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 JUNE 30, 1997
[ _ ] 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 registrant 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.)
515 PINE STREET, SUITE 200, SANDPOINT, IDAHO 83864
(Address of principal executive offices)
(208) 263-5433
(Registrant'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 May 4,
1998 was 8,502,829.
Transitional Small Business Disclosure Format. Yes [ _ ] No [ X ]
<PAGE>
LIFESTREAM TECHNOLOGIES, INC.
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets for the six months ended June 30, 1997
and the year ended December 31, 1996 2
Statements of Loss for the six months ended June 30, 1997
and 1996, the three month period ended June 30, 1997 and
1996, and from the period from date of inception (August
7, 1992) through June 30, 1997 3
Statements of Cash Flows for the six months ended June 30,
1997 and 1996, and from the period from date of inception
(August 7, 1992) through June 30, 1997 4
Notes to consolidated financial statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II. OTHER INFORMATION 12
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 13
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<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Lifestream Technologies, Inc.
Item 1. Financial Statements (A Development Stage Company)
Consolidated Balance Sheets
June 30, December 31,
1997 1996
- -----------------------------------------------------------------------------------------------------------
Unaudited
<S> <C> <C>
Assets
Current assets:
Cash $ 5,509 $ 5,229
Interest receivable, officer 6,367 4,019
Inventory and supplies 35,731 35,731
Prepaid expenses 3,000 27,000
- -----------------------------------------------------------------------------------------------------------
Total current assets 50,607 71,979
- -----------------------------------------------------------------------------------------------------------
Equipment and leasehold improvements, net 17,700 16,135
- -----------------------------------------------------------------------------------------------------------
Other assets:
Patent, net 1,678,726 1,748,457
Note receivable, officer 62,507 54,189
Other 7,706 10,706
- -----------------------------------------------------------------------------------------------------------
Total other assets 1,748,939 1,813,352
- -----------------------------------------------------------------------------------------------------------
Total assets $ 1,817,246 $ 1,901,466
- -----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 250,004 $ 221,777
Interest payable 16,362 6,242
Notes payable 46,144 46,144
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 312,510 274,163
Convertible debt 100,000 50,000
- -----------------------------------------------------------------------------------------------------------
Total liabilities 412,510 324,163
- -----------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Stockholders' equity:
Preferred stock - -
Common stock 7,690 7,387
Additional paid-in capital 3,505,065 3,415,368
Deficit accumulated during the development stage (2,108,019) (1,845,452)
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,404,736 1,577,303
- -----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,817,246 $ 1,901,466
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
Lifestream Technologies, Inc.
(A Development Stage Company)
Consolidated Statements of Loss
Cumulative
Amounts from
Date of Inception
(August 7, 1992) Six Months Ended Three Months Ended
through June 30, June 30,
June 30, ----------------------------- ----------------------------
1997 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
Unaudited Unaudited Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
Revenues $ - $ - $ - $ - $ -
Operating Expenses:
Depreciation and amortization 494,083 72,773 72,162 36,388 36,081
Professional services 841,441 78,331 107,718 26,099 104,792
Travel 180,344 14,614 6,993 9,970 4,966
Research and product
development 134,249 24,687 11,915 12,111 11,615
Salaries and wages 157,750 50,000 33,000 25,000 25,000
Other, general office 305,066 17,972 28,091 7,973 23,629
- -------------------------------------------------------------------------------------------------------------
Total operating expenses 2,112,933 258,377 259,879 117,541 (206,083)
- -------------------------------------------------------------------------------------------------------------
Loss from operations (2,112,933) (258,377) (259,879) (117,541) (206,083)
Other (expense) income, net 4,914 (4,190) 14,889 (2,588) (249)
- -------------------------------------------------------------------------------------------------------------
Net loss $ (2,108,019) $ (262,567) $ (244,990) $ (120,129) $ (206,332)
- -------------------------------------------------------------------------------------------------------------
Net loss per share $ (0.03) $ (0.04) $ (0.01) $ (0.03)
- -------------------------------------------------------------------------------------------------------------
Weighted average number of
shares outstanding 7,538,411 6,570,200 7,673,540 6,765,500
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
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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) Six Months Ended
through June 30,
June 30, ------------------------------
1997 1997 1996
- -----------------------------------------------------------------------------------------------------------
Unaudited Unaudited Unaudited
<S> <C> <C> <C>
Net cash used in operating activities $ (670,616) $ (64,911) $ (29,362)
- --------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (32,958) (4,607) (1,422)
Advances to officer (63,410) (5,202) -
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (96,368) (9,809) (1,422)
- --------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of convertible debt 100,000 50,000 -
Proceeds from stock options exercised 38,179 - 31,250
Proceeds from sale of common stock 408,170 25,000 -
Net proceeds from notes payable 226,144 - -
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 772,493 75,000 31,250
- --------------------------------------------------------------------------------------------------------
Net increase in cash 5,509 280 466
Cash, beginning of period - 5,229 305
- --------------------------------------------------------------------------------------------------------
Cash, end of period $ 5,509 $ 5,509 $ 771
- --------------------------------------------------------------------------------------------------------
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 $ - $ 135,000
Reduction of accrued interest $ 2,033 $ - $ 2,033
Reduction of accounts payable $ 90,381 $ - $ -
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
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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 and the
financial statements and notes thereto included in
the Lifestream Technologies, Inc. Form 10-KSB for the
year ended December 31, 1997.
B. Development Stage The Company has been in the development stage since
Operations and its inception. The Company has had no recurring
Going Concern source of revenue, has incurred operating losses
since inception and, at June 30, 1997, has a working
capital deficiency. 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 1998.
C. Research and Research and development costs are charged to expense
Development as incurred.
D. Intangible Assets In 1992, the Company acquired all of the assets and
liabilities of a related party development
partnership for 3,327,000 shares of the Company's
common stock. The net assets acquired by the Company
primarily included license and distribution rights
which
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had been previously acquired by the development
partnership for cash of approximately $700,000 from
an unrelated company. In 1993, the Company acquired
the patents and technology from this same unrelated
company to complete the asset acquisition. The
patents and technology were acquired through the
issuance of 470,000 shares of common stock, valued at
$1,400,000.
In accordance with the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of",
management of the Company reviews the carrying value
of its intangible assets on a regular basis.
Estimated undiscounted future cash flows from the
intangible assets are compared with the current
carrying value. Reductions to the carrying value are
recorded to the extent the net book value of the
property exceeds the estimate of future discounted
cash flows.
E. Commitments and The Company entered into an employment agreement in
Contingencies March 1996 with its president. This agreement is
automatically extended on an annual basis, unless
terminated by either party. The agreement calls for
an annual salary of $100,000. Further, this agreement
also provides for six months of severance pay in the
event this individual is terminated by the Company.
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Item 2. Management's Discussion and Analysis or Plan of Operation
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations 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.
The Company
- -----------
Lifestream Technologies, Inc. (the "Company" or "Lifestream") (formerly Utah
Coal and Chemicals Corporation) is a Nevada corporation, reorganized on February
11, with its current address in Sandpoint, Idaho 83864.
The Company was formed to develop, manufacture and market a line of health
diagnostic instruments to domestic and international markets. Lifestream's
initial product offering is the CholestronTM, a hand held instrument that
measures cholesterol levels in the blood with medical laboratory accuracy in
under five minutes. It is used in conjunction with a disposable dry-chemistry
test strip. The Company signed a manufacturing agreement with Boehringer
Mannheim, located in Germany, whereby Boehringer will supply the dry-chemistry
test strips and invitro diagnostic optic hardware used by the CholestronTM. This
combination of Boehringer's proven production capabilities and Lifestream's
marketing strategies will set the foundations for the Company's first product
entry.
The CholestronTM will initially monitor only total cholesterol levels, but the
Company plans subsequent introductions of systems and disposable test strips
which can also make readings of high-density lipoprotein ("HDL") cholesterol,
triglycerides, low-density lipoprotein ("LDL") cholesterol levels, and possibly
glucose in one instrument.
Lifestream plans to introduce the CholestronTM to the market through health
professionals, including physicians, HMO's and wellness/lifestyle educators
(work site health promotion programs). Also, the Company will distribute its
products to pharmacists and physicians to support the introduction and
compliance for pharmaceutical companies who sell cholesterol lowering therapy
and to pharmacists offering on-site testing to their customers. The consumer
oriented product, introduced after successful launch to the professional market,
will be geared toward patients with high cholesterol levels who need to monitor
their progress on a cholesterol-reducing program on a retail basis.
The CholestronTM professional instrument offers important education features
absent in competing technologies. Using the Cholestron'sTM keypad, the user can
enter risk factors associated with heart health. The devise uses these factors
to calculate the patients "biological" age (i.e. a measure of how the patient's
heart health compares to others). By changing parameters, a patient can learn
how his or her biological age will improve by
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changing behavior lifestyles, such as quitting smoking or exercising. A key part
of this system is the CholestronTM "smart card", holding up to 75 "bytes" of
information, including the patient's cholesterol readings and other risk factors
downloaded from the CholestronTM meter. This information is then transferred to
the physician's office computer via the "smart card" to provide the patient's
risk profile.
By accessing Lifestream's secured intranet program created jointly with Secured
Interactive Technologies Inc. (formerly Interactive Health Evaluation Systems,
Inc.), a health information software company, the physician can merge the "smart
card" patient information with the latest health research to create a "Personal
Health Evaluation Program" for each patient. This personalized program can then
be printed out and reviewed with the patient and the physician. It can be
continually updated, providing physicians with a state-of-the-art tool to evoke
behavioral change.
The Company believes this approach to fighting and monitoring high cholesterol
is what sets the CholestronTM apart from its competitors. The Company expects
competition from several firms, both those using "singe use" cholesterol
(screening) test strips and those developing an instrument/strip for monitoring
and diagnostics. However, no competitor to date has introduced a monitoring
product into the U.S. over-the-counter market on a retail basis or met the
Company's targeted price range for the professional market.
As of June 30, 1997, Lifestream had an accumulated deficit of approximately
$2,108,019. 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 directly market and distribute its
product, CholestronTM, through-out North America; successful completion of the
Company's regulatory approval process; and the ability to provide the product at
a cost efficient price and quantity. Due to the uncertainty of these factors, it
is difficult to reliably predict when such profitability may occur, if at all.
The development and marketing of consumer medical devices is capital intensive.
The Company has funded operations to date through private equity and debt
financing arrangements. In order to complete the product development and
initiate the marketing and production process it is expected that substantial
additional outside funding will be necessary. To this end the Company completed
a private placement offering of shares of the Company's Common Stock as of May
6, 1998, in which the Company was successful in raising approximately $1.3
million. The Company believes the funds raised in this offering will be
sufficient to fund the development of the product through the initial stages of
production and marketing for the CholestronTM device.
Plan of Operation
In April 1998, the Company completed the required clinical studies for the
Cholestron(TM) unit. Upon completion the Company immediately filed a 510(k)
notification with the Federal Drug Administration ("FDA"). This 510(k)
notification process was permitted
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over the more lengthy Pre-Market Application Process ("PMA") as it is the
Company's position that the Cholestron(TM) unit meets the definition of
"substantially equivalent" to other products (specifically blood glucose
monitoring devices) currently being marketed within the United States. It is the
Company's belief that the FDA's approval will be successfully obtained by July
1998.
As the Company expects regulatory approval, a pre-qualification product run of
the Cholestron(TM) unit is currently in-process. This process is performed both
in-house and through key external vendors to determine the exact assembly line
production process and to determine necessary production quality assurance
standards. Additionally, in May 1998, the Company executed a lease agreement for
a production facility located in Post Falls, Idaho. The Company expects to take
possession of this 6,500 square foot facility by June 1, 1998, and immediately
begin preparation for a preproduction run of 250 units, which is expected to
occur during June 1998. These 250 units would be used for beta site testing,
marketing and as a final quality assurance and control test before beginning
actual production. Currently, the Company has five full time employees, who are
performing the required financial and technological functions necessary to
complete the development of the Cholestron(TM) unit. The Company expects to
increase this to approximately 15 - 20 full time equivalent employees by August
1, 1998, which is the current anticipated date when full production will begin.
Management's Discussion and Analysis
- ------------------------------------
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 decreased to $258,377 in the six months ended June 30, 1997,
from $259,879 for the same period of the corresponding year. The decrease of
$1,502, or 1% was due to a net decrease in professional expenses and an increase
in both salary and research & development. The Company decreased expenses to
$117,541 for the three month period ended June 30, 1997, from $206,083 for the
same three month period of the corresponding year. The decrease of $88,542 or
43%, was due primarily to the absence of legal costs as incurred to obtain
financing in 1996, which were not pursued through similar means during 1997. The
Company expects operating expenses to continue to fluctuate dramatically in the
foreseeable future.
Other Expenses and Income:
Other expenses and income includes those costs incurred relative to both
interest earned and interest paid, and for other miscellaneous non-operating
matters. For the six months ended June 30, 1997, other expenses and income was a
net expense of $4,190 as compared to a net income of $14,889 for the
corresponding six month period of the prior year. The fluctuation from an income
to an additional loss component of $10,699, or 72% was primarily attributable to
a cost sharing arrangement that existed in 1996, whereby the Company received
refunds of certain expenses. In 1997, these costs were
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absorbed 100% by the Company. For the three month period ended June 30, 1997,
other expenses and income was a net expense of $2,588 as compared to a net
expense of $249, for the corresponding three month period of the prior year.
This increase of $2,339 or 940% was primarily attributable to the increasing
base in debt for which interest was accrued.
Net Loss:
The Company's net loss was $262,567 for the six months ended June 30, 1997 and
$244,990 for the six months ended June 30, 1996. This represents and increase in
the loss for the same period of $17,577, or 7%. This increase in the loss was
due to the net decrease in legal costs incurred to obtain financing in 1997, an
increase in salaries and wages due to the execution compensation plan and the
increase in costs associated with product research and development. The loss for
the three months ended June 30, 1997 was $120,129 as compared to a loss for the
three months ended June 30, 1996 of $206,332. This decrease in the net loss of
the Company of $86,203 or 41% was primarily the result of the timing of legal
expenses associated with the efforts of the Company to obtain certain financing.
Financial Condition:
From inception (August 7, 1992) to June 30, 1997, the Company has been financed
through private placements of equity securities and certain issuances of
corporate debt.
As part of the equity transactions, the Company acquired certain key intangible
assets in exchange for shares of common stock. The first of these transaction
occurred in 1992, when the Company acquired all of the outstanding assets and
liabilities of a related party development partnership for 3,327,000 shares of
common stock. The second such transaction occurred in 1993, when the Company
acquired certain patents and distribution rights from an unrelated company in
exchange for 470,000 shares of the Company's common stock.
Additionally, in both 1997 and 1996, the Company received a total of $100,000
pursuant to the terms of two convertible promissory notes. These notes contain
terms which specify a conversion to shares of common stock at a rate of $0.75 or
final maturity in November 1999, and March 2000.
During the six months ended June 30, 1997, the Company used cash in operating
activities of $64,911 as compared to $29,362 for the six months ended June 30,
1997. This increase of $35,549 was primarily due to the increase in contributed
services and the increase in accounts payable for the amounts owed for
professional services. As of June 30, 1997, the Company has a cash balance of
$5,509.
The Company's success will be dependent on its ability to achieve profitable
operations, bring the CholestronTM product 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 development and obtain
regulatory approval to
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market the CholestronTM unit or that additional funds will be available when and
as required by the Company on acceptable terms or at all.
New Accounting Pronouncements:
SFAS 128 In February 1997, The Financial Accounting Standards Board
("FASB") issued SFAS No. 128, Earnings Per Share ("EPS"). SFAS
No. 128 requires dual presentation of basic EPS and diluted
EPS on the face of all income statements issued after December
15, 1997 for all entities with complex capital structures.
Adoption of SFAS No. 128 is not expected to have significant
effect on the Company's financial statements. Basic EPS is
computed as net income divided by the weighted average number
of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common
shares issuable through stock options, warrants and other
convertible securities.
SFAS 130 In June 1997, the FASB issued SFAS No. 130, Reporting
and 131 Comprehensive Income, and SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No.
130 requires that an enterprise report, by major components
and as a single total, the change in its net assets during the
period from nonowner sources; and SFAS No. 131 establishes
annual and interim reporting standards for an enterprise's
operating segments and related disclosures about its products,
services, geographic areas and major customers. Adoption of
these statements will not impact the Company's financial
position, results of operations or cash flows and any effect
will be limited to the form and content of its disclosures.
Both statements are effective for fiscal years beginning after
December 15, 1997.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in 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 and Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LIFESTREAM TECHNOLOGIES, INC.
- ----------------------------
(Registrant)
BY: /s/ Christopher Maus
------------------------------------------------------------------
Christopher Maus, President, Chief Executive Officer, and Director
DATE: May 13, 1998
------------
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statement of the Company for the six month period ended June
30, 1997 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,509
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 35,731
<CURRENT-ASSETS> 50,607
<PP&E> 17,700
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,817,246
<CURRENT-LIABILITIES> 312,510
<BONDS> 0
0
0
<COMMON> 7,690
<OTHER-SE> 1,397,046
<TOTAL-LIABILITY-AND-EQUITY> 1,817,246
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 258,377
<OTHER-EXPENSES> 4,190
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (262,567)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
