10QSB: Optional form for quarterly and transition reports of small business issuers
Published on May 22, 2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended: March 31, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number: 000-27407
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DELTA CAPITAL TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in charter)
Suite 255, 999 - 8th Street, SW, Calgary, Alberta T2R 1J5 Canada
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(Address of principal executive offices)
(403) 244-7300
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
The number of shares of the Registrant's common stock par value $0.001
per share (the "Common Stock"), outstanding as of May 22, 2000 was 14,588,500
shares.
Transitional Small Business Disclosure Format (check one): Yes No x
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DELTA CAPITAL TECHNOLOGIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
(Unaudited)
The accompanying notes are an integral part of these financial statements.
2
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999 and
the Period from March 4, 1998 (Inception) to March 31, 2000
(Unaudited)
The accompanying notes are an integral part of these financial statements.
3
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period From March 4, 1998 (Inception) to March 31, 2000
(Unaudited)
The accompanying notes are an integral part of these financial statements.
4
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOW
For the Three Months Ended March 31, 2000 and 1999 and
the Period from March 4, 1998 (Inception) to March 31, 2000
(Unaudited)
The accompanying notes are an integral part of these financial statements.
5
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2000
(Unaudited)
Note 1. Basis of Presentation
The interim period consolidated financial statements contained herein include
the accounts of Delta Capital Technologies, Inc. and it's subsidiary (the
"Company").
The interim period consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. The interim period consolidated financial statements
should be read together with the audited consolidated financial statements and
accompanying notes included in the Company's latest annual report on Form 10-KSB
for the fiscal year ended December 31, 1999. In the opinion of the Company, the
unaudited consolidated financial statements contained herein contain all
adjustments necessary to present a fair statement of the results of the interim
periods presented.
Note 2. Summary of Significant Accounting Policies
Acquisition 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 in Calgary, Alberta. This acquisition has
been accounted for under the purchase method. In consideration, the Company
issued 500,000 shares of its own common stock, warrants which entitle the seller
to acquire 490,000 common shares of the Company at $2.00 per share, and $69,286.
The cost of the acquisition totaled $1,069,286. Due to this acquisition, the
Company has recorded $1,012,376 of goodwill, which is being amortized over 31
months, its estimated useful life.
From January 1, 2000 forward, the Company's consolidated statement of operations
includes the revenue and expenses of Matridigm. Combining Matridigm's operating
results for the three months ended March 31, 1999 with those of the Company
results in the following pro forma data:
Revenue $ 193,411
Expenses 209,522
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Net Loss $ (16,111)
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Loss per Share $ (0.00)
=========
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Earnings Per Share
Basic earnings per share is computed by dividing income (loss) for the period by
the weighted average number of common shares outstanding during a period.
Diluted earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive common
shares. The weighted average number of shares was 14,300,967 and 8,800,000 for
the three months ended March 31, 2000 and March 31, 1999, respectively. The
weighted average number of shares was 9,352,620 for the period from March 4,
1998 to March 31, 2000.
Capitalized Development Costs
The Company's product reached the stage of technological feasibility as defined
by Statements of Financial Accounting Standards ("SFAS") 86 on January 1, 2000.
Accordingly, all product development costs prior to that date have been charged
to expense and all product development costs subsequent to that date have been
included in capitalized development costs.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This Quarterly Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," and other similar expressions or variations of
such words are intended to identify these forward-looking statements.
Additionally, statements concerning future matters such as the development of
new products, enhancements or technologies, possible changes in legislation and
other statements regarding matters that are not historical fact are
forward-looking statements. Forward-looking statements involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, availability of financial resources
adequate for short-, medium- and long-term needs, demand for our products and
services and market acceptance, as well as those factors discussed in this "ITEM
2. Management's Discussion and Analysis or Plan of Operations" and else where in
this Report.
Delta Capital continues to be an early stage company. On June 1,
1999, Delta Capital acquired the exclusive worldwide license to the
relBUILDER(TM) Enterprise Suite of intelligent e-Commerce and e-Business
software from 827109 Alberta Ltd. (AltaCo), an Alberta, Canada-based private
company. Under the agreement, Delta Capital agreed to pay AltaCo fifteen percent
(15%) royalty payments in the minimum amount of US$33,785 in the first year,
US$135,000 in the second year and US$200,000 in the third year. The agreement
may be renewed beyond the initial three-year term for a nominal amount. The
software may be sub-licensed under terms of the agreement.
In the first quarter of 2000, Delta Capital moved aggressively to
plan the market entry of the recently acquired relBUILDER(TM) technologies. A
major step toward this goal was taken when Delta Capital entered into
negotiations to acquire The Matridigm Corporation, an Alberta, Canada-based
strategic marketing and communications company with special high-tech expertise.
Subsequent to the end of the quarter ended March 31, 2000, on April 19, 2000,
the acquisition was completed. Management believes the acquisition of The
Matridigm Corporation and its key managers - and the strong marketing base they
provide Delta Capital - are critical to Delta Capital's successful penetration
of both United States and international markets. Financial results of The
Matridigm Corporation first quarter have been incorporated into Delta Capital's
financial statements that form a part of this report in order to present Delta
Capital's current financial condition in a comprehensive manner.
a) Delta Capital forecasts modest revenues in 2000 and anticipates
continuing losses from operations as it introduces its relBUILDER(TM) software
and services offering into the marketplace. Delta Capital will need additional
working capital to be successful in its planned activities and continuation of
Delta Capital as a going concern is dependent upon obtaining the necessary
working capital. Management is mindful that equity markets have experienced
significant uncertainty in the first quarter of 2000, however, management has
developed a strategy that it believes will accomplish the objective of obtaining
further funding. Delta Capital anticipates that it will raise additional funds
prior to year-end in the amount of a minimum of US$3.0 million through a
combination of equity financing, participation in software/hardware industry
companies' vendor financing programs and debt financing. However, no assurance
can be given that Delta Capital will successfully consummate such financings or
that such financings will be consummated on terms favorable to Delta Capital.
Furthermore, Delta Capital believes it has adequate funds to meet its cash needs
until no earlier than the fourth quarter 2000.
b) Delta Capital plans to continue its efforts to increase
distribution and sales channels for its
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relBUILDER(TM) software; negotiate partnership arrangements in key markets and
gain strategic partners. Delta Capital's management believes that virtually all
businesses in future will have e-Commerce/e-Business requirements and that the
nature and conduct of business in general is fundamentally changing to
accommodate Internet technology. Delta Capital plans to have sales and support
facilities in two Canadian cities (Calgary and Toronto) and at least four major
metropolitan areas in the United States, and a United Kingdom presence by
year-end.
c) Delta Capital's relBUILDER(TM) software is proprietary and Delta
Capital continues to sponsor development of relBUILDER(TM). To that end, Delta
Capital unveiled v2.0 of relBUILDER(TM) at IBM's premiere business partner
conference, Partner World 2000, in San Diego, CA, in late January. Delta
Capital's management will focus future development based on an extensive
research program designed to test various attributes of the software in terms of
ease of use, brand awareness and other attributes of significance to success in
a competitive marketplace.
d) Delta Capital currently purchases from AtlaCo (now named Delta
Enterprise Technologies (Canada) Inc.), services at fair market rates to ensure
the above-referenced continued development of the software as well as provision
of support services. Management continues to review this relationship to
determine that Delta Capital Technologies, Inc. is gaining maximum benefit from
the arrangement as compared to undertaking these functions to its own account.
e) Delta Capital management did not make any material plant or
equipment purchases during the period under review. However, Delta Capital is
actively seeking to secure additional office space and equipment in Calgary
where it anticipates that its employee head count will rise significantly over
the next two quarters.
f) Delta Capital management anticipates that it will add
approximately 40 full time equivalent employees (FTE) before year end, in
addition to the current 45 FTEs at Delta Capital, The Matridigm Corporation and
Delta Enterprise Technologies (Canada) Inc., the majority of which will be in
sales and customer service capacities.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Delta Capital is not a party to any material pending legal
proceedings other than ordinary routine litigation incidental to the business of
Delta Capital which Delta Capital does not believe is material.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In March, 2000, Delta Capital completed two private placements,
pursuant to which Delta Capital received an aggregate investment of $519,000 in
exchange for 288,500 shares of common stock of Delta Capital, par value $0.001
per share (the "Common Stock") which investors purchased at a purchase price of
approximately $2.00 per share. Delta Capital intends to use the net proceeds of
the private placement for working capital, capital equipment and general
corporate purposes. The shares were exempt under Regulation S as promulgated by
the Securities and Exchange Commission, under the Securities Act of 1933, as
amended ("1933 Act), and the appropriate restrictive legend was placed on the
share certificates issued. Each purchaser represented to Delta Capital that it
was not a U.S. person as define under Regulation S and that the securities were
acquired for investment only, for its own account, and not with a view towards
distribution. The purchaser further represented that at the time the order
originated and through its execution and delivery, it remained outside the
United States.
On April 18, 2000, Delta Capital closed the purchase of all the
issued and outstanding common stock of The Matridigm Corporation, a private
Canadian corporation ("Matridigm") from Michael Steele, Cecilia Lanz, Diana
Steele, Andre Lanz and Robert Sweetman, representing all of the stockholders of
Matridigm. The exchange agreement provided for Delta Capital to receive all of
the issued and outstanding shares of Matridigm in exchange for a cash payment of
Cdn$100,000, 500,000 shares of Common Stock, and 490,000 warrants, each warrant
exercisable to purchase one share of Common Stock at US$2.00 per share.
In each case set forth in this Item 2, the securities were issued
pursuant to exemption from the registration requirements of the 1933 Act under
Section 4(2) and Rule 506 of Regulation D.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 18, 2000, at the annual meeting of stockholders of Delta
Capital, the following persons were unanimously elected as directors of Delta
Capital for a term of one year or until a successor has been elected and
qualified: Paul Davis, Michael Horsey, Kevin Wong, Judith Miller and Michael
Steele. In addition, Peterson Sullivan P.L.L.C. was unanimously elected as Delta
Capital's accountants for the next two years.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1(1) Articles of Incorporation dated March 4, 1998 together
with Amended Articles of Incorporation dated April 23,
1998
3.2(2) By-Laws of Delta Capital Technologies, Inc., a Delaware
corporation, dated April 23, 1998
4.1(3) Stock Option Agreement between Delta Capital Technologies,
Inc., a Delaware corporation, and Judith Miller, Corporate
Secretary and Director of Delta Capital dated September
15, 1999
4.2(4) Letter from Delta Capital Technologies, Inc., a Delaware
corporation, to Judith Miller dated January 7, 2000
4.3 Form of Offshore Securities Subscription Agreement to
purchase 200,000 shares of common stock of Delta Capital
Technologies, Inc., a Delaware corporation, issued to
Winward Overseas Limited, dated March 16, 2000
4.4 Schedule of Subscribers that purchased subscriptions
pursuant to the Form of Offshore Securities Subscription
Agreement set forth in 4.3 above
4.5 Placement Agent Letter Agreement by and between Delta
Capital Technologies, Inc., a Delaware corporation, and
Traction Capital, dated March 1, 2000
10.1(5) License Agreement between Delta Capital Technologies,
Inc., a Delaware corporation, and 827109 Alberta Ltd.
dated June 1, 1999
10.2(6) License Agreement between SiCom Solutions Inc. and 827109
Alberta Ltd. dated June 1, 1999
10.3(7) Letter from 827109 Alberta Ltd. to Delta Capital
Technologies, Inc., a Delaware corporation, 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
10.4(8) 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
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(1) Incorporated by reference to Exhibit 3(I) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(2) Incorporated by reference to Exhibit 3(II) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(3) Incorporated by reference to Exhibit 99(B) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(4) Incorporated by reference to Exhibit 99(C) of the Company's Form 10SB, filed
with the SEC on January 11, 2000.
(5) Incorporated by reference to Exhibit 10(A) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(6) Incorporated by reference to Exhibit 10(B) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(7) Incorporated by reference to Exhibit 10(C) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
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10.5(9) Share Exchange Agreement between Delta Capital
Technologies, Inc., a Delaware corporation, and 827109
Alberta Ltd. dated June 1, 1999
10.9(10) Letter from Rajesh Taneja dated December 3, 1999 regarding
acquisition of corporate names by Delta Capital
Technologies, Inc., a Delaware corporation
10.10(11) 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 Steele, Andre Lanz and Robert
Sweetman
10.11 Form of Employment Agreement
10.12 Schedule of directors and employees of Delta Capital
Technologies, Inc., a Delaware corporation, who executed
employment agreements the form of which is set forth in
Exhibit 10.11
10.13 Debt Settlement Agreement by and between Delta Capital
Technologies, Inc., a Delaware corporation and Bonanza
Mgmt Ltd., a British Columbia company
27.1 Financial Data Schedule
(b) A report was filed on Form 8-K on May 3, 2000, reporting the acquisition
of all the issued and outstanding shares of capital stock of The Matridigm
Corporation.
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(8) Incorporated by reference to Exhibit 10(D) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(9) Incorporated by reference to Exhibit 99(A) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(10) Incorporated by reference to Exhibit 99(E) of the Company's Form 10SB,
filed with the SEC on January 14, 2000.
(11) Incorporated by reference to Exhibit 2.1 of the Company's Form 8-K, filed
with the SEC on May 3, 2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DELTA CAPITAL TECHNOLOGIES, INC.
Date: May 22, 2000 By: /s/ Michael Horsey
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Name: Michael Horsey
Title: Chairman
Date: May 22, 2000 By: /s/ Judith Miller
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Name: Judith Miller
Title: Corporate Secretary
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
3.1(1) Articles of Incorporation dated March 4, 1998 together
with Amended Articles of Incorporation dated April 23,
1998
3.2(2) By-Laws of Delta Capital Technologies, Inc. dated April
23, 1998
4.1(3) Stock Option Agreement between Delta Capital Technologies,
Inc. and Judith Miller, Corporate Secretary and Director
of Delta Capital dated September 15, 1999
4.2(4) Letter from Delta Capital Technologies, Inc. to Judith
Miller dated January 7, 2000
4.3 Form of Offshore Securities Subscription Agreement to
purchase 200,000 shares of common stock of Delta Capital
Technologies, Inc., a Delaware corporation, issued to
Winward Overseas Limited, dated March 16, 2000
4.4 Schedule of Subscribers that purchased subscriptions
pursuant to the Form of Offshore Securities Subscription
Agreement set forth in 4.3 above
4.5 Placement Agent Letter Agreement by and between Delta
Capital Technologies, Inc., a Delaware corporation, and
Traction Capital, dated March 1, 2000
10.1(5) License Agreement between Delta Capital Technologies, Inc.
and 827109 Alberta Ltd. dated June 1, 1999
10.2(6) License Agreement between SiCom Solutions Inc. and 827109
Alberta Ltd. dated June 1, 1999
10.3(7) 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
10.4(8) 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
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(1) Incorporated by reference to Exhibit 3(I) of the Company's Form 10SB, filed
with the SEC on January 5, 2000.
(2) Incorporated by reference to Exhibit 3(II) of the Company's Form 10SB,
filed with the SEC on January 5, 2000.
(3) Incorporated by reference to Exhibit 99(B) of the Company's Form 10SB,
filed with the SEC on January 5, 2000.
(4) Incorporated by reference to Exhibit 99(C) of the Company's Form 10SB,
filed with the SEC on January 11, 2000.
(5) Incorporated by reference to Exhibit 10(A) of the Company's Form 10SB,
filed with the SEC on January 5, 2000.
(6) Incorporated by reference to Exhibit 10(B) of the Company's Form 10SB,
filed with the SEC on January 5, 2000.
(7) Incorporated by reference to Exhibit 10(C) of the Company's Form 10SB,
filed with the SEC on January 5, 2000.
(8) Incorporated by reference to Exhibit 10(D) of the Company's Form 10SB,
filed with the SEC on January 5, 2000.
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10.5(9) Share Exchange Agreement between Delta Capital
Technologies, Inc. and 827109 Alberta Ltd. dated June 1,
1999
10.9(10) Letter from Rajesh Taneja dated December 3, 1999 regarding
acquisition of corporate names by Delta Capital
Technologies, Inc.
10.10(11) 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 Steele, Andre Lanz and Robert
Sweetman
10.11 Form of Employment Agreement
10.12 Schedule of directors and employees of Delta Capital
Technologies, Inc., a Delaware corporation, who executed
employment agreements the form of which is set forth in
Exhibit 10.11
10.13 Debt Settlement Agreement by and between Delta Capital
Technologies, Inc., a Delaware corporation and Bonanza
Mgmt Ltd., a British Columbia company
27.1 Financial Data Schedule
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(9) Incorporated by reference to Exhibit 99(A) of the Company's Form 10SB,
filed with the SEC on January 5, 2000.
(10) Incorporated by reference to Exhibit 99(E) of the Company's Form 10SB,
filed with the SEC on January 14, 2000.
(11) Incorporated by reference to Exhibit 2.1 of the Company's Form 8-K, filed
with the SEC on May 3, 2000.
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