of the business and the interest acquired. The Company
is unable to predict whether the Company will be in control of the business or
whether present management will be in control of the Company following the
acquisition. It may be expected that the business will present various risks,
which cannot be predicted at the present time.
5
Governmental Regulation
It is impossible to predict the government regulation, if any, to which the
Company may be subject to until it has acquired an interest in a business. The
use of assets and/or conduct of businesses which the Company may acquire could
subject it to environmental, public health and safety, land use, trade, or other
governmental regulations and state or local taxation. In selecting a business in
which to acquire an interest, management will endeavor to ascertain, to the
extent of the limited resources of the Company, the effects of such government
regulation on the prospective business of the Company. In certain circumstances,
however, such as the acquisition of an interest in a new or start-up business
activity, it may not be possible to predict with any degree of accuracy the
impact of government regulation. The inability to ascertain the effect of
government regulation on a prospective business activity will make the
acquisition of an interest in such business a higher risk.
Competition
The Company will be involved in intense competition with other business
entities, many of which will have a competitive edge over the Company by virtue
of their stronger financial resources and prior experience in business. There is
no assurance that the Company will be successful in obtaining suitable business
opportunities.
Employees
The Company is a development stage company and currently has no employees.
Executive officers, who are not compensated for their time contributed to the
Company, devote only such time to the affairs of the Company as they deem
appropriate, which is estimated to be approximately 20 hours per month per
person. Management of the Company expects to use consultants, attorneys, and
accountants as necessary, and does not anticipate a need to engage any full-time
employees so long as it is seeking and evaluating businesses. The need for
employees and their availability will be addressed in connection with a decision
whether or not to acquire or participate in a specific business industry.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns no real property. The Company currently uses the offices,
office equipment and support staff of Judith Miller, a director of the Company,
at 1331 Homer Street #B201, Vancouver, British Columbia, Canada V6B 5M5. The
Company currently has no written lease agreement.
ITEM 3. 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.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 5, 2001, by consent of the holders of a majority of the outstanding
shares of the corporation, consent was given to a resolution of the board of
directors of Delta Capital Technologies, Inc. which approved an amendment to the
Certificate of Incorporation of the Company. Pursuant to the resolution approved
by the majority of shareholders and the board of directors, Paragraph four of
the Company's Certificate of Incorporation was amended to read:
The amount of total authorized shares of stock of this corporation is 75,000,000
shares with a par value of $0.001 per share.
This action was taken by holders of a majority of the Company's outstanding
shares without a meeting of shareholders, as allowed by Delaware law.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the Electronic Bulletin Board under the
symbol, "DCTG." Trading in the common stock in the over-the-counter market has
been limited and sporadic and the quotations set forth below are not necessarily
indicative of actual market conditions. Further, these prices reflect
inter-dealer prices without retail mark-up, mark-down, or commission, and may
not necessarily reflect actual transactions. The high and low bid prices for the
common stock for each quarter of the fiscal year ended December 31, 2000 and the
first quarter of 2001 are as follows(1):
Quarter High Low
ended
3/31/00 $6.00 $1.875
6/30/00 $3.5156 $1.4375
9/30/00 $1.5625 $0.5469
12/31/00 $0.5625 $0.0469
3/31/01(2) $ 0.125 $0.0156
Shareholders
As of April 12, 2001, there were 71 shareholders of record holding a total of
55,034,827 shares of common stock.
(footnote)--------
(1) The Company's stock did not trade prior to the year 2000.
(2) Adjusted to reflect 3:1 forward stock split effective on January 12, 2001.
7
Dividends on the Common Stock
The Company has not declared a cash dividend on its common stock in the last two
fiscal years and the Company does not anticipate the payment of future
dividends. There are no restrictions that currently limit the Company's ability
to pay dividends on its common stock other than those generally imposed by
applicable state law.
Recent Sales of Unregistered Securities
The following is a list of all unregistered securities sold by the Company
within the period covered by this report, including, where applicable, the
identity of the person who purchased the securities, title of the securities,
and the date sold.
On November 28, 2000, the Company issued a total of 6,925,250 shares of common
stock at $0.05 per share to Bonanza Management, Ltd. (5,282,337 shares), B. P.
Equity (1,000,000 shares), Cortez Communications, Inc. (333,333 shares), Glenn
Beeman (154,790 shares), and Peter Kent Carasquero (154,790 shares) for
cancellation of debts owed by the Company pursuant to section 4(2) of the
Securities Act of 1933 in an isolated private transaction by the Company which
did not involve a public offering. The Company made this offering based on the
following factors: (1) The issuance was an isolated private transaction by the
Company which did not involve a public offering; (2) there were only five
offerees who were issued stock for cancellation of debts owed to them by the
Company; (3) the offerees did not resell the stock but have continued to hold it
since the date of issue; (4) there were no subsequent or contemporaneous public
offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offerees and the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the next 12 months, the Company intends to continue its attempts to
locate an operating business through an acquisition or merger. The Company
believes it has sufficient cash to satisfy its cash requirements for the fiscal
year 2001 since it has no significant operations. The Company has no current
plans to conduct any product research or development, nor to purchase or sell
any plant or equipment, nor to hire any employees.
Results of Operations
The Company recorded $565,378 in sales for the fiscal year ended December 31,
2000 and $0 for the fiscal year ended December 31, 1999. The Company
discontinued its software development during the year ended December 31, 2000.
Losses
The Company had a net loss for the year ended December 31, 2000 of $5,725,368
compared to a net loss of $652,472 for the year ended December 31, 1999. The
substantial increase in losses was attributable the Company's decision to
discontinue software development and from the disposal of all the assets
relating to the Company's software development operations.
8
The Company expects to continue to incur losses until such time as it acquires
profitable operations.
Expenses
General and administrative expenses for the year ended December 31, 2000, were
$961,209 compared to $154,682 for the year ended December 31,1999. The increase
in general and administrative expenses was the result of expansion of the
Company's operations and hiring of additional management employees.
Depreciation and amortization expense for the year ended December 31, 2000 were
$631,753 compared to $492,756 for the year ended December 31,1999.
Liquidity and Capital Resources
Cash provided by operations was $223,344 for the year ended December 31, 2000,
and cash used in operations was $200,845 for the year ended December 31, 1999.
Cash flows generated from financing activities was $2,032,905 for the year ended
December 31, 2000 and $214,619 for the year ended December 31, 1999.
Cash flows used in investing activities was $2,256,551 for the year ended
December 31, 2000 compared to a use of $34,349 for the year ended December 31,
1999.
Capital Expenditures
The Company made no significant capital expenditures on property or equipment
over the periods covered by this report.
Income Tax Expense (Benefit)
The Company has experienced losses and as a result has net operating loss carry
forwards available to offset future taxable income. The company's net operating
loss carry forwards will expire $3,711,000 in 2020, $161,000 in 2019, and
$39,000 in 2018.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal years ended December 31,
2000 and 1999 are attached hereto as pages F-1 through F-11
[THIS SPACE INTENTIONALLY LEFT BLANK]
9
DELTA CAPITAL TECHNOLOGIES, INC.
FINANCIAL REPORT
DECEMBER 31, 2000
(Letterhead of Perterson Sullivan PLLC)
601 Union Street Suite 2300
Seattle, WA 98101
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Delta Capital Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Delta Capital
Technologies, Inc. and Subsidiary (a development stage company) as of December
31, 2000, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years ended December 31, 2000 and
1999, and for the period from March 4, 1998 (date of incorporation) to December
31, 2000. 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
from 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 consolidated financial position of Delta Capital
Technologies, Inc. and Subsidiary (a development stage company) as of December
31, 2000, and the consolidated results of their operations and their cash flows
for the years ended December 31, 2000 and 1999, and for the period from March 4,
1998 (date of incorporation) to December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has experienced recurring losses from
operations and has a net capital deficiency that raises substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Peterson Sullivan PLLC
- --------------------------------
Peterson Sullivan PLLC
April 4, 2001
Seattle, Washingtonw
F-2
DELTA CAPITAL TECHNOLOGIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
December 31, 2000
ASSETS
Current Assets
Cash $ 49
================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 304,439
Note payable 20,000
----------------
Total current liabilities 324,439
Shareholders' Equity (Deficit)
Common stock, $.001 par value, 75,000,000 shares
authorized; 53,179,512 issued and outstanding 53,179
Additional paid-in capital 6,039,552
Deficit accumulated during the development stage (6,417,121)
----------------
(324,390)
----------------
$ 49
================
The accompanying notes are an integral part of these financial statements.
F-3
DELTA CAPITAL TECHNOLOGIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2000
and 1999, and for the Period
From March 4, 1998 (Date of Incorporation) to December 31, 2000
The accompanying notes are an integral part of these financial statements.
F-4
DELTA CAPITAL TECHNOLOGIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2000 and 1999, and for the Period
From March 4, 1998 (Date of Incorporation) to December 31, 2000
Deficit
The accompanying notes are an integral part of these financial statements.
F-5
DELTA CAPITAL TECHNOLOGIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000 and 1999, and for the Period
From March 4, 1998 (Date of Incorporation) to December 31, 2000
NOTES TO THE FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies
Delta Capital Technologies, Inc. ("the Company") was incorporated on March 4,
1998, in Delaware. The Company is currently in the development stage.
Write-Off of Investment
The Company acquired approximately 36% of the outstanding shares of common stock
of another company in exchange for 15,000,000 shares (5,000,000 shares before
the three-for-one split) of its own common stock in September 1999. The other
company owned the right to software which had been marketed by the Company under
a three-year marketing license agreement. The acquisition was a nonmonetary
transaction which was valued at $2,500,000 based on management's estimate of the
trading value of the Company's shares. This investment had been amortized
through July 1, 2000. The marketing license agreement was acquired for cash of
$33,785 and had been amortized through July 1, 2000.
In July 2000, the Company determined that the software product was not of
marketable quality and elected to discontinue its further support of the
development and licensing of the computer software. At that time, the Company
charged to operations all costs and unamortized balances of intangible assets
associated with the product and the related common shares were cancelled.
Acquisition of a Company
Effective January 1, 2000, the Company acquired 100% of the outstanding shares
of common stock of the Matridigm Corporation ("Matridigm"), a privately held
marketing and communications company located in Canada in a business combination
accounted for as a purchase. The results of Matridigm's operations have been
included in these financial statements since the date of acquisition. In
consideration, the Company issued 1,500,000 shares (500,000 shares before the
three-for-one split) of common stock, warrants which entitle the seller to
acquire 1,470,000 common shares of the Company's common stock valued at $.67 per
share, and $69,286 in cash. The cost of the acquisition totaled $1,069,286. In
connection with this acquisition, the Company recorded $1,012,376 of goodwill.
Matridigm was to assist in the marketing of the computer software discussed in
the preceding section. As of December 31, 2000, Matridigm is no longer
operating. Goodwill was amortized through July 1, 2000, at which time, the
unamortized balance was written off because management determined that this
intangible asset was impaired.
The following unaudited proforma consolidated results of operations for the year
ended December 31, 1999, is presented as if the acquisition of Matridigm had
been made at January 1, 1999:
Net sales $ 350,000
Net loss $ (1,035,000)
Basic and diluted loss per share $ (0.03)
F-7
Since the results of Matridigm's operations were consolidated with the Company
for 2000, no proforma information is presented in this Note. The proforma
consolidated results of operations include adjustments to give effect to
amortization of goodwill. Earnings per share is adjusted to give effect to
additional shares issued in the acquisition.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its subsidiary. Significant intercompany accounts and transactions have been
eliminated.
Revenue Recognition
Marketing services revenue is recognized as services are performed.
Stock-Based Compensation
The Company accounts for stock-based compensation using Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
compensation cost for stock options granted to employees is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee is required to pay for the stock.
The Company granted options to an officer in August 1998 to acquire 600,000
shares of common stock at $.0025 each. The options were to expire March 31,
2000, but were extended through March 31, 2001. No compensation expense was
recorded at the grant date. The proforma amounts required to be calculated by
Statement of Financial Accounting Standards No. 123 are not material to these
financial statements.
Warrants
At December 31, 2000, the Company had outstanding warrants to purchase 3,345,000
shares of the Company's common stock at prices ranging from $.33 to $.67 per
share. The warrants expire at various dates through December 2006.
Taxes on Income
The Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than enactments of
changes in the tax laws or rates.
F-8
Earnings Per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
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 47,718,666 and
31,347,942 for the years ended December 31, 2000 and 1999, respectively. The
weighted average number of shares for the period from March 4, 1998 (date of
incorporation) to December 31, 2000, was 33,622,941. Warrants and options were
not included in the computation of diluted earnings per share for all periods
presented because they were anti-dilutive.
Estimates
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Comprehensive Income
There are no reconciling items between the net loss presented in the Statements
of Operations and comprehensive loss as defined by Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income."
Segment Reporting
Management considers the Company to operate on only one business segment.
Accordingly, any disclosures required by SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," are already incorporated in
other financial statement disclosures.
New Accounting Standards
New accounting standards issued through the date of the independent auditors'
report do not have an effect on these financial statements.
Note 2. Income Taxes
The reconciliation of income tax computed at the federal statutory rate to
income tax expense is as follows:
F-9
The Company's net operating loss carryforwards will expire $3,711,000 in 2020,
$161,000 in 2019, and $39,000 in 2018.
Note 3. Notes Payable
The Company had two unsecured notes payable at December 31, 1999. A note for
$20,000 was due June 30, 2000, and remains unpaid at December 31, 2000, bearing
interest at 6%. A note paid in 2000, bore interest at 12%. The fair value of
these notes is equal to their carrying value because of their short durations.
Note 4. Related Party Transaction
During 2000, the Company paid a director $67,500 for consulting services. This
person resigned from the Board of Directors during the year.
Note 5. Supplemental Disclosures With Respect to Statements of Cash Flows
Significant noncash transactions in 2000 include:
The Company issued shares of common stock as payment of debt totaling $756,524.
The Company issued shares of common stock for $1,000,000 to
acquire the shares of another
company.
F-10
The Company issued 1,050,000 shares of common stock in exchange
for consulting services. The
shares were valued at the market price on the issuance date.
There were no significant noncash transactions in 1999.
Note 6. Going Concern
As shown in the financial statements, the Company incurred a net loss of
$5,725,368 in 2000, 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 $324,390. 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.
Note 7. Subsequent Event
On January 5, 2001, the Board of Directors approved an increase in the
authorized common stock from 25,000,000 shares to 75,000,000 shares and a
three-for-one split of the common stock. Par value of the common stock will
remain $.001 per share. The stock split was effective January 12, 2001.
The effect of the stock split has been recognized retroactively in the
shareholders' equity accounts on the balance sheet as of December 31, 2000, and
in all share and per share data in the accompanying consolidated financial
statements, and notes to the financial statements. Shareholders' equity accounts
have been restated to reflect the reclassification of an amount equal to the par
value of the increase in issued common shares from additional paid-in capital to
the common stock account.
F-11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements between the
Company and its accountants.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Position(s) and Office(s)
- ----------------------- ------- ----------------------------
Douglas P. Johnson 62 President and Director
Darwin C. B. Ross 40 Director
Martin Tutschek 39 Director
Judith Miller 60 Secretary and Director
Douglas P. Johnson, Age 62. Mr. Johnson has provided strategic sales and
marketing consulting services to the healthcare industry for the past 25 years,
and has extensive experience in managing professional sales forces and
negotiating national sales and distribution contracts with manufacturers. From
1994-1996, Mr. Johnson worked for Strategem Inc., of Overland Park, Kansas where
he created, trained and implemented a national contract sales force for Lever
Brothers, Beechnut and W.L. Gore. Most recently, Mr. Johnson was hired as VP
Sales for Newer Technology Inc., of Wichita, Kansas, a company that manufactures
processor upgrades for the apple computer community.
Darwyn C. B. Ross, Age 40. Mr. Ross is currently a practicing barrister and
solicitor in Manitoba where he is a partner at the law firm of Patterson Ross.
Mr. Ross has served as an officer and director of many publicly traded companies
and has been engaged in the real estate and oil and gas industries for a number
of years. As both principal and investor, Mr. Ross has been engaged in the
preliminary financings of a variety of business ventures and has participated in
multiple public financings.
Martin Tutschek, Age 39. Mr. Tutschek is a graduate from the University of
Texas, currently holds the position of the Manager, Business Development, US
operations for Trader.com. His primary role is the analysis and identification
of complimentary business opportunities and the development of the business and
marketing plan of Trader.com. Prior to being promoted to this position he was
the Director of Circulation North American Operations for Trader.com from 1994
to 1997.
Judith Miller, Age 60. Ms. Miller has been the president and a director of
J.A.M. Corporate Consultants Inc. ("JAM") since March 1994. JAM, which is wholly
owned by Ms. Miller, is a private company incorporated pursuant to the laws of
British Columbia, that provides a variety of services including office
management and administration, meeting and special event planning, office
redesign/relocation, and fund raising. Ms. Miller is the sole employee of JAM
and accordingly is responsible for providing JAM's services.
10
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, the
Company is aware of eight persons who during the fiscal year ended December 31,
2000 were directors, officers, or beneficial owners of more than ten percent of
the common stock of the Company, and who failed to file, on a timely basis,
reports required by Section 16(a) of the Securities Exchange Act of 1934 during
such transitional year as follows:
Mr. Douglas P. Johnson - Mr. Johnson was appointed to the board of directors of
the Company in October, 2000. Mr. Johnson failed to file a Form 3 in a timely
manner. Mr. Johnson further failed to timely file a Form 5 for the year ended
December 31, 2000.
Mr. Darwyn C. B. Ross - Mr. Ross was appointed to the board of directors of the
Company in October, 2000. Mr. Ross failed to file a Form 3 in a timely manner.
Mr. Ross further failed to timely file a Form 5 for the year ended December 31,
2000.
Mr. Martin Tutschek - Mr. Tutschek was appointed to the board of directors of
the Company in October, 2000. Mr. Tutschek failed to file a Form 3 in a timely
manner. Mr. Tutschek further failed to timely file a Form 5 for the year ended
December 31, 2000.
Ms. Judith Miller - Ms. Miller was a member of the board of directors during all
of 2000. Ms. Miller failed to file a Form 3 in a timely manner. Ms. Miller
further failed to timely file a Form 5 for the year ended December 31, 2000.
Mr. Mike Steele, Mr. Paul F. Davis, Mr. Kevin K. Wong, and Mr. Michael E. Horsey
all served as members of the board of directors and as officers of the Company
until September of 2000. Mr. Steele, Mr. Davis, Mr. Wong, and Mr. Horsey failed
to file Form 3 in a timely manner, and further failed to timely file Form 5 for
the year ended December 31, 2000.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
No compensation was awarded to, earned by, or paid to any executive officer of
the Company during the period covered by this report.
Compensation of Directors
The Company's directors are not currently compensated.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information concerning the
ownership of the Company's common stock as of April 11, 2001, with respect to:
(i) each person known to the Company to be the beneficial owner of more than
five percent of the Company's common stock; (ii)
11
all directors; and (iii) directors and executive officers of the Company as a
group. The notes accompanying the information in the table below are necessary
for a complete understanding of the figures provided below. As of April 11,
2001, there were 55,034,827 shares of common stock issued and outstanding.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Judith Miller, a director and officer of Delta Capital, entered into a verbal
agreement with Delta Capital on August 26, 1998 pursuant to which Ms. Miller
received a stock option to purchase 50,000 shares of Delta Capital exercisable
at US$0.03 per share for a period of one year. In March, 1999 Delta Capital
completed a forward stock split of 4 to 1 which increased the options granted to
200,000 shares at an exercise price of US$0.0075 per share. On August 11, 1999
the board of directors of Delta Capital extended the expiration date of the
12
stock options to December 31, 1999 and on September 15, 1999 the verbal stock
option agreement was reduced to writing. On December 30, 1999, the board of
directors of Delta Capital approved a resolution to extend the expiration date
of the stock options to March 31, 2000 and the extension was reduced to writing
pursuant to a letter dated January 7, 2000. By consent resolution dated March
16, 2000 the stock option expiration date was extended again to March 31, 2001.
ITEM 13. 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 beginning on page 15 of this
Form 10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K. Reports on Form 8-K The following reports on Form
8-K were filed by the Company during the last quarter of the year
covered by this report:
1. On October 17, 2000, the Company reported that Mike Steele, Paul F.
Davis, Kevin K. Wong, and Michael E. Horsey had resigned as officers
and directors of the Company. Darwyn Ross, Douglas P. Johnson, and
Martin Tutschek were appointed as new Directors joining Ms. Judith
Miller as members of the Company's Board of Directors. See Form 8-K
filed October 17, 2000, and by reference incorporated herein.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
13
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 16th day of April 2001.
Delta Capital Technologies, Inc.
/s/ Douglas P. Johnson
------------------------------------
Douglas P. Johnson, President and Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
/s/ Douglas P. Johnson President and Director April 16, 2001
- ----------------------------
Douglas P. Johnson
/s/ Judith Miller Secretary and Director April 16, 2001
- -----------------------------
Judith Miller
/s/ Darwyn Ross Director April 16, 2001
- ----------------------------
Darwyn Ross
/s/ Martin Tutschek Director April 16, 2001
- ----------------------------
Martin Tutschek
14
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) * License Agreement between Delta Capital and 827109 Alberta
Ltd. dated June 1, 1999. (Incorporated by reference from
Form 10SB filed with the SEC on January 5, 2000.)
10(ii) * License Agreement between SiCom Solutions Inc. and 827109
Alberta Ltd. dated June 1, 1999. (Incorporated by reference
from Form 10SB filed with the SEC on January 5, 2000.)
10(ii) * Letter from 827109 Alberta Ltd. to Delta Capital
Technologies Inc. dated September 2, 1999 acknowledging
receipt of the $20,000 payment and granting a three month
extension of the $30,000 payment to November 1,
1999.(Incorporated by reference from Form 10SB filed with
the SEC on January 5, 2000.)
10(iii) * Letter from SiCom Solutions Inc. to 827109 Alberta Ltd.
dated September 2, 1999 acknowledging receipt of the $20,000
payment and granting a three month extension of the $30,000
payment to November 1, 1999. (Incorporated by reference from
Form 10SB filed with the SEC on January 5, 2000.)
10(iv) * Share Exchange Agreement between Delta Capital and 827109
Alberta Ltd. dated June 1, 1999.(Incorporated by reference
from Form 10SB filed with the SEC on January 5, 2000.)
10(v) * Stock Option Agreement between Delta Capital and Judith
Miller, Corporate Secretary and Director of Delta Capital
dated September 15, 1999.(Incorporated by reference from
Form 10SB filed with the SEC on January 5, 2000.)
10(vi) * Letter from Delta Capital to Judith Miller dated January 7,
2000.1999.(Incorporated by reference from Form 10SB filed
with the SEC on January 11, 2000.)
10(vii) * Non-Distribution Agreement between Delta Capital and Rajesh
Taneja dated July 28, 1999.(Incorporated by reference from
Form 10SB filed with the SEC on January 11, 2000.)
10(viii) * Letter from Rajesh Taneja dated December 3, 1999 regarding
acquisition of corporate names by Delta Capital.
(Incorporated by reference from Form 10SB filed with the SEC
on January 14, 2000.)
10(ix) * Letter of Intent between Delta Capital and The Matridigm
Corporation dated January 19, 2000. (Incorporated by
reference from Form 10KSB filed with the SEC on March 30,
2000.)
10(x) * Amended to the Letter of Intent between Delta Capital and
The Matridigm Corporation dated January 30, 2000.
(Incorporated by reference from Form 10KSB filed with the
SEC on March 30, 2000.)
10(xi) * Exchange Agreement, executed April 14, 2000, among Delta
Capital Technologies Inc., a Delaware corporation, The
Matridigm Corporation, a Canadian corporation, Michael
Steele, Cecilia Lanz, Diana
15
Steele, Andre Lanz and Robert Sweetman. (Incorporated by
reference from Form 10QSB filed with the SEC on May 22,
2000.)
10(xii) * Debt Settlement Agreement by and between Delta Capital
Technologies, Inc., a Delaware corporation and Bonanza Mgmt
Ltd., a British Columbia company. (Incorporated by reference
from Form 10QSB filed with the SEC on May 22, 2000.)
10(xiii) * Services Agreement between Delta Capital Technologies, Inc.,
a Delaware corporation, and Bonanza Mgmt Ltd., a British
Colombia company, dated January 1, 2000. (Incorporated by
reference from Form 10QSB filed with the SEC on August 14,
2000.)
10(xiv) * Lease Agreement between Delta Capital Technologies, Inc. and
O&Y Properties Inc. dated July 19, 2000. (Incorporated by
reference from Form 10QSB filed with the SEC on August 14,
2000.)
10(xv) * Fund Raising Letter Agreement between Delta Capital
Technologies, Inc. and Reovest Financial, Inc. dated May 3,
2000. (Incorporated by reference from Form 10QSB filed with
the SEC on August 14, 2000.)
10(xvi) * Assignment of Lease between Alberni Investments (1988) Inc.,
Flanagan Enterprises Inc. and Delta Capital Technologies,
Inc. dated June 30, 2000 together with the Head Lease
between Alberni Investments (1988) Inc. and Flanagan
Enterprises Inc. dated December 12, 1996. (Incorporated by
reference from Form 10QSB filed with the SEC on August 14,
2000.)
10(xvii) * Investtor Relations Agreement between Delta Capital
Technologies Inc. and Joseph Lynch dated August 1, 2000.
(Incorporated by reference from Form 10QSB filed with the
SEC on November 20, 2000.)
10(xviii) * Consulting Agreement between Delta Capital Technologies Inc.
and National Financial Communications Corp. dated September
1, 2000.(Incorporated by reference from Form 10QSB filed
with the SEC on November 20, 2000.)
10(xix) * Investor Relations Agreement between Delta Capital
Technologies Inc. and Vision Publishing Inc. dated September
26, 2000. (Incorporated by reference from Form 10QSB filed
with the SEC on November 20, 2000.)
10(xx) 17 Consulting contract between Delta Capital Technologies, Inc.
and Greystone Mercantile Bancorp, Ltd. dated November 11,
2000.
23 25 Consent of Accountant.
* Incorporated by reference from previous filings as noted.
16
Exhibit 10(xx)
CONSULTING AGREEMENT
THIS AGREEMENT made and entered into this 9th day of November 2000.
BETWEEN:
DELTA CAPITAL TECHNOLOGIES, INC., A Delaware company having
an office located at Suite B201, 1331 Homer Street,Vancouver, British
Columbia V6B 5M5
(hereinafter referred to as "Delta" or the "Company")
OF THE FIRST PART
AND:
GREYSTONE MERCANTILE BANCORP LTD., an Alberta corporation
having it registered and records office located at 2800, 801 -
6th Avenue S.W., Calgary, Alberta T2P 4A3
(hereinafter referred to as "Greystone" or the "Consultant")
OF THE SECOND PART
WHEREAS:
1. The Company is desirous of expanding its current busines
operations and raising expansion and development
capital for the purpose of marketing its services and acquiring
additional business operations or entering into strategic business
alliances or joint venture arrangements;
2. The Consultant has represented to the Company that it ha
business associations and contacts and the necessary
expertise to introduce the Company to potential strategic business
partners; and represents that it has expertise with engineering (and
funding) financial structures relating to the acquisition of business
operations, strategic business alliances; business combinations;
mergers and acquisitions; and joint venture opportunities.
17
3. The Consultant has represented to the Company that the
consultant has or has access to financial resources to
assist the Company in raising expansion capital;
4. Company, in reliance on Consultant's representations, is
willing to engage Consultant as an independent
contractor, and not as an employee, on the terms and conditions set
forth herein;
NOW THEREFORE THIS AGREEMENT WITNESSETH, that in consideration of the mutual
covenants and premises contained herein and of the obligations herein made and
undertaken, the parties, intending to be legally bound, covenant and agree as
follows:
1 SCOPE OF SERVICES
1.1 Greystone represents that it has expertise with
engineering (and funding) financial structures relating to the
acquisition of business operations; strategic business alliances;
business combinations; mergers and acquisitions; and joint venture
opportunities. Consultant also represents Consultant has expertise in
the referral of Prospective Clients to Company for a designated
referral fee, and will provide other services to the Company under a
separate Consulting Agreement, and will provide additional services for
an additional fee, relating to each Prospective Client, as applicable,
under separate agreements for specified services and fees.
1.2 Consultant shall render such services and deliver the
required reports, contracts, agreements and supporting
documentation concerning the aforementioned services for each
assignment or project, ("Deliverables") in accordance with the
assignments, timetable and milestones set forth and marked, in any
signed agreement between both parties. In the event Consultant
anticipates at any time that it will not reach one or more milestone or
complete one or more projects or assignments within the prescribed
timetable, Consultant shall immediately inform the other party by
written notice, submit proposed revisions to the timetable and
milestones that reflect best estimates of what can realistically be
achieved, and continue to work under the original timetable and
milestones until otherwise agreed between Company and Consultant.
Consultant shall prepare and submit reports of performance and progress
on each project, as Company may reasonably request from Consultant from
time to time.
1.3 Company shall provide and make available to Consultant
the information and resources required to close
transactions called for by this Agreement. In any event that the
Consultant lacks sufficient resources to perform said services called
by this Agreement, Company & Consultant shall negotiate an arrangement
to provide Consultant the necessary resources to complete said
services. For billing purposes, these resources shall be referred to in
this agreement as "company paid consulting expenses". The term
"transaction(s)" refers to one or more transactions approved by the
Company according to the Company's written policies provided to the
Consultant and signed by both parties.
1.4 Company shall, within five business days of receipt of
each Deliverable submitted to the Company, advise
Consultant of the acceptance or rejection of such Deliverable. Any
rejection shall specify the nature and scope of the deficiencies in
such Deliverable. Consultant shall, upon receipt of such a notice of
rejection act diligently to correct such deficiencies. The failure of
the Company to provide such a notice of rejection within such period
shall constitute acceptance by Company of the Deliverable.
1.5 Consultant's work shall generally be performed at
Consultant's office. The work shall be performed in a
workmanlike and professional manner by the Consultant or employees of
Consultant having a level of skill in the area commensurate with the
requirements of the scope of work to be performed. Consultant shall
make sure it, and its employees, at all times observe all laws, and all
Company rules, policies and regulations, including but not limited to
trade secrets, security and safety.
18
1.6 Consultant warrants that if Consultant performs
Consulting work at Company's facilities, that Consultant will
restrict such work to work performed on behalf of the Company as
contemplated herein. This includes but is not limited to use of the
telephone, fax machine, copier, computer systems, bookkeeper and
secretarial services.
1.7 Consultant agrees to negotiate in good faith with Compan
concerning claims to fees, points & commissions,
and to resolve all issues relating to the payment of fees, commissions
or points to third parties, in connection with any mergers,
acquisitions, joint ventures or financings negotiated on behalf of the
Company. In any case where payment of fees, points and commissions has
not been otherwise provided for, the parties agree to negotiate in good
faith to establish the fees & commissions payable to the Consultant.
1.8 The parties agree that the services of the Consultant's
executive, management and staff employees may be
essential to the satisfactory performance of the scope of work called
for in this Agreement. The parties further agree that if such
individual(s) leaves the employ of the Consultant during the term of
this Agreement for any reason, or is unavailable to continue full-time
work called for herein, and if substitute individual(s) acceptable are
not available to continue the work within five business days of the
unavailable party, the Company shall have the right to recommend a
replacement employee to Consultant, and request the termination of said
employee for non-performance. For the purposes of Section 2.2, the
discontinuance of work by any such key employee, and a failure of the
Consultant to hire a recommended and/or suitable qualified employee
within thirty days receipt by the Consultant of a written complaint, is
a breach of the terms of this Agreement.
1.9 Either party shall have the right, at any time, to
request the removal of any employee(s) acting as liaison
between the parties, if said employee is considered unsatisfactory as
representing either Company or Consultant to third parties. Upon such
request, the party so requested, shall use all reasonable efforts to
promptly replace such employee(s) with a substitute employee(s) having
appropriate skills and training.
1.10 Anything herein to the contrary notwithstanding, the
parties hereby acknowledge and agree that Company shall
have no right to control the manner, means, or method by which
Consultant performs the services called for by this Agreement, as long
as the Consultant complies with the Company's written policies provided
to the Consultant and signed by both parties. Rather, Company shall be
entitled only to direct Consultant with respect to the elements of the
service to be performed by Consultant and the results to be derived, to
inform Consultant as to where and when such services are performed,
within reason, providing said instruction provides no conflict of
interest, or violates any Provincial or Federal securities regulation,
and to review and assess the performance of such services by Consultant
for the limited purposes of assuring that such service has been
performed and confirming that such results are satisfactory.
2 TERM OF AGREEMENT
2.1 This Agreement shall commence on the date and year first
above written, and unless modified by mutual
agreement, shall continue until terminated by mutual agreement. This
Agreement shall automatically renew each consecutive year, if not
otherwise in default, for a period of ten (10) years from the date that
both parties sign this Agreement.
2.2 This Agreement may be terminated by either party upon
five business days' prior written notice, if the other
party breaches any term hereof and the breaching party fails to cure
such breach within the five business day period; or any mutually
agreeable period provided in writing and signed by both parties,
provided that,
19
notwithstanding the foregoing the cure period for any failure of
Company to pay fees and charges due hereunder shall be thirty days from
the date of receipt by Company of any notice of breach relating
thereto.
2.3 Upon termination of this Agreement for any reason,
Consultant shall promptly return to Company any and all
materials provided and Company shall promptly return to Consultant, all
copies of any data, records, or materials of whatever nature or kind,
including all materials incorporating the proprietary information of
Company or Consultant, respectively. Consultant shall also furnish to
Company all work in progress or portions thereof, including all
incomplete work.
2.4 Within fourteen days of termination of this Agreement fo
any reason, Consultant shall submit to Company an
itemized invoice for any fees or expenses theretofore accrued under
this Agreement and upon payment by Company of the accrued amounts so
invoiced Company shall thereafter have no further liability or
obligation to Consultant whatsoever for any further fees, expenses, or
other payment.
3 FEES, EXPENSES & PAYMENTS
3.1 In consideration of the services to be performed by
Consultant the company shall pay to Consultant consulting fees in
accordance with the following schedule:
a) upon execution of this Agreement, a retainer in
the amount of USD$50,000;
b)fees as may be negotiated for the successful
conclusion of individual project introductions; agreements;
financings or other deliverables; and
c) the Company shall also reimburse Consultant for
all ordinary and necessary expenses incurred in
connection with the performance of his services hereunder,
provided that timely notice of such expenses is sent to and
approved by an appropriate officer or other authorized
representative of the Company.
3.2 In consideration of the services to be performed by
Consultant, Company shall, within ten days of receipt of
funding dollars, and Consultant's acceptance of each of the
Deliverables, pay or otherwise instruct the Escrow Agent (if
applicable) to pay Consultant the fees established for each Project
contemplated hereby and incorporated herein by referenced with respect
to each such Deliverable, less Company paid consulting expenses.
4 RIGHTS IN DATA & NON-COMPETITION CLAUSE
4.1 As between Company and Consultant, except as set forth
below in this Section 4, all rights, title, and interest in
and to proprietary Company information, related data, or materials
utilized or produced by Company in the performance of the services
called for in this Agreement shall remain the property of Company. All
rights, title, and interest in and to Client lists, materials and data
produced solely by Consultant in the performance of the services called
for in this Agreement shall remain the property of Consultant.
4.2 Company shall hold all rights, title, and interest in an
to all Deliverables, including all rights in copyright that
may subsist herein and all Deliverables shall be considered works made
for hire. Consultant shall mark all Deliverables with Company's
copyright or other propriety notice as directed by Company and shall
take all actions deemed necessary by Company to protect Company's
rights therein.
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4.3 Consultant and Company agree not use the other parties
Deliverables, per Section 4 of this agreement, and
Proprietary Information, per Section 5 of this agreement, to compete
with each other for a period of not less than ten years.
4.4 In the event that the Deliverables shall be deemed not t
constitute works made for hire, or in the event that
Consultant should otherwise, by operation of law, be deemed to retain
any rights to any Deliverables, Consultant does hereby assign all
rights, title and interest in and to such Deliverables to Company.
Consultant agrees to execute any documents of assignment or
registration of copyright requested by Company respecting any and all
Deliverables.
4.5 All rights, title and interest in and to any programs,
systems, data and materials furnished to Consultant by Company are and
shall remain the property of Company.
5 PROPRIETARY INFORMATION
5.1 Consultant acknowledges that in order to perform the
services called for in this Agreement, it shall be
necessary for Company to disclose to Consultant certain Trade Secret(s)
Company has developed that at great expense and that have required
considerable effort of skilled professionals. Consultant further
acknowledges that the Deliverables will of necessity incorporate such
Trade Secrets. Consultant agrees that it shall not disclose, transfer,
use, copy, or allow access to any such Trade Secrets to any employees
or to any third parties, excepting those who have a need to know such
Trade Secrets consistent with the requirements, of this Agreement and
who have undertaken an obligation of confidentiality and limitation of
use. In no event shall Consultant disclose any such Trade Secrets to
any competitors of Company.
5.2 As used herein, the term "Trade Secret(s)", shall mean
any financial, scientific or technical data, information,
design process, procedure, formula, or improvement that is commercially
valuable to Company and not generally known in the industry. The
obligations set forth in Section 5.1 as they pertain to Trade Secret(s)
shall survive this Agreement and continue for so long as the material
remains a Trade Secret(s).
6 PUBLICITY AND USE OF MARKS
6.1 Consultant shall not at any time use Company's name or
any Company trademark(s) or trade name(s) in any advertising or
publicity without written consent of Company.
7 INDEMNIFICATION
7.1 Consultant hereby indemnifies and agrees to hold harmles
Company from and against any and all claims,
demands, and actions and any liabilities, damages, or expenses
resulting therefrom, including court costs and reasonable attorney
fees, arising out of or relating to the services performed by
Consultant hereunder or the warranties made by Consultant pursuant to
this agreement. Consultant's obligations under this Section shall
survive the termination of this Agreement for any reason. Company
agrees to give Consultant prompt notice of any such claim, demand, or
action and shall, to the extent Company is not adversely affected,
cooperate fully with Consultant in the defense and settlement thereof.
8 NON-DISCLOSURE AND NON-CIRCUMVENTION AGREEMENT:
8.1 Definition: "SIGNATORY" - Any one of the signer(s);
separately or individually; of this agreement; and the
signer's corporation(s), sole proprietorship(s), partnership(s),
divisions, subsidiaries, agents, consultants,
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business associates, executive officers, principals, professional
affiliations, board of director members and/or family members with an
intimate knowledge and control, directly or indirectly, of the
signatory's business, whom may or will assist the signer, directly or
indirectly, in the signer's daily or periodic business activities.
8.2 Definition: "ASSOCIATE" - A person's (legal definition)
corporation(s), sole proprietorship(s), partnership(s),
divisions, subsidiaries, agents, consultants, business associates,
executive officers, principals, professional affiliations, board of
director members and/or family members with an intimate knowledge and
control, directly or indirectly, of the person's business. The
"associate" is not a "signatory" but must be associated, in some manner
of form, with only one of the signatories in business. An "associate"
may also be called an "introduced entity", only if unknown to the other
signatory.
8.3 Definition: "INTRODUCED ENTITY" - Introduced banks,
lending institutions, trusts, escrow companies.
corporations, organizations, banking institutions, financial
institutions, brokers, broker/dealers, lenders, borrowers, buyers,
sellers associates, and/or individuals, introduced by one signatory to
the other signatory either individually, separately or by an associate,
whom was not otherwise conducting business with the introduced
signatory, prior to the time of introduction. An (independently
verifiable) invoice, contract, agreement or legal document must be
provided by fax, courier or telex, to the introducing signatory within
two (2) banking days of the introduction by the introduced signatory,
for this to be a valid exemption.
8.4 Definition: "IDENTITY" - Telephone numbers, addresses,
telex numbers, KTT information, fax numbers et al
of the introduced entity or introduced associate of the introduced
entity.
8.5 This is to confirm that each of the named signatories,
separately or individually, and their associates hereby
agree that they will not make any contact with or otherwise involve in
any transaction with any introduced entity without either permission of
the introducing signatory or other agreement signed by the signatories
allowing said contact. A merger agreement, trust agreement, consulting
agreement or escrow agreement ('documents"), executed prior to the
meeting of the signatories, and provided to all signatories at the time
of signature of this agreement, shall constitute said permission, if
the agreement provides general procedures on how a business transaction
is to be conducted between the signatories and how the signatories are
to receive compensation. Any other signed agreement between the
signatories providing a general procedural outline and compensation
arrangements for the signatories for any business activity shall
satisfy the terms and conditions of this agreement. If a signatory
circumvents the other signatories, and receives securities, tangible or
intangible assets, tax benefits, profit, income, commissions or fees
("assets"), as a result of that circumvention, that signatory is liable
for full payment and/or release of those particular assets, to the
signatories representing the other party(ies), upon receipt of the
assets by a Trustee, the signatory or an associate.
8.6 This agreement is effective on the signatories' heirs,
assignees, and designees. The signatories hereby confirm
that the identities of the introduced entity are currently the property
of the introducing signatories and shall remain so for the duration of
the agreement. The signatories hereby agree to keep completely
confidential the names of any introduced entity. Such identity shall
remain confidential during the duration of this agreement, and during
the duration of the transaction. Each signatory agrees to discuss this
information among the signatories to determine as to what information
is to be disclosed and what procedure will be used for the disclosure.
9 LIMITATION OF LIABILITY
9.1 Except as provided in Section 8 hereof, in no event shal
either party be liable to the other for any
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consequential damages or lost profits of the other party.
10 MISCELLANEOUS
10.1 Either party shall not assign, transfer, or subcontract
this Agreement or any of its obligations hereunder without
the prior written consent of the other party; provided, however, that
Consultant may assign its right to receive payments hereunder to such
third parties as Consultant may designate upon advance written notice
to Company of not less than five business days prior to payment.
10.2 This Agreement shall be governed and construed in all
respects in accordance with the substantive laws of the
Province of British Columbia.
10.3 The parties are and shall be independent contractors to
one another, and nothing herein shall be deemed to
cause this Agreement to create an agency, partnership, or joint venture
between the parties Except as expressly provided in this Agreement,
Company shall not be liable for any debts, accounts obligations, or
other liabilities whatsoever of Consultant, including (without
limitation) Consultants obligation to withhold Social Security and
income taxes for itself or any of its employees.
10.4 Consultant shall, upon mutual agreement and upon written
request, at its sole expense, obtain and carry In full
force and effect, during the term of this Agreement, insurance coverage
of the types and in the amounts required to protect the Consultant and
the Company's interests.
10.5 All remedies available to either party for one or more
breaches by the other party are and shall be deemed
cumulative and may be exercised separately or concurrently without
waiver of any other remedies. The failure of either parts to act on a
breach of this Agreement by the other shall not be deemed a waive of
such breach of future breaches, unless such waiver shall be in writing
and signed by the party against whom enforcement is sought.
10.6 All notices required or permitted hereunder shall be in
writing addressed to the respective parties as set forth
herein, unless another address shall have been designated, and shall be
delivered by hand or by registered or certified mail, postage prepaid.
10.7 This Agreement constitutes the entire agreement of the
parties, hereto and supercedes all prior representations,
proposals, discussions, and communications, whether oral or in writing.
This Agreement may be modified only in writing and shall be enforceable
in accordance with its terms when signed by the party sought to be
bound.
IN WITNESS WHEREOF, the Company and the Consultant have caused this Agreement to
be executed by their duly authorized representatives as of the day first above
written.
THE CORPORATE SEAL of GREYSTONE )
MERCANTILE BANCORP LTD. was hereunto
affixed in the presence of: )
/s/ Authorized signature
- ---------------------------------------
C/S
Authorized Signatory )
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THE CORPORATE SEAL of )
DELTA CAPITAL TECHNOLOGIES, INC. )
was hereunto affixed in )
the presence of: )
/s/ Authorized signature
- ---------------------------------------
C/S
Authorized Signatory )
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(Letterhead of Perterson Sullivan PLLC)
601 Union Street Suite 2300
Seattle, WA 98101
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use of our auditors' report dated April 4, 2001, on the
Delta Capital Technologies, Inc. financial statements as of December 31, 2000,
and for the periods then ended, included in the Delta Capital Technologies, Inc.
Form 10-KSB for the year ended December 31, 2000.
Peterson Sullivan PLLC
April 4, 2001
Seattle, Washington
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