10QSB 1 delta10qsb063005.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2005. [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to ______. Commission file number: 33-61892-FW EMERGING DELTA CORPORATION (Exact name of small business issuer as specified in its charter) DELAWARE 72-1235451 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 111 Congress Avenue, Fourth Floor, Austin, Texas 78701 (Address of principal executive offices) (Zip Code) (512) 391-4970 (Issuer's telephone number, including area code) Securities registered under Section 12(b) of the Act: None Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / / Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) YES / / NO /X/ The number of shares outstanding of the issuer's classes of Common Stock as of June 30, 2005: Common Stock, $1.00 Par Value - 43,600 shares EMERGING DELTA CORPORATION Index to Form 10-QSB Part I. FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Balance Sheets as of June 30, 2005 and March 31, 2005 2 Statements of Operations for the Three Months Ended June 30, 2005 and 2004 3 Statements of Cash Flows for the Three Months Ended June 30, 2005 and 2004 4 Notes to the Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 3. Controls and Procedures 8 Part II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits 9 Signatures 10
PART I. FINANCIAL INFORMATION Item 1. Financial Statements EMERGING DELTA CORPORATION BALANCE SHEETS ASSETS June 30, March 31, 2005 2005 --------- --------- (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 38,386 $ 52,593 --------- --------- Total current assets 38,386 52,593 --------- --------- OFFICE EQUIPMENT, cost 5,629 5,629 Less - Accumulated depreciation (3,752) (3,283) --------- --------- Office equipment, net 1,877 2,346 --------- --------- Total assets $ 40,263 $ 54,939 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 2,378 $ 7,452 --------- --------- STOCKHOLDERS' EQUITY: Preferred stock, $1.00 par value; 50,000 shares authorized; no shares subscribed, issued and outstanding -- -- Common stock, $1.00 par value; 200,000 shares authorized; 43,600 shares issued and outstanding 43,600 43,600 Additional paid-in capital 252,214 252,214 Accumulated earnings (deficit) (257,929) (248,327) --------- --------- Total stockholders' equity 37,885 47,487 --------- --------- Total liabilities and stockholders' equity $ 40,263 $ 54,939 ========= =========
The accompanying notes are an integral part of these financial statements. 2 EMERGING DELTA CORPORATION STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30 -------------------- 2005 2004 -------- -------- INTEREST INCOME $ 263 $ 139 COSTS AND EXPENSES (9,865) (33,165) -------- -------- LOSS BEFORE TAX PROVISION (9,602) (33,026) TAX PROVISION -- -- -------- -------- NET LOSS $ (9,602) $(33,026) ======== ======== BASIC AND DILUTED LOSS PER SHARE $ (0.22) $ (0.76) ======== ======== WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED SHARES OUTSTANDING 43,600 43,600 ======== ======== The accompanying notes are an integral part of these financial statements. 3 EMERGING DELTA CORPORATION STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended June 30 ---------------------- 2005 2004 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (9,602) $ (33,026) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 469 469 (Decrease) Increase in accounts payable (5,074) 5,864 Increase in prepaid expenses -- (9,577) --------- --------- CASH USED IN OPERATING ACTIVITIES (14,207) (36,270) --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (14,207) (36,270) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 52,593 161,659 --------- --------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 38,386 $ 125,389 ========= ========= The accompanying notes are an integral part of these financial statements. 4 EMERGING DELTA CORPORATION NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF ORGANIZATION --------------------------- The financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. The results of the operations for the interim periods are not necessarily indicative of the results to be expected for an entire year. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's audited financial statements included in the Company's Annual Report on Form 10-KSB for the year ended March 31, 2005. General Business and Nature of Operations ----------------------------------------- Emerging Delta Corporation (the "Company" or "Delta") was incorporated under the laws of the State of Delaware on February 10, 1993, for the purpose of seeking out business opportunities, including acquisitions, that the Board of Directors, in its discretion, believes to be good opportunities. Coincident with the formation of the Company, one similar company was formed, which is managed by the same officers and directors and is engaged in the same business. The Company will be heavily dependent on the skills, talents, and abilities of its management to successfully implement its business plan. Due to its currently limited funds, it is likely that the Company will not be able to compete with larger and more experienced entities for business opportunities which are less risky and are more attractive to such entities; business opportunities in which the Company ultimately participates will likely be highly risky and speculative. The Company's two directors who serve as Chief Executive Officer and Chief Financial Officer have agreed to discontinue their monthly fees effective May 1, 2005 to conserve the Company's remaining cash to be used to continue pursuing business opportunities. The current cash balance should be adequate to enable the Company to continue its operations for this fiscal year; however, if no business acquisition is consummated in this fiscal year, it is likely the Company will deplete its cash unless their is a cash infusion from some as yet unidentified source. During this fiscal year the directors will pursue other means of raising additional funding for subsequent years. On November 26, 2002 management control of the Company was changed in connection with a tender offer. New management continues operating the Company as a blind pool, as further described herein. The Company's proposed business is sometimes referred to as a "blind pool" because investors entrust their investment monies to the Company's management before they have a chance to analyze any ultimate use to which their money may be directed. Consequently, the Company's potential success is heavily dependent on the Company's management, which will have virtually unlimited discretion in searching for and entering into a business opportunity. Effective May 24, 2004, the Company and EZklick agreed to a Plan of Collaboration with the objective of acquiring ownership of several independent grocery wholesale distribution centers ("IWDCs"), commonly called "Cash and Carry's". Furthermore, the agreement sets forth the preliminary terms and conditions for a merger between the Company and EZklick. EZklick management has operational experience in the independent grocery distribution industry while the Company's management has experience in corporate finance and acquisition and consolidation. After much time and effort spent on this venture it was not successful and the agreement was terminated by mutual agreement of both parties effective October 26, 2004. Concurrently with the agreement with EZklick, the Company retained Altos Growth Corporation of Los Altos, California, as a consultant to research the IWDC industry, identify prospective candidates for acquisition, assist in 5 negotiating the terms and conditions of acquisitions and assist in securing debt and equity financing that is needed in the Company's acquisition efforts. This services agreement was terminated by mutual agreement of both parties effective March 4, 2005. The Company has gained knowledge of the Cash and Carry Industry and continues to pursue an acquisition in this industry. 2. SIGNIFICANT ACCOUNTING POLICIES ------------------------------- The financial statements as of June 30, 2005 and for the three months ended June 30, 2005 and 2004 are unaudited, but in the opinion of the management of the Company, contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position at June 30, 2005 the results of operations for the three months ended June 30, 2005 and 2004 and the cash flows for the three months ended June 30, 2005 and 2004. 3. RELATED PARTY TRANSACTIONS -------------------------- Officers and directors are compensated based on actual time and expenses devoted to the Company's business. During the three months ended June 30, 2005 and 2004 fees of $3,000 and $9,000 respectively were paid to the Company's Chief Executive Officer. During the respective periods ended June 30, 2005 and 2004, fees of $750 and $2,250 were paid to the Company's Chief Financial Officer. The Company's two directors who serve as Chief Executive Officer and Chief Financial Officer have agreed to discontinue their monthly fees effective May 1, 2005 to conserve the Company's remaining cash to be used to continue pursuing business opportunities. Effective May 24, 2004, the Company entered into a services agreement with Altos Growth Corporation ("AGC"), pursuant to which AGC agreed to provide advisory services to Delta in connection with the acquisition of several independent grocery wholesale distribution centers ("IWDCs"). AGC's services are to include finding IWDC acquisition candidates, negotiating their acquisition and arranging for financing of such acquisitions. AGC agreed to provide the services of Martin Nielson as a director and Executive Vice President for Corporate Development of Delta; for such services, Delta agreed to pay AGC $10,000 per month. Conditionally, upon achievement of financial milestones, AGC was to receive an additional $10,000 per month beginning on the seventh month of the Agreement. This services agreement was terminated by mutual agreement of both parties effective March 4, 2005. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You must read the following discussion of the plan of the operations and financial condition of the Company in conjunction with its financial statements, including the notes, included in this Form 10-QSB filing. The Company's historical results are not necessarily an indication of trends in operating results for any future period. Overview The Company was incorporated in 1993 for the purpose of seeking out business opportunities, including acquisitions, that the Board of Directors, in its discretion, believes to be good opportunities. The Company's proposed business is sometimes referred to as a "blind pool" because investors entrust their investment monies to the Company's management before they have a chance to analyze any ultimate use to which their money may be directed. Consequently, the Company's potential success is heavily dependent on the Company's management, which will have virtually unlimited discretion in searching for and entering into a business opportunity. The Company's current focus is on seeking out business opportunities. The Company has created a web site, found at www.cleanpublicshellco.com, to assist in finding business opportunities. The Company has begun the process of contacting potential referral sources with respect to potential acquisitions. Effective May 24, 2004, the Company determined to embark on a program of acquiring ownership of several independent grocery wholesale distribution centers, commonly called "Cash and Carry's", and entered into agreements with other businesses to assist in that program. See Description of Organization, above. 6 Results of Operations Three Month Period Ended June 30, 2005 compared to June 30, 2004 The Company has commenced no operations and has no activities other than seeking out potential business opportunities. The Company earned $263 in interest income during the three months ended June 30, 2005 compared to $139 in 2004. The increase in interest income in 2005 was due to higher interest rates. Costs and expenses for the three months ended June 30, 2005 and 2004 were $9,865 and $33,165, respectively. The Company's costs and expenses consist primarily of fees paid to the Company's management and third party consulting fees, legal and travel expenses related to pursuing potential business acquisitions. A summary of the costs and expenses for the three months ended June 30, 2005 and 2004 are as follows: 2005 2004 -------- -------- Consulting fees - management $ 3,750 $ 11,250 Consulting fees - third parties -- 10,000 Legal expense 363 3,083 Travel expense 3,136 6,317 Accounting and audit expense 710 1,249 Office expense 832 335 Transfer agent fees 450 450 Other expenses 624 481 -------- -------- Total costs and expenses $ 9,865 $ 33,165 -------- -------- The Company engages two directors to serve as Chief Executive Officer and as Chief Financial Officer at the rate of $3,000 and $750 per month respectively. During the three months ended June 30, 2005 and 2004 the total amounts paid the two directors were $3,750 and $11,250 respectively. In 2005 the two directors have agreed to discontinue their monthly fees effective May 1, 2005 to conserve the Company's remaining cash to be used to continue pursuing business opportunities. The consulting fees to third parties of $10,000 in 2004 were to Altos Growth Corporation for advisory services as discussed further below. The legal and travel expense in 2004 was primarily related to the potential acquisition of EZklick, Inc ("EZklick"). Effective May 24, 2004, the Company and EZklick agreed to a Plan of Collaboration with the objective of acquiring ownership of several independent grocery wholesale distribution centers ("IWDCs"), commonly called "Cash and Carry's". Furthermore, the agreement sets forth the preliminary terms and conditions for a merger between the Company and EZklick. After much time and effort spent on this venture it was not successful and the agreement was terminated by mutual agreement of both parties effective October 26, 2004. Concurrently with the agreement with EZklick, the Company retained Altos Growth Corporation of Los Altos, California, as a consultant to research the IWDC industry, identify prospective candidates for acquisition, assist in negotiating the terms and conditions of acquisitions and assist in securing debt and equity financing that is needed in the Company's acquisition efforts. This services agreement was terminated by mutual agreement of both parties effective March 4, 2005. The Company has gained knowledge of the Cash and Carry Industry and continues to pursue an acquisition in this industry. The Company has reviewed several other business opportunities in 2005 and 2004. The Company currently has ongoing negotiations with one potential business acquisition. There are no assurances that this acquisition will be successful. 7 The Company recognized net losses for the three months ended June 30, 2005 and 2004 of $9,602 and $33,026 respectively. The Company expects to incur additional losses, at least for the near term, until such time that a business opportunity is completed. The Company's cash position has been reduced by the past year's losses from $125,000 as of June 30, 2004 to $38,000 as of June 30, 2005. The Company's two directors who serve as Chief Executive Officer and Chief Financial Officer have agreed to discontinue their monthly fees effective May 1, 2005 to conserve the Company's remaining cash to be used to continue pursuing business opportunities. The current cash balance of $38,000 should be adequate to enable the Company to continue its operations for this fiscal year; however, if no business acquisition is consummated in this fiscal year, it is likely the Company will deplete its cash unless there is a cash infusion from some as yet unidentified source. During this fiscal year the directors will pursue other means of raising additional funding for subsequent years. The Company currently has no significant commitments to which it is contractually bound. IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS In connection with forward-looking statements contained in this Form 10-QSB and those that may be made in the future by or on behalf of the Company which are identified as forward-looking by such words as "believes," "intends" or words of a similar nature, the Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. The forward-looking statements contained in this Form 10-QSB were prepared by management and are qualified by, and subject to, significant business, economic, competitive, regulatory and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of the Company. Accordingly, there can be no assurance that the forward-looking statements contained in this Form 10-QSB will be realized or the actual results will not be significantly higher or lower. These forward-looking statements have not been audited by, examined by, compiled by or subjected to agreed-upon procedures by independent accountants, and no third-party has independently verified or reviewed such statements. Readers of this Form 10-QSB should consider these facts in evaluating the information contained herein. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in the forward-looking statements contained in this Form 10-QSB. The inclusion of the forward-looking statements contained in this Form 10-QSB should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this Form 10-QSB will be achieved. In light of the foregoing, readers of this Form 10-QSB are cautioned not to place undue reliance on the forward-looking statements contained herein. Item 3. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. Within 90 days prior to the filing of our Quarterly Report on Form 10-QSB, we carried out an evaluation, under the supervision and the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the design and operation of these disclosure controls and procedures pursuant to the Exchange Act Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be included in our periodic SEC filings. (b) Changes in internal controls. There were no significant changes in internal control over financial reporting during out most recent completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 8 PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS (a) Exhibits. The following exhibits of the Company are included herein. Certificate of Incorporation and Bylaws *3.1 Restated Certificate of Incorporation *3.2 Bylaws *3.3 Proposed Certificate of Amendment to the Restated Certificate of Incorporation 10. Material Contracts *10.1 1993 Stock Option Plan *10.2 Form of Stock Option Agreements 31 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ----------------------- *Filed in original registration statement on Form SB-2, File No. 33-61890-FW (the "Registration Statement") and incorporated by reference. (b) Reports on Form 8-K None 9 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 11, 2005. EMERGING DELTA CORPORATION By: /S/ ALLEN F. CAMPBELL ----------------------- Allen F. Campbell Chairman In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on August 11, 2005. By: /S/ ALLEN F. CAMPBELL Chairman of the Board and Director ------------------------------ Allen F. Campbell By: /S/ JERRY W. JARRELL Chief Financial Officer, Secretary ------------------------------ and Director Jerry W. Jarrell 10