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 MARCH 31, 1998
[ _ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
----------------------------------------
LIFESTREAM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
----------------------------------------
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 MARCH 31, 1998
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets for the three months ended March 31, 1998
and the year ended December 31, 1997 2
Statements of Loss for the three months ended March 31,
1998 and 1997, and from the period from date of inception
(August 7, 1992) through March 31, 1998 3
Statements of Cash Flows for the three months ended March
31, 1998 and 1997, and from the period from date of
inception (August 7, 1992) through March 31, 1998 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
1
<PAGE>
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Lifestream Technologies, Inc.
Item 1. Financial Statements (A Development Stage Company)
Consolidated Balance Sheets
March 31, December 31,
1998 1997
- -----------------------------------------------------------------------------------------------------------
Unaudited
<S> <C> <C>
Assets
Current assets:
Cash $ 223,193 $ 6,160
Interest receivable, officer 10,842 9,482
Inventory and supplies 30,802 30,802
Deferred financing charge 148,545 -
Prepaid expenses 2,068 2,068
- -----------------------------------------------------------------------------------------------------------
Total current assets 415,450 48,512
- -----------------------------------------------------------------------------------------------------------
Equipment and leasehold improvements, net 28,780 23,754
- -----------------------------------------------------------------------------------------------------------
Other assets:
Patent, net 1,592,589 1,623,762
Note receivable, officer 69,622 69,622
Other 2,897 1,500
- -----------------------------------------------------------------------------------------------------------
Total other assets 1,665,108 1,694,884
- -----------------------------------------------------------------------------------------------------------
Total assets $ 2,109,338 $ 1,767,150
- -----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 174,708 $ 216,918
Interest payable 23,911 20,371
Related party payable - 12,435
Payroll taxes payable 6,378 -
Notes payable 41,144 41,144
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 246,141 290,868
Convertible debt 375,000 100,000
- -----------------------------------------------------------------------------------------------------------
Total liabilities 621,141 390,868
- -----------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Stockholders' equity:
Preferred stock - -
Common stock 8,351 8,041
Additional paid-in capital 4,095,488 3,773,536
Deficit accumulated during the development stage (2,615,642) (2,405,295)
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,488,197 1,376,282
- -----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,109,338 $ 1,767,150
- -----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Lifestream Technologies, Inc.
(A Development Stage Company)
Consolidated Statements of Loss
Cumulative
Amounts from
Date of Inception
(August 7, 1992) Three Months Ended
through March 31,
March 31, --------------------------------
1998 1998 1997
- -----------------------------------------------------------------------------------------------------------
Unaudited Unaudited Unaudited
<S> <C> <C> <C>
Revenues $ - $ - $ -
Operating Expenses:
Depreciation and amortization 552,625 41,220 36,385
Professional services 946,488 47,165 52,232
Travel 219,083 7,923 4,644
Research and product development 246,346 29,785 12,576
Salaries and wages 249,750 42,000 25,000
Other, general office 385,720 39,689 9,999
- -----------------------------------------------------------------------------------------------------------
Total operating expenses 2,600,012 207,782 140,836
- -----------------------------------------------------------------------------------------------------------
Loss from operations (2,600,012) (207,782) (140,836)
Other (expense) income, net (15,630) (2,565) (1,602)
- -----------------------------------------------------------------------------------------------------------
Net loss (2,615,642) $ (210,347) $ (142,438)
- -----------------------------------------------------------------------------------------------------------
Net loss per share $ (0.02) $ (0.02)
- -----------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding
8,197,158 7,522,031
- -----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Lifestream Technologies, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash
Date of
Inception
(August 7, 1992) Three Months Ended
through March 31,
March 31, ---------------------------
1998 1998 1997
- --------------------------------------------------------------------------------------------------------
Unaudited Unaudited Unaudited
<S> <C> <C> <C>
Net cash used in operating activities $ (1,054,216) $ (204,311) $ (34,972)
- --------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (49,424) (7,368) (2,223)
Advances to officer (69,622) - -
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (119,046) (7,368) (2,223)
- --------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of convertible debt 375,000 275,000 50,000
Proceeds from stock options exercised 64,379 1,950 -
Proceeds from sale of common stock 730,932 151,762 -
Net proceeds from notes payable 226,144 - -
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,396,455 428,712 50,000
- --------------------------------------------------------------------------------------------------------
Net increase in cash 223,193 217,033 12,805
Cash at beginning of period - 6,160 5,229
- --------------------------------------------------------------------------------------------------------
Cash at end of period $ 223,193 $ 223,193 $ 18,034
- --------------------------------------------------------------------------------------------------------
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 $ 8,271 $ - $ -
Reduction of accounts payable $ 90,381 $ - $ -
- --------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
4
<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 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 its inception. The Company has had no recurring
and source of revenue, has incurred operating losses
Going Concern since inception and, at March 31, 1998, 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
Development expense as incurred.
D. Intangible In 1992, the Company acquired all of the assets and
Assets 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
5
<PAGE>
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.
F. Convertible Debt In March 1998, the Company was advanced $250,000
pursuant to the terms of a convertible debt agreement
(the "Agreement"). Advances received under the
Agreement are due in March 1999, accrue interest at
8% and are secured by shares of the Company's common
stock held by the Company's president. The Agreement
provides that, at the option of the holder, amounts
advanced may be converted into shares of the
Company's common stock at a per share rate of $1.25.
As inducement to advance the funds, the Company
issued the holder 125,000 shares of the Company's
common stock. This stock issuance was recorded as a
deferred finance charge which will be amortized to
expense over the Agreement period.
In March 1998, the Company executed a $25,000
convertible debt agreement. The agreement stated
terms which included an interest rate equal to prime
plus 2%, a 3 year period until maturity and a
conversion feature which is at a rate of $1.00 per
share.
6
<PAGE>
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 possible
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 cholesterol lowering therapy, and to pharmacists offering on-site
testing to their customers. The consumer 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 changing behavior lifestyles, such
as quitting smoking or exercising. A key part of this
7
<PAGE>
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 within a couple
of minutes. 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 March 31, 1998, Lifestream had an accumulated deficit of approximately
$2,615,642. 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
8
<PAGE>
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 increased to $207,782 in the three months ended March 31,
1998, from $140,836 for the same period of the corresponding year. The increase
of $66,946, or 48% was due to primarily to the increase in compensation costs as
the Company hired three new employees during the quarter ended March 31, 1998,
and the increase in other office expenses associated with the development of a
public relations program and participation in major medical industry trade
shows.
Other Expenses and Income:
Other expenses and income includes those costs incurred relative to both
interest earned and paid and for other miscellaneous non-operating matters. For
the three months ended March 31, 1998, other expenses and income was a net
expense of $2,565 as compared to a net expense of $1,602 for the corresponding
period of the prior year. The increase of $963 was primarily attributable to
additional interest expense on the increased balance of convertible debt.
9
<PAGE>
Net Loss:
The Company's net loss was $210,347 for the three months ended March 31, 1998
and $142,438 for the three months ended March 31, 1997. This represents and
increase in the loss for the same period of $67,909, or 48%. This increase in
the loss was primarily associated with the increase in both compensation, due to
additional employees, and trade payables related to product and market
development including participation in several trade shows.
Financial Condition:
From inception (August 7, 1992) to March 31, 1998, 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 the 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.
In both 1997 and 1996, the Company received a total of $100,000 pursuant to the
terms of two separate 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.
Additionally, in the first quarter of March 1998, the Company issued two
separate convertible debt agreements, for a total of $275,000. The first
issuance was a $25,000 convertible debt agreement which included stated terms of
an interest rate equal to prime plus 2%, a 3 year period until maturity and a
conversion feature which is at a rate of $1.00 per share. The second issuance
specified a conversion feature at a rate of $1.25 per share or final maturity in
March 1999. This debt issuance also was secured by a Stock Pledge Agreement
executed between the Lender and the Company's Chief Executive Agreement.
During the three months ended March 31, 1998, the Company used cash in operating
activities of $204,311 as compared to $34,972 for the three months ended March
31, 1997. This increase of $169,339 was primarily due to the increase in net
loss of the period and the increase in payables relative to compensation and
medical trade show participation. As of March 31, 1998, the Company has a cash
balance of $223,193.
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
10
<PAGE>
operations or successfully complete development and obtain regulatory approval
to 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 did not have a
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, and is
only applicable in those periods in which the Company
reports positive net income. .
SFAS 130 and In June 1997, the FASB issued SFAS No. 130, Reporting
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.
11
<PAGE>
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
Exhibit 27 - Financial Data Schedule
12
<PAGE>
SIGNATURES
In accordance with the to 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
------------
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statement of the Company for the three month period ended
March 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 223,193
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 30,802
<CURRENT-ASSETS> 415,450
<PP&E> 28,780
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,109,338
<CURRENT-LIABILITIES> 246,141
<BONDS> 0
0
0
<COMMON> 8,351
<OTHER-SE> 1,479,846
<TOTAL-LIABILITY-AND-EQUITY> 2,109,338
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 207,782
<OTHER-EXPENSES> 2,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210,347)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
