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 12, 2002
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, 2001
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from to
Commission file number: 000-27407
---------
Delta Capital Technologies, Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 98-0187705
- ---------- ----------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
5550 14B Avenue, #205, Delta, B.C., Canada V4M 2G6
-- ---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(604) 943-6422
(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 if 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, 2001,
were $27,530
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
$46,654, based on the average closing bid and asked prices for the common stock
on April 8, 2001.
At April 8, 2002, the number of shares outstanding of the registrant's common
stock, $0.001 par value (the only class of voting stock), was 1,635,896.
1
TABLE OF CONTENTS
PART I
Item 1. Description of Business..........................................1
Item 2. Description of Property of.......................................7
Item 3. Legal Proceedings7
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........9
Item 7. Financial Statements............................................10
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.............................11
PART III
Item 9. Directors and Executive Officers................................11
Item 10. Executive Compensation..........................................12
Item 11. Security Ownership of Certain Beneficial Owners and Management..12
Item 12. Certain Relationships and Related Transactions..................13
Item 13. Exhibits, List and Reports on Form 8-K..........................13
Signatures......................................................14
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
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, the Company's focus was directed towards assessing various potential
acquisition targets in the Internet and related fields. On June 1, 1999 the
Company entered into the software development business. The Company discontinued
the development of its software on October 27, 2000. On May 4, 2001, the Company
acquired control of UMDN, Inc. a marketing company that enrolls members of large
affinity groups, unions and/or associations within a networking service in order
to leverage their buying power to elicit proprietary discounts from both local
and national businesses. The Company terminated its relationship with UMDN on
November 1, 2001 by unwinding the terms of a stock purchase and sale agreement.
The Company was a shell company without operations whose purpose was to acquire
operations through an acquisition or merger for the remainder of the period.
On March 12, 2002, the Company's wholly owned subsidiary, Homelands Security,
Inc. ("Homelands") acquired all the issued and outstanding shares of InterGlobe
Investigation Services, Inc. ("InterGlobe") in exchange for nine hundred and
fifty thousand (950,000) shares of Homelands. The Company intends to expand the
operations of InterGlobe. Further, the Company intends to pursue other start-up
companies with proven operations through merger or acquisition.
History
On June 1, 1999, the Company 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 the Company 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. On April 19, 2000 the Company acquired The
Matridigm Corporation, an Alberta, Canada-based strategic marketing and
communications company with special high-tech expertise. Management believed
that the acquisition of The Matridigm Corporation and its marketing expertise
were critical to the Company's attempts to successfully penetrate both United
States and international markets. On October 27, 2000, due to problems that
arose from implementing the Company's planned operations, the decision was made
to discontinue the development and licensing of the relBUILDER (TM) software
that had been licensed to Delta Enterprise Technologies (Canada) Ltd. of
Calgary, Alberta ("Delta E"). Further, to the discontinuation, the Company
agreed with Delta E to cancel their five million (5,000,000) shares (15,000,000
post 3:1 forward split) share exchange.
On February 26, 2001, the Company entered into a Stock Exchange Agreement with
the shareholders of Au-Online. Com., Inc., an online retailer of jewelry. The
terms of the agreement were never consummated and the parties subsequently
agreed to a mutual termination of obligations.
1
On May 4, 2001, the Company entered into a Stock Purchase and Sale Agreement
with the shareholders of UMDN, Inc., a Delaware corporation ("UMDN") whereby the
Company acquired all of the issued and outstanding common shares of UMDN or
3,500,000 shares and the right to exercise 200,000 options to purchase
additional common shares, in exchange for 1,000,000 shares of the Company's
common stock. The shareholders of UMDN retained 1,050,000 shares of preferred
class A shares each of which was convertible into ten (10) shares of common
stock upon the occurrence of certain events.
UMDN is a marketing company that enrolls members of large affinity groups,
unions and/or associations within a networking service in order to leverage
their buying power to elicit proprietary discounts from both local and national
businesses. The network is created through local discount networks, national
providers and strategic partners. The local network is where members of affinity
groups, unions, and/or associations receive substantial savings on products or
services in a branded environment, on a contractual basis, such as for cellular
service or insurance. UDMN's primary revenue was from the business sector
through charging flats fees for membership. UMDN hoped to generate secondary
revenue from permitting strategic partners access to its captive consumer groups
on an exclusive basis. UMDN's strategic partners paid UMDN a percentage of all
revenue derived from accessing its network. The Company intended to do business
by providing networking services for small to medium sized businesses through
UMDN.
On November 1, 2001, the Company terminated its relationship with UMDN. The
Company and UMDN executed an agreement that allowed both companies to
independently develop and complete their respective corporate objectives. As
part of that agreement, the Company and UMDN unwound the Stock Purchase and Sale
Agreement.
Current Business
On March 12, 2002, the Company's wholly owned subsidiary, Homelands acquired all
the issued and outstanding shares of InterGlobe in exchange for nine hundred and
fifty thousand (950,000) shares of Homelands.
InterGlobe, a British Columbia company, was incorporated in 1995 as a Vancouver
based investigation and security consulting company licensed by the Attorney
General in the province of British Columbia. InterGlobe provides investigation
services to corporations and individuals that include security consulting, loss
prevention, forensic computing, VIP and executive safety, criminal harassment
(stalking crimes) protection, investigating international crime, due diligence,
homicides, abductions, missing persons, canine bomb detection, narcotics,
security and other protection services. InterGlobe owns its own investigative
equipment and can transport its services overnight to remote locations.
InterGlobe has a strong customer service organization that focus' on client
results and has earned a reputation through client satisfaction and media
profiling.
The Company intends on expanding the InterGlobe business in response to the
recent growth in security consulting, loss prevention, forensic computing,
dealing with criminal harassment, canine training and general investigations.
Governmental Regulation
The Company cannot predict at this time the government regulation, if any, to
which the Company may be subject due to its acquisition of InterGlobe. The use
of assets and/or conduct of businesses that the Company may involve could
subject it to public health and safety, land use, trade, or other governmental
regulations and state or local taxation. The Company is in the process of
2
ascertaining, to the extent of the limited resources of the Company, the effects
of possible government regulation on InterGlobe's business. In certain
circumstances, however, such as changing security concerns, it may not be
possible to predict with any degree of accuracy the impact of government
regulation on our business.
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 expanding InterGlobe's
business.
Employees
The Company is currently a holding company with no employees. Executive
officers, who are not compensated for 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. The Company's
subsidiary has one employee.
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 5550 14B Avenue, #205, Delta, B.C., Canada V4M 2G6. The Company currently
pays no rent for use of Ms. Miller's space. The Company's subsidiary,
InterGlobe, occupies 168 square feet for which it pays $1,000(Can) a month on a
month-to-month tenancy.
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) on October 31, 2000.
Daniel Turner has filed a claim 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.
JTE Management, Inc. vs. Delta Capital Technologies, Inc. filed in the Court of
Queen's Bench of Alberta, Judicial District of Calgary (Canada), case no.
0101-06733. JTE Management filed suit asking for $147,542 for services and
expenses it claims are owed by the Company. On August 8, 2001, the court entered
judgment against the Company and in favor of JTE Management, Inc. in the sum of
$171,814.41(Can) plus costs of $2,442.80(Can).
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 Company, by shareholder action in lieu of a meeting as permitted
under Delaware law, consent was given to a resolution of the board of directors
of the Company that 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."
3
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, "DCTN." 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 years ended December 31, 2000 and
2001 and the first quarter of 2002 are as follows:
----------------- ---------------- -----------------
Quarter ended High Low
----------------- ---------------- -----------------
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* $0.125 $0.0156
----------------- ---------------- -----------------
6/30/01 $0.05 $0.01
----------------- ---------------- -----------------
9/30/01 $0.05 $0.01
----------------- ---------------- -----------------
12/31/00 $0.01 $0.00
----------------- ---------------- -----------------
3/31/02** $0.62 $0.13
----------------- ---------------- -----------------
* Adjusted to reflect 3:1 forward stock split effective on January 12, 2001.
** Adjusted to reflect 1:100 reverse stock split effective on January 4, 2002.
Shareholders
As of April 8, 2001, there were 83 shareholders of record holding a total of
1,635,896 shares of common stock.
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 October 4, 2001, the Company issued 1,835,000 pre-reverse
split shares of common stock, for services rendered to the Company, at $0.011
per share, to the persons and entities listed below, all of whom are citizens
4
and residents of Canada, pursuant to Regulation "S" (Rules 901-905) adopted
pursuant to the Securities Act of 1933.
Name Number of Shares
David Jones 500,000
Jack Huber 100,000
Melissa Connors 500,000
Terry Butchart 235,000
Trilliant Ventures 500,000
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," and other similar expressions or variations of such words are
intended to identify these forward-looking statements. Additionally, statements
concerning future matters such as the development of new products, enhancements
or technologies, possible changes in legislation and other statements regarding
matters that are not historical fact are forward-looking statements.
Forward-looking statements involve risks and uncertainties. Actual results could
differ materially from those projected in the forward-looking statements.
Factors that could cause of contribute to such differences include, but are not
limited to, availability of financial resources adequate for short-, medium- and
long-term needs, demand for our products and services and market acceptance, as
well as those factors discussed in this "ITEM 6, Management's Discussion and
Analysis or Plan of Operations" and elsewhere in this report.
Plan of Operations
The Company's plan of operation for the coming year, as discussed above, is to
expand the business of its wholly owned subsidiary, Homelands. The Company
believes it has sufficient cash to satisfy its cash requirements for the fiscal
year 2002 from its current assets.
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 new employees.
Results of Operations
The Company recorded $27,530 in revenues for the fiscal year ended December 31,
2001 and $565,378 for the year ended December 31, 2000. The Company had minimal
operations in the year ended December 31, 2001 as a result of its brief
ownership of Union Members Discount Network, LTD ("UMDN"), which was acquired on
May 4, 2001 and was disposed of to its original owners on November 1, 2001.
5
Losses
Net loss for the year ended December 31, 2001 was $679,793 compared to a net
loss of $5,725,368 in the year ended December 31, 2000. The $5,045,575 decrease
in net loss was attributable to the Company having ceased operations prior to
the end of the year 2000, and having only operated UMDN for part of the year
2001.
The Company expects that it may continue to incur losses until such time as it
acquires profitable operations.
Expenses
General and administrative expenses for the year ended December 31, 2001, were
$693,312 compared to $961,209 for the year ended December 31, 2000. The decrease
in general and administrative expenses was the result of downsizing of the
Company's operations.
Depreciation and amortization expense for the year ended December 31, 2001 were
$0 compared to $631,753 for the year ended December 31, 2000.
Impact of Inflation
The Company believes that inflation may have a negligible effect on future
operations. The Company believes that it may be able to offset inflationary
increases in the cost of sales by increasing sales and improving operating
efficiencies.
Liquidity and Capital Resources
Cash used by operations was $133,384 for the year ended December 31, 2001, and
cash provided by operations was $223,344 for the year ended December 31, 2000.
Cash flows used in financing activities was $133,787 for the year ended December
31, 2001 and $2,032,905 for the year ended December 31, 2000.
Cash flows used in investing activities was $0 for the year ended December 31,
2001 compared to a use of $2,256,551 for the year ended December 31, 2000.
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 of $680,000 will expire in 2021, 3,711,000 in 2020, $161,000
in 2019, and $39,000 in 2018.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal years ended December 31, 2001
and 2000 are attached hereto as pages 9 through 21
6
DELTA CAPITAL TECHNOLOGIES, INC.
FINANCIAL REPORT
DECEMBER 31, 2001
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, 2001, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years ended December 31, 2001 and
2000, and for the period from March 4, 1998 (date of incorporation) to December
31, 2001. 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, 2001, and the consolidated results of their operations and their cash flows
for the years ended December 31, 2001 and 2000, and for the period from March 4,
1998 (date of incorporation) to December 31, 2001, 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 7 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
March 15, 2002
Seattle, Washington
F-2
DELTA CAPITAL TECHNOLOGIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
December 31, 2001
ASSETS
Current Assets
Cash
$ 452
Deposits 3,268
----------------
$ 3,720
================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 290,183
Note payable, due on demand 20,000
Advances 111,513
Advances from shareholders 20,774
----------------
Total current liabilities 442,470
Shareholders' Equity (Deficit)
Common stock, $.001 par value, 25,000,000 shares
uthorized; 722,257 issued and outstanding
a 722
Additional paid-in capital 6,657,442
Deficit accumulated during the development stage (7,096,914)
----------------
(438,750)
----------------
$ 3,720
================
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 INCOME For
the Years Ended December 31, 2001 and 2000, and for the Period
From March 4, 1998 (Date of Incorporation) to December 31, 2001
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, 2001 and 2000, and for the Period
From March 4, 1998 (Date of Incorporation) to December 31, 2001
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, 2001 and
2000, and for the Period
From March 4, 1998 (Date of Incorporation) to December 31, 2001
No cash payments for interest or income taxes have been made.
The accompanying notes are an integral part of these financial statements.
F-6
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. The Company is currently in the development stage.
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 were recognized as services were 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.
In a prior year, the Company granted options to an officer 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. The options were exercised in
March of 2001. The proforma amounts required to be calculated by Statement of
Financial Accounting Standard No. 123 are not material to these financial
statements.
Warrants
At December 31, 2001, the Company had outstanding warrants to purchase 18,750
shares of the Company's common stock at prices ranging from $33.33 to $66.67 per
share. The warrants expire at various dates through July 2002.
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-7
Note 1. (Continued)
Reverse Stock Split
During December 2001, the Board of Directors approved a one hundred-for-one
reverse stock split of the common stock. Par value of the common stock remained
$.001 per share. The effect of the stock split has been recognized 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 decrease in issued common shares from the common stock account to additional
paid-in capital.
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 615,672 and 477,187 for
the years ended December 31, 2001 and 2000, respectively. The weighted average
number of shares for the period from March 4, 1998 (date of incorporation) to
December 31, 2001, was 411,032. 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 accounting principles
generally accepted in the United States 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."
New Accounting Standards
New accounting standards issued through the date of the independent auditors'
report do not have an effect on these financial statements.
F-8
Note 2. Income Taxes
The reconciliation of income tax computed at the federal statutory rate to
income tax expense is as follows:
The Company's net operating loss carryforwards will expire $680,000 in 2021,
$3,711,000 in 2020, $161,000 in 2019, and $39,000 in 2018.
Note 3. Notes and Advances Payable
The Company had various notes and advances payable at December 31, 2001. The
note payable for $20,000, is due on demand and bears interest at 6%. The
advances from shareholders of $20,774 and other advances of $111,513 are due on
demand and bear interest at 12%. Management estimates that the fair value of all
of these notes and advances is approximately $6,000 based on the value of
similar financial instruments in the market.
F-9
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 2000.
Note 5. Supplemental Disclosures With Respect to Statements of Cash Flows
Significant noncash transactions in 2001 include:
o The Company issued shares of common stock as payment of debt totaling $53,766.
o The Company issued 1,000,000 (pre-reverse split) shares of its common stock
valued at fair market value at date of acquisition of $50,000 to acquire
another company. The Company reacquired these shares in exchange for the
acquired company's shares resulting in a nonmonetary loss of approximately
$50,000.
o The Company issued 168,908 shares of common stock in exchange for
consulting services. The shares were valued at market on the issuance
date.
Significant noncash transactions in 2000 include:
o The Company issued shares of common stock as payment of debt totaling
$756,524.
o The Company issued shares of common stock for $1,000,000 to acquire the
shares of another company.
o The Company issued 1,050,000 (pre-reverse split) shares of common stock in
exchange for consulting services. The shares were valued at the market
price on the issuance date.
Note 6. Acquisitions and Write-Offs of Investments
Effective May 4, 2001, the Company acquired 100% of the outstanding shares of
common stock of Union Members Discount Network, LTD ("UMDN"), a privately held
marketing and communications company located in Santa Monica, California. This
acquisition was accounted for under the purchase method. The results of UMDN's
operations have been included in these financial statements from the date of
acquisition through November 1, 2001. In consideration, the Company issued
1,000,000 (pre-reverse split) shares of its own common stock valued at their
fair market value at date of acquisition of $50,000. On November 1, 2001, UMDN
reacquired its shares from the Company in exchange for the shares originally
issued resulting in a loss of approximately $50,000.
F-10
Note 6. (Continued)
The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition.
2001
----------------
Current assets $ 61,654
Goodwill 202,879
----------------
Total assets acquired 264,533
Current liabilities 55,655
Long-term liabilities 158,878
----------------
Total liabilities assumed 214,533
----------------
Net assets acquired $ 50,000
================
Proforma information has not been presented as it is not a meaningful
representation of past results or indicative of future results due to the period
of time that the Company owned UMDN.
In a prior year, the Company acquired an interest in another company and its
related software product in exchange for common stock and cash. In 2000, the
Company acquired another company which was to assist in the marketing efforts of
the software product, as well as perform marketing services for others. This
company was also acquired for common stock and cash. In July 2000, the Company
determined that the acquired software product was not of marketable quality and,
as a result, that the operations of the marketing support company were no longer
necessary. The unamortized balances of the remaining intangible assets acquired,
which amounted to $4,666,391 at July 1, 2000, were written off.
Note 7. Going Concern
As shown in the financial statements, the Company incurred a net loss of
$679,793 in 2001. Further, the Company has net deficiency in capital of $438,750
and has virtually no working capital. These factors raise concerns about the
Company's ability to continue as a going concern.
The Company is seeking other acquisitions but it will need additional working
capital to be successful in any future business activities. Therefore,
continuation of the Company as a going concern is dependent upon engaging in
active business operations and obtaining additional working capital. Management
is presently engaged in seeking additional working capital equity funding and
plans to continue to invest in other businesses with funds obtained.
F-11
Note 7. (Continued)
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 the above objectives and is unable to operate for the coming year.
Note 8. Subsequent Event
On January 31, 2002, the Board of Directors authorized a private placement
issuance of 1,500,000 common shares of the Company at a price of $.10 per share.
In March 2002, the Company sold 603,000 shares for $55,300 of cash and $5,000 of
services rendered under this private placement.
In January 2002, the Company retired $103,618 of its debt in exchange for
1,036,180 shares of its common stock.
F-12
Independent Auditors' Consent
We hereby consent to the use of our auditors' report dated March 15, 2002, on
the Delta Capital Technologies, Inc. financial statements as of December 31,
2001, and for the periods then ended, included in the Delta Capital
Technologies, Inc. Form 10-KSB for the year ended December 31, 2001.
/s/ Peterson Sullivan PLLC
March 15, 2002
Seattle, Washington
F-13
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 20, 2000, Peterson Sullivan PLLC resigned as the auditors of Delta
Capital. Subsequent to that date, Peterson Sullivan PLLC reached agreement with
the Company to be reinstated as the Company's auditors. This reinstatement was
effective as of November 3, 2000. The audit reports of Peterson Sullivan PLLC on
the Company's financial statements for the fiscal year ending December 31, 2000
did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles,
except such reports included an explanatory paragraph for a going concern
uncertainty. In connection with the audits of the fiscal year ending December
31, 2000 and the subsequent interim periods through June 30, 2001, and up to
October 20, 2001 the date of Peterson Sullivan PLLC's resignation, the Company
had no disagreements with Peterson Sullivan PLLC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements, if not resolved to their satisfaction, would
have caused Peterson Sullivan PLLC to make reference in connection with their
opinion to the subject matter of the disagreement. In addition, during that time
there were no reportable events (as defined in Item 304(a)(1)(iv) of Regulation
S-B). See Forms 8-K filed November 15, 2001 and December 5, 2001, and by
reference incorporated herein.
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)
Darwin C. B. Ross 40 President and Director
Martin Tutschek 41 Director
Judith Miller 62 Secretary and Director
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 41. 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 62. 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. Compliance with
Section 16(a) of the Exchange Act
7
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, the
Company is aware of four 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. 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,
2001.
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, 2001.
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, 2001.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
No compensation in excess of $100,000 was awarded to, earned by, or paid to any
executive officer of the Company during the years 2001, 2000 and 1999. The
following table provides summary information for each of the last three fiscal
years concerning cash and non-cash compensation paid or accrued by the Company
to or on behalf of the president.
Compensation of Directors
The Company's directors are not currently compensated.
8
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 8, 2002, 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) 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 8, 2002, there were 1,635,896 shares of common stock
issued and outstanding.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Judith Miller, a director and officer of the Company, entered into a verbal
agreement with The Company on August 26, 1998 pursuant to which Ms. Miller
received a stock option to purchase 50,000 shares of the Company's common stock,
exercisable at US$0.03 per share for a period of one year. In March, of 1999 the
Company 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 The Company extended the expiration date of
the 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 The Company 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.
On March 30, 2001, Ms. Miller exercised her option and purchased 400,000 shares
of the Company's stock for $1,500.00 ($0.0075 per share).
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.
9
(b) 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 November 15, 2001, and again on December 5, 2001, the Company reported
that on October 20,2000, Peterson Sullivan PLLC resigned as the auditors of
Delta Capital Technologies, Inc. ("the Company"). subsequent to that date,
Peterson Sullivan PLLC reached agreement with the Company to be reinstated
as the Company's auditors. This reinstatement was effective as of November
3, 2000. The audit reports of Peterson Sullivan PLLC on the Company's
financial statements for the fiscal year ending December 31, 2000 did not
contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting
principles, except such reports included an explanatory paragraph for a
going concern uncertainty. In connection with the audits of the fiscal year
ending December 31, 2000 and the subsequent interim periods through June
30, 2001, and up to October 20, 2001 the date of Peterson Sullivan PLLC's
resignation, the Company had no disagreements with Peterson Sullivan PLLC
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to their satisfaction, would have caused Peterson Sullivan PLLC to
make reference in connection with their opinion to the subject matter of
the disagreement. In addition, during that time there were no reportable
events (as defined in Item 304(a)(1)(iv) of Regulation S-B). See Forms 8-K
filed November 15, 2001 and December 5, 2001, and by reference incorporated
herein.
2. On October 5, 2001, the Company reported that Peterson Sullivan PLLC
resigned as the auditors of Delta Capital Technologies, Inc., effective
October 20, 2000. Subsequant to that date, Peterson Sullivan PLLC has
reached agreement with Delta Capital Technologies to be reinstated as the
auditors of Delta Capital Technologies, Inc. The reinstatement is effective
November 3, 2000. No Form 8-K was filed by Delta Capital Technologies Inc.
for either the resignation or the reinstatements of Peterson Sullivan PLLC
as the auditors for Delta Capital Technologies, Inc. See Form 8-K filed
October 5, 2001, and by reference incorporated herein.
10
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 12th day of April 2002.
Delta Capital Technologies, Inc.
/s/ Darwyn Ross
------------------------
Darwyn Ross, 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/ Darwyn Ross
- ---------------------
Darwyn Ross President and Director
/s/ Judith Miller
- ----------------------
Judith Miller Secretary and Director
/s/ Martin Tutschek
- --------------------------
Martin Tutschek Director
11
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.)
3(iv) 12 Amended Articles of Incorporation dated March 7, 2001 and filed
March 12, 2001.
10(i) * 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(ii) * Letter from Delta Capital to Judith Miller dated January 7, 2000
(Incorporated by reference from Form 10SB filed with the SEC on
January 11, 2000.)
10(iii) * Share Exchange Agreement dated February 26, 2001 between Delta
Capital Technologies, Inc. and Shareholders of Au-Online.Com,
Inc. (Incorporated by reference from Form 10QSB filed with the
SEC on May 21, 2001.)
10(iv) * Stock Purchase and Sale Agreement dated May 4, 2001 between Delta
Capital Technologies, Inc. and Shareholders of UMDN, Inc.
(Incorporated by reference from Form 10-QSB filed with the SEC on
May 21, 2001.)
10(iv) 13 Agreement rescinding Purchase and Sale Agreement of May 4, 2001,
dated October 31, 2001.
* Incorporated by reference from previous filings as noted.
12
STATE of DELAWARE
CERTIFICATE of AMENDMENT of
CERTIFICATE of INCORPORATION
of
DELTA CAPITAL TECHNOLOGIES, INC.
* First: That at a meeting of the Board of Directors of Delta Capital
Technologies, Inc., held December 13, 2000, resolutions were duly
adopted setting forth proposed amendments of the Certificate of
Incorporation of said corporation, declaring said amendment to be
advisable and resulting in the entry of Shareholder Consents to Action
without a Meeting by the holders of 50.22% of the issued and
outstanding shares of the corporation, said corporation thereby
approving the proposed actions. The resolution setting forth the
proposed amendment is as follows:
* Resolved, that the Certificate of Incorporation of the Corporation be
amended by changing the fourth paragraph, so that, as amended, the
fourth paragraph of the said Certificate of Incorporation shall be and
read as follows: "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."
* Second: The necessary number of shares as required by statute were
voted in favor of the amendment.
* Third: That the said amendment were duly adopted in accordance with the
provisions of Section 228 of the General Corporation Law of the State
of Delaware.
* Fourth: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
* IN WITNESS WHEREOF, said Delta Capital Technologies, Inc. has caused
this certificate to be signed by its Secretary this 7th day of
March, 2001
BY: /s/ Judy A. Miller
------------------------------------------
Judy A. Miller, Secretary and Director
13
Union Members Discount Network
Judith Miller, Director October 31, 2001
Delta Capital Technologies, Inc.
8201, 1331 Homer Street
Vancouver, B.C. V6B 5MS
Ladies and Gentlemen:
Reference is made to the Stock Purchase and Sale Agreement (the "Stock
Purchase Agreement"), dated as of May 4, 2001, by and among Delta Capital
Technologies, Inc., a Delaware corporation ("Delta"); UMDN, Inc., a Delaware
corporation ('UMDN"), and the Shareholders of UMDN (the "Shareholders").
On behalf of all of the Shareholders and pursuant to Section 7.3 of the
Stock Purchase Agreement, the undersigned do hereby exercise the option of the
Shareholders to purchase the 3,500,000 shares of the capital stock of UMDN
acquired by Delta at the closing under the Stock Purchase Agreement for
1,000,000 shares of the capital stock of Delta effective as of November 1, 2001.
By your acceptance hereof, you hereby waive any notice requirements
contained in the Stock Purchase Agreement and agree that the transactions
consummated in accordance with the Stock Purchase Agreement are hereby deemed
fully and completely rescinded, neither UNDN nor the Shareholders has any
further obligation or liability thereunder to Delta, Delta has no further
obligation or liability thereunder to UMDN or the Shareholders and the Stock
Purchase Agreement is null and void and of no further force or effect.
We shall deliver to you the certificates representing shares of the
capital stock of Delta as soon as we receive your executed copy of this letter.
Very truly yours,
/s/ Kent Keith
---------------------------
Kent Keith
/s/ Starla Keith
--------------------------
Starla Keith
Accepted and Agreed
Delta Capital Technologies, Inc.
14