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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 SEPTEMBER 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
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LIFESTREAM TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
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NEVADA 82-0487965
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 LINDEN STREET, SUITE 302, FT. COLLINS, COLORADO 80524
(Address of principal executive offices)
(970) 416-9966
(Issuer's telephone number, including area code)
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 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 [ _ ]
The number of shares outstanding of the registrant's common stock as of November
12, 1998 was 11,026,576.
Transitional Small Business Disclosure Format. Yes [ _ ] No [ X ]
<PAGE>
LIFESTREAM TECHNOLOGIES, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets as of September 30, 1998 and December 31, 1997 2
Statements of Loss for the nine month periods ended
September 30, 1998 and 1997, the three month periods ended
September 30, 1998 and 1997, and from the period from date
of inception (August 7, 1992) through September 30, 1998 4
Statements of Cash Flows for the nine month periods ended
September 30, 1998 and 1997, and from the period from date
of inception (August 7, 1992) through September 30, 1998 5
Notes to consolidated financial statements 6
Item 2. Plan of Operation 9
PART II. OTHER INFORMATION 15
Item 2. Changes in Securities and Use of Proceeds
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 16
Exhibit Index 17
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Lifestream Technologies, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
September 30, December 31,
1998 1997
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Unaudited
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 689,057 $ 6,160
Interest receivable, related parties 14,975 9,482
Inventory and supplies 68,637 30,802
Prepaid expenses 11,384 2,068
Related party receivable 11,330 -
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Total current assets 795,383 48,512
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Equipment and leasehold improvements, net 426,432 23,754
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Other assets:
Patent, net 1,530,243 1,623,762
Notes receivable, related parties 119,622 69,622
Officer advances 11,549 1,500
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Total other assets 1,661,414 1,694,884
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Total assets $ 2,883,229 $ 1,767,150
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</TABLE>
See companying notes to consolidated financial statements.
2
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<TABLE>
<CAPTION>
Lifestream Technologies, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
September 30, December 31,
1998 1997
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Unaudited
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 240,986 $ 216,918
Accrued compensation 4,686 -
Interest payable - 20,371
Related party payable - 12,435
Capitalized lease obligation, current 37,695 -
Notes payable, current 7,358 41,144
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Total current liabilities 290,725 290,868
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Capitalized lease obligation, less current maturities 130,182 -
Notes payable, less current maturities 19,007 -
Convertible debt - 100,000
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Total liabilities 439,914 390,868
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Commitments and Contingencies
Stockholders' equity:
Common stock 10,923 8,041
Additional paid-in capital 8,010,569 3,773,536
Unearned stock compensation (983,405) -
Deficit accumulated during the development stage (4,594,772) (2,405,295)
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Total stockholders' equity 2,443,315 1,376,282
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Total liabilities and stockholders' equity $ 2,883,229 $ 1,767,150
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</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
Lifestream Technologies, Inc.
(A Development Stage Company)
Consolidated Statements of Loss
Cumulative
Amounts from
Date of Inception
(August 7, 1992 )
through Nine Months Ended Three Months Ended
September 30, September 30, September 30,
------------------------------ -----------------------------
1998 1998 1997 1998 1997
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Unaudited Unaudited Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
Revenues $ - $ - $ - $ - $ -
Operating Expenses:
Depreciation and amortization 666,251 154,848 109,508 77,295 36,735
Professional services 1,357,595 458,272 88,787 209,063 10,450
Travel 314,384 103,224 29,701 47,781 15,087
Research and product development 412,681 196,120 60,467 18,486 35,780
Salaries and wages 919,086 711,336 75,000 457,883 25,000
Public relations 363,427 228,687 - 160,925 -
Other, general office 383,468 172,175 29,393 99,442 11,421
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Total operating expenses 4,416,892 2,024,662 392,856 1,070,875 134,473
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Loss from operations (4,416,892) (2,024,662) (392,856) (1,070,875) (134,473)
Other income (expense), net (177,881) (164,816) (6,750) 7,658 (2,560)
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Net loss $ (4,594,773) $ (2,189,478) $ (399,606) $ (1,063,217) $ (137,033)
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Net loss per share - basic and
diluted $ (0.24) $ (0.05) $ (0.10) $ (0.02)
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Weighted average number of
shares outstanding 9,222,000 7,597,570 10,848,000 7,749,238
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</TABLE>
See accompanying notes to consolidated financial statements.
4
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<TABLE>
<CAPTION>
Lifestream Technologies, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash
Date of
Inception
(August 7, 1992)
through Nine Months Ended
September 30, September 30,
-------------------------------
1998 1998 1997
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Unaudited Unaudited Unaudited
<S> <C> <C> <C>
Net cash used in operating activities $ (2,354,058) $ (1,506,494) $ (122,218)
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Cash flows from investing activities:
Capital expenditures (276,757) (232,359) (15,432)
Advances to related parties (129,671) (60,049) (11,971)
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Net cash used in investing activities (406,428) (292,408) (27,403)
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Cash flows from financing activities:
Proceeds from issuance of convertible debt 375,000 275,000 50,000
Proceeds from stock options exercised 109,210 46,780 -
Proceeds from sale of common stock 2,753,968 2,174,798 96,000
Net proceeds from (borrowings on)
notes payable 211,365 (14,779) -
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Net cash provided by financing activities 3,449,543 2,481,799 146,000
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Net increase (decrease) in cash and cash equivalents
689,057 682,897 (3,621)
Cash and cash equivalents, -
beginning of period 6,160 5,229
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Cash and cash equivalents, end of period $ 689,057 $ 689,057 $ 1,608
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Supplemental schedule of non-cash investing and
financing activities:
Issuance of common stock in exchange for:
Patent and distribution rights $ 2,116,865 $ - $ -
Reduction of note payable 185,000 - -
Reduction of accrued interest 25,575 17,304 -
Reduction of accounts payable 90,381 - -
Reduction of convertible debt 375,000 375,000 -
Leasehold improvements 50,000 50,000 -
Financing costs 156,250 156,250 -
Interest paid $ 28,019 $ 18,068 $ -
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</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Lifestream Technologies, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
A. Basis of In the opinion of management, the accompanying
Presentation unaudited consolidated balance sheets and related
interim consolidated statements of loss and cash
flows include all adjustments (consisting only of
normal recurring items) necessary for their fair
presentation in conformity with generally accepted
accounting principles. Preparing financial statements
requires management to make estimates and assumptions
that affect the reported amount of assets,
liabilities, revenue and expenses. Examples include
provisions for returns and bad debt and the length of
product life cycles and buildings' lives. Actual
results may differ from these estimates. Interim
results are not necessarily indicative of results for
a full year. The information included in this Form
10-QSB should be read in conjunction with
Management's Discussion and Analysis or Plan of
Operation and the financial statements and notes
thereto included in the Lifestream Technologies, Inc.
Form 10-KSB for the year ended December 31, 1997.
Certain 1997 balances have been reclassified to
conform to the 1998 presentation.
B. Development The Company has been in the development stage since
Stage its inception. The Company has no recurring source of
Operations and revenue and has incurred operating losses since
Going Concern inception. These factors raise substantial doubt
about the Company's ability to continue as a going
concern. The financial statements do not include any
adjustments that may be necessary if the Company is
unable to continue as a going concern. Management of
the Company has undertaken certain actions to address
these conditions. These actions include seeking new
sources of capital or funding to allow the Company to
commence production of its products. The Company
anticipates commencing operations in the fourth
quarter of 1998.
C. Completion of In May 1998 the Company completed an offering of
Private Placement 1,560,372 shares of the Company's common stock at a
Stock Offering per share price of $1.25. Net proceeds of $1,950,465
have been invested in high-grade government-backed
marketable securities, with maturity periods ranging
from 30 to 90 days, or have been used in operations.
6
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D. Capital Lease In June 1998, the Company leased manufacturing space
Obligation in Post Falls, ID for a term of 60 months. In
connection with the lease agreement, the lessor made
certain facility improvements. The total facility
improvements were paid for in part by the issuance of
40,000 shares of the Company's common stock. The
total leasehold improvements were capitalized by the
Company and the fair value of the common stock issued
was recognized as an increase in Additional Paid-In
Capital. The balance of the capitalized lease
obligation will be repaid in monthly installments of
$3,027 over the term of the lease period.
E. Promissory Note On June 1, 1998 the Company loaned a related party
company $50,000. The Company received a promissory
note which included a stated interest rate of 8%.
F. Convertible Debt In March 1998, the Company issued $250,000 of
convertible debt. The debt agreement specified a
conversion rate of $1.25 per share and an annual
interest rate of 8%. The debt was secured by shares
of the Company's common stock held by the Company's
president. As an inducement to advance the funds, the
Company issued the holder of the convertible debt
125,000 shares of the Company's common stock. This
stock issuance was recorded at its fair value as a
deferred finance charge of $156,250, and was set to
be amortized to expense over the term of the debt.
Additionally, in March 1998, the Company executed a
$25,000 convertible debt agreement with a stated
conversion rate of $1.00 per share and an interest
rate of prime plus 2%.
In June 1998, the Company effectively retired all of
its outstanding convertible debt obligations through
the issuance of 352,000 shares of the Company's
common stock. The conversion price ranged from $0.75
to $1.25 per share. In addition, the Company issued
an additional 29,065 shares as settlement of the
accrued interest outstanding as of the date of the
conversion of the debt to equity, and charged to
expense the remaining unamortized balance of the
deferred financing costs.
G. Stock Compensation The Company has required that new key employees sign
an executive employment agreement (the "Agreement"),
in which the new employee is required to purchase a
quantity of the Company's common stock on the date of
hire at $1.25 per share. In addition, the Agreement
contains a matching provision which states that for
every share purchased, one additional share is sold
7
<PAGE>
for a price equal to the par value of the stock
($0.001). The Agreement provides for a "buy-back
option" which permits the Company to repurchase
shares of stock sold under the Agreement if the
employee leaves the Company for any reason during the
48 to 60 months following his hire, with the right
expiring as to 20% to 25% of the stock each year. The
agreement also contains a stock option grant ranging
from 20,000 to 40,000 shares of the Company's common
stock at an exercise price of $1.25 per share and
with the same vesting period as for the shares of
stock purchased under the agreement.
For the nine months ended September 30, 1998, the
Company executed this Agreement with eight
individuals. The individuals purchased a number of
shares ranging from 1,000 to 30,000, for a total of
109,000 shares (218,000 in the aggregate including
the matching provision). Additionally, an equal
number of shares of stock were sold at the stated par
value of the stock. The Company has recorded the fair
value of the stock sold and corresponding grant of
options to be $983,405 as a component of equity and
is amortizing the balance to compensation expense
over the vesting period applicable to each new
employee.
H. Other Compensation In connection with a 1994
agreement, the Company paid the chairman of the Board
of Directors a $100,000 bonus in July 1998 for
successful completion of the private placement stock
offering completed in May 1998 (See Note C).
8
<PAGE>
Item 2. Plan of Operation
The following Plan of Operation contains forward-looking statements
which involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including
those set forth in the Company's 1997 Form 10-KSB and elsewhere in
this document.
Plan of Operation
- -----------------
The Company was formed to develop, manufacture and market a line of health
diagnostic instruments to domestic and international markets in professional and
consumer settings. The initial product offering will be Lifestream's
professional cholesterol monitor, a hand held instrument that accurately
measures cholesterol levels in the blood in three minutes. Lifestream's
cholesterol monitor would be used in conjunction with a disposable dry-chemistry
test strip. In October 1997, the Company signed a five-year manufacturing
agreement with Boehringer Mannheim GMbH ("Boehringer"), located in Germany,
whereby Boehringer will supply the dry-chemistry test strips and in vitro
diagnostic optic hardware used by Lifestream's cholesterol instrument.
On October 5, 1998, Lifestream's cholesterol instrument was granted marketing
clearance as a professional-use, point-of-care in vitro diagnostic device for
the measurement of total cholesterol in fingerstick whole blood samples by the
United States Food and Drug Administration ("FDA").
Lifestream's cholesterol instrument will initially monitor total cholesterol
levels to aid in the detection of persons who may be at risk for coronary heart
disease, and aid in the management of patients undergoing therapy with lipid
lowering drugs. The Company hopes to make subsequent product changes and
improvements in order to measure high-density lipoprotein ("HDL") cholesterol,
triglycerides, and possibly glucose in one instrument.
The Company plans to market the Lifestream cholesterol instrument to healthcare
professionals. The healthcare professionals are expected to use the instrument
to detect and monitor patients with cholesterol concerns. Using the cholesterol
monitor keypad, a professional will be able to enter risk factors associated
with heart health. The instrument will use these factors to calculate the
patient's cardiac risk (a measure of how the patient's heart health compares to
others).
During the twelve months ended September 30, 1999, the Company also intends to
conduct product research and development to introduce a medical data storage and
transmission system compatible with Lifestream's cholesterol instrument. Through
an input/output port, the instrument would have the ability to download patient
information (cholesterol readings and other risk factors) using a serial cable
or using a Lifestream personal medical record card which holds up to 75 "bytes"
of information. This information along with a secure website can then be
transferred to the computer of a healthcare professional to print a report.
9
<PAGE>
Once this system is developed, a healthcare professional will be able to access
Lifestream's secured intranet program (being created jointly with Secured
Interactive Technologies Inc., a health information software company). The
healthcare professional will be able to merge the patient information with the
latest health research to create a "Personal Health Evaluation Program" for each
patient. This personalized program will be able to be printed and reviewed with
the patient by the healthcare professional and continually updated to provide a
state-of-the-art tool to encourage behavioral change.
As of September 30, 1998, Lifestream had an accumulated deficit of approximately
$4.6 million. The ability of the Company to continue as a going concern and
achieve profitability is highly dependent upon numerous factors including, but
not limited to: the Company's ability to raise additional funds; successfully
manufacture, market and distribute the Lifestream cholesterol instrument;
successfully complete the continuing regulatory approval process; and provide a
reliable product at a cost efficient price. Due to the uncertainty of these
factors, it is difficult to predict when such profitability will occur, if at
all.
The development and marketing of medical devices and related products is capital
intensive. The Company has funded operations to date through private equity and
debt financing arrangements including a private placement offering of shares of
the Company's Common Stock in May 1998, in which the Company was successful in
raising approximately $1.95 million. The Company has utilized these funds to
develop products, establish marketing and sales operations and support initial
production of the Company's products. As of September 30, 1998, the Company had
approximately $500,000 in working capital to continue operations but it requires
additional funding in order to continue as a going concern beyond the fourth
quarter of 1998. Currently, the Company is in process of a private offering to
raise additional funds. If the Company is unable to obtain these additional
funds on a timely basis, there would be substantial doubt about the Company's
ability to continue as a going concern. Additionally, substantial funding from
third parties will also need to be raised in order to successfully manufacture,
market and distribute the Company's products over the course of the twelve-month
period ending September 30, 1999.
10
<PAGE>
In April 1998, the Company completed clinical studies for the Lifestream
cholesterol instrument for professional use. Upon completion of the clinical
studies, the Company filed a 510(k) notification with the FDA. On October 5,
1998, the Lifestream cholesterol instrument was granted marketing clearance as a
professional-use, point-of-care in vitro diagnostic device for the measurement
of total cholesterol in fingerstick whole blood samples. The Company plans to
develop and market a home use personal instrument. The personal instrument will
be marketed to patients with high cholesterol levels who need to monitor their
progress on a cholesterol-reducing program or those individuals who are health
conscious and concerned about their cholesterol levels. However, the Company
must first complete clinical studies for a consumer-oriented instrument and then
file a 510(k) notification with the FDA. There is no assurance that the Company
can successfully complete these clinical studies or subsequently receive FDA
approval for a consumer instrument.
In May 1998, the Company leased a production facility located in Post Falls,
Idaho. The Company took possession of this 6,500 square foot facility in June
1998, and immediately began preparation for a pre-production run of 250 units.
These 250 units have been used for beta site testing, marketing and as a final
quality assurance and control test before beginning actual production.
The pre-qualification product runs of the Lifestream cholesterol instrument have
been successfully completed. The Company is now in limited production of its FDA
cleared professional use products and is producing inventory for market
distribution in the fourth quarter of 1998. The Lifestream cholesterol
instrument is assembled by the Company using sub-components manufactured by
third parties. The Company expects to incur additional expense for capital
equipment and development costs as the Company transitions to volume production
of the Lifestream cholesterol instrument. The extent of additional expense is
dependent on the quantity of sales orders the Company receives.
In June 1998, the Company leased a 2,400 square foot office space in Ft.
Collins, Colorado. This office space is being used as the primary location for
administrative and executive functions (marketing, sales, accounting, and human
resources) for the Company. As a result, the Company has transferred all such
operations, from Sandpoint, Idaho, to this new office. The Company's office
lease in Sandpoint, Idaho will be assumed by other parties at minimal cost to
the Company. Currently, the Company has 18 full time employees. The Company
expects to increase this to approximately 24 full time equivalent employees in
the fourth quarter of 1998 because of expected levels of production during the
twelve month period ended September 30, 1999. The Company anticipates that it
will continue to increase the number of employees as the demand on manufacturing
operations increases, although this may not be the case.
11
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Operating Expenses:
Operating expenses include those costs incurred to bring the Company's product
to market relative to both research and development and general administration.
Operating expenses increased to $2,024,662 in the nine months ended September
30, 1998, from $392,856 for the same period of the prior year. The increase of
$1,631,806 was primarily due to an increase in professional expenses, salary
costs and research and development as the Company accelerated its efforts to
bring the Lifestream cholesterol monitor to market. The Company increased
operating expenses to $1,070,875 for the three month period ended September 30,
1998, from $134,473 for the same three month period of the prior year, an
increase of $936,402. These increases resulted from the opening of a production
facility in Post Falls, Idaho and an administrative office in Ft. Collins,
Colorado. Salary and rent expense increased in order to staff and maintain these
new facilities. In addition, the Company incurred certain costs to prepare a
number of Lifestream cholesterol monitor units necessary for a preproduction
run. Finally, the Company has employed certain individuals in order to begin
marketing the Lifestream cholesterol monitor and to create consumer product
awareness.
Other Expenses and Income:
Other expenses and income includes those costs incurred relative to interest
earned, interest paid, financing costs, and for other miscellaneous
non-operating matters. For the nine months ended September 30, 1998, other
expense, net was $164,816 as compared to $6,750 for the corresponding nine month
period of the prior year. This increase in other expense for each of the nine
month periods was primarily attributable to the increasing base in debt for
which interest and financing costs were accrued. For the three month period
ended September 30, 1998, other income, net was $7,658 as compared to other
expense, net of $2,560 for the corresponding three month period of the prior
year.
Net Loss:
Primarily as a result of the foregoing factors, the Company's net loss was
$2,189,478 for the nine months ended September 30, 1998 and $399,606 for the
nine months ended September 30, 1997. This represents an increase in the loss
for the same period of $1,789,872. The loss for the three months ended September
30, 1998 was $1,063,217 as compared to a loss for the three months ended
September 30, 1997 of $137,033.
Financial Condition:
From inception (August 7, 1992) to September 30, 1998, the Company has been
financed through private placements of equity securities and certain issuances
of corporate debt.
The Company has acquired certain intangible assets in exchange for shares of the
Company's Common Stock. In 1992, the Company acquired all of the outstanding
assets and liabilities of a related party development partnership for 3,327,000
shares of the Company's Common Stock. In 1993, the Company acquired certain
patents and distribution rights from an unrelated company in exchange for
470,000 shares of the Company's Common Stock.
12
<PAGE>
In May 1998, the Company sold 1,560,372 shares of the Company's Common Stock at
a price of $1.25 per share. At September 30, 1998, approximately $1.3 million of
these proceeds had been utilized in operations to fund the initial stages of
marketing and pre-production activities. Until used, the proceeds are invested
in high grade government backed marketable securities with maturity periods
ranging from 30 to 90 days.
Additionally, through September 30, 1998, the Company incurred indebtedness of
$375,000 pursuant to the terms of various convertible promissory notes which
were to convert to Company Common Stock at a price between $0.75 and $1.25 per
share. In June 1998, the Company retired all these notes by the issuance of
352,000 shares of the Company's Common Stock.
During the nine months ended September 30, 1998, the Company used cash in
operating activities of $1,506,494 as compared to $122,218 for the nine months
ended September 30, 1997. This increase of $1,384,276 was primarily due to the
increase in the net loss for the period. As of September 30, 1998, the Company
had a balance of $689,057 in cash and cash equivalents.
The Company's success will be dependent on its ability to achieve profitable
operations, bring the Lifestream cholesterol monitor to market, and obtain
additional funds to support its operations. There can be no assurance that the
Company will achieve profitable operations or successfully complete the
development of the Lifestream cholesterol monitor or that additional funds will
be available when and as required by the Company on acceptable terms or at all.
Year 2000 Compliance:
The year 2000 date conversion issue is the result of computer programs being
written using two digits rather than four to define the applicable year. This
issue affects computer systems that have time-sensitive programs that may not
properly recognize the year 2000. This could result in systems failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in normal business activities. Management has initiated a company-wide program
to prepare its financial, manufacturing, and other critical systems and
applications for the year 2000. The focus of the program is to identify affected
systems, develop a plan to correct those systems in the most effective manner
and then implement and monitor the plan. The program also includes
communications with the Company's significant suppliers and customers to
determine the extent to which the Company is vulnerable to any failures by them
to address the Year 2000 issue. As of September 30, 1998, the Company had not
expended material amounts related to the Year 2000 issue because the majority of
its systems have been purchased from vendors that have certified that their
systems are Year 2000 compliant. Although the Company's Year 2000 program is in
various stages of completion, the Company anticipates it will have all
modifications and replacements in place before the end of 1999. However, at this
time, the Company is not able to determine the estimated impact on the
operations of the Company should it or one of its suppliers or customers be
unable to successfully address the Year 2000 issue.
13
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New Accounting Pronouncements:
SFAS 132 In February 1998, the FASB issued SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits,
which standardizes the disclosure requirements for pension and
other postretirement benefits. The adoption of SFAS No. 132 is
not expected to impact the Company's current disclosures.
SFAS 133 In June 1998, the FASB issued SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133
requires companies to recognize all derivatives contracts as
either assets or liabilities in the balance sheet and to
measure them at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of
(i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or
loss is recognized in income in the period of change. SFAS 133
is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.
Historically, the Company has not entered into derivatives
contracts either to hedge existing risks or for speculative
purposes. Accordingly, the Company does not expect adoption of
the new standard on January 1, 2000 to affect its financial
statements.
SFAS 134 In October 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 134,
"Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise", which effectively changes the way
mortgage banking firms account for certain securities and
other interests they retain after securitizing mortgage loans
that were held for sale. The adoption of SFAS 134 is not
expected to have a material impact on the Company's financial
position.
14
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Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
1. During the three months ended September 30, 1998, the Company has
agreed to sell 2,000, 60,000 and 40,000 shares of Common Stock to James
Moody, Criss Sakala and Gerald Tschikof, respectively, pursuant to the
terms of employment agreements between the Company and each of Messrs.
Moody, Sakala and Tschikof. One half of the shares issued to each of
the employees will be issued at a per share purchase price of $1.25 and
the remaining shares will be purchased for a per share purchase price
of $.001 pursuant to the terms of the employment agreements.
2. In April 1998, the Company agreed to issue 2,000 shares of Common Stock
to each of the five directors elected to the Company's Board of
Directors as compensation for each month each serves as a director of
the Company. Pursuant to this agreement, 6,000 shares will be issued to
each director with respect to the three month period ended September
30, 1998.
The Company relied on Section 4(2) of the 1933 Act as the basis for an
exemption from the registration requirements of the 1933 Act for the
issuances of Common Stock described in items 2-9 immediately above.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit Index
b. Reports of Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1998.
15
<PAGE>
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.
LIFESTREAM TECHNOLOGIES, INC.
- -----------------------------
(Registrant)
BY: /s/ Gerald Tschikof
--------------------------------------------------------------
Gerald Tschikof, President and Chief Executive Officer
DATE: November 13, 1998
-----------------
BY: /s/ Criss Sakala
--------------------------------------------------------------
Criss Sakala, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
DATE: November 13, 1998
-----------------
16
<PAGE>
EXHIBIT INDEX
Exhibit No.
27 Financial Data Schedule
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statement of the Company for the nine month period ended
September 30, 1998 and should be read in conjunction with, and is qualified in
its entirety by, the audited financial statements for the year ended December
31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 689,057
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 68,637
<CURRENT-ASSETS> 795,383
<PP&E> 426,432
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,883,229
<CURRENT-LIABILITIES> 290,275
<BONDS> 0
0
0
<COMMON> 10,923
<OTHER-SE> 2,432,392
<TOTAL-LIABILITY-AND-EQUITY> 2,883,229
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,024,662
<OTHER-EXPENSES> 164,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,189,478)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
